Remaking Liberalism: Daron Acemoglu at the LSE Festival
This is a transcript of a talk given by Acemoglu at the LSE Festival on the 18th of June 2025 (link). I recommend watching the video to enjoy Acemoglu’s presentation style.
Both the transcript and the reformatting were AI-generated with reading comfort in mind.
Introduction
Larry Kramer:
Good evening. My name is Larry Kramer. For those who don’t know, I’m the President and Vice Chancellor here at LSE. It’s my pleasure and honor to welcome you to this very special event, part of the LSE Festival. The theme of this year’s festival is to explore visions for the future, including changes wrought by new technologies, cultural and demographic evolution, ecological pressures from climate change, population growth or flattening, and much more.
One area in which we’re especially pressed for a positive vision is the form and nature of governance and government. Liberal democracy emerged as a possibility in the late 18th and early 19th centuries. Its spread was slow and subject to fits and starts. Abraham Lincoln’s famous Gettysburg Address framed the American Civil War as one asking whether government of the people, by the people, and for the people shall not perish from the earth—because at that moment, it looked like it might. But it did survive, and in the 20th century, it grew, expanded, and spread.
In 1900, only 10 countries, with less than 10% of the world’s population, had democratic governments. By 2000, that number had grown to 120 countries and 55% of the world’s population. This century, so far, has been less hospitable to democratic governments. As of last year, 2024, the number of democracies was down to 89, in countries with barely more than a quarter of the global population. More striking: only 15% of the people of the world now live in nations that can be classified as liberal democracies.
Why that should be so is an interesting and important question. Liberal democracy and liberalism generally have, by any conceivable measure, been extraordinarily successful in creating the conditions for modernity in the world’s advanced economies. While never perfectly realized, they have enabled enormous progress in improving the material conditions of people’s lives, respect for the rights of minorities, openness to new ideas and cultures, and a voice for citizens—all achieved in ways unimaginable in earlier historical periods. Yet, despite that, liberal democracy appears to be flailing, with an uncertain future, particularly in the places where it is oldest and has been thought most deeply established.
So, what has gone wrong, and how might we fix it? Is there a future for liberal democracy and liberalism, and what might that look like? To help us think through and answer such questions, there may be no one in the world better than tonight’s speaker, Daron Acemoglu.
Introducing Daron Acemoglu
Daron Acemoglu is an Institute Professor of Economics at the Massachusetts Institute of Technology, where he is also Faculty Co-Director of MIT’s Shaping the Future of Work Initiative and a Research Affiliate at MIT’s Blueprint Labs. He’s an internationally renowned expert on political and economic development, inequality, institutions, social policy, and the social consequences of technology. He’s published an astounding number of books and papers, including:
- Why Nations Fail
- The Narrow Corridor (exploring how liberty survives between state power and social resistance)
- Power and Progress (examining what it takes to ensure that new technologies actually improve people’s lives)
Daron is a member of every learned society you’ve ever heard of and has won virtually every honor in his field, including the Clark Medal and, of course, last year’s Nobel Prize in Economics, which he shared with his longtime collaborators Simon Johnson and LSE graduate James Robinson. Daron also earned his master’s and PhD here at LSE.
None of those things fully capture why Daron is such a well-respected and beloved member of the academy. It’s also his amazing generosity as a colleague, his openness to challenge and new ideas, and his integrity as a scholar. Please join me in welcoming Daron Acemoglu.
Daron Acemoglu: Remaking Liberalism
Thank you. It’s a true pleasure to be here, and thank you for that introduction, Larry. He forgot to mention one thing: that Shaping the Future of Work Center was funded by Larry—best investment I ever made.
What I’m going to talk about today touches on issues that the rest of the conference has also explored: creating new ideas for the future of governance and the economy. I will share ideas from a book I’m working on, provisionally titled Remaking Liberalism, hopefully out in May 2026.
The Successes and Challenges of Liberalism
Over the last decade, I’ve become convinced that liberalism’s enormous successes are being overshadowed by some problems. It requires remaking of some sorts. Liberalism—broadly speaking, respect for individual liberties and freedoms, efforts to create rule of law, a level playing field, commitment to helping the disadvantaged via redistribution and other public investments—has been the dominant force in generating new ideas for much of the 20th century, perhaps the late 19th century. It is responsible for many achievements over the last 150 years, perhaps longer.
If apes could reason with us, they would understand many parts of our civilization. One part they wouldn’t understand is that enormous power is sometimes used for helping people, rather than for personal gain. That is a success of liberalism, even more fantastical because of three promises that were implicit from the beginning, especially when married with democracy:
- Shared Prosperity: Economic growth would take place, and every group in society would get some share out of it.
- Public Services: Improvements in health, education, infrastructure, and other enabling things.
- Voice: Liberalism is not in conflict with democracy; in fact, it needs and is synergistic with self-government.
These promises, perhaps partly accidentally but also because of the nature of the ideas and political participation that liberalism and liberal democracy generated, came true to some extent. For example, the 30 to 40 years after World War II saw rapid economic growth, wages increasing rapidly, and tremendous improvements in health and education.
The Current Crisis
We live in a very different era now. Surveys across the world, especially in the UK and the US, show that youth are much more negative towards democracy than ever before. Many more people say authoritarian regimes might be better than democracy, or there may be reasons for restricting people’s voting rights or participation—something you didn’t really see in much of the West before.
The number of democracies, which kept increasing, has been reversed for the last 15 years. More importantly, new ideas are coming not from the liberal side, but from the anti-liberal right. If you look at ideas that are spreading and articulating new ways of organizing society, they are the ones getting traction. Part of the reason why we need to have this conversation is that it takes an idea to beat an idea, and just the old version of liberalism is not enough.
Liberalism failed to adjust to being the establishment. Many of its successes were either when it was in opposition, forcing change, or when it was first coming to power and dealing with major crises. Once it became the establishment, it did not adjust to what I call the post-industrial world.
Why Liberalism Worked
Philosophical Foundations
Liberalism is about individuals making choices, then interacting with their community, sharing ideas, and working together. Much of what we do is about knowledge acquisition—not just techniques, but social adaptation. We’ve changed the way we live in tremendous ways, and with each new technology or change, we have to adapt. That adaptation is about knowledge acquired by individuals making choices and sharing that information with their communities.
Communities are important because they create pathways for information to be distributed and to achieve much bigger things than can be done individually. Social adaptation is a group thing—communities themselves need to engage in experimentation.
The secret sauce of liberalism is that it encourages individual choice, organization in communities, trusted sharing of information, and communities via their self-government making different choices. Diversity of communities is a strength, not a weakness.
Liberalism should stand for experimentation and freedom—freedom of expression, thought, and action. The market system, under the right regulatory framework, is ideally made for this. Economic growth and the belief in progress (not inevitability, but possibility) are central.
Political Economy
The way this worked during the first half of the 20th century, and especially after World War II, was what I call the industrial compact. Firms introduced new technologies and ways of producing to reach bigger markets, needing more labor, which increased wages and created shared prosperity. Unions were critical to ensure employers couldn’t use coercion or shortchange labor. Self-government at every level was important for public services to be delivered.
The Post-Industrial Crisis
Economic Shifts
The failure starts with the era of post-industrial economics, especially the introduction of digital technologies. Early digital technologies were very complementary to more skilled, educated workers, creating a wedge between economic opportunities for college-educated workers and the less educated.
More importantly, digital technologies enabled automation, severing the link between production and the demand for labor, especially low-educated workers. This is when inequality exploded, and the lower-education parts of the workforce stopped keeping up.
Baumol’s cost disease—the fact that not every sector has the same productivity growth—plus globalization, added to this divergence between the fortunes of the educated and the uneducated.
Political Shifts
Post-industrial economics was coupled with post-industrial politics: the rise and divergence of the college-educated as a body distinct from the rest of society, cutting links with the rest of society. The educated became richer, more numerous, and their status increased, along with changing values.
Communities that used to be more mixed in terms of education started sorting themselves. The educated predominantly marry, socialize, and live with each other, with very different experiences from the rest of society. Political power of the educated increased, with a reversal of which parties stand for the educated. Now, the college-educated everywhere vote for the center-left, while those without college degrees vote less and less for the center-left.
Within the college-educated group, there is heterogeneity: the “cognitive elite” (top graduates from elite institutions) and the “mass college-educated.” The cognitive elite are much more pro-market and anti-redistribution, while those in education or public administration have different values.
The growing status of the educated group, amplified by the tech sector, led to an agenda of cultural liberalism, which was not shared by much of the rest of society. Attempts to change the values of communities from the top down damaged communities and destroyed the basis of self-government, creating backlash.
The Path Forward: Working-Class Liberalism
Almost 90% of people in recent US surveys say politicians do not care what they think. Only 10% trust Congress, courts, or the media. There is some misinformation and exploitation of discontent, but this reflects a very important backlash.
The basic idea is to create what I call working-class liberalism—a liberalism that gets buy-in from the working classes, centered on communities and self-government at the community level. This means:
- Self-government: Addressing the feeling of lacking self-government.
- Jobs: Shared prosperity cannot be achieved without job creation.
This liberalism must be tolerant of the diversity of communities, especially working-class communities, and prioritize economic growth and job creation. The future should not be one where 90% of the population goes to college; we need better training possibilities and technologies that create jobs for diverse skills.
Q&A Session
On Race and Community
Larry Kramer:
You never mentioned the word “race” once. Most people would think that was a profound factor in shaping where we’ve gone.
Daron Acemoglu:
That’s very important. Some community values will not always create the best pathways for racial integration. Liberalism didn’t have the view that there is always a best way; there are major trade-offs. For me, the limits would be if a community completely abridges the freedoms of its members. If a community has values we don’t like, that’s allowed. Forcing communities to have uniform values is a losing proposition.
On Neoliberalism
Daniela Gabor (SOAS):
Why didn’t we hear anything about neoliberalism tonight?
Daron Acemoglu:
Neoliberalism is a broad tent. The deregulation movement shifted power from labor unions toward big corporations, which had important consequences. Some technological developments and the union’s inability to resist them wouldn’t have happened the same way without Reagan and Thatcher. But they were still within the liberal tradition. The challenge today from anti-liberal thinkers is very different.
On Defining Community
Roberto (Visitor):
Social science scholars have done a poor job defining “community.”
Daron Acemoglu:
I purposefully did not define community. There are two definitions: one puts shared history at the center (faith, ethnic, or working-class communities), and the other is people who share values (community of scholars). Shared history or enough trust is central, at least the way I’m using it.
On Demographics and Immigration
Online Question:
What does declining population mean for the future of liberal democracy?
Daron Acemoglu:
Declining populations will be helpful in two ways: labor shortages will make job creation easier, and attitudes toward immigration will change as labor shortages increase.
On Local Governance and Political Shifts
Audience (Youth):
Does the shift to working-class liberalism and local governance mean a shift more towards the right?
Daron Acemoglu:
I don’t know. Both center-left and center-right parties could play that role. In the US, the right has been taken over by anti-liberal ideas, so it won’t be the Republicans. In the UK or Germany, it could be either. The two parties should compete for this.
On Applicability to Other Countries
Andres:
How applicable is your theory to countries like Turkey, India, Brazil, South Africa, Poland, Hungary, and the Philippines?
Daron Acemoglu:
There are parallels. For example, Erdogan in Turkey constructed a divide between “white Turks” (elites) and “black Turks” (provincials), similar to the US. Globalized elites in every country have more overlap in their values, and those values are perceived as being top-down imposed.
On Education and the Future of Work
Audience (PhD Student):
There’s a sense among the younger generation that higher education doesn’t guarantee a job. What do you think?
Daron Acemoglu:
There’s some truth to that, but it’s exaggerated. AI is making only slow progress. Shared prosperity can only become a reality if we use AI in a pro-worker direction, increasing the capabilities of workers with diverse skills.
On Abundance and AI
Online Question:
How do your ideas compare with the “abundance” recommendations from Ezra Klein and Derek Thompson?
Daron Acemoglu:
Abundance arguments are complementary but different. They offer a solution without a diagnosis and are naively optimistic about AI. Productivity gains from AI are much exaggerated, at least in the next 10–20 years.
On Institutional Innovations in Developing Countries
Sachini David (Stalo Consulting):
What institutional innovations would you recommend for countries like South Sudan or the Sahel?
Daron Acemoglu:
Developing countries need better institutions. If liberal democracy is in crisis in the West, it makes it less likely to spread elsewhere. Self-government is very important, but the institutional elements should not be a copycat of the US.
On Technology and Dignity
Audience:
The wind turbine makes the energy, the machines do the work—we can have a better world.
Daron Acemoglu:
I don’t think it’s such an easy future in the near term. Most people wouldn’t find dignity, happiness, or meaning if they are just sitting at home playing video games, while a small group of machines and entrepreneurs do all the contributing. That would be a dystopian society.
On National Security and Internal Politics
Audience:
How would interstate conflict impact internal politics and the creation of a neoliberal society?
Daron Acemoglu:
International conflict would make things much harder, bringing out the worst of nationalism. For AI and social media, global cooperation is needed, but the focus on reaching AGI has made cooperation between China and the US impossible in the short term.
On Power, Oligopolies, and Surveillance
Frank Fansburg (Middlebury College):
How do you see your vision implemented given the collapse of the division of power, oligopolies, and surveillance?
Daron Acemoglu:
Surveillance is not yet a big concern because companies can’t process all the data. Monopoly is a much bigger problem. The US is now ahead of Europe in breaking up big tech companies. Executive presidency is a big problem, reaching its apex with Trump, whose agenda is to create a Carl Schmitt–style executive presidency—an anti-liberal idea.
On Liberalism and Democracy in Non-Western Contexts
Fatima (LSE):
What happens in places where democratic practices precede liberalism?
Daron Acemoglu:
It depends on how we define democracy. Self-government is very synergistic with liberalism. Even in places where communities have values that are not very liberal, starting from self-government is the path toward more liberal values. My focus has been on the industrialized world, but self-government is important everywhere.
Conclusion
Thank you for an incredibly insightful talk and a wide-ranging set of questions. Let’s please give the speaker a round of applause.