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Rise of Neo-Conservatism
Evolution of western economyClassical Liberal Economy
● Laissez Faire Capitalism● Large inequality
○ Robber Barons - Those became rich through unscrupulous methods
○ Oligopolies establish● Free market lead to a large increase in
wealth for the economy
Modern Liberalism - Welfare Capitalism● Create less inequality through gov’t run
social programs● Care for those who are left behind● Large gov’t involvement● Demand-side Economics
Stagflation - USA 1970s● Stagflation - a condition where both
unemployment and inflation are high● US growing gov’t debt● High levels of tax● Costs of in society increasing:
○ Strong Labour Unions○ High wages(minimum wage too high)○ Many Government regulations
● OPEC raises price on oil○ This impacts the price of everything
● This lead to inflation and unemployment● Demand-side economics would have
worked but gov’ts were always spending
Deficit - The amount of money taken in vs. the amount of money spentDebt - The accumulation of deficits
Neoconservatism - A Reaction to Modern Liberalism ● Believes liberal principles had gone to far● Civil rights leads to affirmative
action(unfair)● Weak diplomacy● Abuse of Taxes● Public education was a failure● Lack of morality in a liberal society● Aligns with parts of the classical liberal
ideology● Today it is represented by the Republican
party and parts are represented by the Conservative Party of Canada
Chicago School of Economics
Supply-Side Economics
● Increase supply by reducing tax and gov’t involvement
○ Privatize and deregulate○ More money in people's pockets
will lead to more spending○ More incentive to invest○ Lower tax on corporations to give
the more freedom with their dollars○ Tax breaks for those who benefit
the economy
Friedrich von Hayek“The Road to Serfdom” (1944)
● Advocate of free market capitalism● Demand-side economics(Keynes) was
excessive intervent● He opposed both monetary and fiscal
policy as it was a may of controlling the economy
● Ideas would inspire Chicago School of Economics
Milton Friedman● Supporter of monetarism and wanted less
gov’t intervention● Leakage - individual income saved in
banks, income lost to taxes, monies spent on imported goods
● Monetarism can solve this leakage● Gov’t involvement limited to - property
rights, printing money, and maintaining law and order
Monetarism● System of a country controlling the
money supply● Money supply directly relates to
economic issues within a state● Believed moderate supply increase
would lead to low inflation with economic growth
Neoconservatives in Practice
Trickle Down Economics(Reaganomics)● Voted Ronald Reagan(1981-89) in on
Principles of Supply-Side Economics○ Often referred to as Reaganomics or
Trickle down economics● He wanted to lower taxes, drop
regulations, reduce government spending● Idea is that if businesses have more
money their money will trickle down into the economy
● This lead to economic growth within the 80’s
● The downfall of his economic policy would be that he increased military spending and ran a huge debt
○ This aligned with the Cold War philosophy of Deterrence
Margaret Thatcher● Britain’s gov’t spending was out of control
○ Followed the Cradle to Grave Philosophy○ National Health Service(NHS) was a huge
cost○ Publicly ran many resources but propped
up mines that were no longer making money
○ Constant strikes due to strong Labour Unions
● Margaret Thatcher was elected to clean up the mess (1979-1990)
● Her policy involved:○ Deregulation○ Privatization of industry○ Reducing power of Labour Unions
● Policy didn’t immediately have a positive impact, but would grow through time
The Iron Lady
Brian Mulroney (1984-93)● Progressive Conservative Prime Minister who
admired both Reagan and Thatcher○ First majority Conservative in 23 years
● Privatized Air Canada, Petro Canada and Canadian National Railway
● Cancelled the Nation Energy Program(NEP)● Created the Free Trade Agreement(FTA)
○ Pre-NAFTA agreement between just US and Canada
● Tried to solve Canadian Debt issues○ Due to Liberal Senate, this was difficult
Canadian Debt● Lester B Pearson(1963-68) - 1 Billion of Debt● Pierre E Trudeau(1968-84*) - 32 Billion of Debt● Brian Mulroney - 39 Billion of Debt
Commanding HeightsStart video at 1:12
