Crisis – what crisis?

We kick off with The Crisis of Democratic Capitalism by Martin Wolf, just published in the UK by Allen Lane.

It needs to be said at the outset that this is an important book. Not so much for what it says – most of which is indisputable – but who is saying it.

Martin Wolf, now, as he says, in “the eighth decade” of his life, is the Chief Economics Commentator of the Financial Times, for which he writes a weekly column. His name and writing will thus probably be familiar to many readers of this newsletter. Wolf occupies a position of enormous influence among financial and political elites, certainly in the West and possibly elsewhere too. We can gauge the heft of his influence from the names of the great and the good who adorn the back cover of the book, lining up to cast praise on Wolf’s work.

Wolf says he believes in democracy “and so in the obligations of citizenship, in individual liberty and so in the freedom of opinion, and in the Enlightenment and so in the primacy of truth”. The motto of his book is “never too much… The health of our societies depends on sustaining a delicate balance between the economic and the political, the individual and the collective, the national and the global”. The son of parents who fled the Nazis, Wolf says he is a child “of catastrophe”; his family history has made him aware of “the fragility of civilization”. The economy he asserts “is not delivering the security and widely shared prosperity expected by large parts of our societies”. That is surely unarguable.

So, we have a noble, skilfully written, but ultimately flawed defence of civilization. The flaw is that Wolf is good at identifying the problems that beset our societies, his solutions to them are hopelessly romantic, requiring a degree of cross-border cooperation and good will that is signally missing. Wolf tells us that people “complain” of his “pessimism”; but he says that “my biggest mistakes have come from over-optimism, most recently over the wisdom of finance and the good sense of electorates”. Reading this book one is left with the impression that Wolf has overlooked one other big mistake – the idea that his sensible proposals could have an audience wider than his coterie. Much of what he says in this book depends on one thing that often these days seems absent – reasonable and intelligent human beings who are willing to listen to opinions that differ from their own. Wolf has written a book that at its core is about ethics – or rather the lack of them in our political and economic spheres – yet that word oddly doesn’t appear in the index. The sub-text of his book is a heartfelt plea for greater trust between nations and among people; yet trust has become extremely scarce.

Wolf correctly states that (electoral) defeat in democracies “is bearable only if the people who outvote you are people you trust. If not, civil war threatens…if authoritarianism of some kind were to replace liberal democracy, competitive market capitalism would be unlikely to survive. A corrupt form of neopatrimonialism would become far more likely. This is no remote danger. It is what (Donald) Trump and his ilk embody”.

Trump and, to a lesser extent, Brexit, is the demon of Wolf’s book. Any Trump supporter is advised to take a tranquiliser before reading to avoid bursting with apoplexy. One might think that the person who presents the biggest threat to democratic capitalism today is Vladimir Putin rather than Donald Trump, but the latter gets more than twice the index name-checks of the former. Wolf loathes Trump and condemns the US for the huge wealth inequality which has developed there – the ratio of average CEO versus employee pay has risen from 42:1 in 1980 to an egregious 347:1 in 2016. “Democracy is for sale” in the US says Wolf.

Wolf’s book makes for excellent reading now, when we are living through another banking crisis. In the Great Financial Crash of 2008-09, the “emperors turned out to be naked. Many members of the public came to believe these failings were the result not just of stupidity but of the intellectual and moral corruption of decision-makers and opinion-formers at all levels – in the financial sector, regulatory bodies, academia, media, and politics”.

The tone of the book is recognisable for any regular reader of the Financial Times. It is that of the author’s absolute confidence in the certainty of his opinions, expressed in suitably dogmatic yet essentially Fabian terms. It is as if Wolf is standing on Mount Olympus and lecturing all us lesser creatures to desist from the mistakes we are making or else disaster will follow. “Alas”, a complex society such as ours “dominated by predatory, short-sighted, and amoral elites is all too plausible. If such elites emerge in a democratic republic, it will collapse”.

That we might just muddle through is not really considered in Wolf’s apocalyptic warnings – the wagging finger refuses to pause. Who knows? He may be right. Pessimist he is but he tries his best to put on a hopeful front.

Full disclosure: this review was written by a former FT journalist.