The Crisis of Democratic Capitalism, by Martin Wolf (Penguin Press, 496 pp., $30)

Martin Wolf’s ambitious book ranges widely across the political-economic horizon. Thoughtful, insightful, if sometimes uneven, it deserves a careful read from anyone with even a casual interest in economics, politics, foreign affairs, political philosophy, or any of the issues that touch on today’s headlines. As with any effort this wide-ranging and ambitious, Wolf’s book has its weaknesses—in some cases where it is most interesting—but overall, it more than compensates.

The Crisis of Democratic Capitalism has four parts. The first and best dissects the relationship between market capitalism and liberal democracy. Wolf shows how market capitalism helped create representative democracy and how the delicate balance between the two, what he refers to as a “symbiotic pair,” is worth nurturing and protecting. That balance has, after all, created unprecedented wealth, individual liberties, and room for human flourishing. His stress on this essential balance reappears throughout the book, which is why that famous expression from the Temple of Apollo at Delphi, “nothing in excess,” appears on the book’s facing page and reappears to good effect several times in the text.

The second part of the book investigates what has in recent years upset this crucial balance. Wolf documents growing income and wealth inequalities as both symptoms and causes of these imbalances. He finds other evidence of failure in the financial crisis of 2008, the Great Recession that followed it, the mismanagement of globalization and a parallel mismanagement of immigration, ineptitude during the Covid pandemic, and more. The failures he describes are largely those of elites, who have, he argues compellingly, engendered a dangerous popular distrust of the institutions essential to democratic capitalism.

When discussing this state of affairs, however, Wolf seems to give way to common distractions. He admits, for instance, that working men and women have ample reason to resent elite failures and to distrust elite institutions, but then he focuses almost entirely on the dangers of the populist response to such feelings. Here, the reader spends much time with Donald Trump and the Republican Party. Though there is room for blame in these quarters, Wolf weakens his arguments by sounding more partisan than is necessary. He would have done better to ask how elites, while getting things so wrong for so many, managed at the same time to help themselves so effectively. Instead, he tells us, in effect, that the reaction to these disasters is somehow more concerning than their cause.

But Wolf does not spare all elites. He does a fine job explaining how business moved away from market capitalism toward what he aptly labels “rentier capitalism.” There is no denying that business has used political influence to gain privileges, protections from competition, and other advantages that have no place in a democratic capitalist system. Wolf’s arguments are cogent and insightful.

These arguments do not go far enough, however. True as it is that business has influenced the political and legal authorities to gain special favors, it also is true that those authorities are willing to work with business to advance their own agendas—and not necessarily on behalf of the commonweal. Wolf argues too often from the assumption that civil servants act as disinterested and consequently even-handed players. That cannot be assumed. They have their own interests, personal and ideological, and they introduce them into everything they do. This establishes two-way lines of influence that create a kind of cooperation between government and business elites to further a joint agenda, one that too often comes at the expense of ordinary people.

Despite this omission, the book’s long middle section offers much insight into fixing these problems. Its mandate for “reform” and not “revolution” contains perceptiveness and deep reading on an impressive array of topics. The analysis covers, among other things, directions for social engineering, fiscal policy, tax reform, pension reform, globalization, corporate governance, and job creation, as well as possible actions to mitigate climate change and boost innovation. And this is only a partial list. If there is any criticism to be leveled here, it is less in the substance than in the speed at which this analysis proceeds. This kind of surfing, imaginative and discerning as it is, gives the reader too little substance with which to weigh pros and cons on each matter. Of course, one can fit only so much into any book, but a more measured development would have helped.

Crisis ends with an application of these ideas to the challenges facing liberal democracies today, including those posed by Russia and China. In some senses, Wolf comes across as optimistic. Passages deal with the weaknesses of China and other authoritative regimes. In other spots, though, he is pessimistic about the ability of democracies to recapture the balance needed to revitalize themselves. Overall, his is a fair assessment. No one can see the future. As satisfying as it would be to read his take on future likelihoods, he chooses instead to leave his readers with a clear, if incomplete, review of the problems and a sense of where solutions might lie. That is plenty.

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