Neoliberalism is a concept originating from the West, emerging and evolving from the need for capitalism to adapt and transform.

Before the rise of neoliberalism, the New Deal initiated by the United States in the 1930s, following the Great Depression, was seen as a significant self-improvement measure of capitalism, marking the beginning of state-interventionist capitalism. The subsequent World War II necessitated unified and strong regulation and planning to develop the economy and industry across the Western world. This led to the widespread adoption of Keynesian economic policies, advocating for government intervention, throughout the post-war Western world. During the 1940s, 1950s, and 1960s, state-owned economic sectors held a significant share within the Western economic system. Additionally, welfare policies promoting social equity and redistribution led to the emergence of welfare states in Western and Northern Europe.

According to the economic geographer David Harvey, starting in the 1970s, capital crises and rapid inflations caused unemployment rates to soar, spreading widespread dissatisfaction. Keynesian policies no longer proved effective, and the Bretton Woods system, which symbolized the post-war economic and financial order, has collapsed. In many developed capitalist countries, the combination of labor and urban social movements hinted at the potential rise of a socialist alternative to replace the post-war social compromise between capitalists and labor. This compromise had successfully laid the foundation for capital accumulation. In many parts of Europe, and even the U.S., communist and socialist parties began to grow, with popular forces vigorously demanding large-scale reforms and government intervention.

In response, the economic elites and ruling classes felt a clear political threat, whether in developed capitalist countries like Italy, France, Spain, and Portugal, or in many developing countries like Chile, Mexico, and Argentina. In the U.S., the control of wealth (as opposed to income) by the top 1% had remained relatively stable throughout the 20th century. However, in the 1970s, this control rapidly declined as asset values (stocks, real estate, savings) plummeted. Consequently, the upper classes had to take decisive actions to protect themselves from political and economic losses. (See, A Brief History of Neoliberalism, 2007, David Harvey)

In this context, neoliberalism emerged as a potential solution to the crisis of capitalist social order and as a remedy for the ailments of capitalism. The core theories and ideas of neoliberalism had already been established. In 1947, a small group of academic economists, historians, and philosophers gathered to form the renowned Mont Pelerin Society. This group included Austrian political philosopher Friedrich von Hayek, Ludwig von Mises, economist Milton Friedman, and even the philosopher Karl Popper. The founding declaration of this society stated:

“The central values of civilization are in danger. Over large stretches of the earth's surface the essential conditions of human dignity and freedom have already disappeared. In others they are under constant menace from the development of current tendencies of policy. The position of the individual and the voluntary group are progressively undermined by extensions of arbitrary power. Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own. The group holds that these developments have been fostered by the growth of a view of history which denies all absolute moral standards and by the growth of theories which question the desirability of the rule of law. It holds further that they have been fostered by a decline of belief in private property and the competitive market; for without the diffused power and initiative associated with these institutions it is difficult to imagine a society in which freedom may be effectively preserved”.

Neoliberalism strongly opposes government intervention, such as the doctrine expounded in the Keynesian theory, and even more strongly opposes theories of central state planning. The rise of neoliberalism began as an ideological and intellectual struggle. According to Hayek, this struggle, not only against Marxism but also against socialism, state planning, and Keynesian interventionism, might take a generation or more to win. When Hayek and Friedman received the Nobel Prize in Economics in 1974 and 1976, respectively, this signifies not only academic respect for neoliberal theories but also symbolizes the establishment of neoliberal thought as mainstream in the Western world. From the 1970s onwards, neoliberalism gradually transitioned from an idea and theory into state policies and practices in the UK and the U.S., influencing global socio-economic development.

The most typical examples of national development transformation under neoliberalism were seen in the UK and the U.S. After Margaret Thatcher became the Prime Minister of the UK in 1979, she initiated a series of radical reforms in political, economic, social, and foreign affairs. Economically, she promoted privatization, controlled monetary supply, reduced welfare spending, and weakened trade unions. Large-scale privatization of state-owned enterprises was a key aspect of her new policies, expanding free competition. In the U.S., the impact of neoliberalism was mainly reflected in the series of reforms known as "Reaganomics". After the failure of Keynesian demand theory in the 1970s, the conservative Ronald Reagan rose to power, adopting "supply-side" economics. This involved reducing taxes, stimulating the economy, creating jobs, and increasing national revenue through economic and wealth growth, all while maintaining low tax rates and increasing overall wealth. The promotion of "Thatcherism" and "Reaganomics" in the UK and the U.S. marked a golden era in the political and economic development of the Western world, demonstrating the successful practice of neoliberalism in these countries.

Since the 1970s, the development and practice of neoliberalism have dominated the world, driving economic and technological advancements. In the prolonged Cold War rivalry between the West and the Soviet Union, neoliberalism emerged victorious. From a geographical perspective, researchers at ANBOUND believe that the global development landscape since the 1970s can be roughly divided into several major regions: First, Western countries dominated by neoliberalism, whose development became the mainstream of the world economy and spread from Western Europe and North America to select countries in East Asia and Southeast Asia. Second, the Soviet Union and Eastern European bloc led by planned economies, which disintegrated after the Cold War. Third, China, transitioning from a planned economy to a market economy, has achieved tremendous success and is still on the path from a developing to a developed country. To reach its development goals, China needs to continue its reforms and transformation, though this process is not without challenges. Fourth, other regions mainly consisting of Latin America, Africa, South Asia, and parts of the Middle East, characterized by relatively underdeveloped economies.

Interestingly, from the perspective of Western scholars, China's economic achievements through its reform and opening-up are viewed as a successful application of neoliberalism in emerging market countries. In his book A Brief History of Neoliberalism, David Harvey dedicates a chapter titled "Neoliberalism with Chinese Characteristics" to analyze China's transformation. Harvey argues that during the 1980s, neoliberal policies gained increasing strength in international trade, opening up the entire world to transitioning markets and financial forces. He believes this created space for China to enter and integrate into the global market, a process that would have been impossible under the Bretton Woods system. China's prominent emergence as a global economic power, in part, resulted from the unexpected outcomes of the neoliberal shift in the developed capitalist world. Harvey also recognizes the importance of institutional reforms and transitions for sustained economic development. He points out that one of the things China must understand is that markets alone cannot transform the economy without corresponding changes, such as class relations, private ownership, and other institutional arrangements. The development along this path is not continuous and often encounters tensions and crises, with external stimuli and even threats playing significant roles.

It is important to note that, like other Western scholars' biases towards China, Harvey's analysis of China's combination of market economy and socialism is still inadequate. He does not deeply explore how China leverages market mechanisms within a fundamental system of public ownership and strives to build a rule-of-law-based society and economy. However, considering that A Brief History of Neoliberalism was written in 2007, during the last golden period of globalization, before the West had systematically developed concerns and hostility towards China's development, and before the rise of geopolitical friction and anti-globalization waves, Harvey's insights and predictions about China's reform process and potential challenges are notably perceptive and foresighted.

Final analysis conclusion:

A comprehensive review of the history of neoliberalism, an analysis of its relationship with global economic development, and an examination of China's reform and opening up through the lens of neoliberalism's diffusion provide valuable insights into why different countries pursue diverse economic and social development paths. The contemporary world is characterized by intense geopolitical dynamics and anti-globalization trends. The future sustainability of neoliberalism, which has previously thrived in the West, is highly uncertain. This uncertainty has significant global implications and warrants close attention from countries like China.