Populist nationalism is on the rise around the world and often brings authoritarian leaders to power. And the neoliberal orthodoxy - reducing the number of employees in governments, cutting taxes, deregulation - which took hold in the West some 40 years ago, was intended to strengthen democracy, not weaken it. What went wrong?
Part of the answer is economic: neoliberalism has simply not delivered on what it promised. In the US and other advanced economies that have adopted it, growth in real per capita income (adjusted for inflation) between 1980 and the Covid-19 pandemic was 40% lower than in the previous 30 years. Worse, incomes at the bottom and middle of the scale have largely stagnated, while those at the very top have risen, and the deliberate weakening of social protections has led to greater financial and economic insecurity.
Rightfully concerned that climate change threatens their future, young people may note that countries under the influence of neoliberalism have consistently failed to enact strong anti-pollution regulations (or, as in the US, to address the opioid crisis and the childhood diabetes epidemic). Unfortunately, these failures are not a surprise. Neoliberalism was based on the belief that unfettered markets were the most efficient means of achieving optimal results. But even in the early days of the rise of neoliberalism, economists had already determined that unregulated markets were neither efficient nor stable, let alone suitable for generating a socially acceptable distribution of income.
Proponents of neoliberalism never seem to understand that the expansion of corporate freedom limits freedom in the rest of society. Freedom from pollution means deteriorating health (even death for asthmatics), extreme weather and an uninhabitable earth. There are always trade-offs, of course; but any reasonable society would conclude that the right to life is more important than the false right to pollute.
Taxation, for neoliberalism, is tantamount to a curse. He presents it as an attack on individual liberties: one has the right to keep whatever one earns, regardless of how one earns it. But even when they get their earnings fairly, proponents of this view overlook that what they earn is made possible by government investments in infrastructure, technology, education and public health. They rarely stop to consider what they would have had if they had been born in one of the many countries without the rule of law (or, say, what their lives would have been like had the US government not invested in Covid-19 vaccines).
Ironically, those who owe the most to the government are often the first to forget what the government has done for them. Where would Ilon Musk and Tesla be if they had not received almost half a billion dollars from the Ministry of Energy of the US President B. Obama in 2010. "Taxes are what we pay for a civilized society," noted Supreme Court Justice OV Holmes. That has not changed: taxes are what is needed to establish the rule of law or provide any other public goods needed by society in the 21st century.
Here we go beyond mere compromises because everyone - including the rich - is better off with an adequate supply of such goods. Coercion, in this sense, can be emancipatory. There is a broad consensus on the principle that we must pay if we want to have basic goods. And that requires taxes.
Proponents of smaller government will, of course, say that many expenditures should be cut, including government-run pensions and public health. But then again, if most people are forced to suffer insecurity due to the lack of reliable health care or adequate income in old age, society will be less free: at the very least, they will lack freedom because of the fear of how traumatic their future might be. Even if the well-being of multi-billionaires was somewhat undermined by asking each of them to pay a little more in tax to fund child tax credits, think what a difference it would make to the life of a child who doesn't have enough to eat or whose parents can't afford a visit to the doctor. Consider what it would mean for the future of the entire country if fewer of its young people grew up malnourished or sick.
All these issues should be central to this year's elections. The upcoming US presidential election offers a stark choice, not only between chaos and orderly government but also between economic philosophy and politics. Current President Joe Biden is committed to using the power of government to improve the well-being of all citizens, especially those in the bottom 99%, while Donald Trump is more interested in maximizing the well-being of the top 1%. Trump, who entertains the public from a luxury golf resort (when not in court), has become a champion of capitalist oligarchs and authoritarian leaders around the world.
Trump and Biden have completely different visions of the society we should work to create. In one scenario, dishonesty, the socially destructive pursuit of profit and rent, will prevail, public trust will continue to crumble, and materialism and greed will triumph. In the second, elected officials and public servants will work in good faith to create a more creative, healthy society based on knowledge and built on trust and honesty.
Of course, politics is never as pure as this description suggests. But no one can deny that the two candidates have fundamentally different views on freedom and building a good society. Our economic system reflects and shapes who we are and what we can become. If we publicly endorse a selfish, misogynistic con man - or dismiss these attributes as inconsequential flaws - our young people will absorb the message, and we'll end up with even more scoundrels and opportunists in office. We will become a society without trust, and therefore without a well-functioning economy.
Recent polls show that barely three years after Trump left the White House, the public has blissfully forgotten the chaos, incompetence and attacks on the rule of law of his administration. If we want to live in a society that values all citizens and strives to create ways for them to live a full and satisfying life, we only need to hear the concrete views of the candidates on certain issues to see that - the choice is clear.
The author is a Nobel Prize laureate in economics; is a professor at Columbia University
Copyright: Project Syndicate, 2024. (translation: NR)
Bonus video:
