The Fall of Neoliberalism and the Future of the World Economy

The 2008 financial crisis marked the peak of neoliberalism. The recovery in the United States was slow and the recovery in Europe was difficult and volatile due to the shared Euro currency. Once recovery was complete, however, the world did not return to pre-2008 neoliberalism. Instead, reactionary movements won elections in 2016 by opposing neoliberal economic policies. They reflected political polarization due to increases in inequality and its consequences. Throughout the neoliberal era, income gains in rich countries were concentrated at the top of the distribution while real wages for average workers stagnated. Policy failures led to declining living standards in the United States—the global hegemon—but reactionary neofascist political movements won power, leading to further inequality and corruption. With the rise of the second Trump administration, it is clear that neoliberalism is over, the hegemon is in decline, and the risk of a global crisis has increased. This period of transition arises from the contemporary challenges of global capitalism—inequality and sustainable energy. The countries that cooperatively address those challenges within the narrow corridor will thrive in the next order, as they capture the gains available from global capitalist markets. Capitalism will evolve and continue.