Martin Wolf is rightly regarded as one of Britain’s most accomplished economic commentators. He is the chief economics commentator for London’s Financial Times, where his regular columns, in which he presents a perceptive and rigorous analysis of global economic and political developments, have won him a loyal readership.
The crisis of democratic capitalism, his latest book, is a timely examination of a relevant and concerning trend. Perhaps 10 or 20 years ago it was generally accepted that democracy and capitalism together were the desirable and almost inevitable destination of a new world order. But geopolitical developments blew the idea – which some equated with Western hegemony – out of the water.
Wolf writes: “Liberal democracy is under increasing outside pressure. The main sources of such pressure are the current autocratic states, especially China, but also revanchist Russia (as dramatically illustrated by the invasion of Ukraine), North Korea and Iran. In response, it is essential to strengthen alliances between liberal democracies around the world.”
Wolf’s focus on China is remarkable. China observed and learned from what it saw happening in the Soviet Union. The country liberalized its economic model, but at the same time the Communist Party of China relentlessly strengthened its political control.
That created what Wolf describes as “something paradoxical: communist capitalism”. Wolf describes China as developing “a stunningly effective mix of a dynamic market economy with a totalitarian state”. In March, Xi Jinping was elected by China’s parliament to an unprecedented third five-year term as president, paving the way to becoming leader for life.
Just days after this historic coronation, Beijing announced it had struck an agreement between Saudi Arabia and Iran that brought two former Middle East opponents into a development pact. This extraordinary diplomatic event illustrates China’s growing influence in global affairs at the expense of US influence.
Later, in arguing that China poses a far greater threat to Western hegemony than was the Soviet Union or Russia, Wolf quotes Harvard analyst Graham Allison, who writes: “The time has come to recognize China as a competitor on the full spectrum. of the US.”
Be that as it may, Wolf outlines the strengths and weaknesses of the West. He notes that China’s real output per capita is still less than a third of the US’s and that it is much easier to catch up – as China is doing – than to lead the way – as China aspires to do.
There is another case for the survival of democratic capitalism: as Wolf argues, capitalist countries provide the best places to live and for the most part remain “remarkably wealthy and fair.” And he agrees with two of democracy’s leading skeptics, Christopher Achen and Larry Bartels, who made it clear in their book Democracy for Realists: Why Elections Do Not Produce Responsive Government that “an independent judiciary, freedom of speech and assembly, and other features of democratic institutions and culture are undoubtedly important.”
Wolf, on the other hand, opposes the alternatives to democracies; both demagogic authoritarianism, in which so-called autocrats and their facilitators erode liberal democracy from within – a clear reference to Donald Trump’s US presidency – and bureaucratic authoritarianism, in which a self-selecting mandarin elite controls all power, as in China.
The tenuous partnership between democracy and capitalism is, of course, central to what the future might look like. Wolf takes a closer look at the history of capitalism and analyzes why great hopes for globalization, which was expected to boost growth and prosperity, have faltered.
Globalization and its discontent?
Wolf concludes that the most likely explanation for this stagnation is that liberalization “ran out of steam” by the early 2000s. Instead, the trend since then has been global deglobalization, he argues.
He writes: “The last liberalization of world trade was the Uruguay Round, which was concluded in the mid-1990s. “The only major liberalization event since then has been China’s entry into the WTO in 2001. This was followed by a series of major attempts – the Doha round of multilateral trade negotiations, the Trans-Pacific Partnership (TPP – rejected by Donald Trump in early 2017) , and the Transatlantic Trade and Investment Partnership (TTIP, between the US and the EU) failed, was rejected or languished.”
While that leads to the conclusion that capitalism has reached some kind of buffer, the reports of its demise are certainly premature. Market economies still exist, but as Wolf concludes in his chapter on democratic capitalism, their continued existence is not inevitable: “The history of modern representative systems of democracy is short, that of a global capitalist economy is not so much older. ”
Indeed, liberal democracy and global capitalism must be saved together, he argues. This fine book, well argued and elegantly written, provides an astute analysis of what needs to be done.
A blind spot
But the author does seem to have a blind spot, and that blind spot is Africa. The continent is barely mentioned. In fact, the only reference to Africa in the book’s index is a global demographic profile in which we learn that slightly less than three-quarters of the increase in the developing world’s share of the world’s population has occurred in sub-Saharan Africa. The population of sub-Saharan Africa has increased from 30% of all high-income countries combined in 1960 to 89% in 2018 – that is from 230 million to 1.1 billion.
Wolf ignores the Africa Continental Free Trade Agreement (AfCFTA) when he lists global trade liberalization events since the Uruguay Round of the mid-1990s. That is a remarkable omission and perhaps illustrates the unfortunate fact that Africa is still often marginalized, misunderstood or ignored by many of the economic thinkers in the West. Home to nearly 1.5 billion people – more than 16% of the world’s population – the source of important resources and a dynamic and growing business class; this certainly has many lessons to learn about the future relationship between capitalism and democracy.
