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Is our democracy in peril?

The Course of Empire, Destruction by Thomas Cole (1836)

“Who isn’t afraid of Martin Wolf?” asks Emma Duncan in The Times. The FT columnist is the most important economics commentator in Britain, arguably the world. And in a new book, he has a chilling warning for the global elite: unless they change their ways, “the end is nigh”. Wolf’s theory is that the “benign marriage” between capitalism and liberal democracy is falling apart. Since the Second World War, the two systems have complemented each other: globalisation made everyone richer, which “fertilised the ground” for liberal democracy to spread beyond the West. The Soviet Union, which offered the only serious alternatives to capitalism and democracy, collapsed.

The problem, Wolf argues, is that democracy and capitalism have always been in tension. Democracy is local; capitalism global. In a democracy people are of equal value; under capitalism their value is measured by their wealth. So when corporations avoid paying tax, ship jobs abroad to save money and demand high levels of immigration to provide cheap labour, voters resent it and vote for policies that “undermine capitalism”. The beneficiaries are populists like Donald Trump and Boris Johnson, who end up serving them “even worse” than the old establishment. So what to do? Wolf has no groundbreaking solutions: his suggested reforms – essentially more European-style social democracy and higher taxes on the rich – amount to: “Be Danish.” Nevertheless, his is an important message. When people accuse him of pessimism, he points out that he wouldn’t exist but for two pessimists (his father and his mother’s father), both of whom fled Nazi-occupied Europe. “Almost to the last individual” their extended families were murdered, he writes. “My family history makes me aware of the fragility of civilisation.”

The Crisis of Democratic Capitalism by Martin Wolf is available to buy here.