And now a digression on democratic capitalism

Some food for thought by Martin Wolf, chief economics commentator for the Financial Times and author of The Crisis of Democratic Capitalism, in interview with Yascha Mounk.

Wolf: It was pretty obvious that something had happened in recent years which undermined the confidence of a broad part of our population in the economic and political systems together, leading them to listen to [populist] voices which I simply hadn’t expected to be listened to, particularly in sophisticated, advanced democracies like the U.S. and U.K. …

[Back when industrial capitalism emerged, the working class was] too important and too potent in society to be ignored. They couldn’t be forever repressed or suppressed. They had to be bought out, as it were … They wanted to get more prosperous. They wanted welfare. But they didn’t want revolution. That created the welfare democracies of the mid-20th century. It was a solution to the conflict that Marx had described but a solution that he didn’t envisage. And they became incredibly prosperous by historical standards.

[But] the technological and economic forces that created this widely-shared prosperity were, I think, temporary. [Look at] the difference between Apple and General Motors, for example, the two most valuable companies of their age. In the United States, Apple basically doesn’t invest anything in physical terms. It doesn’t employ many people. It’s a tiny labor force compared with what GM had. All the people it does employ are very skilled university graduates. It is a completely different sort of business. Finance is the same … [and] it doesn’t look as though the economy is going to go back.

Mounk: For listeners who agree with you about the crisis of democratic capitalism, what can we do in order to maximize the likelihood that democratic capitalism may survive?

Wolf: We should try, so far as we can, to have a politics that focuses on broadly-shared welfare rather than fundamentally divisive cultural issues. The big problem with cultural issues is they really are zero-sum; they’re war to the death, as it were. And that’s not necessarily true if you focus on giving people opportunities for a better life. You have to pay more tax—that I accept. But if you give people childcare, better education, better chances, greater equality of opportunity, better health care in the U.S. (which is crucial) … greater involvement of workers in corporate governance … If you combine it with training, people who you wouldn’t think you could get to do completely different jobs actually learn how to do so. This all requires, of course, an active state with some greater level of tax support. But it seems to me that those things … are things that most people will recognize as worth doing if the alternative is a political breakdown.

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5 thoughts on “And now a digression on democratic capitalism

  1. Very interesting. But, we know where the real issue lies. It’s not in the politics necessarily, it’s in the broad lack of integrity, respect, and common decency in the business world. The politicians are only part of the problem. The main source of the problem is the people themselves. We’ve weaponized a person’s job and basically blackmailed them into doing whatever the people at the top need to buy their next superyacht.

    You don’t see bad behavior punished. You don’t see business owners or managers who deny sick leave, or bereavement punished either. You don’t see businesses come under fire for lying to employees or renigging retirement plans. It’s done. Even Chik-fil-A has done it. But it’s not punished by anyone.

    Wolf’s comments about the hype around cultural issues are spot on. That, unfortunately, isn’t going to go anywhere until we teach people to think for themselves once again. The people on either side of the cultural divide, however, are the biggest enemies of that. The right of any religious coloring claims they’re just trying to be holy (they’re usually anything but). The left claim the same, but they call it “justice” or “inclusivity” only they aren’t very just or inclusive.

    And both sides bankrupt anyone who gets in their way morally, intellectually, or economically. All either end up doing is destroying the art of thought. Sometimes, even art itself.

    Liked by 2 people

  2. This sounds like going back in time; to the ‘good old sixtieth’ in middle Europe, with a strong union movement, a fair taxation system, free education on all levels, free childcare and free Medicare for all, dental and optical included. In the USA they called it socialism, in Germany it was just considered sensible governing. So where has it all gone? Despite many prophetical predictions, the corporate takeover had been completed by the mid-ninetieth.

    Liked by 1 person

    • Thanks, Michael. I see the apparent tension. Wolf emphasizes how the 20th-century economy (his GM example) is gone forever and the new economy (his Apple example) has shaken the average person’s faith in democratic capitalism, and yet his recommendations are right out of the 20th-century Left — more worker involvement in corporate governance, invest in more equal education, job support, etc., focus less on demographic identities/squabbles and more on giving everyone a fair shot at the pie regardless of their demographic identity. I lean in Wolf’s favor though. I think those strategies CAN be applied to the new high-tech economies, insofar as they all seem to have retained relevance after the shift to what he calls the new Apple-type economy. (Maybe I’m just an old 60s middle Europe guy in spirit 🙂 )

      Liked by 1 person

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