La crisi del capitalismo democratico

by Martin Wolf

Capitalismo e democrazia sono complementari, hanno bisogno l'uno dell'altra. Eppure il patto che per decenni ha unito queste forze è piú fragile che mai.

«Martin Wolf è il miglior giornalista finanziario del mondo».
The Washington Post


In questi anni gli errori e le storture dell'economia hanno scosso profondamente la fiducia nel capitalismo globalizzato. E allo stesso tempo i limiti strutturali e gli errori della politica hanno messo in discussione la nostra fede nella democrazia liberale. Il legame radicato e diffuso tra libero mercato e libere elezioni è vicino al punto di rottura. Mentre monopoli vastissimi dominano consumi e scelte di vita, entità statali che rifiutano i valori democratici controllano pezzi giganteschi del mercato globale. Tutto sembra concorrere alla crisi finale del capitalismo democratico, quel delicato equilibrio tra capitale e politica, tra ricchezza e potere che ha caratterizzato gli ultimi decenni di storia dell'Occidente. Ma, argomenta Martin Wolf, firma di punta del Financial Times e una delle voci piú autorevoli dell'economia mondiale, il capitalismo democratico è ancora, pur con le sue fragilità e le sue ombre, il sistema migliore per garantire il benessere del genere umano. Capire perché è in sofferenza è l'unico modo per provare a salvarlo.

«Una lettura necessaria. Un tour de force». Los Angeles Review of Books «Una accurata e intelligente critica dell'economia globale».
New Yorker

«Una sintesi stimolante di cosa sia il capitalismo democratico, e di come aggiustarlo».
Ben Bernanke

«Martin Wolf ha scritto il resoconto definitivo dei mali che affliggono la democrazia e il capitalismo».
Yascha Mounk

Genres: Economics, Politics, Nonfiction, History, Business, Finance, Society

707 pages, Kindle Edition

First published February 7, 2023

About the author

Martin Wolf is associate editor and chief economics commentator at the Financial Times, London. He was awarded the CBE (Commander of the British Empire) in 2000 for services to financial journalism. Wolf won the Overseas Press Club of America’s prize for Best Commentary in 2013 and the 2019 Lifetime Achievement Award at the Gerald Loeb Awards. He was a member of the UK’s Independent Commission on Banking in 2010-11. Wolf is the author of The Shifts and The Shocks: What We’ve Learned— and Have Still to Learn—from the Financial Crisis.

Reviews

[Robert Felton · Rating 1 out of 5]

   I knew I was in trouble when the book opened by misdefining Socialism. He says it's when the government controls the means of production. Nope. It's actually when the workers and communities own the means of production.
     From this opening falsity, he proceeds to offer a maddeningly deceitful critique of the failures of socialist polices while never mentioning the variety of ways that Western countries have embargoed,  sanctioned, bombed and coup d'etat'd countries into oblivion when they dared to embark on their own socialist systems.
      Chile in the 1970s and Haiti in the early 2000s are just two examples.
      He refuses to engage on the ways that exploitation is undeniably baked into the free market economic model. You show me a "free market capitalism" success story, and I will show you cut corners or worker exploitation somewhere down that supply chain. Simply waving your hands in the air and declaring "no system is perfect," isn't good enough when the gap between the successes and failures in this system is so massive.
        There is a lot of hemming and hawing about corruption in the system, and emphasizing that there needs to be transparency in our political ecosystem and corporate relations, but he never explains how that happens in a captured two-party duopoly where accountability will never be reached when neither side wants to hold their people accountable.
        For example,  there is the repeated assertion in the book that Trump's "big lie" was a major attack on representative democracy and it should be called out as such. This while he says nothing about Russiagate, (the debunked conspiracy that Trump was a Rissian agent), Hilary Clinton getting debate questions early from Donna Brazile, and Biden moving South Carolina to first in primary voting to benefit himself.
        Couldn't the same logic apply to those liberal actions and their affect on the political process?
        Wolf also makes several grandiose, pro- free market claims that do no stand up to serious scrutiny: "Markets allow people to use their imagination,  skills, and efforts to better themselves, without approval from a higher authority. " You can only do this if you have the financial means to support yourself in a system where everything is monetized. A person who has the means to be patient while pursuing his business objectives is very different from a working class person who would have little time (would have to maintain a day job in the meantime), energy (balancing two careers in the interim) and financial stability to prosper waiting for success. Hence, your examples of Elon Musk and Bill Gates are bad because they both came from wealth.
          It has only gotten more difficult to reach the "American Dream" in the free market system as salaries have stagnated, while the cost of living has exploded. Add into it the student debt crisis (which Wolf barely mentions) and his Horatio Alger myth of Capitalism sounds less and less attainable by the year.
          Then there is the UBI question, which Wolf approaches with disingenuous nuance, before ultimately arguing against it as it would not be affordable (the fact that the pentagon lost $1.8 trillion in taxpayer money and the media responded with a collective shrug suggests otherwise) and it's not fair to get something for nothing (As apposed to environment polluting companies getting subsidies, corporate bailouts and stealing money from employees through wage theft).
        All in all, this was a malformed collection of underdeveloped ideas, pro-Capitalism cheerleading, Trump Hate,  and a call for policing social media for misinformation (whatever that may be, since it is completely dependent on the bias' of the person consuming it). I say skip it

[Jeroen Vandenbossche · Rating 2 out of 5]

Quite the disappointment.

It is not that I disagree with Wolf’s diagnosis or with the policies he prescribes. In fact, I agree with the former and have a lot of sympathy for most of the latter, including his ardent defense of piecemeal social engineering.

Despite this I found the book quite dull. I have not come across a single original insight or policy proposal which had not been advocated by others in a more enthusiastic and/or persuasive manner before.

The book is also very repetitive (in itself and of Wolf’s earlier writings) and the rhetoric is annoyingly pompous.

Too bad, I wish I could have been more positive.

[Kusaimamekirai · Rating 4 out of 5]

One of the better and more readable books on capitalism I’ve read.
Wolf is no Bernie Sanders but neither is he Milton Friedman in that his central thesis is that capitalism is the best economic system produced to date but it can only function properly when all of the citizens living under it are engaged and invested in it.
For Wolf that means several things.
To name a few:
1) That all citizens feel the rules of the game are fair and equally administered irrespective of one’s income.
When one sees corporate robber barons completely escape legal punishment for financial malfeasance, and in fact receive golden parachutes and government bailouts, it follows that all will eventually lose trust in the system (one could argue that the robber barons through their behavior never had it to begin with).
2) Citizen’s confidence in the system of voting itself.
When people begin to believe that either their vote will be discounted either through their representative being more interested in lobbyists time and money than their own (former representative, and Trump chief of staff Mick Mulvaney once said ‘If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.’, or through outright voting fraud, they will begin to look for a system that better represents them.
Wolf argues that this is in fact what we are seeing playing out across the globe as democratic capitalist countries begin to give way to autocratic or plutocratic ones where a frustrated populace is willing to leave everything to a strong ‘leader’ who will dispense with the lobbyists and the corruption. In reality of course, autocrats are deeply corrupt but often skilled at appearing to be the opposite.
Wolf presents at the end of the book some ideas to restore citizens trust in democratic capitalism, some quite good while others are less so, but he also rightly points out that capitalism can only survive if citizens choose to be active members of their countries. This means not only voting but being well informed in an age of misinformation. Without these things, we may indeed see not only capitalism, but democracy itself fade into memory.

[Hanna · Rating 5 out of 5]

Enlightening book which was particularly revelatory to me, a millennial who before Russia's invasion of Ukraine took democracy and capitalist economy for granted. Brilliantly written, the book helped me clarify my political standing and changed many opinions of mine.

Martin Wolf wisely explains how the complementary opposites, democracy and capitalism, need each other. In a sense, capitalism is a market competition, while democracy is a political competition, which we know works better than a monopoly. Both of them share the rule of law, the value of human agency in political and economic life, and the equality of status (everyone has a voice and can buy/sell what one owns). Democracy and capitalism are symbiotic: economics provides a rationale for cooperation, and politics provides the framework for it; however, it is essential that power is separated from wealth.

Today it is absolutely vital to make this “marriage” work as the rentier capitalism enabled huge income inequality (e.g. financial sector grew enormous not due to the productivity growth, but due to balance sheet speculation), pandemic favoured the rising of the competent autocratic governments, and the echo chambers of digital media fuelled anger among the population. Modern hyper individualism also threatens the democracy and social capital (the clubs and communities disappear, people consume information through a lonely and personalised newsfeed)

Unless we make changes, we’ll witness a disastrous rise of populism. Populism has two underlying aspects: hostility to elites (not necessarily bad) and rejection of pluralism (very dangerous as democracy is built on the idea of pluralism and accepts the liberty of defeat). The evils of populism are a short-termism and indifference to expertise. Unlike a populist government, good government has respect for expertise, while lets the final judgement to be made by the representative of the people. What distinguishes court from good bureaucracy is the loyalties to particular personalities not the institution/government/country. It is also important not to let absolute meritocracy be a base system in government as our personality and talent are greatly defined by our endowment. Some form of meritocracy is inevitable yet we need the elite to be decent, reliable, honest and respectful to fellow citizens and the rule of law.

The book explains current demographic and political changes in the society. In XX century politics had been defined by economic issues (the left demanded equality, the right - greater freedom). In the XXI century it shifts towards identity politics. The left focus on the interests of marginalised groups (women, blacks, immigrants, LGBT), while the right - on patriotism and traditional national identity. Demographically, politics also changed: in the 1950-50s "the left-wing parties were associated with lower education and lower income voters, while now they associate with higher education voters. So high income voters continue to vote for the right, while high education voters shifted to the left. As a result the gap between leftist intellectuals and labour grew further resulting in the disappearance of old coalition committed to economic redistribution.”
Eventually, identity politics will lead to tribalism and wrong beliefs about the entitlement of certain groups. In reality, we are a mix of overlapping identities, so a political debate has to focus on widely shared measurable things (poverty, age, sickness) not on cultural or ethnic identities. It is also dangerous to promote nationalism. Instead we can think about patriotism: which is defensive by nature and has no wish to force other people and desires no power and prestige over others. With shared love to one’s country, its idea and history, it's easier to tolerate the difference in opinions and values of the opposition. As a next step, we have to enforce the understanding that citizens have obligations to one another in small and big things (COVID mask policies tested people’s sense of consideration and care for one another).

The challenge to democracy is huge, yet this brilliant book suggest solution in a form of consequential reforms, rather than one-off revolutionary changes. Here are his key ideas that were particularly interesting to me:

Economy
- Tax capital, rent and land (not enterprise, effort and saving) as it will not lower the output; consider taxing cities with higher network externalities (Londoners earn higher income due to network externalities, not a higher productivity), tax philanthropy (which is not necessary driven by charity - e.g. nobody elected Bill Gates to solve world health problems)
- Turn corporation taxes into destination taxes rather than on the location of production to disrupt tax heavens
- Cancel tax deductibility of debt to motivate companies fund themselves through equity rather debt, but let them expense the investments
- Treat carried interest (e.g. bonuses in private equity) as income not capital gains (as there is no possibility for losses)
- Allocate the rent income of corporations not to shareholders and top managers to ensure they are focused on product quality but not on rent seeking
- Link CEO bonuses not to shareholders compensation who enjoy limited liability but on long terms health metrics of the company and the climate
- Fund audit services from the listing fee on stock markets (as the investors have to be interested in the quality of the accounts) or set up a public body financed from corporate tax
- Establish public sector balance sheet transparency

People (Equality of status and opportunity but not necessarily the outcome)
- Introduce collective defined benefit pension scheme with shared investment pot to share the risks
- Reform student debt: income contingent loan plan for student debt or the equity part in student debt to allow universities benefit from their most successful students
- Control migration to prevent free riders reap the benefits of the welfare state and undermine the trust in benefit redistribution (citizenship is exclusive)
- Enhance opportunities and decentralisation for less developed regions built on local identities (localism of Switzerland that combines benefits of global scale operations and small-scale politics)

Government
- Make top government officials high paid (as in Singapore), but select them carefully and demand devoted public service
- Maintain universal franchise limiting only immature people. Epistocracy (the rule by the knowledgeable) does not guarantee smart outcome (e.g. German intellectuals votes for Nazi, smart people let the financial crisis happen) as our emotions drive our choices. Also, people without political rights would matter less politically and so socially  - as long as people can vote, their views and interests cannot be ignored
- First-past-the-post system doesn’t work – the best one is a system of transferable vote where the 2nd and 3rd preferences also count unless 1st choice won an overall majority
- Prohibit gerrymandering
- Interesting idea to consider compulsory voting as in Australia. It’s senseless to add more low-informative voters, yet it ensures universal voting and precludes vote suppression
- Make parties independent of private money (e.g. enable taxpayers donate a certain amount of their tax payment to political party in the tax return)
- Establish transparency of donations and ban donations by corporation (they are not citizens) and foreigners
- Martin Wolf suggests the following system:
1. House of Representatives consist of professional politicians elected by the people who originate the legislation, out of which the government is randomly selected
2. House of Merit consists of people of significant achievement elected for 10 years with 1/10 changed yearly who are to check, amend, and delay the legislation (but not veto)
3. House of People elected for one year by the lot delay legislation and transfer controversial questions to the referendum with [50%]60% required vote for [non]constitutional change

Media
- Ban political advertisement in social media to prevent the emergence of partisan channels (as Fox News in the US)
- Introduce digital tax on social media to finance public broadcasters and local media
- Create separate regulations for businesses of systemic risk in digital economy (as extra caution for big banks)
- Ban the anonymous posts in digital space so that everyone can be identified (as the banks have to know their customers)
- Make Facebook and similar platforms responsible for the content they publish + allow the algorithm review by independent public body as it affects the whole society (or develop “middleware” that allows people to choose an algorithm that, say, prioritises content from high-quality news websites)
- Shift political discourse to more appropriate channels (as Vermont-based site Front Porch Forum where neighbours interact; or Polis website in Taiwan where government asks for inputs from citizens)

International cooperation
- Promote development assistance to developing countries who fight for democracy (as Ukraine) as they will strengthen the liberal democracy at home. However, direct intervention is reasonable only when it’s controlled by international community (case of Japan and Germany after WWII where the culture of advance economic society existed and democratisation happened quickly vs Afghanistan where democratisation could have taken a century)
- Provide investment in developing countries (a western alternative to the Belt and Road initiative)
- Provide assistance for developing countries in sustainability shift (incl. carbon border tax if needed)
- Foster international trade (both poorer and richer countries would enjoy higher prosperity)
- Renegotiate of rules of international cooperation addressing new challenges (WTO, financial regulation, management of international debt) and give voice to rising powers of China and India (e.g. voting share in IMF), otherwise they would come up with their own institutions
- Reserve G-7 meetings for informal discussion among the leading liberal democracies
- Redistribute the penalty for above average emissions to countries with the low average missions

Today governments should focus on systemic fragilities in economics and society to increase their robustness (being able to continue operations throughout unexpected emergencies) and resilience (being able to be rebuilt and reconfigured). The challenge of uncertainty is that of thinking systematically. We need to strengthen the economic bonds of citizenship while deepening international cooperation to address 3 major challenges: the collapse of democratic capitalism, the rise of China and the climate change.

China's regime is a big threat for democracy. Unlike in democracies, which are self-correcting systems, under authoritarianism it is much harder to change the regime. The foundation of China's regime is economic growth, which is hindered now with rising debt, suppression of entrepreneurship, typical to bureaucratic capitalism systems. However, we have to keep the war unthinkable (that's why Ukraine invasion is so frightening). We have to maintain interdependence and cooperation on global issues, yet preserve democracy and freedom which gives hope for western people as well as some Chinese people; as well as maintain autonomy in strategic technologies and security in the most important aspects of the economy - e.g. energy and health.

This absolute must-read book reassures that democracy can be saved with a simple but powerful idea of citizenship which thrives on widely shared prosperity and shared trust in competent government.

[Jim Parker · Rating 4 out of 5]

As the esteemed economics editor of the Financial Times, Martin Wolf has been a long-time champion for what he calls ‘democratic capitalism’. That these days that phrase strikes many as a contradiction in terms is really at the heart of my criticism of this book.

I agree fully with Wolf (and Churchill) that while democracy is a flawed system, it is the best system we’ve got. Liberalism - in the sense of the protection of civil rights, freedom of assembly, and a free media - is non-negotiable. Democracy - in the sense of government of the people, by the people and for the people - is the foundation of strong and just societies.

But Wolf seems unable or unwilling to see that capitalism is mortally wounded. He rightly assesses the dangers we face from rising authoritarian populism, distrust of elites and a loss of faith in public institutions. But he sees this primarily as a communication problem, a failure of corrupted elites, than as a design flaw in the system itself.

He also fails to make the connection between the climate emergency - the biggest and most existential threat we face - with the 200 years of inexorable and unsustainable growth that capitalism has brought about. Yes, capitalism has brought with it much that is good, but the planet simply cannot sustain exponential growth and we will need a new operating system if we are to survive.

So much of what Wolf calls for in response to the challenge against democracy - cooperation, attacks on obscene inequality, getting money out of politics - are anathema to the capitalist impulse. And the end point of this ruthless logic we now see in the second Trump administration’s final dismantling of the institutions of liberal democracy.

Capitalism must be tamed if we are to survive as a species. Wolf himself praises FDR as the greatest reformer of the 20th century. But what made the 30 glorious years that followed the Second World War so successful was the accommodation between capitalism and social democracy.

I guess these quibbles come down to definitions and where you draw the line. But capitalism as a concept is so shop-soiled that I wouldn’t be trying to save it at this point. Democracy, yes.

[Gregory Cornelius · Rating 5 out of 5]

The Crisis of Democratic Capitalism is an important and timely book.

Financial Times journalist Martin Wolf begins by explaining the risks of tyranny, relating his family’s tragic experience of Nazi occupied Poland, before presenting well researched summaries of the global histories of democracy and capitalism. With the backing of statistics he explains why the combination of liberal democracy and market capitalism is the most successful political economic system in the history of the world.

Wolf explains in simple terms what the important values of democracy are: universal suffrage and equality in the eyes of the law. His explanation of liberal democratic values echoes Fukuyama’s ‘Liberalism and its Discontents’ and his concerns mirror Larry Diamond’s ‘Democracy in Decline’. Pushing further forward from Fukuyama and Diamond, Wolf builds an argument that democratic capitalism and its institutions are under pressure and in need of reform (the risk is liberal democracy devolves into autocratic capitalism or plutocracy).

This is very contemporary book discussing today’s current events in the context of history: analysing the impacts of China’s global aspirations, for example. Importantly Wolf provides a useful list of practical political remedies which could be implemented now in order to strengthen and defend the values of democratic capitalism: to find ‘balance in the marriage between liberalism and capitalism’ through Karl Popper’s ‘piecemeal social engineering’ and a revitalised idea of citizenship. The book is packed full of quotable thoughtful expressions of political and economic ideas: “The world can not unsee the Trump presidency”, he writes.

Martin Wolf is a great thinker. Great book.

[Brad Benson (moving to StoryGraph) · Rating 4 out of 5]

A very recent and therefore fascinating assessment, because it takes into account recent upheavals like Tr_mp, Brexit, and (the arguably-botched management of) the Covid-19 pandemic. Democracy is at a perilous spot --particularly with the entertainment-ization (my word) of politics & media, increasing income inequality, and exacerbating global issues like global warming, the rise of China, and the War in Ukraine. Dry at times and often a stark reminder of our situation (too soon!), the ultimate message is that citizens must not become apathetic, but rather must hold leaders (both elected and not) accountable and PARTICIPATE to ensure government is "for the people, by the people..." and not only in protection of one's personal beliefs and ideals.

[Max D'onofrio]

There were some interesting analysis from this book that seemed to capture interesting elements of our times. But I honestly kind of got bored by the end. And some folks who aren't a fan of capitalism probably wouldn't like it.

[mich 🩶 · Rating 4 out of 5]

prefacing this by declaring that, after self-reflecting on the relentless trolling i’ve done throughout the year (sorry greg), i have entered the Goodreads Serious Era ™️and shall now attempt to genuinely evaluate the things i read, because media literacy cool and good etc. anyway, my like 3 active friends on goodreads have probably noticed me reading a lot more social science stuff compared to literature and that’s because of my very rational fear of being intellectually mogged by the humanities nerds in the LSE debate team coming september. also i realise that i sound like this is my first day on earth throughout most of this review so i apologise for any ignorant statements made!! will probably seriously review angels or hmt next in light of its resurgent political relevance (when i recover from IB that is)…who knows

i picked up this book initially as a means to learn a little more about democracy and capitalism and how they function together in a modern context, so i was really interpreting this as more of an introduction to the flaws of western liberal democracies rather than a penetrating radical critique calling for a total systemic overhaul i (and other readers) had initially been lured into thinking this book would be about. also because of the appropriate timing; watching the US on the brink of another four years under the same demagogic, borderline authoritarian right-wing populist this book loves to reference anytime it speaks of the erosion of democracy — except now he’s an even more potent threat somehow (that bullet had one job) (though his martyrisation would probably have radicalised his already nutty following to an even scarier extent) than he was back in 2016 with project 2025 on the way — is definitely not assuaging my disillusionment and anger in good ol 'murican politics anytime soon but it is what it is i suppose.

broadly, this book is split into two parts. the first part is framing where he outlines evidence of the actual ‘crisis’ whilst emphasising the importance of regulated and coordinated democracy and capitalism. in the second part he prescribes and evaluates multiple policies to address unchecked dangers within the current system. the general impression i got from other reviews of this book is that whilst wolf’s diagnosis is accurate (even if the stance is somewhat softer), his prognosis can be considered somewhat shallow and unoriginal — probably as a direct result of its softer stance. the unoriginal part i can tolerate because i’m not really looking for another communist manifesto or something. however i didn’t expect him to spend the entire first part of the book attempting to defend the system and then prescribe relatively more low-impact workarounds. to elaborate, wolf spends a lot of time establishing emerging faults in our status quo. yet he attributes the increasingly salient decline in its legitimacy to problems like increasing voter distrust, shifts towards financial/rentier capitalism and covid rather than any deeper structural issues. his thesis thus comes across as more of a defence rather than condemnation of a failing political reality in which plutocracy, economic inequality and climate destruction emerge as seemingly inevitable byproducts. according to goodreads comments i guess this is a viewpoint many are finding more and more untenable, but because i have yet to develop a more nuanced understanding of my own political alignment, i won’t comment on this part any further. as educational material though i thought this was pretty good (i don’t read nearly enough books like this so take this with a grain of salt.) ultimately i still think majority of the points he makes are compelling, well-substantiated and balanced. moreover, most of the solutions he prescribed are pretty valid and defensible -- though i personally disagree with some.

focusing then on the first part, something i personally found valuable (as someone who is very ignorant about politics) was the analysis of why said populist leaders and bad policymaking emerge -- as a result of growing discontent with economic failure and political elites. i think there was a line on how, amidst paranoia and dissent, rather than ‘stop trusting everyone’, some people ‘start trusting anyone’, blindly placing faith in even the most corrupt demagogues so long as they declare misplaced blame on some easy-to-dogpile perpetrator, whether that be globalisation or immigration or minorities in general (brexit, trump), even when they actually contribute to economic prosperity. i mean we see it frequently; the whole 'us versus them' rhetoric, the marriage between nationalism and anti-pluralism etc are not new phenomenons. the book further implies that conservatice politicians are simultaneously able to convince the public to protect the interests of the actual elites responsible for their general misery (we love trickle down economics😍😍) to differentiate between left-wing and right-wing populism. i will probably steal all of this mech for future debates because democracy motions are scary, and i no longer have michael li or tony shu to matter dump for me in my prepped first speaker role now that i am out of high school. anyway. the deepening divide between the brahmin left and populist right mentioned in the same chapter is definitely something i’ve observed myself on social media (literally just came across the most xenophobic and ironic post on twitter of a japanese business kindly telling chinese and korean foreigners to fuck off out of their country with like 30k likes, so i guess musk is sanctioning outright racism now.) and something i plan on looking into further. another fun little anecdote: i’ve had at least two friends point out the blatant racism they’ve faced upon stepping foot into the UK, whether that be in cathedral towns in the countryside or even the bustling international city centres, which is making me a bit apprehensive about london but whatever.

moving on to the second part, then. wolf brings up a lot of what i personally think are simply minor adjustments to the system, all categorised under universal aims like reducing inequality, increasing transparency and ending corruption etc. essentially these few chapters contain a lot of popular ideas but in moderation. i mean it’s hard to disagree with most of what wolf suggests, though he probably could have gone a step further. in terms of economic policies, he essentially argues for better employment laws (e.g. higher min wage, more workers rights), more government investment into media and technology, regulation of tech companies, taxes on pollution and rent to raise funds, and incentivising competition by increasing scrutiny towards monopolies (e.g. mandatory justification for mergers and acquisitions). some of these suggestions are basically reiterations of what we'd yap about for like econ paper 3 (though with infinitely more well-informed and nuanced justifications, of course). the criticisms for the policies he disagrees with i feel are also somewhat valid (like his UBI skepticism). what i found more interesting was his plan to reform liberal democracy, where he attempts to defend a highly controversial part of the status quo re: citizenship. his argument is along the lines of how the exclusivity of citizenship will stimulate loyalty towards institutions, whilst conversely, allowing immigrants to vote will only erode faith in the nation. this i personally disagree with. he also presents a questionable dichotomy: either you concede that citizens are more important than foreigners and hence you have incentive to care about their needs, or you treat them both as equally insignificant so the inequality migrants face don't matter. not only is the logic here a bit dubious, but i personally think the re-enforcement of national identity will only worsen the whole anti-pluralist anti-immigration discourse mentioned in earlier parts of the book. but then again, i am not the editor-in-chief of the financial times. regardless, his other suggestions, like the shift away from identity politics towards common objectives and broader administrative reform (e.g. ending private funding of political parties) aren't particularly hard sells. something minor i also appreciated in this section was wolf's explanation of why taxes in the status quo are inherently regressive, based on factors such as how taxes exclude things like capital income and services, and also how some of the ultra-rich use tax havens and philanthropy as strategies for tax avoidance. (again stealing this mech for future debates.)

the book ends with justifying why democratic capitalism is vital for a collaborative world order. wolf argues here that maintaining core values of democracy are safeguards against china's encroachment, whilst simultaneously pushing for more collaboration between the G7 and global south to achieve common goals, like sustainable development. i disagree here with wolf's characterisation of the world order; again i feel like he defends western hegemony a bit too much for my own liking. also the whole 'maintaining complex relations with china' was a bit vague..i'm unclear as to how this will be achieved. but this is a minor nitpick, and i broadly understand the position he's coming from.

in terms of the general writing and presentation, i think some parts were a tad repetitive, specifically in the first part. whilst i don’t have specific examples i remember instances of repeated analysis and frequent re-iteration of the same points. overall though the content was really easy to understand. nothing more to say here.

concluding this absurdly long review by saying that i will probably read more books on autocracy or socialism to gain a different perspective. and i don't think anyone here gives a fuck but i think writing this definitely helped me consolidate what i learned. yay goodreads.

(if you've somehow read this whole thing just so you know i love you forever <3333 thanks for being patient with my silly thoughts)

[Emil Garcia-Godos Wiig · Rating 4 out of 5]

Tl;DR «like, can we just talk about the political and economic state of the World right now»

Mad interessant bok som jeg husker lite av fordi det er skrevet på engelsk og med politiske og økonomiske begreper som suser over hodet på meg. Men uansett vel verdt å lese på grunn av alle de ulike synspunktene på verdenspolitikk og økonomi som jeg aldri har tenkt på. Som fan av statlig regulering var jeg litt i tvil og kritisk i starten, da Wolf kan være ganske direkte i sin kritikk av alle andre økonomiske systemer, og kan virke litt i overkant tilhenger av kapitalismen, men han følger godt opp ved å gjøre rede for og finne løsninger på de viktigste kritikkene av systemet, som lobbyvirksomhet, sosial ulikhet, og generell inkompetanse blant de økonomiske elitene. Etter å ha lest og vært bergtatt av David Graeber og hans like sine idealistiske visjoner om utopier uten landegrenser, borgerlønn og avsløring av den moderne kapitalismens svakheter, var det godt å lese en mer edruelig fremstilling av dagens politiske og økonomiske situasjon. Føler meg meget smart og fikk kompliment av søt jente for bokvalget, så det oppsummerer vel hovedårsaken til at jeg leser uansett. Tommel opp.

[Suman Srivastava · Rating 2 out of 5]

So disappointing. He sounds like he’s going to come up with profound solutions and ends up suggesting minor tweaks. I expected a lot more from him.

[Caio Garzeri · Rating 3 out of 5]

Legal que ele dê nome aos bois em questões como taxação, mídias sociais, Trump, indústria financeira, lobby, etc. Dado o público pra quem ele escreve, fiquei surpreso. Ele está realmente preocupado. A tese central se resme em que nos últimos ~30 anos tecnologia e laissez faire deram origem a uma plutocracia dedicada a aumentar sua riqueza e poder, destruindo o capitalismo democrático. Agora, isso contrasta muito com a primeira parte do livro. Ela não importa tanto, mas fica difícil engolir a fábula sobre como democracia e capitalismo nasceram do mesmo berço. Acho que tem uma inconsistência no jeito de ele olhar pra história e pro que a gente vive hoje.

[J · Rating 3 out of 5]

First half reasonable but predictable insights on the condition of the modern world, second half a trite index of the authors policy aims

[Christopher · Rating 2 out of 5]

This book reads with the clarity of house sitting instructions left on a notepad.

Wolf has opinions on the everything wrong with democracy in the West and some well tread ideas of how to fix it. It’s a shame that he doesn’t take the time to refute present ideas from those in the mainstream that he calls out as damaging and instead brings out well worn aphorisms from Burke and some naval gazing articles from John Kay.

[Thomas Romano · Rating 5 out of 5]

Good analysis from Martin. Touches upon so many different aspects of the modern crisis in democratic capitalism. Impressive to think it came out before the re-election of Trump. In so many instances, it seems as if he is referencing him directly. Goes to show that he is nothing more than a symptom of a system that has been sick for much longer.
Props to Martin for also attempting to identify solutions. Some easier to implement than others, some quite controversial. I found interesting his proposal for 2 additional houses. One that is completely based on random selection from the general population. I doubt this would solve the flawed plutocatric system that arose (especially in the US). Even more doubtful that anything like this would ever see the light of day. However, I strongly appreciate his out-of-the-box thinking on these issues.

[Raymundo · Rating 5 out of 5]

Uno de los mejores libros de Martin Wolf sin lugar a dudas. Nos habla claramente de que el capitalismo necesita a la democracia para sobrevivir y viceversa también. No puede haber democracia si la mayoría de las ganancias del capitalismo se la llevan los más ricos. Se requiere impuestos progresivos sustanciales, que las políticas de competencia funcionen, que exista igualdad de oportunidades, incluso llega a sugerir la importancia de la representación política por medio de una lotería/sorteo en la población. Muy recomendable.

[Lordoftaipo · Rating 5 out of 5]

A friend asked me, ‘What good does it do if it presents nothing new?’ As much as I wanted to deny, Martin Wolf isn’t the most innovative with his thesis, which has enmeshed those of other scholars. Yet it is so coherently written and manages not to fumble on the suggestions.

In a similar vein, also published this year, Power and Progress by Daron Acemoglu and Simon Johnson was eclipsed in fluency, much less its accessibility, unlike their seminal work The Narrow Corridor that has accurately captured the wobbly position of our democracies. Wolf shared this prognosis and argued that we are on the cusp of democratic backsliding. Ideological zombies like to call, ‘Rise of the east, decline of the west.’

A grim outlook is writ large on the statistics. Or simply look around you: both sides of the political spectrum cast doubt on democracy. They are distrusting it for different reasons. Corporate lobbyists inhibit progress towards a more sustainable and supportive economy; aloofness of the elite inspires anti-intellectualism and resort to a strongman who defies intellectuals. The chasm is well-nigh incorrigible unless each side re-embraces plurality that truly characterises a robust democracy—’consent with dissent’.

We are all too familiar with how people stuck in ‘deaths of despair’ had sought for a messiah, repeatedly a megalomaniac, to ‘save’ them. Wolf’s actionable advice was directed at the Brahmin Left, whose contempt for patriotism would be unhelpful at best. Reinstating civic virtue that is largely devoid in the Covid-19 context where people have mistook (limited) liberty for (unlimited) licence. Rethinking patriotism in this light to help construct an imagined community as devised by Benedict Anderson is exemplary of Wolf’s unstoppable wit.

If social cohesion were a macronutrient that is in shortage, demagogic politicians would be a major carcinogen that is in abundance. All the more worrying is that such a contagion is permeating bodies politic around the world. It does not help the self-righteous lot continue to jeer at the underprivileged and the working class, which will only pull the society further apart.

Western societies are not failing people as a simple result of flawed democracy and rentier capitalism. Some quack doctors appeal to the China model or quirky versions of communism as the panacea. They are either overlooking their infrastructure that enables an impartial process to adjudicate, or they are just expressing their anti-democratic sentiments. I find it unnatural as to dismiss the system in its entirety just because of extrinsic defects. A rigged and mercantilist liberal democracy is still lightyears ahead of an autocracy. Because there is a chance to change.

To the surprise of anti-democratic zealots, in any disenfranchised polity some problems are permanent as long as the dictator’s clique holds sway. Power will be unrestrained, dissent snuffed out and protests prohibited—as a Hongkonger, I have zero idea what they are signing up for. They may always adopt the Singapore model until they come to realise that the real obstacle is the lack of confidence (of your own system), courage (to reform) and civility (embedded in patriotism) that Singaporeans hail. No, a megalomaniac alone cannot tarnish a democracy without some sort of mandate and an amenable people.

With regards to nearly all aspects of the quandary facing the Western democracies, Wolf put forward controversial proposals such as tax on economic rents, a border tax on top of the carbon tax, presumption against M&A, and sanctioning verified online identity. They may not be unheard of because a good roadmap needs not the most subversive ideas, but ones that dare to dream. Those at a position superior to the chief economics commentator at Financial Times who can advise better will not be scant. They are merely too prudent or pragmatic or plutocratic to lay out an ambition.

Should time allow, Wolf might have discussed in greater detail more possible reforms. Nonetheless, I am genuinely astonished by the idea of inviting the UK and France to give way to India and the EU. He was already right about the new world order in the making—the West should learn to cope with China’s hegemony. In the time of writing that the BRICS are expanding is the best evidence that Wolf was right again about the international bodies risking being replaced away. It is not in the world’s best interest that the authoritarian club, riding on the wave of de-globalisation, took shape in the name of empowering developing nations. Not gathering around the US is one thing; not guarding your land of the free is another.

Going back to the valid inquiry in the beginning, my response was terse. The book is so actionable that I just show it to everyone. However sceptical about capitalism and democracy you may be, Wolf will show you an alternative arrangement that does not sacrifice your civil liberties and political rights.

[Patrik Šváb · Rating 5 out of 5]

A well-organized book, a very up-to-date topic. I prefer the economic chapters, the political being still decent. The idea about their linkage is not new, but here adequately described in detail both theoretically and empirically. A set of policy recommendations how to revive the “marriage” of capitalism and democracy follows. Some of them I have not thought of before.

[Denis Chrissikos · Rating 2 out of 5]

Did not make it past chapter 8. Discussions in the book are too broad and shallow, and are mostly derived from paraphrasing arguments or theories of other scholars and authors. Basically reads like a collection of long-winded essays based mainly on secondary sources.

[Jon · Rating 5 out of 5]

A towering achievement. Tirelessly sourced and researched with a huge scope. I may not agree with all of it, but it is consistently thought-provoking. 

[Mariam · Rating 3 out of 5]

Lacked nuance.

[Greg · Rating 5 out of 5]

This remarkable book, although at times a difficult one to plough through, performs an unusual service: While multiple volumes have been written about the myriad grave crises of our time, most of them have focused either on how government choices and economic policies have gotten us into this mess or on the nature and development of the multiplying anti-democratic forces that have acquired monikers such as populist nationalists or white supremacists.

Wolf’s book, however, combines those themes in a way that I would think everyone except the most ideologically rigid folks might find revealing and, even more important, major elements of the political steps necessary to right our badly foundering ship that is our democratic republic.

“Homo sapiens is prone to orgies of stupidity, brutality, and destruction,” Wolf observes in his preface. “Humans naturally separate people into those who belong to ‘their’ tribe and outsiders. They slaughter the latter gleefully. They have always done so. I have never taken peace, stability, or freedom for granted and regard those who do so as fools.” (P. xvi)

And, now that our eyes are wide open, he continues, “As the twenty-first century progressed, we saw a shift away from liberal democracy toward systems that some have called ‘illiberal democracy’ but might be better described as ‘demagogic autocracy.’” (P. xvii)

“This book will argue that economic disappointment is one of the chief explanations for the rise of left- and right-wing populism in high-income democracies. Many point instead to cultural factors: status anxiety, religious belief, or outright racism. These are indeed important background conditions. But they would not have affected societies so deeply if the economy had performed better. Furthermore, many of these supposedly cultural changes are also related to what has been happening economically: the impact of deindustrialization on the labor force and the pressures of economic migration on established populations are among the important examples. People expect the economy to deliver reasonable levels of prosperity and opportunity to themselves and their children. When it does not, relative to those expectations, they become frustrated and resentful. This is what has happened.” (P. 4)

The task he sets for himself – and, I think, performs admirably – is to lay out for us just how this happened, including the key economic and political decisions made by policymakers and their disastrous refusal to come to the aid of those who fell behind as consequence of those decisions.

Leftists will find reinforcement for their view that capitalism must be subject to regulation and adjustment if it is to serve the many rather than the few. And conservatives will find their charges that elites, economists, and politicians have together refused to see what unrestricted globalism has done to so many industries, regions, and people over the past 40 years.

In essence, beginning in the late 70s, politicians in the US and in the wider West decided – for a mix of reasons and theories – to abandon the social contract with the people that had proved to be such a vibrant means of creating a flourishing and prosperous middle class from the close of the Second World War until the 70s. What they turned to were policies that not only caused some of the highest-paid jobs to be located outside the US – and, hence, a tremendous loss to white non-college educated males who formed the backbone of once-powerful unions – but also to the redirecting of national wealth from the majority to the minority of millionaires and billionaires, people who were only too happy to funnel a generous portion of their increasing wealth into politicians and policies that ensured that their nests would continue to be padded.

And how can these minority wealthy individuals pull this off? By repeating the trope that government is not the answer but, rather, the problem and by supporting those who instigate the culture wars and keep them stirred up. An enraged populace is not a thinking one.

For the most part, the politicians who made these mistaken decisions were not doing so to intentionally hurt anyone. They had come to believe that “the markets” were the way that in the future the greatest benefit to all could be realized. And their reasoning took place in the changed environment of the post-60s:
the rise of neo-conservatism that made a “new” case for laissez-faire economics, arguing that “markets knew best” in how to allocate resources, human and material;
a certain “fatigue” after 40 years of vigorous government involvement in improving the lives of their citizens;
the chaos of the 1960s where so many things seemed to come under challenge or simply come apart;
the impact upon the Republican Party that the departure of white Southerners from the Democratic to the Republican Party caused, not least of which was its embrace of the “race issue”;
the abolition of the “fairness doctrine” that had previously governed how issues were presented and argued in the media; the rise of talk radio with a decidedly anti-government and anti-liberal flavor (salted with elements of white nationalism and states’ rights); and
the impact of the internet and those forces who opted to use its ability to reach every individual with messages that made little effort to comply as traditional “news” or unbiased focus.

Wolf covers all of this in some detail and shows how each individual item had a snow-balling effect on the whole.

While the surge of white nationalism and nationalist-populism is the Right’s reaction to all of this, Wolf does not white-wash the liberal Left, either. He faults them for failing to understand how neo-liberalism’s embrace of the market – rather than the government – as the solution, and their clear abandonment of white working-class folks, especially males, made their new focus on identity politics – championing the cause of Blacks and other ethnic minorities while also embracing tradition-challenging efforts by gays and trans-gender folks – such a huge mistake because it seemed as if one had to choose either the white working class or ethnic, religious, or gender-challenging minorities. This was a false polarity; the issue was really both, which the Left badly bobbled and the Right saw as their opportunity to widen the political gap through the use of culture wars.

The unintended consequence – both for traditional liberals and conservatives – has been a truly threatening rise of authoritarian persons and factions, again both in the US and in Europe. Although mostly not as nakedly fascist as the extreme right in Germany and Poland, many of the most discontented are clearly eager to “throw the baby out with the bathwater,” as evidenced by plunging confidence in political figures and in all institutions. Authoritarians have no real answers or solutions except by posing as the leader of the true people of this country.

“Democratic capitalism is now confronted by authoritarian versions. They take two different forms. One is ‘demagogic authoritarian capitalism,’ and the other is ‘bureaucratic authoritarian capitalism.’ The former is an internal threat to high-income liberal democracies: this is what they might turn into. The latter is an external threat to high-income liberal democracies: this is what might defeat them. It is, after all, the system that runs China, their most potent rival….

“The demagogic variant of authoritarianism comes out of electoral majoritarianism taken to destructive limits…. Liberal democracy mutates into illiberal democracy and then outright dictatorship. This has become the most common way for authoritarian regimes to emerge…. (P. 176)

“Such regimes de-institutionalize politics: they make it personal. This is government by arbitrary rulers and their courts. Common features of such regimes include a narrow circle of trusted servants, promotion of members of the family, use of referendums as ways of justifying greater power, and the creation of security services personally loyal to the ‘great leader.’…
“Such a system combines the vices of populism with the evils of despotism. The vices of populism are short-termism, indifference to expertise, and the prioritization of the immediately political over longer-term considerations. The evils of despotism are corruption and arbitrariness. The two together make for economic inefficiency and long-term failure. These regimes tend to be kleptocratic on a grand scale. The kleptocracy breeds in the darkness all authoritarians love. Theirs is the politics of lies, oppression, and theft, hidden under a veneer of love for the people.” (P. 177)

OK, you might be thinking, ENOUGH WITH THE MESS ALREADY!!! WHAT THE HECK DO YOU PROPOSE AS SOLUTIONS????

Well, it just so happens, that he does have such suggestions.

Interestingly, for those on the Right not hopelessly already swallowed up into the nihilism and belief that only a savior on a white horse can make things right by wiping out all that is wrong and instituting justice again, what Wolf proposes is both modest and radical – a fervid recommitment by politicians and citizens to the goals of the New Deal!

In January of 1941 FDR, in his annual address to the Congress, gave what has since been remembered as his Four Freedoms speech. Those “four freedoms” were;
 freedom of speech
 freedom of worship
 freedom from want.
 freedom from fear

He went on to spell out what were the “basic things expected by our people of their political and economic systems” which, he said, “are simple. They are:
• Equality of opportunity.
• Jobs for those who can work.
• Security for those who need it.
• The ending of special privilege for the few.
• The preservation of civil liberties for all.
• The enjoyment of the fruits of scientific progress in a wider and constantly rising standard of living.

Wolf comments that sincerely attempting to make these goals a reality would go a long way towards reinvigorating our democracy with the necessary “glue” of a shared commitment to realize the good of all.

A big order, but a truly worthy one. Continuing down our current path will clearly lead to disaster: increasing disparities between the wealthy few and the rest of us, a nation and planet plundered even further for the interests of the global few, and an impoverished and climate made hellish for our children and children’s children.

And central to beginning this effort is tackling the evil consequences of allowing money to control our political life. Wolf writes, “The most economically successful must not be allowed to control the political system, rig markets, inflict harms (such as environmental damage), establish a hereditary oligarchy, or avoid paying the taxes required to secure all the other objectives.” (Pp. 229-31)

Unfortunately, there seem to be very few politicians who have such goals as their guiding star. Nor, pathetically, do there seem to be any at present with the vision, voice, and charisma to help convey to our people the overriding goals to which we should return to.

But this important book goes a long way in helping us – citizens who bear a tremendous responsibility for the future of our democratic republic – better understand how we “got here” and what it will take to bring us back home to the country we love once more.

[Alejandro Gonzalez · Rating 4 out of 5]

Un libro por demás enriquecedor, con una serie de ideas que presentan soluciones lógica y plausibles a uno de los problemas más reales que vivimos hoy en día: el desgaste de la democracia como actualmente lo conocemos.

Es interesante como ciertas ideas resuenan sin importar no ser de UK o USA y al mismo tiempo como otras claramente demuestran los privilegios del autor.

Mi único pero es esa transformación de China como el país malo de malolandia pero rescato las ideas y soluciones que propone al respecto: al final, hay que aceptar su lugar como potencia y entablar relaciones que vayan más allá de resultados económicos.

Una gran lectura, con datos interesantes y una discusión que vale la pena tener.

4/5 ⭐️

[danny · Rating 3 out of 5]

this book took me several years and restarts to get through and finish. the material is really compelling and very current, but there was just something holding it back from being a smooth read. it’s highly informative, yet falls into the camp of being *too* neutral; there was just nothing going on for so long, and you’re almost unsure of what academia side the author believes in

[Feng Ouyang · Rating 4 out of 5]

"The Crisis of Democratic Capitalism," authored by Martin Wolf, the Financial Times' chief economics commentator, examines Western democracy and the market economy and the challenges they currently face. This work distinguishes itself with a unique viewpoint among numerous others, stressing the interdependence of the market economy and liberal democracy. It argues that the contemporary challenges we confront are deeply embedded in the systemic issues of both, necessitating an integrated approach for resolution.

First, the book delves into the intricate relationship between liberal democracy and market capitalism, acknowledging the broad spectrum and diversity within these concepts. It concentrates on the political and economic frameworks of countries with advanced economies, including Western and Northern Europe, the United States, and Canada. Notably, these nations are characterized by widespread participation among their populations in both political and economic domains.

Wolf points out that democracy and capitalism have evolved concurrently and are mutually dependent in the modern era. He argues that capitalism thrives on government regulation to mitigate externalities and judicial arbitration to enforce contracts and preserve market integrity. Thus, the legitimacy of government, anchored in public trust, becomes essential. A decline in the credibility of the political system erodes market confidence, leading to disorder and inefficiency. Moreover, without equitable and widespread political engagement, the market system is skewed to benefit a wealthy minority, risking turning market capitalism into a plutocracy.

Conversely, Wolf contends, the vitality of democracy hinges on active citizen participation. This requires citizens to lead comfortable and secure lives, affording them the leisure and means to engage in societal dialogues. A flourishing economy thus enlists every individual as a stakeholder in the political system, incentivizing a dynamic and orderly democracy. However, if a considerable segment of the populace is discontent with their economic circumstances, disillusionment with democracy can set in, paving the way for the rise of anti-establishment populists who pose a significant threat to democratic institutions.

Within this context, the book scrutinizes the pressing issues plaguing contemporary political and economic landscapes. In the realm of politics, the book identifies the dominance of wealth as a significant peril to democracy, where the affluent wield outsized political influence. This concentration of power is evident in several forms: beyond conventional lobbying and political contributions, the wealthy can shape policymaking through NGOs and private-public partnerships, which governments increasingly favor as cost-effective methods for enacting social policies. Crucially, the role of social media in spreading information and fostering dialogue allowed a wealthy few who control social media to direct civic discourses and sway public opinions. These mechanisms tilt the political power towards the rich, deviating from the democratic ideal.

Economically, Wolf zeroes in on the distressing escalation of inequality, contending that despite the substantial roles of globalization and immigration, they are not the primary culprits behind this trend. He attributes the root cause to "rent-seeking" behaviors—pursuits of financial profit without corresponding contributions to value. Such behaviors encompass monopolistic practices, reckless financial gaming without accountability, and exorbitant executive compensation. The repercussions of inequality are intensified by the deceleration of economic growth in Western nations, leading to stagnation or even a decline in the living standards of the middle class. This cycle of economic rent-seeking intertwined with political oligarchy undermines the very pillars of liberal democracy.

The intertwining of political exclusivity and economic disparity breeds a widespread disenchantment with democratic institutions such as governments, elite universities, and political parties. This disenchantment fuels populism, advocating for dismantling and rejecting existing institutions and societal norms. While populism may lead to perilous outcomes, a segment of the populace might view it as a preferable alternative to the unsatisfactory status quo. This widespread disillusionment and the rise of populism represent a significant threat to the fabric of liberal democracy, further compounded by the apparent allure of China's national capitalism model.

Subsequently, the book shifts focus to potential solutions, where Wolf adopts a cautious approach, emphasizing incremental measures. He underlines the critical role of a robust social support system in ensuring financial security and fostering growth opportunities across all societal segments. Furthermore, he champions transparency over stringent government controls as the principal strategy against corruption and rent-seeking behaviors. The solutions proposed are inspired by the welfare socialism practiced in the Nordic countries and Western Europe. Additionally, Wolf supports globalization and advocates for competition and collaboration with China.

Despite its authorship by a journalist, the book presents well-founded and convincing economic arguments. Using macroeconomic principles, Wolf elucidates that trade imbalances are merely symptoms rather than the root causes of our financial turmoil, pinpointing the real issue as the West's lack of fiscal discipline and low savings rates. The book furnishes data demonstrating that the economic strains attributed to immigration and globalization are too minor to account for the challenges faced. As such, it argues against succumbing to populist narratives that blame these factors. With evidence, Wolf makes a compelling case that democratic capitalism significantly outperforms the state-managed capitalism preferred by China, instilling confidence that we can preserve our way of life through competition instead of containment in the face of China’s global aspirations.

It is insightful to draw a parallel with "Why Nations Fail" by Acemoglu and Robinson, which posits that economic prosperity and societal advancement hinge on the inclusivity of economic and political processes. In its optimal state, democratic capitalism embodies this inclusivity, promoting innovation and driving productivity. "The Crisis of Democratic Capitalism" illustrates the perilous consequences when inclusivity is eroded by the disproportionate influence of the wealthy, warning that such imbalance can lead to the degradation of our system into oligarchy and populism. Maintaining inclusiveness is crucial to prevent the downfall of democratic capitalism.

In "People, Power, and Profits," Joseph E. Stiglitz delves into the issue of stark economic inequality, framing it predominantly as a matter of social justice and advocating for increased governmental intervention and regulation to curb the influence of the affluent. In stark contrast, "The Crisis of Democratic Capitalism" adopts a more modest approach, favoring less radical reforms. Wolf finds common ground with certain conservative ideas, such as imposing greater restrictions on globalization and tightening control over immigration. Rather than endorsing extensive government “investment” to compensate for inequality, he proposes surgical-style measures to directly address and remedy market shortcomings. While his recommendations might lack the allure of more radical proposals, they offer a pragmatic and grounded basis for constructive dialogue.

In conclusion, "The Crisis of Democratic Capitalism" highlights the critical challenges that democratic capitalism faces in the modern era. The book identifies the interdependence of the market economy and liberal democracy and the systemic issues embedded in both. The challenges of political exclusivity, economic disparity, and widespread disillusionment with democratic institutions pose a significant threat to the fabric of liberal democracy. As we grapple with these challenges, it is essential to recognize the intricate relationship between democracy and capitalism and the role that each plays in sustaining the other. By addressing these systemic issues, we can work towards a future where democratic capitalism thrives and benefits all members of society.

[Don · Rating 3 out of 5]

(This is a joint review of this book with Bernie Sander's 'It's OK to be Angry About Capitalism')

++++++++++++++++++++++

In his work aimed at saving capitalism, the former US secretary for labour, Robert Reich, defines capitalism as free markets plus private property. The UK’s leading financial journalist, Martin Wolf, sees this as not only the foundation on which liberal democracy does rest, but excludes the possibility that it can subsist on any other.

For Wolf, who expounds his argument in The Crisis of Democratic Capitalism, the virtue of the system is that it allows for the separation of the two major forms of power in society – economic and political – into separate and distinct domains, each governed by its own set of rules and conventions. In theory, this means that the two forms of power hold each other in check and prevent the defects of one from escaping from the terrain on which is supposedly confined and contaminating the other. The individualism which flourishes in free markets is corrected by political power which requires a notion of public good, rooted in a collectivist ethic, to be a feature of the social order. On the other hand, enthusiasm for the equality of citizens is curbed by anchoring the rights of individuals in the sanctity of the amounts of property over which they assert monopoly control.

All of this suggests that a democratic form of capitalism is the best of all systems and efforts should be made to ensure it prospers across the world. But it is not in a good state of health at the moment. Developments in the US version of capitalism have seen the walls between the economy and politics severely battered, with the former breaking out of the room it had been allocated to intrude of government and the functioning of the state. In addition there is an external challenge coming from another form of capitalism, decidedly illiberal and antidemocratic, but which nevertheless is fully endowed with the other supposed virtue of the system; its driving of innovation and rapid growth. If the liberal capitalism of the West goes to smash at any time soon then we can expect the authoritarian model being developed by the Peoples’ Republic of China to take the helm.

Wolf wants us to be concerned about the state of contemporary capitalism in order to heal its ills but Bernie Sanders says, on the contrary, it should be making us angry. Aside from this there is a very large overlap between their respective view on what they feel is wrong with the system. They both describe a situation in which capitalist corporations have fought back against the powers of government to regulate their activities, reaching a point at which the vulgar interests of CEOs and the people who cluster around them people in boardrooms has become the determining feature of political life. The experience of the US, with its Super PACS (political action committees) and billion dollar budgets for corporate lobbyists, is taken as the nadir in both books, adding to the long list of other authors who have set out similar evidence of the insidious power of business interests emanating from the City of London and elsewhere.

Both authors hope for a revival of involvement in political life on the part of ordinary citizens but it is at this point that Wolf gets into a bit of mess because of his deep aversion to the crudities of populism. Populism blurs the crucial distinction between the separate realms of where political and economic power are exercised. Its essence is, after all, nothing less than the mobilisation of the one resource that the ordinary citizen has – the capacity to act in concert with tens of millions of others in political activities in order to obtain a solution to the economic problems which oppress their lives. To be effective populism requires that the walls which separate liberal society into its manageable components are dismantled in order that the exercise of power across the system is viewed as a totalising whole. Committed liberals like Wolf can only hear a drumbeat leading the masses towards authoritarian government of either the far right or the far left when populism becomes the organising feature of politics.

Bernie Sanders has fewer reservations when it comes to getting ‘the many’ worked up over the state of their lives. His book, It’s OK to the Angry About Capitalism, aims for exactly that end, bringing the American working class out onto the streets and organised into a new wave of trade union militancy, and, of course, voting for whatever left wing candidates the Democratic party can be persuaded to offer the electorate. Whereas Wolf would be happiest if all of the turmoil of politics of the last few years, with its mass rallies and social media generated anger, could be dialled back in order that sensible politicians, liberated from the influence of dirty money, could return to solving problems as they crop up on the basis of a sensible, whatever-works-best approach, Sanders wants to see more of the megaphonic mass chanting, only this time under the banner of left wing reform rather than billionaire idolatry.

Ironically both draw their inspiration from the change to American capitalism under the presidency of Franklin D. Roosevelt, wrought under the impact of the 1930s recession and the years of the second world war. They both quote word-for-word pride Roosevelt’s expression of pride in being, personally, the object of hatred emanating from “business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.” Wolf notes with some embarrassment that the speech in which this statement was made was “demagogic in style and populist in content”, but no matter since it led to the New Deal which provided the space for federal technocrats to so their magic healing. But Sanders sees the value of saying things plainly and in language ordinary people will relate to as being precisely in the way it reconnects citizens with politics and revitalises enthusiasm for reform in ways that could never be achieved by technocrats and experts.

Wolf’s book gives more impressive detail about the mess the modern capitalist system is mired in, illustrated with the insight you’d expect from a journalist who has been so hugger mugger with the system for so many years. But the sheer extent of the horror undermines his faith that all could be put right with the “’New’ New Deal” he sets out in the second half of the book. However sincere is his wish to save capitalism, the overhaul of the economic and political institutions he advocates goes well beyond anything the British Labour party or the US Democrats seem prepared to contemplate in government. The example of British Labour, with its economic strategy to date hinging on getting institutional investors and venture capitalists onside to get a few more percentage points onto current lacklustre growth, doesn’t suggest any sort of appetite for anything like a reforming new deal of any sort.

For Sanders, the energy he seeks to invoke by getting his readers angry about capitalism takes us to the point of asking, if it is so bad, should we be aiming to dismantle it replace it with something better? For a politician best known for the considerable feat of being a democratic socialist elected to high office in a country where each and every form of socialism is demonised, it is disappointing that he say more about why this antipathy needs to be challenged and more said positively about the contribution working class socialist currents to US progress in the past, and what it has to offer for the future.

Wolf sees democracy and liberal social values as being in dire danger in the current period but his suggestions for a remedy seem pallid and uninspiring. He places his hopes in the re-emergence of a class of technocratically competent New Dealers which hasn’t yet shown itself anywhere on the contemporary landscape. How ironic will it be it the last best hope for liberal democratic government lies with the social forces advocating ‘for the many, not the few’ in a programme of radical reform which preserves individual liberty even as it overthrows oligarchic monopoly power over the economy? So much now rests on the success of the political project that makes more and more people angry about capitalism.

[Catherine Woodman · Rating 5 out of 5]

One review I read called this bleak yet oddly comforting, and I have to agree with that mixed emotion. To me, an avowed avoider of all things related to economics, politics, and money, this is the sequel to Thomas Picketty's Capital In The Twenty First Century. In other words: 1) I know nothing about this subject and 2) these are books that make cogent and understandable presentations of what the problem is with the flow of money and power today.
The book's review of recent history is sobering. Governments of all sorts have become less accountable to the public. Authoritarian states have grown more oppressive; some strong democracies have wobbled; weaker ones have crumbled. And the opportunism of strongmen is far from the only cause. Data published in 2020 show that, among the roughly 1.9bn residents of democracies, less than a quarter live in countries where most voters are satisfied with that system of government. This loss of faith—and the accompanying retreat from democracy—are rooted in decades of economic failure. On its face, that seems a very reasonable argument. Since the early 1980s, income and wealth inequality have risen dramatically in many countries; in America, for instance, the share of pre-tax income earned by the top 1% has nearly doubled by some counts, from about 10% to 19%. In rich economies growth in productivity and in the inflation-adjusted incomes of the typical household has been disappointing. Deindustrialization has left many working-class cities permanently depressed.
We have seen all of this in the United States, where we are hurdling toward La Belle Epoque, with the rich getting much richer and the middle class sliding downward into near poverty. The glimmers of hope are that when women's rights were stripped away from them in the Dodd decision, essentially making them unequal citizens who no longer have autonomy over their own bodies, the ground shifted. Despite a dismal economy, Democrats out performed Republicans in the 2022 election, and the trend is continuing in early 2023. Vote, keep voting, urge others to vote and support voters world wide.

[Lubomir Christoff]

Well researched and broad but shallow and naive

[Jonathan F · Rating 3 out of 5]

The first half or so of the book is quite good. The case he makes for the political regression of Western constitutional democracies is strong — that it's tied to a decline in productivity growth in Western capitalist economies. The second half of the book is not very good: it's filled with many of the same run-of-the-mill ideas for reform that you can read anywhere else, although there are bright spots mixed in with it all (as well as some especially bad ideas - e.g. a foreign legion under UN Security Council control).

What would have been a much more interesting second half of the book is a deeper commentary on how Western democracy can move forward with any reform given the fundamental problem of growing distrust in its leaders and institutions.

Because the book doesn't speak to overcoming the critical breakdown of democratic politics that he identifies in the book's first half, the second half comes off as a medley of "feel-good" recommendations. Worse, some recommendations seem counter to another overarching argument made in the first half — that the breakdown in Western democracy is related to a growing bureaucracy not directly accountable to the electorate. For example, he calls for more independent regulators. But how will independent regulators help if the electorate is driven to vote for populist leaders because they want to "drain the swamp?" More challenging still, how will any of Wolf's recommendations be implemented if a shrinking percentage of the electorate doesn't believe in democracy — as he shows with data in the first half?

He repeatedly references the fall of the Roman Republic. He uses it as an analogy. I think he misses the bigger lesson in that analogy. Wolf talks about how the Republic fell to Bad People. He doesn't talk about how changes in the scale of governance, and how these changes vis-a-vis the city's constitutional institutions, changed the rules of the game in favor of these Bad People.

Specifically, as the territory governed by the Roman Republic grew, the city adjusted to be able to govern these territories: by introducing governors responsible for local taxation and who could raise armies independently from the city's consular armies. The change in political incentives directly relates to the rise of private armies under leaders like Pompey or Caesar, armies capable of challenging consular armies and making the notion of an annually-raised consular army obsolete.

The more apt analogy, then, is how the growing scale of global governance and the ad hoc solutions implemented to deal with these new challenges change the incentives within the modern political system. He doesn't discuss this at all.

Wolf also doesn't grapple with the most difficult challenge to Western democratic capitalism: decreasing total factor productivity. I don't think the right approach here is to make recommendations on how to fix this. How can you fix a decline in low-hanging fruit? The only thing we can hope for is that the technologies we are introducing now will eventually lead to a new set of low-hanging fruit, in a similar way to how the technologies developed during the period of relatively low TFP of the 1870s, 80s, and 90s eventually led to the technological boom of 1920–70.

You can't write a book on hope, but you can write a deep reflection on what is to come under the assumption that the current reality of low-TFP persists. If the economy is the primary driver of the electorate's faith in the democratic system, as Wolf persuasively argues, then our future seems pretty bleak. This is a large reason why I found the second half of the book to be so poor. It doesn't mirror the real talk of the first half.

The outcome of the way the second half of the book is written is that the people who need to read Wolf's book the most are most likely to reject it. If he had instead reflected on what is to come if things remain the same, the second half of the book may have served as a broadly appealing call-to-action.

Still, the book is worth reading. The author is well-read; the bibliography is a great reference for future reading; and the data is generally excellent.

[Toby · Rating 4 out of 5]

The Crisis of Democratic Capitalism was published in 2023, and was written shortly after the Russian invasion of Ukraine. Wolf began writing it in 2016 and explains that the reason that it took so long was that he had to take into account the shifting sands caused by first Brexit, then the election of Donald Trump, then Covid and finally Trump's abortive January 6th coup. He does not mention quite what a second Trump presidency might mean for his thesis, although as he continues to write for the Financial Times, it isn't difficult to find out.

Wolf's thesis will be obvious and apparent to many followers of world events, and virtually all readers of the left-centre press. Democracy and regulated market capitalism are more fragile than we once believed. They are only about 200 years old and have been born on a tide of rising prosperity caused by regular and rapid innovation and a widening of the suffrage. Since 2008 prosperity has barely risen and, by some measurements, inequality has increased dramatically. Furthermore, and without at this point knowing quite what the AI revolution means, innovation and productivity have slumped which means that a rising tide of prosperity certainly cannot be assumed. This may have, and is having, dramatic effects on trust in institutions, governments and the consensus that democracy remains the best form of government.

The middle classes have been hollowed out, left behind by the excessive increase in remuneration by the super-rich and caught up by the rising wages of those benefiting by minimum and living wages. Given that it has been traditionally the middle classes who have had most to gain from democratic capitalism, their loss of support could be catastrophic. Brexit and Trump were the warning signs of a potentially more long-term rise in support of nationalism and the far right, magnified by irresponsible use of social media and new technology. Elon Musk barely gets a mention. If there is a second edition one assumes that he will fill more space.

The remedies in the book are not radically, and deliberately so. Wolf is not a revolutionary but holds to the view of longterm piecemeal change. He adapts FD Roosevelts five principles of the New Deal:
1. A rising, widely shared, and sustainable standard of living.
2. Good jobs for those who can work and are prepared to do so.
3. Equality of Opportunity
4. Security for those who need it.
5. Ending special privileges for the few.

He addresses each principle with a variety of reforms whilst recognising that there is no magic wand. Universal Basic Income is swiftly disposed of and equality of opportunity is (to my mind at least) not adequately explored. The inequity of a private schools system that can give a veneer of confidence and expertise to the talentless (pace Boris Johnson) is not mentioned. Companies are exhorted to think beyond shareholder profits and executive pay which rewards short termism is lambasted but the question of enforcing this is only briefly addressed.

As for politics, Wolf comes up with a series of suggestions all of which make eminent sense - especially the reform of the House of Lords which has increasingly become a nursing home for political cronies (assuming that they ever turn up). Citizens parliaments, selected by lots, is an excellent idea but Elon Musk will be on Mars long before we see them happen.

The takeaway message is that the USA is already lost to democracy and urgent action is needed for the UK and Europe to prevent us from falling into the same black hole. Right now my confidence is not high.