NEW YORK – Around the world, populist nationalism is on the rise, often shepherding to power authoritarian leaders. And yet the neoliberal orthodoxy – government downsizing, tax cuts, deregulation – that took hold some 40 years ago in the West was supposed to strengthen democracy, not weaken it. What went wrong?
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Part of the answer is economic: neoliberalism simply did not deliver what it promised. In the United States and other advanced economies that embraced it, per capita real (inflation-adjusted) income growth between 1980 and the COVID-19 pandemic was 40% lower than in the preceding 30 years. Worse, incomes at the bottom and in the middle largely stagnated while those at the very top increased, and the deliberate weakening of social protections has produced greater financial and economic insecurity.
Rightly worried that climate change jeopardizes their future, young people can see that countries under the sway of neoliberalism have consistently failed to enact strong regulations against pollution (or, in the US, to address the opioid crisis and the epidemic of child diabetes). Sadly, these failures come as no surprise. Neoliberalism was predicated on the belief that unfettered markets are the most efficient means of achieving optimal outcomes. Yet even in the early days of neoliberalism’s ascendancy, economists had already established that unregulated markets are neither efficient nor stable, let alone conducive to generating a socially acceptable distribution of income.
Neoliberalism’s proponents never seemed to recognize that expanding the freedom of corporations curtails freedom across the rest of society. The freedom to pollute means worsening health (or even death, for those with asthma), more extreme weather, and uninhabitable land. There are always tradeoffs, of course; but any reasonable society would conclude that the right to live is more important than the spurious right to pollute.
Taxation is equally anathema to neoliberalism, which frames it as an affront to individual liberty: one has the right to keep whatever one earns, regardless of how one earns it. But even when they come by their income honestly, advocates of this view fail to recognize that what they earn was made possible by government investment in infrastructure, technology, education, and public health. Rarely do they pause to consider what they would have if they had been born in one of the many countries without the rule of law (or what their lives would look like if the US government had not made the investments that led to the COVID-19 vaccine).
Ironically, those most indebted to government are often the first to forget what government did for them. Where would Elon Musk and Tesla be if not for the near-half-billion-dollar lifeline they received from President Barack Obama’s Department of Energy in 2010? “Taxes are what we pay for civilized society,” the Supreme Court Justice Oliver Wendell Holmes famously observed. That hasn’t changed: taxes are what it takes to establish the rule of law or provide any of the other public goods that a twenty-first-century society needs to function.
