Paul Krugman on Neoliberalism

Paul Krugman is positioned as a strong critic of the post-1980 "neoliberal policy revolution," which he associates with sharp cuts in top marginal tax rates, deregulation, and privatization. He argues that the resulting focus on market fundamentalism, where faith in markets and disdain for government often trumps evidence, has contributed to increased economic inequality, citing the stagnation of real incomes for most workers relative to the top earners in the preceding post-war era. While acknowledging that some specific policy changes within the broader neoliberal framework, such as certain trade liberalization measures, might have had merits or were even bipartisan, Krugman maintains that the overall ideological shift undermined economic performance for the majority and led to a plutocracy. He has specifically criticized banking deregulation as having gone poorly and contributing to financial instability, contrasting this with the more stable post-1945 economic model.

He suggests that the neoliberal movement in the United States was sustained by a political alignment that favored wealthy elites and corporations, resulting in policies that benefited the very rich while simultaneously reducing the social safety net and public investment in areas like research and infrastructure. The economic framework of neoliberalism, in his view, is distinct from the classical liberal ideal because it often requires significant state intervention to implement market-like reforms across all areas of life. Though he has been called a loyal opposition to the more vicious elements of neoliberalism, he ultimately rejects the core neoclassical economic precepts underpinning the ideology, arguing that its focus on market efficiency often neglects crucial social factors and has led to a system that socializes costs while privatizing profits.