The Great Democracy

by Ganesh Sitaraman

  The American story is similar. Reagan passed the torch to George H. W. Bush. Although Bush was not from Reagan’s political camp within the Republican Party (he had challenged Reagan for the presidency in 1980 and was viewed with skepticism by the true believers), Bush moved to embrace Reaganism in his campaign commitments. At the same time, with the losses of Carter in 1980, Walter Mondale in 1984, and Michael Dukakis in 1988, Democrats began to think they had to embrace neoliberalism as a path out of the political wilderness.

  Eventually, however, what started as a reform agenda attempting to correct the excesses of the previous era transformed into an ideology that extended its tentacles into every area of policy and even social life. Having lost any sense of balance, in its third stage, neoliberalism overextended. The result in economic policy was the Great Crash of 2008, economic stagnation, and inequality at century-high levels. In foreign policy, it was the disastrous Iraq War and ongoing chaos and uncertainty in the Middle East.

  The fourth and final stage is collapse, irrelevance, and a wandering search for the future. With the world in crisis, neoliberalism no longer has even plausible solutions to today’s problems. As an answer to the problems of deregulation, privatization, liberalization, and austerity, it offers more of the same or, at best, technocratic nudges. The solutions of the neoliberal era offer no serious ideas for how to confront the collapse of the middle class and widespread economic insecurity. The solutions of the neoliberal era offer no serious ideas for how to address the corruption of politics and the influence of moneyed interests in every aspect of civic life—from news media to education to politics and regulation. The solutions of the neoliberal era offer no serious ideas for how to restitch the fraying social fabric, in which people are increasingly tribal, divided, and disconnected from civic community. And the solutions of the neoliberal era offer no serious ideas for how to confront the fusion of oligarchic capitalism and nationalist authoritarianism that has now captured major governments around the world—and that seeks to invade and undermine democracy from within.

  In 1982, as the neoliberal curtain was rising, Colorado governor Richard Lamm remarked that “the cutting edge of the Democratic Party is to recognize that the world of the 1930s has changed and that a new set of public policy responses is appropriate.” Today, people around the world have recognized that the world of the 1980s has changed and that it is time for a new approach to politics. The central question of our time is what comes next. What comes after neoliberalism?23

  4

  AFTER NEOLIBERALISM

  The central failures of neoliberalism were twofold. Neoliberalism sapped society of community and solidarity, leaving people lonely and isolated and pushing us to retreat into tribal identities. And neoliberalism’s preference for private action had few limits—it created gaping inequality and, with it, unleashed the economically powerful to reshape politics, markets, and even society to serve their interests.

  These two crises—neoliberalism’s social crisis and its crisis in political economy—lead to four main possibilities for the future along, two dimensions: inclusive or exclusive communities and economic populism or concentration. Reformed neoliberalism seeks to fix the biggest failures of neoliberalism; it preserves the old ideology’s individualism and cosmopolitan sensibilities while seeking to mitigate some of the worst errors of its upwardly redistributionist economics. Nationalist populism rejects neoliberalism on both grounds, organizing a community around ethnic, racial, or otherwise nationalist sentiments while delivering economically populist policies. Nationalist oligarchy combines cultural nationalism with economic oligarchy. Great democracy is at once socially inclusive and economically democratic.

  Although there are examples of each of these approaches in the world today, they are necessarily ideal types—paradigms for what politics might bring. As a result, no person or even political theorist is likely to fit any one of these approaches perfectly. Each of these responses to the neoliberal era is evident in contemporary politics, but not all of them appear to be equally viable. At the moment, reformed neoliberalism and nationalist populism both suffer from serious deficiencies that make them unlikely to succeed as models for reform in the next few decades. The battle is more likely between nationalist oligarchy and great democracy. Both are complete worldviews, both could be stable systems of politics, and both are therefore viable contenders for defining the next era of politics.

  Reformed Neoliberalism

  Neoliberalism promised a system of individual freedom and competitive markets. It delivered a system in which political and economic power are concentrated in the hands of a small number of corporations and individuals. If neoliberalism went wrong, one possibility is to make it right, to curb its greatest excesses and mitigate its worst consequences. In a sense, we could adopt a measured, promising neoliberalism instead of the steroid-enhanced version that emerged in the 1990s and 2000s. Although they don’t identify this way, a variety of thinkers have, in effect, advanced elements of what we can think of as a reformed neoliberalism.

  The most prominent and sophisticated strand is liberaltarianism, a portmanteau that reflects a desire to bridge the divide between liberals and libertarians. Although they rarely discuss it, liberaltarians embrace a libertarian attitude toward equality—support for racial, religious, gender, and sexual tolerance. But their real contribution to rethinking public policy is economic. Liberaltarians like Brink Lindsey and Steven Teles are concerned about rising economic inequality, and they argue that government contributed to inequality due to private actors capturing government and skewing public policy. They call this the “captured economy” and focus on four areas of policy: Wall Street subsidies, intellectual property, occupational licensing, and neighborhood zoning. In each of these areas, they argue that interest groups—banks, companies, licensed professionals, and homeowners—have skewed policy to benefit themselves at the expense of market competition and efficiency. Without capture, Wall Street wouldn’t get subsidies, companies wouldn’t own the intellectual property in drugs or music for generations, hairdressers and dentists wouldn’t be able to restrict entry into their profession, and neighborhood density would increase as builders put up more housing.1

  Liberaltarians Will Wilkinson and Samuel Hammond argue that the next era should be one defined by the “free market welfare state.” Their key insight is that Republicans who opposed big government were grouping regulations and social services together when the two are actually distinct. Unbundling these components, they argue for a society with few regulations (the free market part) and significant public benefits, like Social Security and Medicare (the welfare state part). They claim that this approach is superior to other regimes because it will unleash dynamism in the economy while simultaneously protecting those who are on the losing end of change.2

  All four of these thinkers must be applauded for grappling seriously with real problems and for creative, insightful thinking to find solutions. But as a defining paradigm for the next era of politics, both endeavors suffer from some problems. Start with the liberaltarian approach. First, it is unclear that liberaltarianism will accomplish its goals. For example, Lindsey and Teles argue that inequality is partly a function of upward redistribution—wealthy people and interests capturing government and using it to serve themselves. This seems right in the case of Wall Street subsidies and intellectual property. But consider their example of occupational licensing. There is a significant income difference between most licensed hairdressers on the one hand and most doctors and lawyers on the other. Are hairdressers really the wealthy elites who are contributing to rising inequality in America? It seems unlikely. This is a problem because people are more likely to agree to deregulate hairdressers than doctors or lawyers, which means that in practice, reforming occupational licensing rules is likely to hit lower-income professions disproportionally hard. Lindsey and Teles also argue that there is real harm to consumers: licensing means there are fewer hairdressers, which increases prices for
poorer consumers. This might be true. But licensing also raises the wages of hairdressers, creating jobs with better wages. It isn’t obvious that society would be better off with slightly cheaper haircuts, compared with better-paying jobs that can’t be outsourced—and which, in turn, would help families pay for slightly more expensive haircuts.

  Wilkinson and Hammond face a similar problem. They argue that the free market welfare state will unleash economic dynamism and innovation due to lower regulatory burdens. It is certainly possible that regulations—and especially badly designed regulations—can frustrate economic innovation. But at present, the evidence suggests this focus is misplaced. Alex Tabarrok, a libertarian economist, conducted a study that shows that government regulations are not the cause of the lack of dynamism in the economy. The study is particularly notable because Tabarrok undertook the research seeking to prove the opposite. Regardless of how he broke down the numbers, he was unable to find any burdensome effect of regulations on dynamism.3

  The second problem with liberaltarianism is that its deregulatory policies might harm freedom and increase inequality because they could unleash and concentrate private power. Liberaltarians, like neoliberals, are more concerned with government action than inaction. And although they recognize that private actors can capture government, they don’t confront how unregulated private actors can oppress people in the marketplace. Without regulations, companies would be free to dump toxic waste into rivers, remove safety protocols from mines and oil rigs, and use lead paint in children’s toys. Some liberaltarian thinkers tend to focus on a narrow set of areas—licensing and zoning are the primary areas—and many make claims about regulation. But they pay less attention to all the benefits of regulations—clean air, clean water, safe workplaces, and safe toys. Nor do they attend as much to government regulations that preserve market competition and prevent fraud. Whether the goal is combatting the concentration of wealth or increasing economic dynamism, it isn’t clear why liberaltarians do not focus more on reinvigorating antitrust enforcement to break up tech companies or airlines. For some reason, one of the greatest threats to the economy is hairdressers getting paid a few extra dollars, not price-gouging telecom companies, Amazon taking over the lion’s share of online retail sales, or consolidation in the defense sector.

  It may be that they are a bit reticent to abandon neoliberalism. In his article coining liberaltarianism as a term, Lindsey suggests that liberals and libertarians might find common cause if libertarians abandon their goal of ending Social Security and Medicare and liberals, in turn, agree to cut these programs. Nothing about this proposal seems any different from the conventional neoliberal position on those programs. Coming to liberaltarianism as a self-described liberal, Teles acknowledges that his intellectual journey began with the Washington Monthly (run by Charles Peters, who was an intellectual leader of the center-left neoliberals in the early 1980s) and the Clinton-era Democratic Leadership Council. Left liberaltarianism’s origins, in other words, are an outgrowth of neoliberalism.4

  Another strand of reformed neoliberalism makes bold claims but with a single specific policy. In recent years, many people have become interested in the transformative possibility of a universal basic income (UBI), a policy by which everyone would get a cash income from the government every month. The advocates for this policy are wide ranging: philosophers, former labor union leaders, tech company CEOs—even Milton Friedman was for it. Some are interested in UBI as a way to alleviate poverty. Others are fearful that technology, artificial intelligence, and automation will lead to the widespread destruction of jobs, and they see UBI as a way to guarantee an income to those whose livelihoods will be wiped out by technology.5

  As a policy matter, much depends on how the UBI is designed. Some people see it as a supplement to the social safety net. But others argue that it should replace the social safety net—just give people cash and let them buy, for example, health care on the private market. There’s also the question of how much the UBI would pay, with some of the leading proponents suggesting $1,000 per month. Economically, the UBI suffers from serious challenges. Twelve thousand dollars a year falls just south of the federal poverty level for a single person in the United States. And if the UBI is a replacement for the social safety net, rather than a supplement, poor people won’t have access to Medicaid for health care. Imagine trying to pay for housing, food, transportation, and other expenses—plus health care costs on the private market—on $12,000 a year. To make things worse, the existence of a UBI might also depress wages: businesses could decide to drop wages to minimum wage because they know people have a supplementary income of $1,000 per month. For those who want to adopt a UBI because they fear that technology will eliminate most jobs in the future, the challenge is perhaps even greater: if the UBI is set too low, people will still need jobs to survive. The challenge is that raising the amount of the UBI to a livable dollar figure gets extremely costly extremely quickly. As Luke Martinelli has put it, “An affordable UBI would be inadequate, and an adequate UBI would be unaffordable.”6

  The central problem with the UBI is that its supporters—even on the left—frequently assume that there is no alternative to a neoliberal economy that distributes wealth to a small number of very wealthy people and leaves everyone else impoverished. Even those motivated by fears of automation and technology assume both that there won’t be jobs that require humans and that a small number of oligarchs will own all the robots. Whether consciously or not, they have resigned themselves to living within the structure of the neoliberal economy, seeking only to mitigate its worst excesses. But it isn’t clear why we have to accept such a fate. Instead of accepting the distribution of wealth and then slightly redistributing wealth through a limited UBI, we could instead embrace what Jacob Hacker has called “predistribution,” the idea of reshaping the rules of the market so the distribution of wealth isn’t so skewed in the first place. Such a policy, however, requires thinking about regulation, antitrust, and corporate ownership. But such policies are rarely on the lips of the UBI proponents.7

  None of this is to say that addressing licensing rules, creating a UBI, or other liberaltarian proposals might not each be desirable as a matter of policy to solve some more narrowly tailored problems. These are creative ideas, and well-designed versions of them certainly have merit. The problem is that, on their own, they don’t do enough to address the magnitude of contemporary political, economic, and social challenges.

  Indeed, while the theorists of reformed neoliberalism have been dreaming up policies to address the excesses of the last era, the ground of capitalism has shifted, initiating what Shoshona Zuboff has called “the age of surveillance capitalism.” Technological developments have fundamentally reformed industrial capitalism, Zuboff argues, into a system built on constant, widespread surveillance of the population. Tech companies such as Google and Facebook have a business model based on collecting data on every aspect of a person’s life—where you are at any moment, what you eat, how well you sleep, what temperature your house is, what you listen to. This information, along with everything else they collect, can be used for increasingly narrowly targeted advertising. But it can also be used to modify behavior and to control actions. With so much data, for example, big tech companies have the power to steer users to particular restaurants, political candidates, and even emotions. When this is coupled with psychological research on how to manipulate people’s actions, free choice is reduced to little more than a fig leaf.8

  In China, the fusion of state and market takes these dynamics to their logical extension, which some commentators call “digital authoritarianism.” China’s tech companies are transforming personal data into social credit scores that rise and fall as people engage in prosocial or antisocial behavior. And because any individual’s score is impacted by the scores of people in his or her social network, there is a strong incentive for people to pressure their friends into prosocial behaviors. The result is an authoritarian society without th
e degree of violence and oppression that has accompanied these governments in the past. The Chinese approach, Zuboff argues, leads to “guaranteed political and social outcomes: certainty without terror.”9

  Some of the proponents of reformed neoliberalism recognize that their policy solutions are partial, and they see their proposals as complementary to other reforms. But when thought of as a comprehensive vision, reformed neoliberalism falls short. In return for amassing great wealth in the lightly regulated marketplace, the titans of industry will agree to pay higher taxes to fund a slightly better welfare state that keeps ordinary people just above water. It should be no surprise, therefore, that some of the leading UBI proponents are extremely well-off technology entrepreneurs. Instead of ending surveillance capitalism, they would only alleviate its worst consequences. Reformed neoliberalism, it turns out, is little more than a social contract for oligarchy. This is not desirable, and it is unlikely to be stable. It is hard to imagine that deregulating hairdressers and paying individuals $12,000 a year will stop demagogues from stirring up nationalist hatreds and mobilizing people to overthrow self-indulgent wealthy elites. And if reformed neoliberalism helps legitimize digital authoritarianism instead, is that any better? Constant surveillance and behavior control are hard to square with any modern idea of a free society.

  Still, reformed neoliberalism is a plausible path forward—and for many, a tempting one. It requires less political courage to make minor changes to the current trajectory of society than it does to push for big reforms. Powerful elites are willing to trade minor tax increases and redistribution for maintenance of a system that benefits them. And nostalgia and the desire for a return to normalcy have a natural pull, particularly in times of uncertainty and flux. For many who oppose President Trump and remember the Obama era, reformed neoliberalism may seem like the best path because incremental reforms appear to be a way to recapture the past. The problem is that history only goes in one direction. Reforming neoliberalism is not only the least ambitious path we could take going forward and not only unlikely to clean up the wreckage of the neoliberal era. It is also unlikely to address the fundamental transformations taking place today.