Democracy requires a new, progressive capitalism.

Amid another election season, our impulse to debate American democracy through a single political lens is understandable. But we’d be better served considering a second closely related question too: Which economic system serves the most people? Sign up for the Prompt 2024 newsletter for opinions on the biggest questions in politics On one side of the economic debate are those who believe in largely unfettered markets, in which companies are allowed to agglomerate market power or pollute or exploit. They believe firms should maximize shareholder value, doing whatever they can get away with, because bigger profits serve the common good. The most famous 20th-century proponents of this low-tax/low-regulation shareholder-centric economy, often referred to as neoliberalism, are Milton Friedman and Friedrich Hayek. These Nobel Prize-winning economists took the idea beyond the economy, claiming this kind of economic system was necessary to achieve political freedom. They worried about the growth of government in the aftermath of the Great Depression, when under the influence of John Maynard Keynes, the state was taking on new responsibilities to stabilize the economy. In “Capitalism and Freedom,” Friedman argued that “free markets” were indispensable to ensure political freedom. In Hayek’s words, government overreach would lead us down “The Road to Serfdom.” We’ve now had four decades of the neoliberal “experiment,” beginning with Ronald Reagan and Margaret Thatcher. The results are clear. Neoliberalism expanded the freedom of corporations and billionaires to do as they will and amass huge fortunes, but it also exacted a steep price: the well-being and freedom of the rest of society.

The road to authoritarianism is not paved by government doing too much but too little. The surge in support for populism, especially of the ugly nationalist variety, has many causes. It would be overly simplistic to ascribe it just to economics. Still, it is no coincidence that populist nationalism is a graver threat in countries such as Israel, the Philippines and the United States than in Sweden, Norway and Denmark, where high-quality free public education, strong unemployment benefits and robust public health care free their citizens from the common American anxieties over how to pay for their children’s education or their medical bills.

There is an alternative. A 21st-century economy can only be managed through decentralization, entailing a rich set of institutions — from profit-making firms to cooperatives, unions, an engaged civil society, nonprofits and public institutions. I call this new set of economic arrangements “progressive capitalism.” Central are government regulations and public investments, financed by taxation. Progressive capitalism is an economic system that will not only lead to greater productivity, prosperity and equality but also help set all of us on a road to greater freedoms.

More From The Washington Post (subscription required):