Impact of Neoliberalism on Democracy

Abstract

Divisive and polarizing as neoliberalism has been throughout the course of history, it has become unavoidable to avert one’s gaze at the negative implications on democracy that the policies of economic liberalization carry with them. This paper will primarily focus on how existing problems in capitalist societies such as wage inequality and labour market segmentation will never be solved as so long as neoliberalism remains hegemonic, and how this system of thought perpetuates the factors that keep these core issues fixed. Failing to acknowledge and reform the concentration of wealth among the elite, particularly in countries with historical legacies built upon exploiting differences based on race, ethnicity, religion, and gender, creates ideal conditions for the pervasion of democracy. Policies such as austerity accentuate the concentration of wealth and diminish the welfare state, averting from the core principle which democracy is founded on; that the government is ruled by the people. From here, one can conclude that reclaiming democracy in Western society inherently implies striding away from the key principles neoliberalism is founded on.

Neoliberalism: The Requiem of Democracy

Luck, the phenomenon people use to describe their notably positive, negative, or even improbable events, seems to be as relevant as it was thousands of years ago. Peasants tending to their fields looked to that aspect of chance as to whether or not the rains would come pouring onto their fields, sure to bring in a bountiful harvest. Today, in a capitalist society, this aspect of chance still exists, and seemingly helps decide what race you are, what gender you are, what ethnicity you are, and almost mockingly predetermines factors in your life that affect the experiences you’ll have, some for better, and too many for worse. The poor today, many due to these very similar systems of chance, find themselves dedicating all the time they have simply just to acquiring enough capital to survive. They contribute to a shocking disparity during the democratic process of voting as they, without education, fail to place enough of an emphasis as a collective; they tragically fail countless times to amass focused power towards electing a party that would help alleviate their struggles. This results in an outcome where proportionately, far less individuals who are poverty-stricken will vote as opposed to wealthier individuals. Neoliberalism, a system that diminishes the welfare state, and constricts assistance to the poor, is inherently anti-democratic as the power is not truly in the hands of the people. Rather, this power is only ever in the reach of those who can afford to vote.  

In the labour market, segmentation occurs that directly affects how some individuals are compensated. This uneven capital distribution essentially decides what people can afford, and as function of that, what lives they might lead. In the Sourcebook of Labor Markets, Kaufman describes how this segmentation occurs from industry to industry, describing how African Americans functioned in occupational distributions towards lower incomes, and how sex segregation was even more prevalent (Kaufman, 646). The feminization of occupations and changes in wages has shown itself to be one of the primary sources of the gender wage gap in Britain, describing how “moving from an entirely male to an entirely female occupation entails a loss in individual earnings of 13 percent” (Murphy, Emily, Oesch, Daniel). There is a major concern that many hold that do not believe in the gender wage-gap, where the belief that feminized, marginalized industries are only paid less because the work being performed inherently deserves to be compensated less. This concern is disproven by evidence which shows that in models of “statistical discrimination”, differences in the treatment of men and women from average differences between the two groups in the expected value of productivity leads employers to discriminate. Additionally, the exclusion of females from “male” jobs results in an excess supply of labour for “female” occupations, giving industries the opportunity to depress wages (Blau, Kahn, 846).  This is further reverberated in the statement that “Contrary to the prevailing idea in economics, differences in productivity – human capital, job-specific skills, and time investment – do not fully explain the wage gap between male and female occupations”, describing how the wage penalty associated with working in a female occupation is much larger especially in the private sector where formal rules are not as well established (Murphy, Emily, Oesch, Daniel). This wage inequality creates unique power groups in society, which compete against each other, supporting the political groups in our democratic system they believe will bring the most benefit to themselves. Neoliberalism perpetuates this wage inequality suffered by the labour market through attacking unions and shifting the power into the capitalist’s hands, creating a systemic pressurized vacuum around the workers’ dependence on corporations for their jobs (Gindin). As a result, especially in these heavily segmented industries, workers will work longer hours, go into debt, and try to increase their own wealth as much as possible, even if it means working against other marginalized groups. Its brutal consequence: the working class is further divided, and the needed consolidation of power amongst the poor is disrupted and viciously mauled (Gindin). The wealthy do not face these same barriers, and as a result, the voting system is far more accessible for them, resulting in a more focused power which brings in parties that are likely aiming to serve further in the interests’ against the poor who cannot afford to vote. Consequentially, it shows, and in what some deem the “heart of neoliberalism”, the United States has shown in 2014 that up to 75.5% of the lowest income groups did not vote, and census data shows that only families making $150,000 or more began to see a steady rise in voting percentages (Census Gov, 2015). The effect of poverty directly links itself to the staggering trend of voter loss, and it cripples democracy through leaving the individuals who would require change the most in society unable to participate in the democratic system.

The widespread application of neoliberal policies at its very worst has seen a strong growth of social inequality worldwide, which has led to the polarization of income distribution and the concentration of wealth in the top of the social pyramid. Although neoliberal economists argue that wage inequality was persistent during the era where Keynesian economics were prevalent, neoliberalist policies have consistently further widened wages and grown wage inequality (Palley). Keynesian economics in fact attempted to remedy these issues the most at the time comparatively, throughout the welfare state (Palley).However, it was in fact unable to generate a solution that would keep the economy stable, and although it did not contribute to increasing wage inequality like neoliberalism did, it failed to implement clear solutions to it. To propose a strong concept that would serve as a guide throughout the inconsistencies of neoliberalism and how to address its shortfalls, we travel to Greece. The issue within the concentration of wealth lies in within, christened by Greek economist Yanis Varoufakis, the theory regarding the twin peaks crisis in capitalism. Yanis argues that through various financial crises throughout history, focusing on the financial crisis in 2008, capitalism inherently funds and founds two peaks, “one of which is a mountain of un-payable debt and banking loss, and one which is a mountain of idle savings of surpluses too frightened to be invested productively and in a manner that produces the income by which to repay the losses and the debts” (Varoufakis). He points to the issue of corporations and the wealthiest individuals who can afford to build these surpluses failing to recycle all of this “idle cash”, citing reasons as self-preservation and greed, as well as incapability and a paralysation by fear to be invested in the economic activity which would generate income that would repay the debts causing the first peak crisis. Although some may argue that this economic crisis would have no direct implication on democracy, Yanis argues that there is a cannibalization of the political sphere by the economic sphere, in which capitalism in his analogy “is a group of predators which are so successful at hunting that they run out of food too fast and starve to death”, taking away power from the classes in society that do not have the capital to match the top (Varoufakis). In order to revitalize the political sphere, and keep democracy strong, there is one glaringly obvious solution: to eliminate the existence of the working poor. One of the major forces in today’s landscape is technology, and through automation, capitalism is quite literally cutting the working poor out of the picture. In that sense, the already marginalized groups in society are being pushed off the marginalized industries that have been developed through time due to segmentation, but capitalism does not offer a clear ascent for these impoverished parties. Social conflict deepens, and the twin peaks that Yanis explains grows taller (Varoufakis). The concept of wage labour, which is heavily pushed upon by neoliberalism, is a huge factor in how it constricts the working class by not allocating profits effectively. To properly address how society can be democratic once again, the root cause in neoliberalism would have to be targeted, a system where, “You earn capital as you work, your capital follows you from one job to another, and the company you work for is owned only by those who work for it at that moment. All income would then stem from capital, and from profits, and so the concept of wage labour would become obsolete, where there would no longer be separation between those who own and do not work in the company, and those who work but do not own the company.” (Varoufakis). This would prevent surpluses from sitting idly and would serve to remove the existence of the working poor, inherently equalizing power again in a society where everyone truly does have equal opportunity to access their right to vote and contribute in a political system. Whether or not that a world like that would still require multiple parties in a political system would be ambiguous, but there is still the truism that the permeating existence of social difference between humans that will always exist, which would require different parties to represent those respective interests and beliefs.

Austerity, which is founded on the liberal economist’s primordial idea of debt reduction, strengthened itself in a time following the Great Recession of 2007, where many believed the sky-rocketing debt to be one of the deeper causes of the crash. The core issue of austerity is that it aims to fix the economy, and the people who support it make the falsifying equivocation that healing the economy will of course result in the saving of the people. The issue of cutting social spending and increasing taxation is that it hurts deprived groups the most. When one attacks the welfare state, they take away protective factors and increase social risk. On the issue of unemployment in the United Kingdom, austerity measures have sought to make savings by reducing public sector employment, where there were over 500,000 public sector job losses which directly correlated with a 20% rise in suicides in the regions affected by austerity measures (European Journal of Public Health, 2017). The poor have less capital, and with it, harder access to support systems that address their concerns, and austerity puts barriers up that makes it even more difficult for them to climb out of the hole. Additionally, as austerity targets social spending in the health system, coverage and access to care always changes to benefit the wealthier, who have the capital to navigate resources that the poor cannot (Broersma). With the damage it deals to the working class, it is no surprise that these austerity measures slowed and prevented economic recovery, making the losses that the impoverished had faced even more disturbingly immoral. The IMF, one of the primary symbols of neoliberalism as a group that incentivizes developing countries to undergo the process, summarised that Osborne-style austerity economics increases inequality and instability, undermining growth (Elliot, 2016). From an individual’s standpoint, not being able to access healthcare as conveniently can mean not being able to come into work, putting you further behind in the rat race, and reducing your time and ability to vote. From the mental health perspective brought up earlier, for many, austerity policies can mean closing yourself out of the idea that there is even hope, of the system improving for those who are disadvantaged (Dyck). A system which imposes these immoral measures onto a staggeringly large amount of the population cannot possibly claim to be democratic as it blocks the individuals who need change the most in the system from voting, yet preaches under the rhetoric of “freedom” as it continues to impose measures that do everything to imprison and chain the impoverished.

Neoliberalism, working in tandem with democracy,  provides a seemingly equal opportunity for individuals to succeed through voting for what they want, but fails to acknowledge the shocking disparity between voters who are wealthy, and voters who are poor. In a system that thrives on privatized profit, the poor are trapped in a cycle where due to a lack of capital, fundamental factors that can change one’s life are treated as luxuries, with education being the most core of those tendencies. Without education, and the time constraints that the poor have where all their time needs to be spent dedicated to just meeting their needs to survive, it can be extremely difficult to climb out of poverty when the generational damage is being done. Poverty is a contagion, and it spreads far faster than wealth does, and through neoliberalism, which aims to shrink the welfare state and block the assistance which would help to alleviate this huge imbalance between the rich and the poor, it keeps a “democratic” system in place where the people who need change the most cannot even afford the time to participate in its process. Margaret Thatcher once said “There is no society, only individuals”, a famous line in which she inadvertently quoted Marx, who used that very line to describe the “sack of potatoes” repression in France during the Industrial Revolution where society had degraded into an amorphous mass composed of individuals who could not act together, describing the failure of neoliberalism to unite the power that the people have.

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