The neoliberal mirage: Deconstructing the myth of a labor-free economy

During Europe’s Industrial Revolution a century and a half ago, a broad consensus emerged among economists across the political spectrum, liberal and socialist alike, that all economic value came from labor. Without human toil, or the “living element” of production, no meaningful output could be extracted from nature nor from capital itself.

They determined that capital was simply the product of human effort manifested in the form of machines, equipment, and buildings necessary for production.

At the time, labor was centrally positioned in discussions about economic relations, as was its status as the source of any economic value exchanged for money in markets. Disagreement between liberals and socialists was largely confined to the definition of labor.

Liberals treated the workforce as one factor of production among others; socialists stressed labor’s social character, which in turn enabled the reformists among them to advocate for welfare states and income redistribution. More radical socialists spoke of class struggle and social revolution.

Unsettling assumptions

Today, contrary to the views that prevailed until mid-twentieth century, consensus among economists has receded sharply regarding the centrality of workers—except among those still holding fast to Marxism and adjacent traditions.

In mainstream economics, other factors have taken labor’s place as generators of value: foremost among them innovation, especially in technology. But innovation is, itself, a form of labor; it is highly skilled and highly productive labor, and it relies on applications of technology in physical or digital forms in order to develop the technology itself.

The same applies to financial services, which have expanded greatly in developed capitalist economies such as the United States, United Kingdom, Singapore, and Hong Kong over the past few decades. In some cases, finance is now regarded as an economy in its own right, detached from the “real economy,” rather than simply one of its many sectors.

Under the dominance of fiscal economics, value generation operates similarly to technological innovation. The specialized skills of a few experts—who some also call “wizards” or “charlatans”—were responsible for the communications revolution. These experts also trade endlessly in financial assets, including stocks, bonds, derivatives, cryptocurrencies, and virtual assets that exist nowhere outside the internet and in no physical place.

Where, then, is labor in a globalized economy marked by these features? Is it merely a faint echo from an earlier era, when a labor-intensive industry formed the backbone of economic life and the source of all value? Or is the continued insistence on the centrality of labor nothing more than an outdated leftist ideological bias?

The globalization of labor

The answer lies in two core observations. First, objectively speaking, and at least for now, human toil remains the essential condition for producing any value.

Perhaps this will hold only until artificial intelligence, coupled with robotics, comes to dominate the production of goods and services—assuming AI itself will not still require people to operate it and direct its use. Until then, human work at all skill levels, including creative and intellectual work and not merely manual or low- and mid-skilled labor, remains indispensable to generating value. The principles of the nineteenth and twentieth centuries still hold true, when labor shifted into operating machines and industrial equipment.

Second, while labor’s objective importance endures, the conditions and the institutional, legal, and political frameworks governing it, have deteriorated significantly over the past four decades under dominant neoliberal policies.

Thus, the narrative that human workforce is being replaced with technology or finance as a means of production is the ideological culmination of worsening material conditions: the expansion of the informal sector, the erosion of social protections, and the weakening of unions and labor parties.

This deterioration began in the 1980s among low- and medium-skilled workers. It then expanded to include highly skilled professions, which have now become subject to insecure and unprotected working conditions under the pretenses of labor-market liberalization and flexibility.

The economic globalization of the past 40 years was capacitated by neoliberal hegemony and the political influence of the United States and European Union. It relied on drawing hundreds of millions of workers from the periphery, particularly from Asia, and into the global economy. These workers were put to work in factories, producing goods ranging from metals and machinery to clothes and technology, forming what is now known as the global supply chain.

This process relied on eroding the industrial base in core economies, weakening their working classes while building larger and deeper industrial bases in economies such as South Korea, Taiwan, then China, Thailand, Indonesia, Malaysia, and later Vietnam, Cambodia, and Bangladesh. The same holds for India if we consider the services enabled by the communications revolution since the 1990s.

From the standpoint of the global political economy, expanding labor bases was only one face of globalization. The other was the dramatic growth of service sectors, which also drew in hundreds of millions of workers across varying skill levels. Some jobs were low-skilled, such as personal services, drivers, and delivery workers—ironically linked to advanced technological platforms run by firms such as Amazon, Alibaba, Uber, and DiDi. Others were highly skilled, such as programmers and education workers.

Considering these dimensions reveals a fuller picture than the fragmentary one offered by advocates of neoliberalism, who see globalization as a few thousand engineers, programmers, investors, and financial advisers making deals or speaking over internet apps from all corners of the earth.

All value (still) comes from labor

Labor remained central and magnetic, attracting hundreds of millions of people from places like China, India, and Brazil who, forty years ago, were outside the grip of capitalist markets. But this coincided with labor’s declining political and economic position. In 1980, labor comprised 61% of global income. In 2025, it comprised only 53%.

This does not mean that labor has become less important to the economy, rather; it reflects the deterioration of labor’s conditions and terms. This may help explain the worsening inequality in income distribution over the past four decades, now close to levels seen at the start of the twentieth century.

Just as technological development over recent decades expanded labor on a global scale in industry and services, the growth of finance in the same period also depended on labor, albeit indirectly. The expansion of financialized economies rested on the enormous inflation of public and private debt in both the Global North and South.

This included swelling public debt, corporate debt, and household debt used to finance consumption, such as personal loans, car loans, and credit cards.

How can debt become a profitable investment for owners of capital in banks and funds? Only through borrowers’ ability to meet their obligations. For the overwhelming majority of the world’s population, this depends on future labor income—especially given that the poorest half of the world’s population held no more than 2% of global wealth in 2025. In other words, half the planet has no other source of income generation besides labor.

The same applies to government debt. As states’ capacity, or willingness, to tax capital has declined over the past four decades, and as trade taxes have fallen under increasing liberalization, the ability to service public debt depends primarily on taxing labor income.

The conclusion is that the economy still revolves around extracting value from labor, and that the purchasing power sustaining a globalized economy plagued by overproduction depends on incomes generated by labor—whether current or future, as in the repayment of private or public debts through taxes. Until production is fully handed over to AI-powered robots, and human labor supposedly disappears, the claim that labor is no longer important is little more than empty propaganda. Or wishful thinking on the part of investors and capital shareholders, and their theorists.