The Polarizing Economy

Neoliberalism’s Hidden Agenda

Political polarization is currently inflicting great harm on American society. Neighbors and families alike are suffering from intense alienation in what used to be a healthy difference of opinion. The current environment is producing high levels of mistrust that present a danger to our way of life. If left unchecked, the freedoms we currently enjoy will be lost due to lack of understanding.

This essay argues that political polarization is not a cultural accident but the consequence of a half-century of economic restructuring. Beginning in the 1970s in this country, a school of thought known as neoliberalism emerged which advocates for prioritizing capital over labor, undermining public welfare, and eroding democratic cohesion. A closer look at this strategy and its effect on the economy is necessary to understand the danger.

In her 2024 book, Counterrevolution: Extravagance and Austerity in Public Finance, Melinda Cooper frames the issue well. She presents neoliberalism in contrast to a known quantity, Keynesianism, which preceded it. Of course, many people may be unfamiliar with that term as well, so in this essay, I’ll introduce the basic tenets of Keynesianism which may be recognizable to some as this country has a quarter century of successful experience with it (1945-1973). With a better understanding of it in relation to the current economic model, we can begin to see more clearly how today's mainstream policies are contributing to political and social polarization.

The Keynesian Revolution

Developed by British economist John Maynard Keynes in the 1930s, Keynesianism is credited with helping to end the Great Depression. Keynesianism represents an economic principle that suggests public funding is often necessary to stimulate economic activity. The concept was revolutionary in economic thought at the time. Up to that point in history, it was not uncommon for business owners to exploit labor and anyone or anything that got in its way. Governmental stimulus as a means of supporting a failing economy had never surfaced as a viable option. The economy, such as it existed at all, was thought to be the domain of rich and powerful businessmen.

Keynes argued, however, that government must take responsibility for creating what he called an 'effective demand' for goods and services. An effective demand was defined as the amount of consumer spending necessary to spur business firms into production. He was able to show that government could stimulate the economy by way of infrastructure spending and other projects so that more jobs were created and consumer purchasing power would then entice business to maintain higher levels of economic activity. Without the necessary governmental stimulus, the economy would not operate at full capacity, he maintained, resulting in higher unemployment adding to the problem. With an adequate money supply provided by a governmental infusion of new revenue when necessary, jobs would be created, incomes would rise, and the economy would gain or regain momentum.

That is the essence of Keynesianism: keep the wheels of commerce turning through governmental intervention and consumers and business firms alike, benefit. For a quarter of a century after the war, the principles of Keynesianism worked well for the U. S. and for other countries of the world as well. Along with a significant labor movement, these principles produced a strong middle class of consumers with good wages and low unemployment.

The Neoliberal Counterrevolution

Not everyone bought into this prescription. Neoliberals, in particular, saw this as a threat to their economic sovereignty and objected to the government taking an active role in managing the economy. They argued that government intervention distorts the natural workings of markets. Instead, they championed a “hands-off” approach, placing their faith in financial markets and private enterprise. In the neoliberal world, they professed that markets are king and not to be tampered with.

Neoliberalism gained prominence in the 1970s amidst economic stagnation, inflation, and global competition. Their ideas found powerful champions in leaders like Ronald Reagan and Margaret Thatcher, who implemented tax cuts for the wealthy, deregulated industries, and rolled back the welfare state. While neoliberalism promised growth and efficiency, it failed to deliver. Wealth became concentrated in the hands of a few, while union membership declined and job security vanished. Social safety nets were slashed in the name of austerity, leaving many Americans vulnerable to economic shocks.

A half century of neoliberal policies has left the country more divided than at any time since the turn of the 20^th century. These policies have resulted in the top 1% owning more wealth than the bottom 90% collectively. Systematically favoring capital over labor, wealth over income, and privilege over equity, neoliberal policies have left most Americans vulnerable with little political power. Neglecting the needs of ordinary Americans has resulted in a high degree of polarization.

Polarization

Political polarization in a democracy is not inevitable. Disagreement is natural; it becomes destructive only when exploited by those seeking to divide. By weakening the public sector and concentrating economic power into the hands of a few, neoliberalism has created fertile ground for scapegoating and resentment.

An increasingly unequal society erodes trust. Citizens no longer believe that institutions work for them. The frustrations caused by stagnant wages, housing unaffordability, and job insecurity are redirected—often cynically—toward immigrants, minorities, or political opponents. Populist movements feed on this alienation, offering simplistic answers to complex problems.

Meanwhile, neoliberals continue to insist that markets are best left alone. They portray government regulation as a barrier to prosperity, even as unregulated markets have led to financial crises, environmental degradation, and declining public health. Their model treats the economy as a machine governed solely by supply and demand, ignoring its deeply social character. With the financial means to sell their message, American democracy has been put to the test.

Conclusion

America’s polarization did not emerge by chance. It is the predictable outcome of policies that have enriched a few, while impoverishing many. Since the mid-1970s, neoliberalism has hollowed out the middle class with stagnant wages, rising asset prices, and reduced public investments. This has resulted in feelings of anxiety, alienation, and in some cases, anger directed at immigrants and government institutions. It has often been encouraged by populist rhetoric exploiting this discontent for the benefit of the few.

The shift from Keynesian economic management to neoliberal market discipline has reshaped our economy. Severe income and wealth inequality presents a unique challenge. It is no longer just a moral issue. It has become a cultural issue. It has forced us into different ideological camps. Understanding this cultural shift helps to explain why financial anxiety has deepened and trust in government has eroded.

The public is desperate for good governance as the January 6^th insurrection has shown. This desperation has made us susceptible to simplistic solutions in hopes of a quick fix. There is no simple solution, but there is a roadmap. Building a strong and educated middle class with a Keynesian revival of basic humanitarian values such as fair wages, public investments, and sufficient financial oversight will go a long way in protecting our democracy. With a half-century of misguided monetary policy, the road back will be difficult to traverse, but if we want to retain our democratic values, we must self-educate to better understand how we got to this point. The future of your children and grandchildren depends on it.