Neoliberalism and globalization are two distinct yet interrelated processes that began to spread across the world in the 1970s and 1980s. Neoliberalism mainly aims to limit the role of the government in the economy through corporate deregulation, cuts to social benefits, privatization of public assets, and tax cuts for corporations and the investing class. It promotes the free movement of goods, services, capital, and money within countries and throughout the world. Neoliberalism advocates a free-market economy in which governments exist only to maximize the efficiency of global markets, such as by securing property rights. Meanwhile, globalization is the process that promotes the integration of markets worldwide and intensifies economic, political, social, and cultural relations. In other words, globalization creates an interconnected world and removes barriers between countries.

Neoliberal ideas arguably became popular in the early days of contemporary globalization, as they support removing trade barriers, liberalizing capital, and promoting global investment. These measures could not have been implemented as thoroughly as they have been without globalization. The liberalization of trade, free financial flows, the rapid development of information and communication technologies, and other factors raised global awareness and the need for global governance. Thus, neoliberalism became part of globalization itself.

Prior studies suggest that neoliberalism and globalization have similar effects. Globalization has made capitalism more competitive, as the increase in trade has changed the economic situation for large companies that must compete with other companies abroad. Free financial flows increased competition among large banks and financial institutions. Labor markets also experienced heightened competition, and some argue that this has led to harmful consequences, such as greater income and wealth inequality and higher unemployment rates. Indeed, in 1990, unemployment was higher in all countries in the Organisation for Economic Co-operation and Development relative to the preglobalization period except for Austria, Sweden, and the United States. Apart from inequality, neoliberal and global policies have arguably increased the alienation of some workers due to downsizing and job losses attributable to more international competition. Additionally, some scholars claim that the integration of markets, the mobility of capital, and networking have reduced the efficiency of national governments.

Globalization and neoliberalism may also have consequences for democratic governance. The so-called democratic recession—the current weakening of democratic institutions around the world—could be a delayed consequence of globalization and neoliberal reforms. Some scholars argue that neoliberal policies often undermine democracy by increasing inequality and weakening government welfare systems. Though globalization can promote democracy through international cooperation, it also pressures developing countries to adopt market-friendly reforms that limit their political autonomy. These policies, along with elite-driven economic agendas, could lead to democratic institutions that lack true public participation.

Furthermore, increased immigration typically accompanies neoliberalism and globalization, which may reduce employment or wages for some people when more immigrants are willing to work for lower wages. Some may also view increased immigration as a cultural threat. Seemingly, the only recourse for those concerned is populist political parties (right-wing or left-wing), which resist globalization and embrace nativist, protectionist measures. The rise of populism, in turn, erodes democracy and constitutes the democratic recession.

Despite the popularity of this backlash narrative, there are few comprehensive, global studies that examine the possible effects of neoliberalism and globalization on democracy. Our research explores these effects using data from more than 140 countries during three periods: 1980–2022, 2000–2022, and 2011–2022. We measured neoliberalism with the Fraser Institute’s Economic Freedom of the World index and globalization with the KOF Swiss Economic Institute’s globalization index. We measured democracy using five metrics: the Varieties of Democracy project’s indexes of liberal democracy and electoral democracy, Freedom House’s measures of civil liberties and political rights, and the Polity IV Project.

Our findings reveal that increases in economic freedom and globalization are positively correlated with all five democracy scores during both 1980–2022 and 2000–2022. The components of the neoliberalism index that drove this correlation the most were the legal system and property rights, modesty of regulation, and freedom of international trade, while social globalization was the most important component of the globalization index. However, we found no correlation between the globalization index and democracy or between the neoliberalism index and three democracy measures during 2011–2022. This is an interesting observation, as many scholars view this period as most clearly embodying the democratic recession.

Thus, our research finds no evidence to corroborate the popular claim that neoliberalism and globalization have contributed to the ongoing democratic recession, nor does it find evidence that these trends have mitigated the democratic recession. That said, our study has primarily established general associations rather than precise causal relationships. Economic freedom and globalization likely have a two-way relationship with democracy: Each outcome influences the others. Therefore, future research is needed to untangle these relationships.

Note
This research brief is based on Stefani Branilović and Tibor Rutar, “Neoliberalism and Globalization Are Not Undermining Democracy: Panel Evidence from More than 140 Countries, 1980–2022,” American Journal of Economics and Sociology, May 7, 2025.