The Neo-liberal’s conception of the minimalist State approximates Classical Liberalism’s emphasis on the State being a mere protectionist (law and order) outfit leaving the individuals free to pursue their self-interest in a manner deemed the best possible by them. Just as early positive Liberalism and its later variant, the Welfare State, were a reaction to the ‘excesses’ of Classical Liberalism, Neo-liberalism has come about as a consequence of disenchantment with the Welfare State. About roughly, a little over two decades ago, liberal democracies the world over (India included) started voicing disillusionment and, in fact, outright frustration with the hitherto dominant paradigm of the Welfare State.  

The Neo-liberal State, largely came to be seen as a concrete manifestation of the New Right philosophy that emerged in Thatcherite England in the late 1970s. (Alternatively, one can say that the New Right was a version of Neo-liberalism as it emerged in the UK under its Conservative Prime Minister Margaret Thatcher).

1. Criticism of welfare state: - In the book The Road to Serfdom (1944), Hayek said that collectivism or socialism and totalitarianism are the two sides of same coin. Both disregard liberty and autonomy of individuals. He said that monopoly of state over economic activities is harmful for liberty of individuals.
2. Rolling back of state: - Nozick (state anarchy and utopia) is neo-liberal or libertarian who said that powerful state goes against the basic concept of liberty. Hayek also wrote in the Constitution of Liberty, welfare state curtails the autonomy, self-reliance, independence and risk-taking capability of individuals.
3. Minimal and neutral state: - Neo-liberals believe in a minimal state. Hayek said that idea of progressive taxation violates the concept of equal pay for equal work. He also said that there is a difference between misfortune and injustice. Free market unlike justice does not presuppose a distributer. On the name of welfare state bureaucracy becomes powerful which ultimately end liberty.

The basic tenets of the Neo-liberal State are as follows:

• Focus on Individual Liberty - The principle of individuals not having the right to coerce each other should be extended to the State, ‘which after all is only an amalgam of individuals.
• Greater Innovation - Greater freedom greater innovation and progress; innovation would not occur where the State owns or controls the means of production.
• Importance of Incentive - Incentive is greatly motivating, while State intervention leads to ‘caution and inertia’.
• Significance of Free Markets - Free markets are conducive to ‘social coordination’. ‘Unlike a totalitarian State, a market economy evolves unconsciously, without depending on coercion, by relying on millions of individual actors constantly responding to price signals’.
• More Freedom - Planned societies are less free. They involve social engineering – the (former) Soviet Union being a classical example – but social engineering in whose interests? Free markets promote freedom.
• Social Justice - The Neo-liberal view of the State perceives ‘social justice carried out by the State to be inherently unfair’. This is because ‘certain individuals enjoy rewards they do not deserve, while others have rewards removed that they should be entitled to’.
• Pro-consumer Stance - State power can be unfairly monopolised, as interest groups form and are granted special treatment. The natural workings of the market are then upset. Monopolised State power adversely affects consumers. ‘They pay more and get less, as agencies of the State become increasingly captured by the individual interests of particular interest groups’.