How neoliberalism turned the world against its young

Why in news?

Youth-led protests from France to South Asia have revived debate on whether neoliberal economic policies have failed young people. According to experts, the problem is not too many young workers but too little demand for labour, caused by neoliberal cuts in public spending and falling wages.

UPSC Relevance

Mains GS1 – Political philosophies like capitalism and socialism.

Mains GS2 – Welfare schemes for vulnerable sections; role of the State.

Mains GS3 – Growth, development and employment; inclusive growth; effects of liberalisation on the economy.

PSIR – Neoliberalism, globalisation, State vs market debate (PSIR Paper 1 and 2).

What is neoliberalism?

Neoliberalism is a set of ideas and policies that gives the free market the central role in economic and social life and limits the role of the State to protecting property, enforcing contracts and maintaining stable money. It is called “neo” (new) liberalism because it revives the 19th-century classical liberal faith in free markets, after the Keynesian welfare-state era.

Origins and spread

• Trigger – The stagflation of the 1970s (high inflation with high unemployment, worsened by oil shocks) discredited Keynesian policies.
• First adopters – Chile under Pinochet (the “Chicago Boys”, 1970s), Margaret Thatcher in the UK (1979) and Ronald Reagan in the US (1981).
• Global spread – Through the Washington Consensus (term by John Williamson, 1989) and IMF-World Bank Structural Adjustment Programmes in developing countries.
• Peak confidence – After the fall of the Soviet Union, Francis Fukuyama called it the “End of History” (1992). Thatcher’s slogan “There Is No Alternative” (TINA) captured the mood.

Economic connotations

• Privatisation – Selling or reducing State ownership in public enterprises.
• Liberalisation and deregulation – Free trade, open capital flows, fewer licences and controls.
• Fiscal discipline – Low deficits, cuts in public and welfare spending, lower taxes on business and the rich.
• Monetarism – Priority to controlling inflation over full employment; independent central banks and inflation targeting.
• Flexible labour markets – Easier hiring and firing, contract work, weaker unions.
• Trickle-down belief – Growth at the top will eventually benefit everyone.

Political connotations

• Market over State – The citizen is seen more as a consumer and the State as a facilitator, not a provider.
• Individual over collective – Thatcher’s famous line “there is no such thing as society” reflects stress on individual responsibility over collective rights.
• Weakening of organised labour – Breaking of strikes (UK miners 1984-85, US air traffic controllers 1981) shifted class power towards capital.
• Depoliticisation – Key economic decisions moved to technocrats, independent central banks and global bodies like the WTO and IMF, away from elected governments.
• Strong State, small welfare – Critics like David Harvey argue neoliberalism needs a strong State to enforce markets and property rights, while shrinking welfare.
• Cross-party consensus – Centre-left parties also adopted it through the “Third Way” (Bill Clinton, Tony Blair), narrowing political choice.

Keynesian welfare State vs Neoliberal State

Neoliberalism in India

• 1991 crisis – Foreign exchange reserves fell to barely a few weeks of imports, forcing an IMF loan and the LPG reforms (Liberalisation, Privatisation, Globalisation).
• Key reforms – End of licence raj, rupee devaluation, FDI opening, disinvestment, financial sector reforms; later FRBM Act (2003), GST (2017), IBC (2016), inflation targeting (2016) and the four Labour Codes.
• Indian difference – India never adopted a pure model. Large welfare programmes continued or expanded, such as MGNREGA, the National Food Security Act, PM-KISAN and DBT-based schemes. Scholars call it “reform by stealth” or a mixed path.

Achievements of neoliberalism

• Global poverty reduction – Extreme poverty fell sharply after 1990, mostly because of rapid growth in China and India.
• Control of inflation – The high inflation of the 1970s was brought under control in most economies.
• Trade and technology – Global supply chains spread technology, cut prices of goods and created jobs in export economies of East Asia.
• India’s gains – Faster GDP growth after 1991, rise of IT and services, telecom revolution, a large startup ecosystem and strong forex reserves. As per the World Bank, extreme poverty in India fell from 27.1% (2011-12) to 5.3% (2022-23).
• Efficiency and choice – Competition improved the quality of services such as airlines, telecom and banking; consumers got more choice.

Failures 

• Jobless or job-poor growth – Growth has not created enough decent jobs. Labour-saving technology and now AI add to the pressure.
• Rising inequality – Gains went mainly to the top. In India, the top 1% held about 22.6% of national income in 2022-23 (World Inequality Lab), among the highest in the world.
• Falling wage share – Wages grew slower than productivity, reducing demand and making jobs scarcer.
• Weak safety nets – Cuts in welfare and austerity after the 2008 financial crisis hit young people hardest.
• Unaffordable housing – Young people in many countries cannot afford homes, delaying marriage and family.
• Costly education – Fee hikes, student loans (US student debt is over $1.6 trillion) and in India, high costs of private colleges and coaching.
• Precarious work – Contract, gig and platform jobs lack security, pensions and health cover.
• Political fallout – Youth anger has fed protests and populism: Arab Spring (2011), Sri Lanka’s Aragalaya (2022), Bangladesh quota protests (2024) and Nepal’s Gen Z protests (2025).

The other side of the debate

• Supporters of neoliberalism argue that problems come from incomplete reforms, rigid labour laws and poor education quality rather than markets themselves.
• Developing countries like India, China and Vietnam gained enormously from open trade and investment.
• Excessive State spending can cause inflation and debt crises, as seen in the 1970s and in Sri Lanka in 2022.
• Skill mismatch is real: India Skills Report and industry surveys repeatedly find only about half of graduates are employable.

Way forward 

• Employment-led growth – Push labour-intensive sectors like textiles, food processing, leather, toys, tourism and electronics assembly. Link incentives to jobs, as in the Employment Linked Incentive scheme (PM Viksit Bharat Rozgar Yojana, 2025).
• Public investment as job creator – Spending on health, education, care economy, housing and green infrastructure creates jobs and builds human capital at the same time.
• Affordable, quality public education – Strengthen government universities and ITIs so that a degree does not mean debt.
• Better school-to-work transition – Apprenticeships and internships (PM Internship Scheme), drawing from Germany’s dual vocational system.
• Social security for new workers – Implement the Code on Social Security, 2020 for gig and platform workers; State models like Rajasthan’s Platform-Based Gig Workers Act, 2023.
• Support MSMEs – Easy credit, cluster development and timely payments, since MSMEs are the largest non-farm employers.
• Women’s participation – Childcare, safe transport and flexible work to raise female labour force participation.
• Fair wages and demand – Enforce floor wages under the Code on Wages; a healthy wage share supports consumption and investment.
• Managing AI and automation – Large-scale reskilling and a social dialogue on technology adoption.
• Learning from others – Denmark’s “flexicurity” (flexible hiring with strong safety nets) and South Korea’s developmental State show that markets and an active State can work together.
• Middle path – The answer lies not in rejecting markets but in an enabling and caring State: markets for efficiency, State for equity, in line with Amartya Sen’s capability approach and the Directive Principles (Articles 38, 39 and 41).

Conclusion

Neoliberalism lifted growth and reduced poverty in many countries, but it also widened inequality and left many young people with costly degrees and few secure jobs. For India, with one of the world’s largest young populations, the demographic dividend can turn into a burden if growth does not create decent work. The task is to combine market efficiency with public investment in people.

Mains Practice Question

“Neoliberal reforms delivered growth but failed to deliver decent jobs for the young.” Critically examine this statement in the Indian context and suggest measures for employment-led growth. (15 marks, 250 words)

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