The Conflict of Equity and Egalitarianism vs Neoliberalism and its Effect on American Democracy

Introduction

America has long been the most symbolic pillar of individual freedom in the modern and developed world, and rapidly grew into that position, not only due to its history as the first nation to break away from the grip of the British Empire and establish itself as a nation governed for and by its own people, but also due to the technological expansion of the post-WWII era that brought civil and economic rights to an array of different social demographics in the nation. This progression not only helped America further its culture of diversity, inclusion and civil equality but also helped bolster its economic expansion to go with an eclectic expanse of collective rights for all its citizens, cementing America’s position as the most prosperous melting pot in world history and the benchmark of civil liberty worldwide. Since America’s inception in 1776 with the writing and signing of the Declaration of Independence that cut its ties from its former parent country, the US established its commitment to the document’s introducing and defining clause. “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”.[1] These words, engraved into the founding of the country, as a fundamental and integral promise to its people, went on to inspire the movements of those who fought for equal rights and equal opportunities for America’s disenfranchised, regardless of race, religion, gender or class. Spanning from Abraham Lincoln and the ablitionists fight to preserve the union and end slavery, to Susan B. Anthony and the struggle for women’s suffrage, to the New Deal of FDR and the creation of the welfare state to assist those struggling during the Great Depression, to Martin Luther King Jr. and the civil rights movement that sought to achieve equal civil rights for all people, and so on. Throughout history, America’s ascension as the world’s greatest superpower, as well as the world's most ambitious cultural experiment to date was always led and facilitated by leaders who continued America’s agenda of promoting and upholding freedom, equity and justice for its people. Through political and socioeconomic change and development, and the parallelling international consequences that accompanied it such as an increase in cultural and financial globalization as well as global trade, both the US’s example and influence has spanned wide throughout the globe glorifying itself as the most powerful and proclaimed example of ensurers of political rights and economic opportunities for its citizens. Its set of power-balancing governmental ideals and principles that were established and written by the founding fathers allowed Americans to gain the freedom and opportunity to prosper economically, as well as have efficacy in their politics, allowing America to grow into one of the most powerful nations in history, with particular respect to its overall economic output; military power, cultural influence, and execution of governmental and civil practice. This is all due in part to the strength and durability of it’s revolutionary style of government, which is America’s prized legacy and most precious gift to the rest of the world. The American Constitution, which was written and devised by James Madison and the founding fathers, provided the framework for a form of democracy that would self-check and balance power throughout three different branches of government; through state, local, and federal levels of government, and maintain itself through elections of representatives who will stand for the people’s will. It is a system of governance that allowed America to survive intense cultural turmoil like the Civil War, the Civil Rights Movements of the 1960s, extreme economic downturns like the Great Depression and the housing bubble burst of 2008 causing the Great Recession, as well as other economically and culturally tumultuous events that could have have brought political and economic disaster to American civilization had there were not been safeguards and systems in place for recovery and change.

But in modern times, there has been a change in the direction of the country’s ideals, as well as it’s overall priorities. Democracy in America, as well as in many other places around the globe, has been failing and succumbing to authoritarian pressure, and democratic rights and freedoms have been disappearing, along with the people’s collective faith in their government. At an astounding rate, plutocracy, populism and the subsequent authoritarianism that has inevitably followed has been supplanting the fair and democratic electoral processes created to maintain accountability, transparency and political efficacy in the free countries of the world. This development has been followed by socio-political turmoil including resistance movements such as Hong Kong’s democratic resistance against the authoritarian grip of mainland China and the left-wing social movements within the United States such as Antifa and Black Lives Matter, but governmental suppression of these resistance movements has been strong-handed and stifling. Anti-democratic governments such as China and Russia have been asserting the weakness of the democratic system in favor of their own regime control of government, and have been fighting and stomping out any forces that attempt to oppose them. Specifically during the presidency of Donald Trump this was also the case in the US. Shows of nepotism and corruption within the state, disregard for the freedom of the press, favorance toward emboldening the wealthy and powerful, and the dismissing, condemning, and restricting of constitutional shows of protest and civil assembly have all been present. Notions in bad-faith for recounts of votes, dishonest calls into question of voter integrity and claims of election results being tampered with by foreign entities and by political oppositions have poisoned the U.S’s democratic integrity and have seeded doubt and fear into the American people about the effectiveness of their government. But why is democracy failing in the US and allowing authoritarianism to prevail and what can we do to reverse this development?

Many speculate about social and economic factors playing a role in the failings of US democracy. Since the 1980s, wealth inequality in America has been rising rapidly and class mobility has been falling sharply due largely in part to the neoliberal economic policies first implemented by the Reagan administration. Also known as Reaganomics, this series of policies decreased taxation rates for the countries wealthiest individuals and companies, and argued that if the country’s top earners were given more tax lenience and economic stimulus then the benefits of their increased net earnings would “trickle down” and flow into the pockets of stakeholders including workers, communities, and other supposed beneficiaries of these company’s economic successes. A plethora of studies have shown that this was not what occurred. Instead, unskilled labor wages began to decline and continuously lost its share in the nation's GDP, the national debt began to climb rapidly, and the overarching theme of anti-statism that has taken hold of the republican party led to the rise of the authoritarianism of Donald Trump. The neoliberal policies of Reagan allowed political populism to take hold of elections and has encouraged corporations to lobby politicians for benefits for their own business agendas, often influencing policy at every level of government and undermining the power of the civilian constituents that fairly and purposefully elected their representatives. To combat these developments America’s institutions and policies must remain flexible and tackle the economic and social situation that lies before it, especially with the quickly approaching expansion in industry and technology that many are calling the fourth industrial revolution on the horizon. In order to tackle these challenges, America’s democracy must be sound.

Literature Review

A number of scholars have been aware of America’s crisis of democracy for some time now. Many find links between the neoliberal policies that began a rise in the disproportion of wealth between economic classes in America, and the influence that corporate America has begun wielding in American politics, harming our strength of government and democratic affairs. But to begin however, I will define neoliberalism using Thomas Biebricher’s definition he uses in his article Neoliberalism and Democracy, stating “neoliberal theory is best understood as a body of thought that is not exclusively concerned with economics but rather with political economy, and thus it includes a political philosophy replete with views on the state and democracy as well.”[2] Biebricher also comments on the concept of neoliberalism by exploring its roots as the answer to the Keynesian model of economics that took hold of the United States following the Great Depression in the 1930s. During this time FDR successfully rebranded progressive and Keynesian economics as liberal and was able to leave the ideas of classical liberalism of Adam Smith and David Ricardo without an intellectual base. But as the European revolutions including the Bolshevik Revolution in Russia and the Germany National Socialism party ascension came into fruition with their rejections of classical liberalism, some such as renowned economist Friedrich Hayek began to reassert the values of classical liberalism as a new “neoliberal” idea and as economically viable stating “the old liberalism is not of much use for our purpose, what we need are people who have faced arguments from the other side and fought themselves through a position from which they can both critically meet the objection against it and justify their views.”[3] This was essentially a utilization of the crisis of fascism in Europe as a catalyst for once again advocating for a deregulation of capitalism in the United States.

In the wake of the revival of classical liberalism in the form of neoliberalism as a resurgent economic idea, the ideas began to take hold in American politics. John Komlos in his paper Reaganomics: A Historical Watershed deconstructs and critiques the policies of the Reagan administration and explains where they went wrong. The 1970s saw economic stagflation defined by an inflation level of around 13%[4] and an employment level of around 7.7% and due to this, Ronald Reagan was able to win the presidency in 1981 with his anti-government rhetoric and claims that overtaxation caused “reduced incentives to work and save” and “reduced employment for the poor and older workers.”[5] His ideology of supply side economics, also known as trickle down economics or Reaganomics was an ideology largely based on faith and not on economic data or evidence. It included a major tax break in 1981 that changed marginal tax rates at a 25% drop across the board, which dropped the top tax rate from 70% to 50% and the lowest from 14% to 11% exemplifying the disproportionate economic advantage given to the wealthy of America.[6] Soon after, there was another tax break in 1986, dropping the top tax rate again from 50% to 38.5% that added further to the wealth disparity being promoted by the Reagan administration, all in order to encourage economic activities that did not occur. Personal savings as a percent of disposable income began to decline rapidly from a long period of consistency at 11.4% from 1951-1981, to 8.5% in 1988 and then dropping sharply to 3.2% by 2005, and while gross private investment increased at a rate of 4.24% from 1950 to 1979, over the time of the Reagan administration the investment levels did not change and remained at 4.26%.[7] These tax breaks disproportionately affected America culturally as well, Black women were among the most unemployed prior to 1981 and and after the tax cuts were still largely unemployed at an astounding 41%. In support of cutting government social programs Robert Hall of Stanford University, called the welfare programs Reagan was defunding “pouring money down the rat holes”[8] in reference to his perceived waste of money being spent on welfare programs that assisted poor communities. Many believed that the reduced taxation of the rich would actually refinance itself by providing an increase in income for workers which would incentivize people to work harder and make business owners take more risks. This proved not to be the case as lowering government revenue through lowering tax rates while also spending half of the government budget on the military was primed for large deficits. Indeed, during Reagan’s administration the national debt tripled from $965 billion to $2,740 billion. The after effects of the Reagan administration were felt immediately. While the top 1% of earners' wealth grew 229% since 1979, the bottom 90% has grown just 40%.

In Corporations, Politics, and Democracy: Corporate political activities as political corruption we hear about the effects that business has in the political realm and what the implications it has on influencing government actors and elected representatives are. Daniel Nyberg asserts that the exercise of power and influence of corporations within the “political sphere of decision making, the public sphere of deliberation, and the private sphere of citizens’ interests”[9] leads to systemic dependence upon corporations in decisions and excludes citizenry from these three spheres in democratic processes and is effectively political corruption. He asserts that the literature on corporate political activity(CPA) and on the political corporate social responsibility(PSCR) are both ineffective in communicating the implications on our democracy that corruption within corporate lobbying can have and that these literatures are effectively forgone by most businesses and are overestimating “corporations willingness or capacity to forego strategic interests.”[10] He observes that while politicians are viewed as corrupt for engaging in bribery and quid pro quo exchanges, corporate agents are viewed as advancing their company’s strategic interests and that both are engaging in legal behavior. However he adds, they both are fundamentally impeding on the trust of citizens that is necessary for democratic processes. Corruption in campaign financing is one of the most egregious of the different forms, as PAC contributions to different campaigns of different lawmakers “almost always lead lawmakers to vote more similarly”[11] on policy issues. And because relationships are not formalized through contractual agreements, instead under the table receptions of money and information, they cannot be legally called bribery. Furthermore with the Citizen’s United Act, corporate spending has become a part of free speech, making corporate interests protected under the first amendment. Nyberg’s observations about the interactions of governmental officials show how democracy can become lenient on the endless funding of big corporations and that corruption can become an institution within a democracy, corroding it from the inside.

In Democracy, Policy and Inequality: Efforts and consequences in the developed world, Dae Jin Yi and Jun Hee Woo look at the effects that effective democracy can have on not only reversing the wealth disparity but also that income inequality has on democracy itself. They argue that while democracy does not have a direct effect on the redistribution of wealth itself, it does influence policy which can have varying levels of effect on the spread of wealth throughout a nation. They define two areas of policy that have the most sizable levels of impact on the distribution of wealth throughout a society, levels of government spending and the generosity of the welfare state. They then describe the datasets and empirical models that they use to analyze their framework. Their findings result in the conclusion that, while a generous welfare state can help close the gap between the wealth disparity between classes, the spending of the government has no effect on closing the gap between the income disparity.

In Reflexive Democracy: Political Equality and the Welfare State Olsen and Mccarthy analyze the welfare state as a means of promoting agency, instead of mere equality of goods and resources, effectively asserting that creating a welfare state becomes a means of promoting participation in not only the economy but in democracy as well. The authors argue that creating a system of welfare that not only reproduces poverty, but that also marginalizes groups politically is a significant harm to our democratic ideals. Recent welfare programs such as TANF (Temporary Assistance for Needy Families) “does not provide adequate opportunities to acquire the skills and resources they would need to participate as equals in politics”[12], and that this subjects them to being “less able to form the programs that directly benefit them.”[13] In the book, the authors lay out three genres of argument for the welfare state in America, the labor-paradigm, the feminist-paradigm, and the deliberative-democratic paradigm. In reference to the last, the authors lay out a participatory ideal that the welfare state needs to aspire to. Stating that social norms in a society such as, political participatory age, maturity, retirement, marriage, and other norms that we adopt are established by law sets the stage for their next required norm in society, fair and normatively valid political discourse. Ultimately, Olsen and Mccarthy claim that integrating economic, social, cultural, and political preferences with other goals and values enables individuals to have a voice, which is key in a democratic society.

Research Design

My research question is, why is democracy failing in the US and allowing authoritarianism to prevail and what can we do to reverse this development? I will be answering this question through data I have found in my literature sources above including Neoliberalism and Democracy; Corporations, Politics and Democracy; Democracy, Policy and Inequality: Efforts and consequences in the developed world; and Reflexive Democracy: Political Equality and the Welfare State as well as other sources of analytical quantitative and qualitative data I have come across. Using statistics on income inequality that I obtained through research on the effects of neoliberal economic policy and through research on political corruption, as well as qualitative data on the effectiveness of the welfare state and its effects on political discourse I will be able to make a definitive statement on the causes of democratic failings in the United States and what factors may play into its recovery.

Analysis

I argue that the rise in wealth inequality and corporate power since the 1980s has not only led to the increased power of the private sector, especially in the decisions that our elected representatives make, but also that it led to the rise of authoritarianism by way of political populism in 2016. In a study conducted “Empirical evidence for the rise of populism after a crisis, especially from the extreme right, is provided in a study of over 800 General Elections in 20 advanced economies over the last 140 years. The study’s key finding is that on average, ‘extreme right-wing parties increase their vote share by 30% after a financial crisis.’”[14] This study conducted with a large sample size suggests that the extreme right, after going through a financial crisis such as the one America suffered with the Great Recession of 2008, often increase their voting and become 30% more active in the general vote. If we assume that the election of Donald Trump in 2016 was won through populist tactics, enabled by an economic crisis of which was disastrous enough to provoke a population to vote for a potential authoritarian, the next questions are what was the cause of the economic disaster and how do we stop the rise of a political populist from maximizing on the woes of the economically wounded in our country once more?

Answering one of these questions we can look at the neoliberal policies that shaped our country’s economy as well as the global economy’s policies since the 1980s. The deregulations of the financial sector in the American economy as well as the liberalization of capital mobility in the global economy is widely theorized to have been the cause of the worst economic recession since the Great Depression. Capital daisy chains of debt built through flimsy financial innovation schemes connected investors with savers across the country without even their knowledge, and when the housing market finally crashed and people started defaulting on their mortgages, those daisy chains fell apart and people lost much of their savings as well as homes. Economic irresponsibility was surely at fault for the need and desire of individuals to own multiple homes they couldn’t afford, but the misbehavior of the financial sector in issuing subprime loans can be accredited to the capital liberty they had due to financial deregulation. Editor of the Financial Times Peter Northam said, “because they process the many billions of dollars worth of investments flowing across national borders each day, the markets have become the police, judge and jury of the world economy—a worrying thought given that they tend to view events and policies through the distorting lenses of fear and greed.” [15] Neoliberal economic policies and irresponsible financial actors were ultimately concluded to be the main cause of the recession, which caused further wealth disparity and which was the subsequent cause of the extreme political right’s political unrest which ultimately led them to the populist Donald Trump.

There is also extensive research on the presence of the private sector in the governmental affairs of Washington DC. Since they became emboldened by neoliberal economic policies, big corporations have been lobbying congressmen and women unethically to try and influence the political decisions of Washington DC, harming our democratic processes and corrupting our government. The CPA (corporate political activity) was directly involved in the attack on unions in the United States for the purpose of trying to roll back wealth distribution regulations, resulting in limited options to counter from political proponents. This was also combined with a lobbying campaign to redirect policies that were going to be going toward public services, such as schools and health services, to the private sector. This imposition of the private sector is a direct assault on the nation's democratic processes. They’ve also lobbied directly against citizen’s first amendment right to free protest, as the CPA have convinced lawmakers to privatize certain locations so citizens cannot go there to practice free assembly.[16] By these developments in private sector dominance and even governmental dependence on the private sector, we can conclude that capital and wealth play too large a part in the decisions of our government to be ignored. Democracy cannot function when its representatives corrupt the good faith of their constituents who voted them in on the promises they made and the actions that they sold. Capital cannot continue to hold more disproportionate influence in our democracy than labor and the middle class. “The corporate interlocking of the three spheres leads to de-democratization, since the spheres’ independent democratic function to account for representation, voice and interest are undermined.”[17]

What we can do to reverse these developments is invest in the welfare state and promote inclusive political discourse in all areas of our society. In order to ensure the “participatory ideal” authors Olsen and Mccarthy state that economic security is not enough. Participation in the economy along with participation in our democracy can be facilitated by ensuring the formation of norms in society. This will allow people to justify and evaluate beliefs through a new found assertiveness due to a known value in themselves. The formation of these norms, the authors state, must be rooted in equality. The true goal of the welfare state is therefore equal political agency. Their ultimate assertion being “citizens should have sufficient and equal opportunities to formulate the norms, laws, and policies under which they live.”[18]

Conclusion

My findings from my research enabled me to describe the ways in which democracy was under assault in America and propose methods for dealing with the fall out. While democracy has been a guiding light for America in its history, its beacon will soon pass if action is not taken to preserve its true worth as a system of governance that can be fair and effective. America must take on a position as an economic and therefore political enabler. Neoliberal economic policies allowed the wealthy to become much wealthier due to the trickle down economics of the 1980s and this allowed the wealthy to increasingly become encouraged to take liberty with the power of their capital to influence politics in self-interest, harming democratic trust and good faith along with impeding upon the integrity of constitutional law. Neoliberal policies also increase wealth disparities and have the capacity to create disastrous economic recessions like seen with the subprime mortgage crisis of 2008, creating situations of political and economic strife which have the capability to lead the victims of economic fallout to populist tendencies which can be taken advantage of by authoritarian opportunists, often leading to further social, political and economic strife. Increasing wealth disparities in our nation also birth an inequality of value which disallows individuals to have the personal power to speak up to dictate the societies they want to live in. But with the bolstering of a welfare state and the ensuring of positive social norms that will allow the societal participatory ideal to come into fruition, democracy can be strengthened. For America and its history of enabling rights and opportunities to all its citizens, the next goal that will need to be tackled is the economic disparity within its separation of classes, closing the gap and allowing for further class mobility. Addressing this problem will allow individuals to become involved and have faith in their political power once more. Ultimately, the most efficient way of ensuring a participatory democracy is ensuring that those that are directly affected by its outcomes are directly involved with its processes. In order to make this a reality America’s political leaders will have to enable better wealth ensurance; recognize, regulate and do away with corporate influence in politics, and set and maintain the stage for the whole of America’s democratic participators to act with care and diligence.

Works Cited

Biebricher, Thomas. “Neoliberalism and Democracy.” Constellations, vol. 22, no. 2, 2015, pp. 255–266., doi:10.1111/1467-8675.12157.

Komlos, John. “Reaganomics: A Watershed Moment on the Road to Trumpism.” The Economists’ Voice, vol. 16, no. 1, 2019, doi:10.1515/ev-2018-0032.

Nyberg, Daniel. “Corporations, Politics, and Democracy: Corporate Political Activities as Political Corruption.” Organization Theory, vol. 2, no. 1, 2021, p. 263178772098261., doi:10.1177/2631787720982618.

Testimony • By Elise Gould • March 27. “Decades of Rising Economic Inequality in the U.S.: Testimony before the U.S. House of Representatives Ways and Means Committee.” Economic Policy Institute, www.epi.org/publication/decades-of-rising-economic-inequality-in-the-u-s-testimony-before-the-u-s-house-of-representatives-ways-and-means-committee/.

Yi, Dae Jin, and Jun Hee Woo. “Democracy, Policy, and Inequality: Efforts and Consequences in the Developing World.” International Political Science Review, vol. 36, no. 5, 2014, pp. 475–492., doi:10.1177/0192512114525214.

Reflexive Democracy: Political Equality and the Welfare State, by Kevin Olson, MIT Press, 2006, pp. 19–26.

Nat O'Connor. “Three Connections between Rising Economic Inequality and the Rise of Populism.” Irish Studies in International Affairs, vol. 28, 2017, p. 29., doi:10.3318/isia.2017.28.5.

Beder, Sharon. “Neoliberalism and the Global Financial Crisis.” Research Online, ro.uow.edu.au/artspapers/216/.

[1] Thomas Jefferson, "The Declaration of Independence," (1776) [2] Biebricher, Thomas. “Neoliberalism and Democracy.” Constellations, vol. 22, no. 2, 2015, pp 255 [3] Biebricher, Thomas. “Neoliberalism and Democracy.” Constellations, vol. 22, no. 2, 2015, pp 257 [4] Komlos, John. “Reaganomics: A Watershed Moment on the Road to Trumpism.” The Economists’ Voice, vol. 16, no. 1, 2019, pp 12 [5] Komlos, John. “Reaganomics: A Watershed Moment on the Road to Trumpism.” The Economists’ Voice, vol. 16, no. 1, 2019, pp 3 [6] Komlos, John. “Reaganomics: A Watershed Moment on the Road to Trumpism.” The Economists’ Voice, vol. 16, no. 1, 2019, pp 4 [7] Komlos, John. “Reaganomics: A Watershed Moment on the Road to Trumpism.” The Economists’ Voice, vol. 16, no. 1, 2019, pp 4 [8] Komlos, John. “Reaganomics: A Watershed Moment on the Road to Trumpism.” The Economists’ Voice, vol. 16, no. 1, 2019, pp 4 [9] Nyberg, Daniel. “Corporations, Politics, and Democracy: Corporate Political Activities as Political Corruption.” Organization Theory, vol. 2, no. 1, 2021, pp 2 [10] Nyberg, Daniel. “Corporations, Politics, and Democracy: Corporate Political Activities as Political Corruption.” Organization Theory, vol. 2, no. 1, 2021, pp 2 [11] Nyberg, Daniel. “Corporations, Politics, and Democracy: Corporate Political Activities as Political Corruption.” Organization Theory, vol. 2, no. 1, 2021, pp 9 [12] Reflexive Democracy: Political Equality and the Welfare State, by Kevin Olson, MIT Press, 2006, pp. 20 [13] Reflexive Democracy: Political Equality and the Welfare State, by Kevin Olson, MIT Press, 2006, pp. 20. [14] Nat O'Connor. “Three Connections between Rising Economic Inequality and the Rise of Populism.” Irish Studies in International Affairs, vol. 28, 2017, p. 33 [15] Beder, Sharon. “Neoliberalism and the Global Financial Crisis.” Research Online p 5 [16]Nyberg, Daniel. “Corporations, Politics, and Democracy: Corporate Political Activities as Political Corruption.” Organization Theory, vol. 2, no. 1, 2021, p 15 [17] Nyberg, Daniel. “Corporations, Politics, and Democracy: Corporate Political Activities as Political Corruption.” Organization Theory, vol. 2, no. 1, 2021, p 16 [18] Reflexive Democracy: Political Equality and the Welfare State, by Kevin Olson, MIT Press, 2006, pp 97