Reviewed by Canon Mike D Williams
Liberal democracy is under threat. The biggest threats are domestic. They come from ‘poor political and policy responses to economic and technological change’. Yet no country is an island in the global economy and the rise of autocratic states and China add to the challenge, according to Martin Wolf.
Martin Wolf is chief economics commentator at the Financial Times and brings a deep understanding of economics to this analysis of democratic capitalism. He is a self-confessed pessimist due in part to his family history of his parents escaping from the Holocaust. His grandfather’s pessimism saved his family. This book is written as a response to the invasion of Ukraine, a Trump presidency, the Covid pandemic and the transfer of power from the US to China. The key point is that our economics has destabilised our politics and vice versa. The market economy has tilted towards the elites and no longer provides widely shared prosperity.
Wolf begins with the story of how free market capitalism developed and intertwines with politics in the West to create a more prosperous world. Then there is a very detailed analysis of the ‘democratic recession’ and how he believes the balances between politics and economics, the market and state, domestic and global, winners and losers and technological change and ability to adapt to it have been destabilized. There are possibly too many graphs and detailed statistics for the average reader, but the evidence is sound. Trust in governments to manage the challenge of balancing the politics and economics is being lost, especially after economic failures and mixed responses to Covid. Autocracies and populism are on the rise as a result. People turn to those with the simple solutions only to find the situation becomes worse. In a chapter on the perils of populism there are plenty of stories to illustrate the argument.
Part of the solution, argues Wolf, is for governments in high income democracies to make sure that companies are subject to competition, the population is well educated, the infrastructure on which the economy depends is first-rate and that research that drives technology is well funded.
The US continues to dominate the global stage. Much of the book does focus on the US and UK and this is balanced by the global perspective. One of the facts that stood out was that in 2019, high income democratic countries accounted for only 16% of the world’s population but accounted for 57% of global output at market prices. Things are changing with the rise of China. The new reality of a growing China is challenging the global order and adding to the fragility and complexity of how democratic countries renew themselves. Democratic capitalist countries have different values to autocracies. Values such as equality of opportunity and freedom need defending says Wolf.
This book is a tour de force about the state of democratic capitalism. Whilst pessimistic in its analysis it is forward looking in how to restore trust and rebuild the balance between politics and wealth creation that will sustain the future of democracy.