The pillars of economic orthodoxy are shaking as the economists at the International Monetary Fund question the merits of neoliberalism. A recent article in the IMF's quarterly magazine Finance & Development asks simply "Neoliberalism: Oversold?" and concludes that in some cases the answer is "yes." The reassessment is important, as it shows a readiness among the faithful to question conventional wisdom. At the same time, however, this new analysis is not a repudiation of all neoliberal tenets. A sensible balance, it seems, is the proper response to crisis, not principle divorced from reality.

Neoliberalism is capitalism in its purest form. It calls for the smallest possible government, the opening of domestic markets to foreign competition, and allowing capital to go to where it will (ostensibly) be used most efficiently. In practice, this means shrinking the state and lifting the hand of bureaucracies, privatizing enterprises, balancing budgets, opening domestic markets to international competition and permitting money to move across borders with minimal restrictions.

The poster boy for neoliberal success is Chile, which implemented such reforms under dictator Augusto Pinochet in the early 1970s and enjoyed 5 percent annual growth in per capita real income from 1985 to 1996, which set the pace for Latin America. That success, along with support from Ronald Reagan and Margaret Thatcher, pulled neoliberalism from the fringes of economic discussion into the mainstream.