Neo-Liberalism and Social Democracy - Essay Example

Neo-liberalism comes from the terms “neo” and “liberalism”. Liberalism is a term that denotes freedom in expressing one's political, economic, and religious ideas. Neo on the other hand means a new kind of concept/ liberalization. On this note, neo-liberalism is a new concept and has gained prominence over the last 25 years. The main aim of neo-liberalism is to create a laissez-faire economy, free of governmental regulations (Sawyer and Arestis, 2004).

Social democracy on the other hand refers to a political ideology whose main intention is to create democratic socialism by using gradual and reformist methods. This is a policy that involves creating a welfare state and initiating schemes that will encourage collective bargaining. It aims to achieve this objective through an evolutionary and peaceful transition of the country’s economy to socialism. This is by reforming capitalism, to ensure that the rich are not always the dominant players in an economy. Advocates of social democracy believe that the best system of governance is a representative democracy. This type of democracy must occur under the rule of law (Eichengreen, 2012).

It advocates for decision-making processes to include aspects of economic democracy. On this basis, it guarantees all stakeholders of an economy equal rights and benefits, and this includes employees and employers. This type of democracy advocates for a mixed economy, and is against some aspects of capitalism, such as poverty, oppression, and inequality. On this basis, social democracy rejects a laissez-faire economy, as well as an economy that is controlled by the government (Sawyer and Arestis, 2004). Social democratic policies include universal access to health care, education, and employee compensation. Social democracy advocates for the formation of trade unions, and collective bargaining rights. Social democracy and neo-liberalism take different approaches to explain poverty. For example, Neo-Liberalism denotes that the causes of poverty emanate from tighter control of the economy by the government.

According to this theory, people are unable to get opportunities of making wealth, because the market is structured in a way that it is only the government that can acquire resources from it. Neo-Liberalists argue that some of the government services are not of high quality, as a result, the needs of people are not satisfied. On this basis, poverty will grow. To find poverty, therefore, there is a need to de-regulate the economy and provide equal chances for individuals to accumulate wealth. Through the deregulation of the economy, the government initiates measures that will help in increasing the profits of businessmen within an economy. This includes reducing taxes and removing trade barriers such as the issuance of license fees, or payment of some minimum amount of money, for an individual to conduct trade.

Neo-liberalists believe that this will help in creating job opportunities, hence reducing poverty. Neo-liberalism also eliminates the concept of the community or the public good. According to neo-liberalism, the poor need to find ways of eliminating their problems with housing, education, and social security. Social democracy on the other hand denotes that poverty is caused by excessive deregulation of the economy by the government. According to social democrats, the liberalism of the economy makes the rich continue growing richer and the poor continue growing poorer (Pautz, 2012). This is because the rich have an access to capital, and they, therefore, have the capability of investing in new areas of business. The poor on the other cannot access capital, and as such, they will continue providing labor to the rich, who on most occasions exploit their services.