For decades, many of the poorest in developing countries have been left reeling from free-market World Bank and International Monetary Fund (IMF) economic policies. Structural Adjustment Policies (SAPs) included forced privatisation, public spending cuts and lowered taxes on the global south. They spelled a triumph for Milton Freedman's Chicago School of Economics, which proposed that only by leaving everything to the market could economies flourish. Prosperity did rise for the few, as levels of inequality deepened. Sound familiar?

The austerity agenda in the UK and across Europe turns this dogma inward, with SAPs finally coming home to roost. Is this finally the signal we need to fight for more progressive economic justice throughout the world?

Following a relatively stable period in the post-war years, when Keynesian economics proved a great success and the NHS was built, a succession of governments that favoured market-based policies came to power in America and the UK.

This free-market ideology, known as neoliberalism, was backed by a range of privately funded rightwing thinktanks, such as the American Enterprise Institute, and Britain's Institute of Economic Affairs.

In the developing world, neoliberalism was translated into the Washington Consensus. The experiment started in 1970s Chile, with Friedman advising dictator General Pinochet to cut public spending and let the corporate sector take over. The results were disastrous. Inflation rose to 375% in 1974, and by 1975 Chile suffered unemployment of almost 30%. By the 1980s Chile had one of the highest rates of inequality in the world. The country's debt exploded as the rich became richer and the poor became poorer. Chile only recovered once these prescriptions were binned.

Yet the experience was spun by corporate lobbyists and rightwing thinktanks as a much-needed pain that Chile had to endure, as the policies were then rolled out across the world. As a result, what was ultimately a set of prescriptions for Latin America became translated as the only path to development.

Just as the UK is now attempting to repay its debt within four years at the expense of the most vulnerable in our society, SAPs were imposed on countries such as Chile to prioritise debt repayment over expenditure on health, education and development.

While debt flourished, millions suffered, as the private sector swooped in and extracted as much value as it could. Throughout the 1990s and 2000s, poor countries sold off vital agricultural lands, prioritising export-led growth (where mainly big companies survive) over feeding their own people, alongside privatising public services.

Water privatisation in the south, for one, failed abysmally, with fewer than 900 people connected per day over 10 years, instead of the needed 200,000 people that would be needed to meet the millennium development goal. Private sector options were pushed because of ideology, not common sense.

Even the IMF admitted it got it wrong. In a 2004 report, it concluded: "It cannot be taken for granted that public-private partnerships are more efficient than public investment and government supply of services… the theory is ambiguous and the empirical evidence is mixed."

A review by the IMF of privatisation showed that SAPs often resulted in rising unemployment, an erosion of tax revenues and increased debts.

In fact, four of the five fastest growing developing countries in the late 1990s were those that rejected neoliberalism. After a severe famine in 2005, Malawi rejected IMF and World Bank prescriptions and subsidised fertiliser for poor farmers. As a result, during the 2007/08 food price crisis, Malawi was not only able to feed its population, but became a bread basket to the region.

So why are we treading this uncertain path here? In the UK we're seeing banks grant bonuses equivalent to DfID's entire annual budget, but calling our debt levels unsustainable. The government is slashing hundreds of thousands of jobs and dismantling our welfare system to balance the budget. Ex-Treasury official David Blanchflower has argued that "the cuts will lead to a spiral of unemployment and leave a further 3 million people jobless."

The deficit isn't caused by profligate government spending to support an over-bloated welfare state, but by a massive bank bailout, shrinking government revenues, and a decline in corporate taxation. As in the developing world, maintaining public spending is what we need for long-term support to our economy, and to our populations.

Throughout the global south, social movements are fighting the dogma of austerity and privatisation. For decades, Europe has been held up as a paragon for how social democracy can work, by providing free healthcare or education, and ensuring people have a high quality of life at the same time. The legacy of the Chicago School is invading this last battleground for social justice. Fighting the austerity agenda at home is a truly globally relevant campaign.