Capitalism and Neoliberalism- what’s the difference?  What Pakistan should do 

Neoliberalism and Capitalism

Both capitalism and neoliberalism advocate a free market economy free of state intervention. The line between capitalism and neoliberalism is so thin that many people consider the two concepts to be interchangeable. However, there are differences that distinguish each of them. 


Capitalism advocates a free market economy in which market forces such as demand and supply regulate the market without the intervention of the state. This fosters the profit motive and encourages entrepreneurship. It emphasizes the rule of law and limits state participation to administration and the upkeep of law and order. 

In a capitalist market, goods are produced at the lowest possible cost due to stiff competition among entrepreneurs. However, this entails paying low wages to workers who are unable to obtain goods and services that are out of their price range. Because the state bears no responsibility for providing any services to its citizens, low-wage workers may face inconvenience, particularly when essential services such as healthcare are involved. This is an unethical situation and a negative feature of the capitalist economy. 

However, capitalism comes in a variety of flavours. According to some models, the government should make large investments in infrastructure and take steps to increase employment, which are required for capitalism to reach its full potential. Some models envision a society in which some aspects of social life remain non-capitalist in nature while capitalism contributes to economic growth. These models do not want the drive to accumulate capital – the core spirit of capitalism – to dictate socio-cultural values. 


Before delving into neoliberalism, consider the liberalism that prevailed in the United States during the 1800s and early 1900s. It promoted the theory that free trade was the best way for a country’s economy to develop. During the 1930s Great Depression, it was challenged by John Maynard Keynes, a renowned economist who advocated full employment for full growth of capitalism and believed that it could be achieved through area-specific intervention of the government and central bank for job creation. Following the Keynesian theory of the government working for the common good, the United States saw a significant improvement in the standard of living for a large number of people. However, the crisis of capitalism over the past two and a half decades has paved the way of the revival of the previous liberalism with a greater force under the name “neo-liberalism”. 

Read More: Impact of Philosophy on Modern Society   – About Pakistan

Neoliberalism is a political philosophy that claims to understand the relationship between human nature and economics and concludes that capitalist profit maximization can maximize human flourishing. It refers to a set of economic policies that advocate for economic liberalization, open markets, deregulation, the elimination of licences and all forms of state control in trade and commerce, and the rapid globalization of the capitalist economy. 

Neoliberalism promotes its philosophy regardless of whether it harms workers’ interests or undermines the safety net for the poor. It defends spending cuts for social benefits such as healthcare, education, and public utility services that have a negative impact on the public’s interests. Individual responsibility is intended to replace the concepts of public good and social security in Neoliberalism. According to this viewpoint, individuals must help themselves in all circumstances, rather than looking to the state for assistance. Many believe that capitalists are using neoliberalism to reclaim the powerful position that it lost following the Russian revolution and the rise of social democracy in Europe. 

Capitalism vs. Neoliberalism 

Capitalism is a social and economic system that exists in most parts of the world, with the exception of socialist and communist countries. It is a system that promotes private ownership and entrepreneurship while not criticizing the motive or profit-making. It is a market that is unregulated by the government and is ruled by the forces of supply and demand. Neoliberalism is another term for the emergence of ideas and thoughts in the economic world over the last 25 years or so. There is a lot of overlap between capitalism and Neoliberalism, and some people believe the two terms are interchangeable. 

What distinguishes Neoliberalism from Capitalism? 

• Neoliberalism refers to the most recent developments in capitalism. 

• Neoliberalism is a variant of capitalism. 

• For some, Neoliberalism is akin to capitalism on steroids. 

Neoliberalism in Pakistan 

Even during the heady days of decolonization in Pakistan, the relationship between capital and state forged under British colonial rule did not give way to a new systemic logic. For the most part, the Pakistani state has led economic modernization projects based on the commodification of land, water, forests, minerals, and other natural resources, while also facilitating accumulation by private industry and agriculture. Only the social power of Pakistan’s organized labour, peasant, and student movements could force a modicum of wealth redistribution. 

During the neoliberal era, the regulatory state has almost entirely broken the few promises it made to working people. The army dominates the state apparatus in Pakistan’s specific postcolonial context. It has facilitated increasingly violent and financialized forms of capital accumulation while profiteering uncontrollably. 

Pakistan, for example, is now by far the world’s leading producer of soccer balls: Sialkot, a city in Punjab with a population of around 500,000, now produces nearly 70% of global supply. In 2020, nearly 60,000 people were employed in Sialkot’s soccer ball factories. The city is also a global hub for the production of surgical instruments. 

Pakistan’s role in global manufacturing has received less attention and praise from the neoliberal mainstream than that of its neighbours India and Bangladesh. The business press has portrayed the latter as success stories for housing multinational pharmaceutical corporations and a heavily feminized garment industry. 

Workers’ working conditions and pay rates in all of these industries are frequently deplorable. 

Read More: Role of Foreign Investment in Economic Development of Pakistan  – About Pakistan

Globalization of manufacturing processes exposes workers to crises such as the COVID-19 pandemic and Russia’s invasion of Ukraine. During the pandemic, demand for soccer balls in Sialkot fell dramatically, but factory owners expected the market to rebound in time for this year’s World Cup. 

The windfall profits generated by speculative avenues such as real estate and the stock market are a second feature of neoliberalism in Pakistan. Following the events of 9/11, relatively affluent Pakistanis living in Western countries remitted large sums of money to General Pervez Musharraf’s US-backed military government in Pakistan. Plots in gated housing developments were a particularly popular destination for such investment. 

This real estate boom has accelerated over the last two decades. Property developers have devoured agricultural land in suburban areas, eager to increase real estate supply for a hungry, upwardly mobile class of investors. The Pakistani military and other state institutions are directly involved in the land grab and eviction of farmers and workers. Indeed, public officials, both serving and retired, frequently act as partners in these property developments, exemplifying the state-capital nexus that underpins Pakistani neoliberalism. 

The US “war on terror” boosted militarized accumulation in Pakistan, giving the army an excuse to push such processes forward under the guise of “counterterrorism.” While the US military-industrial complex made billions by waging an endless war in neighbouring Afghanistan, its Pakistani client army made vast sums by monopolizing contraband trade, roadbuilding, logistics, and construction within Pakistan. 

Under the guise of “development,” the final pillar of Pakistan’s neoliberal accumulation regime has been a no-holds-barred expropriation of the commons. 

This has meant focusing on a variety of geographical zones, from coastal deltas and inland waterways, which are traditional sources of income for fishing communities, to mountainous highlands rich in mineral deposits (and which play host to reckless forms of tourism). Pakistani and multinational elites have also increased their efforts to extract gold, copper, and coal from historically oppressed peripheral regions. 

What Pakistan should do? 

The fact that a society like Pakistan is highly unequal in terms of wealth/income distribution, gender relations, and caste differentiations is ignored by the neoliberal theoretical framework. As a result, when the state does not direct development, market forces simply reproduce and reinforce existing realities in Pakistani society, resulting in increased socioeconomic inequalities. This not only has a negative impact on Pakistani society’s socioeconomic dynamics, but higher inequities also impose a significant constraint on the prospects for rapid growth and sustainable economic development. 

It is also critical to recognise that economic development processes generate conflict in society. For example, urbanisation or industrialization may necessitate deforestation, which some members of society may not approve of, while others may believe it is necessary and unavoidable for the welfare of society. Similarly, developmental processes may give birth to new elites who may challenge the hegemony of old elites. As a result, the role of the state is not only central, but also indispensable in resolving at least some of the embedded conflicts generated by development processes. 

The economy cannot and should not be studied as a separate and isolated sphere unaffected by politics, institutions, or social classes. As a result, the central tenet of neoliberal policies, which separates the state from the economy, cannot be considered a serious development strategy. Contrary to the claims of neoliberal policymakers, neoliberal policies harm poor and working people everywhere, including the developed and developing worlds. 

Read More: The Economy of Pakistan – About Pakistan


As stated previously, capitalism is an economic practice, and neoliberalism is a philosophy that fanatically defines how societies that practice capitalism should be managed. To summarize, Pakistani neoliberalism has consolidated and exacerbated patterns of capital accumulation and colonial statecraft that have shaped social life in the region for over three centuries. In contrast to Latin America, where the ravages of neoliberalism have resulted in the revival of left-progressive movements, Pakistan and the South Asian region as a whole are increasingly under the control of reactionary political forces. 

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