Guest Editor's Introduction

the rapid rise of antidemocratic regimes in recent years has inspired a torrent of articles and books by economists seeking to explain the phenomenon. The embrace of ethnonationalist policies and the rejection of democratic norms, some argue, can be attributed to economic forces—namely, the failings of market fundamentalism and the ill effects of "hyperglobalization," specifically the heightened income inequality associated with deindustrialization. In the late twentieth and early twenty-first centuries, deregulation, trade liberalization, and financialization ruled economic policy. In the countries now riven by antidemocratic forces—for example, Turkey, Hungary, India, Brazil, the United Kingdom, and the United States—the economics of deindustrialization seem to be at the heart of the problem. This point of view is held by a range of economists, from the neoclassical British columnist Martin Wolf (2023) to the neo-Keynesian American Nobelist Joseph Stiglitz (2024) to the Indian Marxist Prabhat Patnaik (2024). It extends across the discipline's subfields: economic history (Eichengreen 2018), labor economics (Autor 2024), international economics (Rodrik 2020). The precise mechanisms linking economic and political change vary in these accounts. David Autor (2024) discusses the way imports and job loss have led to "deaths of despair" (Case and Deaton 2019); for Dani Rodrik (2024) it is working class formation; for Pranab Bardhan (2022) it is economic insecurity. Teresa Ghilarducci and Ludovica Tursini (2024) emphasize the role of relative economic decline. But in all cases, economic phenomena are at the root of antidemocratic movements.

This issue of Social Research addresses several crucial questions. What are the economic forces that spurred the growth of antidemocratic regimes and policies? Can economics reverse this trend? In other words, can the discipline that contributed to the current antidemocratic wave also point the way forward? This is an interdisciplinary collection, comprised of essays by scholars from economics, history, and political science, all of whom are grappling with one question: What is the future of capitalism in the face of the widespread retreat of democracy?

Throughout the history of economic thought, there has been an uneasy relation between economics and democratic politics. John Stuart Mill ([1861] 2023), highly sympathetic to socialism in the economic realm, advocated democracy only for the educated, rational, and virtuous, not for others and certainly not for poor countries or colonies. Joseph Schumpeter ([1942] 2020) envisioned democracy as empowering elites to oversee the political system. Kenneth Arrow ([1951] 2012) identified the "impossibility" of rational social choice under a system of open voting.

The unease between economics and democratic politics can be found in the two opposing philosophical roots of economic thought: liberalism and Marxism. Liberalism, especially in its utilitarian form, is the foundation of modern neoclassical economics, where scientific advance must be underpinned by the logic of rational individual choice. The Marxian tradition at the core of modern political economy emphasizes social structure rather than individual agency and locates class conflict at the center of economic and political dynamics. Both traditions sit uncomfortably with notions of democracy.

In the liberal tradition, the primacy of individual freedom leaves it without a model of social structure and thus without a conception of political action or justice at the collective level. In their classic effort at a reconstruction of the relation between economics and democracy, Samuel Bowles and Herb Gintis write:

The modern liberal conception of the individual has a defect that renders its model of choice incompatible with democratic theory. This is the assumption that the individual enters into a choice situation with externally constituted goals—the "preference" of neoclassical economics, and the "interests" of political science…. Liberalism tells us that people make decisions. But the liberal conception of action must be reconstructed to recognize that decisions also make people.

(1986, 123)

The Marxian tradition foregrounds the inherent dynamics of domination in capitalism, leaving unaddressed the role and significance of individual agency. Bowles and Gintis remark that in its deemphasis of privacy and individual freedom, Marxism becomes disconnected from democratic norms, and "the Marxian commitment to democracy even where it is most heartfelt, as in the writings of Rosa Luxemburg and Nicos Poulantzas, is thus without firm theoretical roots" (1986, 20).

The role of economic policy in spurring democracy's backslide has received considerable attention. What has received far less attention are the economic effects of the antidemocratic turn. A previous set of essays found some common features of economic policy in countries as diverse as the US, UK, India, Turkey, Hungary, and Poland (Gabriel et al. 2024). These include opposition to free trade, hostility to immigration (even when immigration would address workforce shortages and demographic shrinkage), state support of natalist and social protection policies, favorable tax and investment policy toward a select group of private corporations, and a general willingness to rely on state power, rather than market forces, in pursuit of policy goals (see Berg and Tursini 2024). Others argue the exigencies of global capital markets have placed limits on the degree of policy independence in these countries, with monetary policy in Turkey and Hungary as prime examples (Gabor 2024; Patnaik 2024). Economic growth has been slower under populist regimes historically (Schularick, Trebesch, and Funke 2024), and economic outcomes for ethnic minorities have often been less favorable than the average (Tejani 2024; Zayim 2024).

How might capitalism evolve in response to democratic challenges? The essays in this issue of the journal begin to provide answers to this question. Historian Federico Finchelstein implicitly takes issue with the premise of the question. He argues that fascism and right-wing populism historically have subordinated questions of economics to political control. Fascists are open to a variety of economic philosophies. In "Authoritarianism and Free Markets: Notes on Fascism, Populism, and Economics," Finchelstein asks whether authoritarian politics requires a particular economics; his answer is they do not. Twentieth-century dictatorships were concerned with political domination. Economics was of secondary importance. In the 1990s, the presidents Alberto Fujimori in Peru and Carlos Menem in Argentina adopted a closer link between economics and politics with a "neoliberal populism." The essay concludes with an assessment of the regime of Javier Milei, current president of Argentina, where economics are primary and the politics of populism are of secondary importance.

Political scientist Mark Frazier expands the discussion to communist-led state capitalism, showing that Communist China has elements of neoliberalism. In "China's Neoliberal Authoritarian Social Policy," Frazier explains how China, one of the world's important exceptions to the wave of neoliberal economics, has adopted social policies that mimic many of the attributes of neoliberal economies. He focuses on the old-age pension system in China, where employer-financed and individualized social insurance programs have created evident inadequacies in support, worsening as the population ages. Benefits are highly unequal, and pension fund deficits are growing. The policy design affects labor markets by encouraging large-scale informal employment and evasion of social insurance payments. He concludes that the centralized political dominance of the country's current leader Xi Jinping and the financial frailty of the social protection system have reduced local government initiative with respect to social protection, with serious implications for economic well-being.

The next section provides a theoretical and empirical assessment of how the economic impact of the neoliberal policy agenda played into the political transformation. Prabhat Patnaik's essay, "Employment and Poverty under Neoliberal Capitalism," makes the bold case that the "crisis" caused by neoliberal economics has ushered in neofascism in India and elsewhere. The weakening of the working class, he argues, results from the policy focus on international capital markets, the overall growth of the labor force in the Global South, and the privatization of public assets. These pressures on the lower class have led the government to other, noneconomic forms of control, with "fascist elements … shifting the discourse from issues of material life to 'othering' some hapless minority group …. The alliance between the corporates and the Hindu supremacists in India belongs to this genre." Patnaik calls for a policy of "constitutionally guaranteed" economic rights, including adequate nutrition and healthcare, the right to an education and a job, and a decent pension.

In "Americans' Downward Mobility Shifts Votes to the Right," economists Teresa Ghilarducci and Ludovica Tursini explore the economic causes of increased support for Republican presidential candidates between 2008 and 2020 and especially for Donald Trump in the 2020 election. Their contribution is to focus on changes in relative economic well-being, measured at the level of US counties. They find that declines in this measure are associated with a turn to right-wing political support.

The remainder of the volume considers a set of economic alternatives. The first topic is industrial policy: state subsidization of and investment in targeted industries aimed at spurring technological dynamism, job creation, and international competitiveness. Industrial policy has been core to economic reforms in countries seeking to solve the problem of income inequality, particularly in the US under the Biden administration. The articles in this section go beyond the usual state versus market debate and highlight new features and possible limits of such policies. An important question is whether shifts in industrial policy can adequately address economic injustice. This moves the economic policy discussion beyond that stalwart of social democratic economic policy in the twentieth century, Keynesianism. Despite the power of John Maynard Keynes's vision of capitalism, Keynesianism has arguably limited the economic imagination by being reduced to the straitjacket of monetary and fiscal policy as the only tools of adjustment. Industrial policy has reemerged at various times in history when free-market capitalism was viewed as inadequate to the task. Often, this was in the context of industrial development, whether it was the US in the nineteenth century, Japan and Korea in the twentieth century, or China in the twenty-first.

Mariana Mazzucato and Lorenza Monaco continue in this tradition with "Rethinking Industrial Strategies and the State: A Global South Perspective." They discuss the role of government in innovation and the need to return the benefits of innovation to the public sector. Industrial policy, they argue, should go much deeper than simply correcting market failures; it should also work to shape markets. The state must be "mission oriented" to promote economic growth and industrialization in socially conscious ways that provide broad benefits to society, even if they require alterations to the private sector, including its financial sector and corporate governance institutions.

In "Industrial Policy: Populist and Progressive," economist Richard McGahey explores the surprising case of far-right groups in the United States that have embraced industrial policy, something typically associated with left-leaning, interventionist government. McGahey reviews the new group of conservative intellectuals who advocate for significant government assistance to working-class people and communities and criticize traditional conservative economic positions rooted in market-oriented economics. J. D. Vance, the 2024 Republican vice-presidential nominee under candidate Trump, has advocated this position, to the chagrin of some in the business community. McGahey concludes by analyzing how progressive industrial policy could tap this new trend on the right and attract political support from White working-class voters that could be allied with more support for democracy and reduced support for authoritarianism.

Hans Kundnani and I add a skeptical note related specifically to the massive industrial policy effort by the Biden administration. In "Can Democracy Be Saved by Economic Policy? The Burden of Bidenomics," we discuss the multiple objectives of President Joe Biden's ambitious industrial policy, including raising US competitiveness, resisting China, and promoting democracy by supporting those left behind by globalization and deindustrialization. We argue that the problem of democracy is different from the demands of populism, and as a result, other, perhaps more intractable, noneconomic issues must be addressed, including how to reduce the influence of money in elections and how to construct more representative political procedures. Bidenomics, massive and successful as it might be, cannot do all the work on its own. To raise the likelihood of buy-in to democracy, there must be significant political changes as well.

The next set of articles considers the reform of global economic governance. Since the breakdown of the Bretton Woods monetary system in the 1970s, international trade and investment liberalization politics have been at the heart of a neoliberal agenda. If any part of this agenda must be revamped, it is the global dimension.

In "The Relationship between Sovereign Debt and Politics," economists Martin Guzman, Yanne Horas, Anahí Wiedenbrüg, and Maia Colodenco describe the changing landscape of global debt. Propelled by the expansionary monetary response of advanced economies (e.g., quantitative easing in the US), developing nations became even more dependent on the private financial system than they already were. This creates pressures that weaken democracy in these countries, because it gives disproportionate influence to domestic and global financial interests. The increased dependence on bondholders creates a powerful constraint on progressive policymaking.

In "Globalization after De-globalization," Thomas Liess, Michael Tedesco, and I describe the role of global economic policy within the neoliberal agenda. The era of globalization that began in the late 1970s shifted into "hyperglobalization" in the first decade of the twenty-first century. It hit "peak globalization" around 2011 and, in the past 10 years, seems to have given way to a new period of "de-globalization." We focus on the recent shift away from the liberalization of the 1980–2010 period toward more nationalist, protectionist, and, in many cases, xenophobic policies. The shift is in part a response to the excesses of hyperglobalization. The rules of globalization were built on a theory of competitive product and factor markets, while the world was in fact riven with growing asymmetries of market and geopolitical power and, in particular, a strong factor bias toward capital—that is, a bias toward global corporations. We conclude with some principles for redesigning the rules of global economic engagement that would be supportive of a more just, democratic, and sustainable system.

The final section of this issue provides two far-reaching alternative political economy approaches, each asking if a new economics can reinvigorate social democracy. In "The Evolution of Illiberalism: Necropolitical Economies and a Democratic Antidote," political scientist Jessica Pisano uses the example of Russia and Ukraine. She goes beyond the idea of ethnonationalism as a case of clientelism providing social protection to a loyal domestic group to introduce the concept of necropolitics. In her analysis of the xenophobia of illiberal regimes, she distinguishes between governments that value individual human life and those that devalue life within and beyond their borders. Pisano concludes that social democracy can be legitimately sustained in countries that value human lives, even in periods of crisis.

The issue concludes with Mark Setterfield's case for a "social capitalism." In "Managing the Discontent of the Losers Redux: A Future of Authoritarian Neoliberalism or Social Capitalism?" Setterfield provides an account of the economic consequences of the neoliberal period in the US, with a focus on how household debt accumulation sustained consumption at a time when disposable income was stagnant. He outlines two possible ways forward and makes a powerful case for social capitalism because it is democratic and it attacks the inequity and insecurity of free markets at their core by reconnecting wage growth and productivity growth and providing universal social protections such as healthcare and childcare.

The current moment compels us to move beyond the traditional philosophical foundations of economics to gain a deeper understanding of the connection between economy and democracy. If neoliberal economic policies have brought a widespread political revolt, and illiberal regimes have suppressed labor while limiting civil liberties, independent courts, and free elections, then what is the model for our economic future? The articles in this issue provide a robust beginning to this crucial conversation.