Mon, Sep 30, 2019 - Page 7 News List

Capitalism reigns, but it is in deep trouble

For liberal democracy to recover, we will have to eat some humble pie and recast the prevailing liberal philosophy, politics and economic policy

By Richard Reeves  /  The Guardian

Illustration: Yusha

Capitalism reigns, but it is in trouble. Therein lies the paradox of our age. For the first time in human history, a single economic system spans the globe. Of course, there are differences between capitalism Chinese-style, American-style and Swedish-style.

Close up, these differences can seem significant. However, viewed through a wider lens, the distinctions blur. As the economist Branco Milanovic writes in his new book, Capitalism Alone, “the entire globe now operates according to the same economic principles — production organized for profit using legally free wage labor and mostly privately owned capital, with decentralized coordination.”

After the fall of Soviet communism in 1989, and China’s embrace of the market, crowned by the nation’s entry into the WTO in 2001, it seemed, for a brief flicker of human history, that the world was converging on a political economy of free markets in liberal democracies.

As it turned out, markets spread, but without necessarily bringing more democracy or liberalism along with them.

Capitalism without democracy was assumed to be at most a passing phase. Eventually, so Western liberal thinking went, China and other Asian nations adopting what Milanovic calls “political capitalism” — free markets, but authoritarian politics — would have to adopt liberal political institutions, too.

However, so far, the liberalization thesis remains unproven. China has successfully adopted a market system — and, even more importantly, a market culture — without liberal democratic institutions.

Meanwhile, Western democracies are in various states of crisis, struggling to contain a resurgent populism. To a large extent, they are reaping what they have sown. After the Berlin Wall fell, the Western technocratic and political elite became complacent, hubristic and arrogant.

Over dinner in cosmopolitan cities, they discussed Francis Fukuyama’s The End of History, pushed further and faster toward freer trade and more porous borders, and insisted that inequality was being sanitized by meritocracy.

The elite reformed our left-wing parties into Third Way parties, who swept to power: This was the era of former US president Bill Clinton, British prime minister Tony Blair and German chancellor Gerhard Schroeder. Yes, there were problems, but nothing beyond the reach of centrist technocratic solutions; a little retraining here, some social liberalization there.

“Looking back, the era since the fall of the Berlin Wall seems like one of complacency, or opportunities lost,” said the novelist Kazuo Ishiguro in his 2017 Nobel lecture. “Enormous inequalities — of wealth and opportunity — have been allowed to grow ... and the long years of austerity policies imposed on ordinary people following the scandalous economic crash of 2008 have brought us to a present in which far-right ideologies and tribal nationalisms proliferate. Racism is once again on the rise, stirring beneath our civilized streets like a buried monster awakening.”

Western liberals thought they had won, because they looked around the world at burgeoning markets, but missed the fact that they were losing, slowly but steadily, in their own backyards.

As soon as working-class voters were given outlets for their anger — US Republican Party presidential candidate Donald Trump, Brexit — it poured out of them. The populist stew is of course a complex concoction, mixing misanthropy and nativism with genuine concerns about economic prospects.

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