Can Democracy Survive Global Capitalism?

1. The Postwar "Miracle" of Democratic Capitalism Was Exceptional and Fragile

The postwar system squared a circle. It achieved the improbable feat of combining dynamic capitalism with near-full employment, increasing income equality based on rising wages, and expanding social benefits.

Anomalous era. The three decades following World War II represented a unique period of "egalitarian capitalism" in the West, characterized by robust economic growth, widespread prosperity, and a significant reduction in income inequality. This was not a natural outcome of capitalism but a deliberate political achievement, born from the bitter lessons of the 1930s and the war. Key pillars included:

• Tight regulation of private finance.
• Empowerment of organized labor.
• An activist role for government in the economy.

Fortuitous convergence. This "vulnerable miracle" was sustained by a temporary confluence of factors, particularly the United States' economic supremacy and its magnanimous leadership during the Cold War. The US, with its progressive New Deal government, partnered with Europe to build mixed economies insulated from speculative finance. However, this system was weakly anchored politically and ideologically, making it susceptible to erosion once these unique circumstances faded.

Seeds of reversal. The success of this contained capitalism inadvertently sowed the seeds of its own undoing. As capitalists gradually regained their influence in the late 20th century, the political and institutional foundations of this balanced system began to weaken. The inflationary turmoil of the 1970s provided an opening for corporate and ideological right-wing forces to dismantle these democratic counterweights, leading to a reversion to unregulated market principles.

2. Financial Deregulation Fueled Global Capitalism's Anti-Democratic Turn

The free-market conservatives who regained power in the 1980s were beneficiaries of the reversion to global monetary turmoil and global financial deregulation.

Unleashing finance. The 1970s marked a critical turning point, as the Bretton Woods system of fixed exchange rates and capital controls collapsed, unleashing speculative private finance. This shift was not an economic necessity but a political choice, driven by resurgent financial interests and conservative governments. The consequences were profound:

• Increased financial instability and crises.
• A bias towards austerity in national economic policies.
• Reduced capacity for governments to manage their economies for full employment.

Washington Consensus. International institutions like the IMF and World Bank, initially conceived to stabilize the global economy, mutated into instruments for enforcing classical laissez-faire policies, particularly on developing nations. This "Washington Consensus" mandated balanced budgets, privatization, and free capital movements, often turning debt crises into broader economic catastrophes. This dogma severely limited the policy space for nations to pursue egalitarian economic models.

Domestic and global feedback. Financial deregulation at home and abroad became mutually reinforcing. Thatcher's "Big Bang" in Britain and the gradual dismantling of New Deal regulations in the US (like Glass-Steagall) created a global environment where banks sought the weakest regulatory regimes, leading to "regulatory arbitrage." This complexity and opacity in finance ultimately contributed to the 2008 global financial collapse, yet the political hegemony of finance remained largely unshaken.

3. Globalization Became a Tool to Undermine Labor and Social Contracts

Globalization without labor standards put wages ruthlessly back in competition, at a time of high global unemployment.

Labor as a commodity. The postwar social contract aimed to "take wages out of competition" through strong unions and regulations, forcing employers to compete on innovation rather than wage suppression. However, the new global regime, lacking international labor standards, reversed this, treating labor as a mere commodity. This political shift, not technological inevitability, led to:

• Outsourcing of jobs to lower-wage countries.
• Deliberate dismantling of national labor protections.
• Weakening of trade unions across the West.

Casualization of work. Employers increasingly restructured regular payroll positions into precarious "contingent" work (part-time, temp, contract, gig), avoiding benefits, stability, and labor laws. This "fissured workplace" model, facilitated by digital technology and lax enforcement, shifted risk onto workers and depressed wages, contributing to a widespread perception of worsening work conditions. Examples include:

• FedEx drivers misclassified as independent contractors.
• Hotel clerks working for management companies, not the hotel brand.
• The rise of platforms like TaskRabbit and Instacart.

Erosion of European protections. Even Europe's once-robust social contracts came under assault. The EU, through directives like the Posted Workers Directive and rulings by the European Court of Justice, actively undermined collective bargaining and national labor regulations. This created a "race to the bottom" in wages and social standards, particularly with the influx of workers from lower-wage Eastern European member states, further fragmenting the workforce and weakening union power.

4. The Center-Left's Embrace of Neoliberalism Betrayed Its Base

By the 1990s, center-left parties (led by Bill Clinton in the US and Tony Blair in the UK) had joined the neoliberal globalist consensus, undermining their own credibility when ordinary people decided they’d had enough.

A shift to the center. Following prolonged conservative rule and the perceived failures of traditional left policies, a new generation of center-left leaders—Bill Clinton, Tony Blair, Gerhard Schröder—repositioned their parties as "modernizers." They embraced market-friendly policies, often adopting elements of their conservative predecessors' agendas, believing there was "no alternative" to a deregulated global market. This included:

• Fiscal conservatism and budget balancing.
• Further financial deregulation.
• Weakening of trade unions and social protections.

Consequences of compromise. While these leaders achieved some social gains (e.g., minimum wage, some welfare state modernization), their economic policies ultimately failed to stem the tide of rising inequality and job insecurity for the working and middle classes. This strategic shift alienated their traditional base, leaving a vacuum that right-wing populists would later exploit. The personal enrichment of these leaders after leaving office further highlighted the perceived corruption of the political class.

Lost alternatives. The center-left's embrace of neoliberalism was not an economic inevitability. Alternative policies, such as public investment, robust labor market programs, and stronger regulation, were available but dismissed. This failure to offer a credible progressive alternative, coupled with a focus on cultural liberalism over class issues, left working-class voters feeling abandoned and disrespected, paving the way for the rise of figures like Donald Trump and the Brexit movement.

5. Trade Policy Was Reimagined to Serve Corporate and Financial Elites

In the third phase, beginning in the 1980s and intensifying with the creation of the World Trade Organization in 1995, financial and corporate interests waged a successful campaign to transform the trade agenda into one of general deregulation.

From tariffs to deregulation. Postwar US trade policy initially balanced open markets with national development, allowing allies like Japan to protect nascent industries. However, from the 1980s onward, trade agreements underwent a radical transformation. They ceased to be primarily about tariffs on goods and became powerful tools for:

• Dismantling domestic financial, health, consumer, and labor regulations.
• Prioritizing corporate property rights over national sovereignty.
• Opening global markets for "financial services" (banking).

The China paradox. US policy towards China exemplifies this shift. Despite China's state-led capitalism and human rights abuses, successive US administrations granted it full WTO membership, driven by the interests of American multinational corporations seeking offshore production and financial firms eager for market access. This "separate peace" with Beijing sacrificed American manufacturing jobs and a balanced trading system, while empowering a geopolitical rival.

Investor-state dispute settlement (ISDS). A key feature of new trade deals like NAFTA and the proposed TPP was ISDS clauses, which allowed corporations to challenge national regulations in private, extra-legal tribunals. These panels, often riddled with conflicts of interest, effectively superseded national courts and democratic processes, further eroding national sovereignty and public interest protections in favor of corporate power.

6. Tax Systems Were Rigged, Accelerating Inequality and Undermining Public Funds

The loss of tax fairness and legitimacy came in three phases: first domestic, next global, and then, in a convenient feedback loop, global competition to cut taxes supercharged further domestic tax cutting.

Erosion of progressivity. The steeply progressive tax structures of the postwar era, with high marginal rates on the wealthy and corporations, were gradually dismantled from the late 1970s onward. Driven by "supply-side" theories and powerful corporate lobbies, tax cuts disproportionately benefited the rich, leading to:

• A flatter, less progressive tax system.
• Reduced government revenue.
• Increased reliance on regressive payroll taxes.

Global race to the bottom. Globalization intensified this trend, as nations engaged in "tax competition" to attract investment by slashing corporate and capital gains tax rates. This created a "Catch-22 dilemma" for welfare states, as they faced rising social needs but a shrinking revenue base. The EU, despite its integration, failed to prevent member states from engaging in this destructive competition.

Tax havens and evasion. Beyond legal tax competition, globalization enabled widespread tax avoidance and evasion through offshore tax havens and complex accounting maneuvers like "transfer pricing." Corporations like Apple and Pfizer booked trillions in profits in low-tax jurisdictions, effectively paying little to no tax. Governments, often complicit or overwhelmed, failed to enforce existing laws, further eroding public trust and the legitimacy of the tax system.

7. Global Governance Institutions Became Instruments of Laissez-Faire

Numerous quasi-public bodies play a role in setting and enforcing international rules. The problem is that the ones with real power, such as the IMF, the World Bank, the WTO, and the EU, have been substantially captured by financial elites and have far less democratic accountability than their domestic counterparts.

Democratic deficit. While global challenges like climate change demand international cooperation, existing global governance institutions often operate with a "democratic deficit." They lack the transparency, accountability, and enforcement mechanisms of national democracies, making them susceptible to capture by corporate and financial interests. This leads to:

• A bias towards inaction or weak action on public interest issues.
• Industry-dominated standard-setting bodies.
• Limited avenues for citizen participation.

Illusory social responsibility. Efforts to promote corporate social responsibility through voluntary codes and certification regimes have proven largely ineffective. While some initiatives (e.g., fair trade coffee, anti-sweatshop movements) have raised awareness, they lack the mandatory, enforceable power of state regulation. Powerful corporations often use these as public relations tools, while continuing to engage in practices that undermine labor and environmental standards.

Weakness in human rights. In areas where global rules are most needed, such as human rights and labor standards, international bodies like the ILO are largely hortatory, lacking enforcement power. The US, while promoting "free trade," consistently resists binding treaties that would constrain its own corporate behavior or hold it accountable for human rights breaches, highlighting a double standard that prioritizes capital over social welfare.

8. Economic Insecurity Fuels the Rise of Illiberal Populism

In our own era, as in the 1920s, an excess of economic liberalism—supercharged by globalization—is destroying political liberalism.

Backlash against elites. The widespread economic insecurity, stagnant wages, and widening inequality resulting from neoliberal globalization have generated a profound popular revulsion against the governing class. This frustration, often unfocused and inchoate, has been skillfully channeled by right-wing populist leaders who promise to "take back" the nation from "cosmopolitan" elites.

The "others" as scapegoats. Right-wing populism typically operates as a "triad," rallying masses against elites and against despised "others" (immigrants, refugees, cultural minorities). This scapegoating diverts anger from systemic economic issues, allowing populist leaders to gain support while often aligning with the very corporate interests that caused the economic dislocations. This dynamic was evident in:

• Donald Trump's appeals to white working-class grievances.
• Brexit's focus on Eastern European migrants.
• European far-right parties' anti-immigrant rhetoric.

Erosion of democratic norms. This populist surge represents an "illiberal democratic response" to decades of undemocratic liberal policies. It often involves a contempt for parliamentary democracy, a rejection of liberal values like tolerance and compromise, and a preference for a "strong Leader" who embodies the "true popular will." This erosion of democratic norms, reminiscent of the interwar period, makes societies vulnerable to authoritarianism.

9. Today's Right-Wing Populism Echoes Historical Fascism

What is chilling is the rejection of many of the elements not just of liberal democracy—but of modernity itself, including rationalism and even objective truth.

Disconcerting parallels. While not yet as vicious or totalitarian as 20th-century fascism, today's right-wing populism shares troubling characteristics with its historical predecessors. These include:

• A sense of overwhelming crisis and national victimhood.
• The primacy of the group over the individual.
• Dread of decline due to "alien influences."
• The appeal of a strong leader whose instincts supersede reason.
• Contempt for parliamentary institutions and a "fake" media.

Illiberal democracies. In countries like Russia, Turkey, Hungary, and Poland, leaders like Putin, Erdogan, and Orbán have systematically dismantled democratic checks and balances while maintaining the forms of democracy (elections, parliaments). They suppress opposition, control the media, and curtail judicial independence, creating "illiberal states" that are profoundly anti-liberal in substance.

Trump's authoritarian style. Donald Trump's rise displayed alarming elements of this neofascist playbook, including:

• Inciting cybermobs and condoning violence.
• Using "dog-whistle" anti-Semitism.
• Employing "Big Lie" tactics to undermine objective truth.
• Mingling business interests with national policy.
  However, the resilience of US constitutional institutions and the pushback from other branches of government and the military have, so far, limited his autocratic ambitions.

10. Reclaiming Democracy Requires a Progressive Populist Counter-Movement

If democracy is to survive, the cycle will need to be reversed. This will require much stronger democratic institutions and a radical transformation of capitalism into a far more social economy.

Reversing the cycle. To counter the slide towards corporate autocracy and neofascism, a robust progressive populist movement is indispensable. This movement must:

• Rally ordinary people to understand and contest the rigged rules of capitalism.
• Rebuild trust in government as a force for public good.
• Subordinate globalism to the needs of national, full-employment economies.

Progressive policy agenda. A 21st-century mixed economy, or "democratic socialism," would involve:

• Finance as a Public Good: Drastic simplification and containment of private finance, treating banks as public utilities.
• Green Infrastructure: Massive public investment in modernizing infrastructure and transitioning to a post-carbon economy, creating millions of good jobs.
• Positive Nationalism: Trade rules that protect domestic industries, labor, and social standards from exploitative global competition.
• Restore Regulation: Reinvigorating antitrust enforcement and consumer protections against corporate abuses.
• Social Income & Wealth: Expanding public services (e.g., Medicare for All, free college) and democratizing wealth through mechanisms like citizen dividends (e.g., Alaska Permanent Fund).

US leadership and political will. While the EU struggles with internal divisions and austerity, the US, despite its flaws, remains structurally capable of governing its market. A progressive Democratic president and Congress, backed by a mobilized electorate, could lead this transformation, much as FDR did in the 1930s. This requires a clear, strategic vision that reclaims the public realm and demonstrates that social institutions can serve people more equitably and efficiently than purely commercial ones.

Last updated: February 26, 2026