The End of the Free Market Illusion

Over the past half-century, the world has witnessed the rise and apparent decline of the neoliberal order. Once celebrated as the “end of history” (Fukuyama, 1992), neoliberalism promised boundless prosperity through market liberalization, deregulation, and the free flow of capital. In practice, however, it functioned as a political project to restore class power, systematically weakening organized labor and transferring productive forces to the Global South in search of cheap labor. Within the imperial core, most notably the United States and Great Britain, the result has been deindustrialization, wage stagnation, and the erosion of working class security. Disillusionment with this model has fueled a new wave of protectionist and nationalist politics; tariffs, trade wars, and anti-immigration rhetoric that together signal the emergence of a neomercantilist phase of capitalism. Yet, rather than reversing neoliberal decline, these measures merely conceal its contradictions, channeling popular anger away from capital and toward scapegoats. This article argues that neomercantilism represents capitalism’s attempt to manage its own crisis, a desperate strategy that preserves profit while deepening inequality and repression. But before we begin, we must define our terms.

Neomercantilism refers to the contemporary re-emergence of protectionist and nationalist economic policies within advanced capitalist states. It prioritizes trade surpluses, domestic production, and state intervention in markets, often justified as a defense of national interests against foreign competition. While classical mercantilism of the seventeenth and eighteenth centuries sought national wealth through protectionist trade and state-directed accumulation, neomercantilism operates within the global capitalist system rather than outside it. It represents an attempt by core capitalist states, especially the United States and Great Britain, to manage the contradictions produced by neoliberal globalization; rising inequality, deindustrialization, and popular discontent. As Dani Rodrik (The Globalization Paradox, 2011) notes, such policies are political responses to the social instability of globalization. Still, they neither challenge the logic of capital accumulation nor resolve its crises.

Neoliberalism is an economic and political doctrine that seeks to subordinate all spheres of social life to market logic through privatization, deregulation, and the weakening of labor power. Emerging in the 1970s as a reaction to the crises of post-war Keynesianism, it restructured global capitalism by prioritizing capital mobility over social welfare, eroding collective protections in favor of individual competition. According to David Harvey (A Brief History of Neoliberalism, 2005), neoliberalism is best understood not as an ideology of free markets, but as a class project, a deliberate effort to restore the power of economic elites after the social democratic gains of the mid-twentieth century. Through policies of deregulation, privatization, financialization, and austerity, it re-established capital’s dominance over labor both domestically and globally, often by relocating production to regions where labor was cheapest and most easily exploited.

While mainstream economic discourse often portrays neoliberalism as a natural evolution of capitalism or a technocratic response to economic inefficiency, a Marxist analysis reveals its deeper social function. Neoliberalism did not emerge merely as a set of free market reforms, it was a political project to restore the power of the capitalist class after the postwar period of social democracy and organized labor. Following the crises of overaccumulation and stagflation in the 1970s, capital sought to reassert profitability by dismantling the structures that had empowered the working class. As David Harvey argues, neoliberalism “has not been about the restoration of markets, but about the restoration of class power. ” (Harvey, 2005) Through privatization, deregulation, the liberalization of trade and finance, and the suppression of labor unions, it reconfigured the global economy in favor of capital mobility and against the collective strength of labor. This transformation was justified ideologically through appeals to individual freedom, entrepreneurship, and efficiency. Yet, its material outcome was the opposite; the concentration of wealth, precaritization of labor, and the erosion of social protections. Production was offshored to the Global South, where labor was cheaper, effectively displacing productive forces from the imperial core and undermining domestic industry. The working class in the United States, once the symbolic beneficiary of capitalist modernity, became the principal victim of neoliberal globalization.

The structural consequences of neoliberal globalization are most visible in the economic and social decline of the American working class. From the 1970s onward, U.S. policymakers embraced deregulation and free trade as universal goods, facilitating the mass relocation of production to the Global South. This process hollowed out the industrial base that had once sustained stable, unionized employment for millions. Between 1970 and 2020, U.S. manufacturing employment fell from nearly twenty million to around eleven million workers, a decline accelerated by the expansion of global supply chains and competition from low-wage economies such as China.

U.S. Bureau of Labor Statistics. All Employees, Manufacturing [MANEMO]. Federal Reserve Bank of St. Louis, FRED, 2024

Real wages tell a similar story. Despite rising worker productivity and corporate profits, median weekly earnings have remained largely stagnant in real terms since the late 1970s. The promise of upward mobility has been replaced by widespread precarity, with many young workers forced into low-wage service jobs that offer neither security nor benefits. Compounding this crisis is the collapse of organized labor: union density in the United States has fallen from roughly one in four workers in 1970 to less than one in ten today. Together, these indicators reveal not a neutral process of market adjustment but a deliberate redistribution of power and income from labor to capital. The neoliberal freedom of capital has meant the unfreedom of workers, who now confront economic insecurity and political marginalization within the very heart of the imperial core.

OECD. Trade Union Density (Indicator). OECD Data, 2024. U.S. Bureau of Labor Statistics. Union Members — 2023 Summary. U.S. Department of Labor, Jan. 2024.

As the contradictions of neoliberal globalization intensified, sections of capital began to abandon the universalist rhetoric of free markets and pivot toward a new protectionist pragmatism. This neomercantilist turn represents not a rejection of neoliberalism but its mutation; an attempt to preserve capitalist accumulation under conditions of social fragmentation and geopolitical rivalry. Domestically, this shift has manifested in the rhetoric of America First and the revival of industrial policy under both Republican and Democratic administrations. State subsidies for semiconductor manufacturing and reshoring initiatives are justified as measures of national security, yet their class content is clear: public funds are mobilized to secure corporate competitiveness rather than rebuild the social wage. Protectionism here is not about protecting workers but about protecting profits from Chinese competition.

Politically, neomercantilism finds its mass base in right wing populism, a reactionary articulation of class anxiety that channels legitimate grievances into nationalism, xenophobia, and cultural resentment. The deindustrialized worker, stripped of union power and social solidarity, becomes a subject of economic despair easily mobilized against migrants or foreign enemies. Trumpism, Brexit, and similar movements across Europe reflect this logic. They are forms of reactionary Keynesianism; temporary redistributions to domestic capital coupled with intensified border regimes and racialized nationalism

On the international level, the United States and its allies have reasserted a strategic economic nationalism aimed at containing China and reconfiguring global supply chains. Yet this strategy exposes the fragility of the imperial core: the same mechanisms that once underpinned global dominance, financial liberalization and global production networks, now undermine it. Neomercantilism, then, is not a renewal of empire but a symptom of its decline, an ideological effort to reassert control over a global order that capital itself has rendered uncontrollable.

The resurgence of economic nationalism and xenophobic rhetoric in the imperial core evokes unsettling parallels with the interwar years. Then, as now, a global capitalist crisis produced both economic islocation and ideological confusion. The Great Depression shattered faith in liberal capitalism, and political elites responded by turning inward, erecting tariffs, restricting migration, and mobilizing chauvinist myths of national rebirth. Today’s neomercantilist policies follow the same logic: they promise protection from the very insecurities generated by capitalism’s own global expansion. This repetition is not accidental. Both periods represent moments when the contradictions of capital accumulation could no longer be managed through liberal institutions. In the 1930s, the bourgeoisie turned to fascism as a means of disciplining labor and restoring profitability; in the 2020s, capital flirts once more with authoritarian solutions to crisis. Anti-immigrant discourse, the policing of dissent, and the valorization of the productive citizen all point toward a similar trajectory, a defensive, exclusionary, nationalism cloaked in the language of economic sovereignty.

The lesson of history is clear: protectionism and repression cannot resolve capitalism’s internal contradictions. They can only defer them, often at catastrophic human cost. The parallels between the declining neoliberal order and the interwar descent into authoritarianism remind us that when capital faces crisis, it turns not toward emancipation but toward control.

The proclaimed death of neoliberalism does not mark the birth of a new social order, but the decay of an old one. Neomercantilism, cloaked in the language of national renewal, is capitalism in retreat, a system turning inward to defend its contradictions with tariffs, border walls, and authoritarian measures. Once again, the working class is told that its immiseration is the fault of the foreigner or the migrant, while the true authors of crisis, the ruling class, remain untouched. History, however, offers no salvation in repetition. The same contradictions that have driven capitalism from neoliberal expansion to neomercantilist contraction reveal its fundamental limits. No combination of protectionism or fiscal nationalism can overcome the basic logic of exploitation on which the system depends. The solutions now offered are merely mechanisms of control, designed to preserve accumulation at the cost of human dignity and democratic possibility. What lies ahead, then, is not a new equilibrium but an open struggle over the future itself. Either capital will continue to consolidate its power through repression, or the working class will rise to reclaim its own. The time has come to recognize that the crisis is not temporary; it is terminal. The only true alternative to the chaos of a dying order is the creation of a new one: a socialist world founded on collective ownership, democratic control, and solidarity across borders

About the Author

Citation List

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