PEACEFUL CIVIL WAR?

Dick Pountain /Political Quarterly/ 03 May 2023 09:42

BOOK REVIEW: The Crisis of Democratic Capitalism, by Martin Wolf; Allen Lane Feb 2023, pp474, £30

“Democracy is peaceful civil war. The divisions that emerge in democratic politics may, in the wrong circumstances and with the wrong people, become sources of insurrection, civil war, or creeping authoritarianism in the name of the people.” 

So says Martin Wolf, the Financial Times’ chief economic commentator for almost thirty years and now perhaps the most respected and influential financial journalist in the world. He’s an enthusiastic supporter of both capitalism and democracy and an opponent of state socialism. Surely therefore it must be rather easy to predict the opinions he will offer about the current state of the world in his substantial study ‘The Crisis of Democratic Capitalism’? Actually not. He’s not really a member of that pack of Cold-War-Liberal economists who surround the thrones of Western capitals, egging on governments to more extreme forms of neoliberal austerity. This rapidly fading clique all subscribe to the moral axiom of postwar US political and economic supremacism, namely that democracy and capitalism are inseparably joined together as ‘liberal democracy’, a system of governance so virtuous that it’s worth fighting wars to spread it around the world. 

By contrast Wolf believes that the connection between democracy and capitalism is neither moral, nor inevitable, nor unbreakable, but is rather contingent, fragile and historically determined by specific circumstances that may never arise again, and that this connection is now under the most serious threat since the 1930s. He believes a separation between democracy and capitalism must only lead to one of two kinds of catastrophe: weakening democracy leads to authoritarian plutocratic rule while weakening capitalism leads to economic stagnation and loss of innovation. The emergency measures he proposes to counter the current threat – which he’s not certain will succeed – look remarkably like those that would be proposed by a Keynesian Centre Left (if we had one).

Wolf first became a free-market enthusiast upon reading Hayek while working at the World Bank in the 1970s, but after joining the FT in the ‘80s he became ever more disillusioned with excessive veneration of the private sector, so that when the world financial crisis of 2007-8 erupted he was a strong advocate of governmental fiscal and monetary interventions and a leading light in the so-called ‘Keynesian resurgence’. Since then he’s been a vocal supporter of public goods as the guarantors of security and stability, a position that he defends and explains in some detail in this book.

His book is organised into three sections the first of which, ‘On Capitalism And Democracy’ gallops briskly through a history of human civilisations, industrial revolutions and the rise of markets. He offers a plausible account of the way commercial markets ultimately required democratic rights, even though the process of winning them was slow and stepwise through intense political struggle against vested aristocratic interests. And such rights didn’t automatically bring with them economic equity: that requires an ongoing struggle by organised labour for a welfare state and collective bargaining. Wolf walks away from his earlier infatuation with free markets thus: “Universal suffrage democracy leads to a big government by the standards of the nineteenth century. Such governments are consistent with the survival of competitive capitalism. The libertarian version of capitalism is, however, incompatible with universal suffrage democracy. People who want the former must openly admit their opposition to the latter.” Wolf sees such a drive toward plutocratic absolutism among Trump’s US Republican adherents.   

The second part, ‘What Went Wrong’, analyses the trends and events that have lead to erosion of support for political parties of both Left and Right, the rise of populist charlatans like Trump, Johnson and Bolsonaro, and the shift of capitalism away from productive investment towards the various forms of rent seeking: “The economy of the mid-twentieth century in the high-income countries, with its armies of unionized, reasonably secure, relatively well paid, and overwhelmingly male industrial workers, was the product of a particular stage of economic development, buttressed by the postwar commitment to full employment. This social and cultural pattern has vanished, together with its economic base.” He supports this conclusion with copious statistics and graphs, quoting sympathetically from progressive critics like Adam Tooze, Guy Standish and Thomas Piketty. 

Part three is weakest of the sections, in which Wolf proposes policy changes he hopes might counteract public disillusion with politics and corporations and make regulation more effective. These include accelerating the transition to renewable energy; properly financing the NHS, care and pension systems; curbing the political influence of corporate money and attacking corporate tax evasion. Some currently fashionable nostrums he rejects, like a Universal Basic Income which is “too ill-targeted to be a good use of the additional tax money that would have to be raised to pay for it”. His hope is that a package of major reforms might still improve economic security enough to restore faith in democratic politics and reduce the attraction of populist demagogues.  

It feels odd to have to defend democracy in 2023, but remember that the Leninist/Trotsyist view of ‘bourgeois democracy’ as a sham erected to conceal capitalist exploitation which must be demolished to build socialism, still has adherents in parts of the Left – the violence, corruption and incompetence of many actually-existing 20th century socialist and communist regimes, and the cascade of  ‘colour revolutions’ that ended most such regimes suggest that representative democracy does command widespread popular consent. Even so it’s reasonable to ask whether forms of ‘democratic socialism’ – as proposed for example by the Labour Party under Corbyn and McDonnell, Bernie Sanders in the USA, or the more far-reaching proposals of Thomas Piketty for ‘participatory democratic socialism’ – could eliminate the threat to democracy posed by an increasingly plutocratic, rent-seeking neoliberal global capitalism. 

Wolf’s reforms would leave capitalist property more regulated but under the same ownership and management, whereas more radical schemes demand a degree of property and control be transferred to the workforce through works councils, share ownerships and Piketty’s ambition to redistribute income, wealth and capital across successive generations. Wolf openly doubts whether the political will and electoral support can be mustered to achieve even his rather mild reforms, and far steeper obstacles face such radical schemes, but even if none of these horses is going to run, it  helps a bit for a voice as authoritative as his to confirm that the grandstand is on fire…

To me Wolf’s ‘democratic capitalism’ looks very like the social democracy that prevailed in much of the West during the post WWII boom: a mixed economy with some publicly-owned utilities operating alongside private firms, and unions representing the interests of the employed. Not a victory but rather an armistice in the class war, whereby workers agree not to expropriate capitalists in return for a fair share of the wealth they create. Almost all political economists nowadays scorn the idea of return to social democracy as impossible, proffering various reasons, sometimes dubious and contradictory. These remind me of a wry and subversive Italian proverb Al contadino no far sapere quant'è buono il cacio con le pere (Don’t let the peasants know how good pears are with cheese!)