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Liberalism can win back the working class. Here’s how

by Daron Acemoglu

The American political class is mesmerised by Zohran Mamdani. On a platform of democratic socialism, this charming son of two intellectual immigrants has swept the New York mayoral race, becoming, at 34, the youngest person to win the office in more than a century. He has been standing up to Donald Trump in the president’s hometown. Could he set the Democrats on a new course nationally as well?

In the run-up to the vote in early November, the party was adrift, badly in need of rallying energy and a clear sense of direction. Trump’s 2024 election was a true shock to the system — a victory that could not be attributed to Russian interference or a wolf in sheep’s clothes fooling the American people. He increased his vote share from 2020 across almost all demographic groups, including minorities and the working class, and even women. Even if party insiders have tried to deny it, this was a powerful repudiation of Democratic policies and strategies.

The US, like several other industrialised nations, is not just witnessing a shift of support away from the centre-left to the centre-right. It is hard-right ideas, often openly anti-liberal, and anti-democratic ones that are gaining momentum. Bedrock democratic institutions are continuing to lose the public’s support.

Trust in the House, the Senate, the presidency and the judiciary is at or near all-time lows, and an alarmingly high number of Americans no longer affirm that democracy is the best form of government. Many are quick to volunteer opinions such as “lawmakers do not speak for people like us”.

Defeat in 2024 has also deepened the divide between two powerful wings of the Democrats. Centrists blame it on the party’s emphasis on cultural politics, stifling regulations, and policies and rhetoric that appear far too leftwing for the American public. Progressives interpret it as the party not being radical enough either in economics or on cultural issues at a liminal time needing more inspiring leadership.

Progressives are the ones rejoicing at Mamdani’s victory. Many have already concluded that the mayor-elect’s strategy is the future for the Democratic party as it takes on Trump and his heirs. Centrists, meanwhile, are in retreat. 

The crisis of liberal democracy

Understanding Mamdani’s rise and appeal — and what his lessons are for the opposition to Trump — will take us a long way towards assessing what has happened to US democracy and to liberalism.

The future of left liberalism — committed to the protection of liberty and the betterment of economic conditions for all citizens, including working people — is on the line. But the diagnosis needs to be deeper than that offered by Democratic party insiders.

Today we are in the midst of a crisis of liberalism and liberal democracy. The rise of sordid anti-liberal, anti-democratic far-right movements cannot be understood without recognising this.

From the outset, liberal democracy pledged shared prosperity and self-government. Shared prosperity refers to a process of economic growth from which all groups, regardless of education, gender, age or geography, benefit. Sharing is about working people also getting a slice of improvements in economic productivity and living standards.

Shared prosperity has always been fundamental to democracy. When British Chartists campaigned for the extension of the voting franchise in the 1830s and 1840s, one of their leaders described the campaign as “a knife and fork, a bread and cheese question”. Democratic participation has remained interwoven with bread and cheese.

Self-government is even more defining for democracy. It isn’t just about giving people a say on how they are governed, but also bolstering participation in local and national politics so that democracy truly involves people making decisions about their lives. Self-government is what communities do when they govern themselves; what citizens do when they have a say in the laws that impact their lives; and what workers do when they organise into trade unions that enable them to influence their working conditions and pay.

When it delivered on these pledges, liberal democracy flourished and became what some political scientists have called “the only game in town” — the only widely acceptable political form, embraced even by its foes. In the industrialised world, political participation became axiomatic to democracy, and the decades following the second world war witnessed remarkable shared prosperity. Not only did working people experience rapid wage growth and improving living standards but, in many countries, inequality declined as the economy kept growing.

To be fair, the conditions were ripe for liberal democracy’s success. Democratic governance required broad, diverse coalitions. Franklin D Roosevelt’s New Deal coalition consisted of the labour movement, Southern Democrats and left-leaning intellectual elites. The Swedish Social Democratic party governed almost continuously from 1932 to the mid-1970s not just by representing workers but also by acting as a liberal tent, bringing together the middle classes and farmers. These coalitions created room for the voice of distinct segments of society to be heard, self-government at several different levels to be practised and compromises to be struck.

More important was the enabling role of the industrial compact for shared prosperity. Companies strove to expand their production and to reach new markets, and to be able to do that they needed to hire more employees to scale up production. This encouraged them to offer high wages to attract workers. Even if some were tempted to get what they wanted by pressing down workers or by other coercive means, labour unions and democratic oversight wouldn’t allow that.

Liberal democracy was made by its pledges. It plunged into crisis because of their undoing. A lot of this volte-face was about the eclipse of the industrial compact and the rise of a post-industrial society, dominated by digital technologies and the college-educated professionals that these empowered.

Digital technologies severed the link between economic growth and shared prosperity. With the widespread automation enabled by digital tools, companies could expand without hiring more employees and paying workers more, and the skill bias of these technologies gave a boost to the earnings of highly educated and managerial workers. The result was a staggering increase in inequality in the US, with the inflation-adjusted wages of low-education men falling most years between 1980 and 2014 — even as the aggregate economy and the urban, globalised professionals were flourishing.

That the computer age was leaving behind the working class, which used to typically support left-leaning parties, was unnoticed by the college-educated, who were becoming politically and socially ascendant in the environment digital technologies created. That they had started living separately, socialising separately, marrying separately, and holding very different views from the less educated undergirded this omission.

There was also a major sin of commission on the part of left liberals. As they abandoned classic working-class or social democratic issues, they started focusing on cultural politics — in part because cultural divides had become more pronounced and in some ways more intractable in an age defined by shifting mores, globalisation and increasing immigration flows from countries with dissimilar traditions. But the cultural divide that emerged between different education groups and ideologies did not have a simple solution. Even as norms were changing on important issues such as gay marriage, new rifts were opening related to the assimilation of new immigrants, transgender rights and cosmopolitan versus local priorities.

The college-educated, fatefully, turned to social engineering efforts, trying to accelerate cultural change — in universities, schools, the entertainment industry and even workplaces. These efforts, though often well meaning, were nonetheless perceived by many working-class communities as the imposition of the priorities of college-educated values on the rest of society. The scene was set for a crisis of liberalism and of liberal democracy.

The crisis of liberal democracy has to be understood within this context, alongside the backlash that the collapse of shared prosperity and social-engineering efforts has created. 

The challenge of delivery

The solution cannot be found in the standard remedies of Democrats and other left-leaning parties in Europe, since this would double down on the cultural politics that progressives have been spearheading. Centrists’ softer message often sounds like the status quo — not up to the task of remaking shared prosperity. Yet fanciful policies that promise better living standards but don’t deliver would only make the problem worse — especially since they would deepen the mistrust of the public in liberal democratic institutions and pledges.

I argue that nothing short of forging a new working-class liberalism can succeed. This has to centre on shared prosperity, a reintegration of the lower-education workers into politics, a commitment to local governance by all communities (within the bounds of protecting basic liberties) and true diversity of opinion (even on controversial matters).

To build a working-class liberalism, Democratic party leaders will have to achieve four challenging feats at the same time. Mamdani has beautifully illustrated how to do the first two, but will probably fail at the next pair.

First, the left needs to communicate with the voters, and this starts with a combination of good-mannered charm and charisma. Mamdani presented both in spades.

Second, the focus needs to be on working-class issues — jobs, wages, cost of living and so on. Mamdani had the great sense to build his campaign on affordability, taking a key step in this direction.

Third comes the really hard part: the Democratic party has to appeal to working-class communities around the country. This cannot be done with democratic socialist preoccupations that work with urban, well-educated and progressive voters in megacities. Nor will rhetoric that elevates cosmopolitan values above working-class community priorities succeed. We need Mamdani-style charm that is credibly directed at communities that have been in economic and social decline in Appalachia, in the South, in small cities throughout the country. The label democratic socialist and the cultural vibes of New York politics are unlikely to work.

The fourth challenge may be even more daunting — achieving shared prosperity.

Liberal democracy and left-leaning leaders need to deliver on their pledges. My research shows that support for democracy increases significantly when democratic governments build shared prosperity, reduce inequality, provide high-quality public services and control corruption. This is what all Democratic governors and mayors need to do today. But if you start with unachievable pledges, you are undermining your ability to deliver on them.

Mamdani’s promises of improving affordability in New York City rely on free bus services, cheaper groceries, universal childcare (financed by taxing the wealthy) and rent controls aimed at ensuring widely available and affordable housing. Yet these promises will soon hit the ugly wall of reality.

New York City cannot afford the services Mamdani has promised, even if he were to tax the very wealthy in the city. And he won’t be able to do that because setting income or corporate taxes is not in his power unless the New York governor allows it. Rent control can at best work only for a short while. When pledges turn out to be empty words, liberal democracy and the Democratic party that stands for it will be further tarnished.

This is part of a deeper point. Under the control of the urban college-educated elites, the Democratic party has focused on fiscal redistribution as a way of papering over the problem of rising inequality, turning its back on strategies that were more central both to shared prosperity and to working-class priorities, such as good jobs and high wages. But history teaches us that only robust wage growth and strong job creation for workers of diverse skills can deliver true shared prosperity. Creating a fairer, more affordable economy in New York is tightly linked with improving job creation in the city. That cannot be done without a broader effort to create more high-paying jobs in the American economy as a whole.

A major leg of this agenda will have to centre on rebuilding stronger labour-market institutions that protect low-pay workers (including better workplace representation and decent minimum wages). But even more important is redirecting artificial intelligence.

AI and the future of liberal democracy

Digital technologies unmade shared prosperity. AI appears poised to continue this trend, with widespread automation of office jobs as well as further automation on the factory floor as it becomes combined with advances in robotics. If this is the direction of travel, dreams of rebuilding shared prosperity will remain just that — unfulfilled dreams.

But there is no reason to be despondent. Automation isn’t the only thing that AI can do. Machine learning methods and AI more broadly can also help workers, by enabling them to obtain and use better information relevant to their tasks and helping them become more productive and essential for the production process.

This type of “pro-worker AI” can support robust wage growth and promote job creation. It would make AI an enabler of shared prosperity, rather than its foe. It is also technically quite feasible.

Pro-worker AI is also productivity-enhancing AI. It can help us have much better electricians (with the help of AI tools that enable them to expand their repertoires, understand new electrical equipment and become much better at troubleshooting complex problems), more capable educators, and much better-informed nurses who can ease the bottlenecks in the healthcare system. In each of these areas, and in several others, there are prototype AI technologies that signal the promise of this agenda.

And the US economy, like the rest of the industrialised world, badly needs productivity improvements. Higher productivity would lead not just to better living standards and greater wages, but to more tax revenues and greater international competitiveness. Service sectors, such as healthcare and education, have traditionally had slower productivity improvements than manufacturing, holding back economic growth. Pro-worker AI can revolutionise these sectors.

Here is the problem, however. This isn’t what current efforts are focused on. The enthusiasm around artificial general intelligence (AGI), which has been the main driver of massive investments in large language models and other generative AI technologies, is highly symbiotic with further automation — AGI is attractive in the eyes of many because it enables more and more tasks to be done by AI models rather than by humans. If this becomes a reality, or even if it becomes the main focus of the industry without being fully realised, the prospect for creating good jobs and robust wage growth would be greatly diminished.

Hence, a different — pro-worker — direction of AI is essential for working-class liberalism. But pro-worker AI will not emerge by itself. We need new policies, including the right regulatory framework, to discourage manipulative uses of AI and to encourage more competition in the tech industry, subsidies to more socially beneficial uses of AI, and the removal of inefficient tax subsidies to capital that tend to encourage too much automation.

Without pro-worker AI, promises of better living standards and greater affordability will not be realised, whether they are pledged by Mamdani for New York or the next national leaders of the Democratic party for the entire United States.

The Democratic party is the natural vehicle for this new agenda, especially since Trump has become close to oligarchs in the tech industry. This is also an agenda around which both progressives and centrists could coalesce.

Redirecting AI and transforming the Democratic party to be a home for the working class today might appear as a pipe dream. But it ain’t so. Because pro-worker AI could also boost productivity and is within reach, the right policies could be transformative (in the same way that a modicum of subsidies and regulations kick-started the boom in renewable energy in the early 2000s).

The Democratic party is a big tent and remains committed to creating a more equal and fairer society. It should also be possible for the party to work towards reintegrating the working class it has lost.

But first, we need to learn the right lessons from the crisis of liberalism and the recent election.