Upend the trickle-down

In the early 1980s, the United States under President Ronald Reagan and the United Kingdom under Prime Minister Margaret Thatcher introduced neoliberalism, a political and economic ideology advocating for smaller government, industry deregulation, tax cuts, and reduced social spending. Reagan's administration adopted the Mandate for Leadership, a 3,000-page document from the conservative Heritage Foundation, which became the blueprint for neoliberal reforms. By 1982, 60% of its proposals had been implemented, influencing global policy. Neoliberalism prioritized market freedom over state intervention, aiming to boost economic growth through private sector expansion. This shift marked a departure from post-World War II policies that emphasized public investment and social welfare.

Trickle-down economics is the idea that benefits for the wealthy, such as tax cuts, will eventually 'trickle down' to benefit everyone else. However, the article argues this theory failed in practice. Neoliberal policies led to increased government debt, which rose from 40% to 65% of GDP in OECD countries between 1980 and the present. Despite promises of prosperity, GDP per capita growth slowed from nearly 3% annually in the 1980s to just 1% today. Household debt also doubled as a percentage of GDP, indicating that economic gains were not broadly shared. The 1987 Black Monday stock market crash highlighted the risks of deregulation and reduced state oversight.

Neoliberalism reduced the state's ability to regulate industries and manage systemic risks, leading to moral hazard—a situation where institutions take excessive risks because they believe they will be bailed out. This contributed to the rise of financialization, where the finance sector grew significantly in size and influence. In the US and UK, financial institutions became powerful players in both the economy and politics. This shift created a cycle of market bubbles followed by crashes roughly every seven years, generating wealth for investor elites while making home ownership and retirement less accessible for the middle class and younger generations.

Neoliberal policies prioritized cutting public spending, including infrastructure investments. Governments reduced funding for transportation networks, energy systems, and other public capital projects. As a result, aging infrastructure led to declining productivity. Government expenditure remained steady at around 50% of GDP, but reduced tax revenues forced governments to rely more on borrowing. High government debt, combined with deregulated credit markets, encouraged households to take on more debt, further straining economic stability. These changes contributed to institutional weakness and declining public trust in democratic institutions.

Neoliberalism weakened corporate governance, leading to high-profile failures such as the 2008-09 global financial crisis and the Iraq War's failure to find weapons of mass destruction. Poor government decision-making during the COVID-19 pandemic further eroded public trust. The World Uncertainty Index, which measures global uncertainty based on economic reports, shows a rising trend from 1990 to 2025, reflecting growing public frustration and instability. These governance failures have contributed to a sense of political malaise and destabilization in Western democracies.

The article suggests that low salaries for government officials contribute to mediocrity and corruption in politics. For example, the base salary of the US president has been fixed at $400,000 since 2001, while the UK prime minister earns around £170,000 ($230,000) annually. These salaries are lower than those paid in the past and do not reflect the responsibilities of leadership. The article proposes raising political salaries to be competitive with CEO compensation in major domestic companies. For instance, tripling the salary of Australian parliament members would cost less than $80 million, a small price for managing a $2 trillion economy.

Many Western democracies operate under a two-party system, such as the Liberal and Labor parties in Australia or Republicans and Democrats in the US. This political duopoly limits competition and stifles substantive reform. The article advocates for reforms to increase competition, including higher salaries for politicians to attract better candidates and stricter disclosure of candidates' assets and interests. It also suggests implementing democracy vouchers, as used in Seattle, where voters receive vouchers to support their preferred candidates or parties during elections. These measures aim to reduce the influence of money in politics and encourage new political directions.

Gross Domestic Product (GDP) is the most common measure of a country's economic performance, but the article argues it is an inadequate yardstick. GDP measures the total value of goods and services with a price but ignores social, environmental, or political factors. For example, spending on wars or rebuilding after disasters increases GDP, while unpaid labor or natural resources are not counted. The article highlights New Zealand's Living Standards Framework, which measures wellbeing alongside economic growth. It recommends adopting balanced measures that consider social and environmental factors to guide better policy decisions.