Partly there was simple apologetics. Powerful voices had emerged from the popular struggles of the late 1960s and early 1970s challenging the legitimacy of capitalism. The mainstream defence against such voices had been that Keynesian state intervention had proved capitalism could satisfy people’s needs. Now that claim fell apart in the face of economic crisis. The argument had to be turned upside down. State intervention was now presented as the problem rather than the solution.
This was especially pleasing for those who dealt in finance rather than production, because under the new orthodoxy any way of making money was necessarily beneficial. Neoliberalism saw sitting at home receiving interest or dividend payments as an incentive to production, and therefore a valuable social activity. As Nikolai Bukharin had pointed out long before, it was “the economic theory of the leisure class”. 
But more than apologetics was involved. There was a sense of desperation within capitalist circles in the mid-1970s. The first signs of crisis in their system coincided with growing assertiveness among workers. There had already been attempts to counter this in the late 1960s and early 1970s. Wage controls were imposed in Britain in 1966-70, 1971-2, 1973-4 and 1975-9; and in the US in 1971. Left wing supporters of Keynesianism tend to forget that these were an integral part of the post-war orthodoxy. But wage controls were not effective. They might work for a year or two, but they built up resentment among workers, which encouraged militancy even where it had hardly existed before, and they eventually fell apart amid waves of strikes.
The reborn free market approaches presented by Friedman and Hayek seemed to offer a way out. They claimed that the economy would resolve its own problems if it were freed from “distortions” to the market – whether these came from state intervention or from trade union interference with the “flexibility” of the labour market. Free trade would prevent national monopolies distorting prices, and unemployment would settle at the “natural rate” necessary to prevent wages eating into profits.
Ruling class ideologies are rarely just lies cynically spread in order to win the acquiescence of the ruled. They are sets of beliefs that give the ruling class a sense of its own importance, sanctify its rule in its own eyes as well as in the eyes of others and provide it with confidence that it can deal with any apparent flaws in its own system. Keynesianism fulfilled this role during the post-war decades in the advanced Western countries, as did Stalinism in the “Communist” states and “developmentalism” in Latin America, as well as the post-colonial states of Africa and Asia. But it became increasingly clear from the mid-1970s onwards that state intervention could not prevent economic crises in any of the world’s regions.  Neoliberalism succeeded in filling the ideological gap. As such it appealed not just to finance capital, but to productive capital as well.
(Source: jayaprada, via goethes-fist)