Neoliberal Legacies and AI Disruption: How Crony Capitalism and Automation Are Reshaping Emerging Markets and Fueling Policy Backlash

The Mises Institute article 'How Neoliberals Fueled The Rise Of Socialism' by Connor O'Keeffe argues that the post-1980s neoliberal order—framed as free-market but rooted in crony interventionism from the Progressive Era—has generated economic instability and inequality, making socialist appeals inevitable. Drawing on historians like Gabriel Kolko, it contends that business elites drove regulatory expansion to shield themselves from competition, a pattern continued through inflation-financed programs, financial crises, and globalization that enriched connected interests while eroding broad prosperity.[1][2]

This critique gains fresh relevance when viewed through the lens of AI-driven economic shifts in emerging markets. Neoliberal globalization expanded outsourcing and business process outsourcing (BPO) sectors in countries like India and the Philippines, creating millions of middle-class jobs in call centers, software services, and back-office work. World Bank analyses now document how generative AI is eroding these advantages: online job postings in South Asia declined post-ChatGPT, with sharper drops in AI-exposed roles such as customer support and data processing. In India, exposed occupations face wage pressures and hiring slowdowns, potentially displacing workers in sectors that neoliberal policies helped build.[3][4]

The parallel is striking. Just as neoliberal policies masked crony redistribution as market freedom—leading to public disillusionment and openness to interventionist alternatives—AI automation threatens to hollow out the very labor arbitrage that sustained emerging economies. World Bank reports highlight lower overall job displacement risk in low- and middle-income countries (around 4.5%) compared to advanced economies, yet warn of concentrated hits to digitally tradable services, rising inequality, and pressure on electricity/infrastructure. Complementary effects exist, but barriers like skills gaps and weak connectivity limit gains, potentially deepening divides and prompting demands for state-led responses.[5]

Scholars and outlets across the spectrum note neoliberalism's role in breeding backlash: from populism on the right to renewed socialist interest on the left, fueled by crises where the state protected elites. AI may accelerate similar dynamics globally, as displaced workers in emerging markets turn toward policies emphasizing redistribution or protection from technological disruption. The result is not inevitable socialism, but a clearer view of how interventionist legacies—whether Progressive Era regulations or 1980s globalization—interact with new technologies to reshape political economies. Connections often missed include how AI could replicate the 'hollowing out' effect Kolko described, transferring value from broad labor forces to tech owners and prompting renewed calls for politicized economic control.