Book review of The Crisis of Democratic Capitalism by Martin Wolf


Among business and financial journalists, there has never been a doubt that Martin Wolf is at the top of our heap. Over a career that now spans 35 years, there is nobody better read, better sourced or more insightful than the longtime economic commentator for the Financial Times. Wolf is the first person you turn to during a financial crisis, a thoughtful and generous colleague and the gold standard against which the rest of us are judged. Oxford trained, Davos polished, a Commander of the British Empire, Wolf is a charter member of a British establishment whose foibles and failures he is quick to chronicle.

Wolf’s latest book is “The Crisis of Democratic Capitalism,” in which he argues that neither capitalism nor democracy can survive and thrive without the other, and where they have coexisted in a kind of self-reinforcing harmony, they have produced the most prosperous, free and happy societies the world has ever known. But, Wolf warns, that self-reinforcing harmony has now given way to an equally self-reinforcing collapse characterized by crony capitalism and thuggish autocratic rule that threatens our freedoms and our prosperity.

Although Russia’s Vladimir Putin, China’s Xi Jinping, Hungary’s Viktor Orban, Turkey’s Recep Tayyip Erdogan and Britain’s Boris Johnson make cameo appearances in Wolf’s analysis, it is Donald Trump who casts the shadow over Wolf’s jeremiad, and most of his narrative and analysis focuses on the United States. His rationale seems to be that it was the United States that was most responsible for shaping the post-World War II liberal democratic order, and it is the failure of that order in the United States that will bring Europe and the rest of the world down with it.

For a Brit, Wolf has a respectable grasp of the arc of modern American politics and the source of the polarization and dysfunction that now grip its capital. But as you would expect, the strongest sections are on the more familiar turf of finance and economics. The most interesting are his riffs on what he and others have called “rentier capitalism,” in which, because of a lack of competition, some firms, along with their investors and workers, earn outsize profits and salaries at the expense of other workers, customers and suppliers. The result is a widening gap in income and opportunity not only between rich and poor, but between skilled and unskilled, between those who live in economically thriving regions and those in declining ones, between those who pay their fair share of taxes and those with enough money or political clout to avoid doing so. Wolf is also at his best when talking about the financialization of the economy — the excessive profits earned by Wall Street banks and investment houses, the excessive focus on investors by corporate managers, and the interplay between cheap money, financial crises and the declining trust in economic and political institutions.

Particularly noteworthy is Wolf’s attitude toward the “elites” who run the major institutions of society, who surely see him as a fellow member and who form the core of his readers. Some of the best passages of the book are his scathing criticism of a business and political establishment that has failed to make globalization work for unskilled workers, who have been left to bear the full cost of the adjustment; of the “Brahmin” disdain with which well-off and well-educated voters view the lifestyle choices and values of the urban and rural working class; and of the failure of the business, media and political elite to put the public interest ahead of their own, undermining the social trust essential for the success of capitalism and democracy. Yet unlike many progressives, Wolf’s battle cry is not to tear down institutions and topple those who run them. Rather, it is to demand that his fellow elitists make good on the responsibility that goes with their privilege.

“The corruption, injustice, and lies of elites are powerful solvents of bonds that tie citizens together, inevitably replacing patriotism with deepening cynicism,” he writes. “Without decent and competent elites, democracy will perish.”

Unfortunately, these satisfying nuggets, along with Wolf’s broader theme, are buried in what turns out to be a sprawling discourse over nearly 400 pages of text on just about anything that might explain how capitalism and democracy ran off the rails. The historical sweep of the narrative, the profusion of data, the insistence on breaking down every question or proposition into numbered points and subpoints — it all gets to be exhausting. Rather than publish a curated anthology of past columns, Wolf may have succumbed to the temptation to string them together, a suspicion confirmed by a peek at the bibliography, which features more than three pages of citations to his own work. For anyone not fascinated by five-point plans to revive the mainstream media, the pros and cons of universal-basic-income schemes, the flaws of modern monetary theory, the robustness of complex systems, the dramatic rise of global capital flows and macroeconomic imbalances, and the distinctions between left, right and centrist populism — and even for those of us who are — the book is likely to prove overwhelming.

At the conclusion, Wolf declares that we are at a moment of “great fear and faint hope” and confesses serious doubts “that the US will still be a functioning democracy by the end of the decade.” In his pessimism, he may be overlooking the most important quality of both markets and democracy, one that has allowed them to prevail over the alternatives, even in perilous times like these: their capacity for self-correction.

Steven Pearlstein is the Robinson professor of public affairs at George Mason University and a contributing opinion writer at The Washington Post, where he has been a longtime business and economics columnist. He was awarded the Pulitzer Prize for commentary in 2008. He is the author of “Moral Capitalism: Why Fairness Won’t Make Us Poor.”

The Crisis of Democratic Capitalism

Penguin Press. 474 pp. $30

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