From Invisible Hand to Iron Fist: When Populism Rewires Capitalism

The late 20th century was supposed to be history’s quiet conclusion. With the Cold War ending in the symbolic collapse of the Berlin Wall, a confident intellectual consensus took hold: liberal democracy, coupled with market capitalism, had not only prevailed but had rendered ideological alternatives obsolete. It was this mood that animated Francis Fukuyama’s famous “end of history” thesis, which was not a claim that events would cease but that the contest over political and economic systems had, in essence, been settled.

Three decades later, that confidence appears not just premature but almost quaint.

The backlash against what came to be labelled “neoliberalism” has not merely questioned the outcomes of liberal capitalism; it has unsettled its philosophical core. Rising inequality, financial excesses, and periodic crises, most notably the 2008 Global Financial Crisis, have eroded the moral authority of markets. What was once presented as a system of broad-based prosperity increasingly came to be seen as one of concentrated gains and socialised losses. Fukuyama himself later acknowledged this drift: liberalism had not failed in theory so much as it had been distorted in practice, hollowing out the very middle classes that sustained it.

Into this discontent has stepped populism, a force less coherent in ideology than potent in emotion. It thrives on grievance and frames politics as a battle between “the people” and entrenched elites, and promises restoration rather than reform. Yet in executing this promise, it often produces an unexpected inversion. In rejecting market excesses, it does not restore market discipline; instead, it elevates state power in ways that begin to dominate both democracy and capitalism.

Nowhere is this paradox more visible than in the contemporary United States. The country that long championed free markets and limited government has, in recent years, exhibited a more assertive, interventionist state — one that deploys tariffs as instruments of political messaging, leans on corporations for alignment, and increasingly blurs the boundary between policy and personal authority. The critique of neoliberalism has not led to purer capitalism; it has given rise to a more politicised one.

Classical political philosophy offers a useful frame for understanding this shift. For John Locke, the state existed to protect life, liberty, and property, acting as an umpire, not a player. Neoliberalism broadly operated within this Lockean tradition, seeking to constrain state overreach while enabling markets to function. But the populist turn carries echoes of Thomas Hobbes, where the state — Leviathan — commands authority to impose order. The difference, however, is that today’s Leviathan is neither philosophically grounded nor institutionally restrained. It is more improvisational, often guided by immediate political calculus rather than enduring principles.

This is where the spectre of megalomania looms. In political terms, megalomania is not merely about ego; it is about the personalisation of power, the gradual conflation of the leader with the state. Populist legitimacy rests on a direct claim to represent “the people,” which in turn weakens the role of institutions as mediators. When the leader embodies the popular will, institutional checks can be cast as obstructions, and dissent as disloyalty.

The economic consequences are subtle but profound. Markets, which depend on predictability and rule-based governance, begin to operate under the shadow of discretion. Corporations find that proximity to power matters as much as efficiency. Regulatory frameworks become instruments of signalling rather than neutral enforcement. Governance becomes largely symbolic and is seldom taken seriously. Even central banks, historically insulated, face pressure to align with political priorities. What emerges is not classical state control, but a hybrid system that is part capitalism and part political patronage.

This transformation also erodes institutional neutrality, one of the quiet pillars of liberal democracy. The strength of the neoliberal order lay not just in markets, but in the credibility of institutions that governed them. When those institutions are perceived as extensions of corporate-political authority, confidence frays. Investment becomes contingent not merely on economic fundamentals but on political cycles. The invisible hand, to invoke Adam Smith, begins to feel the weight of a very visible one.

The global implications are equally significant. As the United States recalibrates its economic and political posture, the broader international order fragments. Trade becomes more transactional, alliances more conditional, and multilateral institutions less influential. The shared assumptions that once underpinned globalisation give way to a patchwork of national strategies, each shaped by domestic political imperatives. The less said about the lack of decency in political commentary, the better.

At its core, this moment represents a deeper philosophical rupture. Fukuyama’s “end of history” was not undone by the resurgence of a coherent ideological rival, but by the internal contradictions of liberalism itself, exposed and amplified by populist reaction. The result is not a clear alternative, but a contested terrain where markets and states jostle without a stable equilibrium.

The danger lies in overcorrection. If neoliberalism erred in its faith that markets could self-regulate, populism risks erring in its faith that power can. The expansion of state authority, especially when personalised, carries its own risks of excess, distorting markets, weakening institutions, and ultimately undermining the democratic fabric it claims to defend.

The task ahead is neither to resurrect neoliberal orthodoxy nor to embrace populist assertiveness, but to reconstruct a balance — one where markets are disciplined without being politicised, and where the state is empowered without becoming dominant. That requires not just policy innovation, but philosophical clarity. A recognition that neither the invisible hand nor the Leviathan can be left unchecked.

History, it turns out, did not end. It merely paused — long enough for its contradictions to gather force.