Capitalism reigns. But capitalism 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. But 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 Chinas embrace of the market, crowned by the nations entry into the World Trade Organization 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. But, 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 Fukuyamas The End of History, pushed further and faster towards freer trade and more porous borders, and insisted that inequality was being sanitized by meritocracy. The elite reformed our leftwing parties into Third Way parties, who swept to power: this was the era of Clinton, Blair and 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 civilised streets like a buried monster awakening.
Western liberals thought they had won, because they looked around the world at burgeoning markets. But they 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 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.
Western liberals thought they had won, because they looked around the world at burgeoning markets. But they missed the fact that they were losing in their own backyards
Political leaders, disoriented by the backlash, are tempted by cultural explanations, as Hillary Clintons unfortunate description of some of Trumps supporters as deplorables. The phrase was taken out of context before being bounced around every social media echo chamber. But today Trumps most ardent followers wear deplorable as a badge of honor. A decade ago, Barack Obama worried about folks who cling to guns or religion. When voters feel that they are being looked down on, they are sure to become angry.
Ishiguros accusation (a self-accusation, too, I should add) of complacency is exactly right. We made the economic arguments for free trade, automation and immigration on the grounds that on net, and in the long run, these are good for the economy. True, as a matter of economic fact. But what we paid insufficient attention to was the necessary implication that right now, some real people will lose out.
Policies to offer really substantial help to those most affected by change rarely made it to the top of the political agenda. Bill Clinton did too little to invest in workers even as he pursued free trade and sound money. Tony Blair did too little to manage immigration from other EU countries. And to be clear, at the time, I was emphatically on their side. But we were wrong. Here is just one example of the misdirection of resources. Before the passage of Trumps 2017 tax law, for every $1 the US government was spending on trade adjustment assistance for workers, it was spending almost $25 on tax subsidies to the endowments of elite colleges. Against a backdrop of rising inequality, this was unconscionable.
The question now, as posed by Bill Galston and others in this series, is whether the political leadership can be found to reform the political economy of nations like the US and UK, in the same spirit as during the 1930s and the postwar years. Right now is a bad time to answer that question, of course. The bilateral buffoonery of Trump and Boris Johnson suggests that things are going to get much worse before there is much chance they will get better.
For liberal democracy to recover, we will have to recast prevailing liberal philosophy, politics and economic policy. Philosophically, liberals will have to start by eating many slices of humble pie. It turned out to be a terrible mistake to assume that capitalism and democracy naturally go hand in hand. Perhaps an understandable one, given a certain historical view. Liberal democracy and liberal capitalism were, after all, twins, born of the European Enlightenment. But as history has shown repeatedly, they can be separated. It is simply wishful thinking to believe that some deep natural processes drive liberal causes. They have to be fought for, over and over and over again. Platos line about democracy being a wonderfully pleasant way of carrying on in the short run used to be a modernists laugh-line. But were not laughing now.
For liberal democracy to recover, we will have to recast prevailing liberal philosophy, politics and economic policy
Politically, the challenge is to reassert the authority of government over the market, not in order to cramp competition but in order to see it flourish. The corruption of government by powerful businesses is not a weird anomaly. It is precisely where market incentives lead; the currency of political economy is not money but power.
The fundamental concept in social science is Power, wrote the British philosopher Bertrand Russell, in the same sense in which Energy is the fundamental concept in physics. Writing in the pre-dawn of the second world war (his essay was published in 1938), Russell delineated various kinds of power: economic power, priestly power, hereditary power, power over opinion, naked power, and so on.
A free society, Russell insisted, requires institutions and cultures that keep each one of these forms of power in check, and stop them being converted easily one to the other. If economic power or priestly power can be readily turned into political power, for instance, we should be wary of the likely result. Democracies have to be constantly patrolling the borders between different sources of power. Separation of powers is a political principle, not just a constitutional one. Russell was concerned about power because he was a liberal. In fact, he was John Stuart Mills secular godson. (Both of them spent time in jail for their beliefs, but thats another story.)
The concatenation of political and economic power, especially in the US, is intrinsically damaging, as Matt Stoller showed in this series. The airline industry is a case in point. As Thomas Phillipon in The Great Reversal and Binyamin Applebaum in The Economists Hour both point out, it was under-regulated in the 1930s, over-regulated in the 1970s, and under-regulated again since. One of the most used measures of economic concentration, the snappily named Herfindahl-Hirschman Index, rose and fell in line with the extent to which the government enforced competition.
Muscular regulation is often required to ensure genuine competition but all too often, the political right has a knee-jerk reaction against regulation, and the political left has a knee-jerk reaction against competition. A competitive free market is a good thing. But like tabby cats, it does not exist in the wild.
Once again, what matters here is power. Democratic political systems and capitalist economic systems share an important and attractive feature, of diffusing power. When every vote counts equally, politicians are obliged to serve the people. When every dollar counts equally, companies are obliged to serve the people, too.
Capitalism works best when it acts in a centrifugal manner to disperse power, less well when it tends towards concentration
This diffusive feature is actually what puts the liberal in liberal democracy and liberal capitalism. At heart, both are massive power-sharing agreements. Capitalism works best when it acts in a centrifugal manner to disperse power, less well when it tends towards concentration. Right now, capitalism in many nations, including the US, is tending more towards centripetal than centrifugal capitalism as many of the essays in this series have shown, including from Ganesh Sitaranam.
Economic power is being concentrated geographically. Today 25 cities, most of them on the coasts, account for more than half of the US economy. Between 1960 and 1980, economic activity was dispersing across regions, reducing spatial inequality. Since 1980, the trend has been the other way, with activity becoming more concentrated in the coastal cities.
Neighborhoods are becoming more economically distinct, too: if you are rich, your neighbors are more likely to be rich than in the past likewise, if you are poor. Poorer neighborhoods are increasingly cut off, socially and geographically, from the sources of economic prosperity. Almost all (90%) of the poorest counties in 1980 were still at the bottom in 2016, according to research from the Hamilton Project at Brookings.
In terms of policy, the liberal consensus that growth would automatically spread and be shared has been shattered. New measures of distributional growth, as proposed by Heather Boushey, are badly needed. More broadly, both social and economic policy will have to shift resources aggressively to provide more support for children in middle and lower-income families, especially in terms of skills and education, as part of what Melissa Kearny dubs a new social contract.
The potential for well-structured, centrifugal capitalism to bring prosperity and choice continues to be demonstrated on a global scale. But this potential is not being realized within many of the countries that currently dominate the international economic scene.
Capitalism in its liberal variant is under serious pressure. But an inwards turn, away from markets, away from trade, away from competition, away from dynamism, would spell dark times indeed, not least for the very people currently most attentive to the bugle call of retreat from the populist movements of left and right. Capitalism may be broken, at least in places. But it is not beyond repair.
See more here:
Yes, capitalism is broken. To recover, liberals must eat humble pie - The Guardian
- Paul Krugman - The Conscience of a Liberal - December 11th, 2016 [December 11th, 2016]
- Liberal Democrat Voice - December 11th, 2016 [December 11th, 2016]
- Urban Dictionary : liberal - December 12th, 2016 [December 12th, 2016]
- READ MORE : Liberal groups want delay of Sessions' hearing - January 5th, 2017 [January 5th, 2017]
- What Is a Liberal - What Is Liberal Bias - January 9th, 2017 [January 9th, 2017]
- Liberal Party of Australia - Wikipedia - February 1st, 2017 [February 1st, 2017]
- Conservatives reject liberal humor in Trump era: Dave Berg - USA TODAY - February 7th, 2017 [February 7th, 2017]
- Liberal Judicial Activism Borders On Insurrection - Daily Caller - February 7th, 2017 [February 7th, 2017]
- Liberal Fake News Reportedly Growing - Yahoo News - February 7th, 2017 [February 7th, 2017]
- House Science Chairman Sees Liberal Cover-Up on Warming Pause - Scientific American - February 7th, 2017 [February 7th, 2017]
- Furious Liberal MPs turn on 'rat' Cory Bernardi - The Australian Financial Review - February 7th, 2017 [February 7th, 2017]
- 'Rallying point': Abbott to headline conservative Liberal fundraiser in Melbourne - The Age - February 7th, 2017 [February 7th, 2017]
- I'm A Liberal, And I Want Milo Yiannopoulos On My Campus - Huffington Post - February 7th, 2017 [February 7th, 2017]
- Cory Bernardi says he resents being used in Liberal party 'proxy war' - The Guardian - February 7th, 2017 [February 7th, 2017]
- HuffPo's New Editor In Chief Is Already Undoing Arianna's Liberal Legacy - Daily Caller - February 7th, 2017 [February 7th, 2017]
- Why Are Liberals Surprised by the Senate Confirmation of DeVos? - National Review - February 7th, 2017 [February 7th, 2017]
- Liberal Hashtag #NotMySuperBowlChamps Protests Patriots' Support of Trump - Fox News Insider - February 7th, 2017 [February 7th, 2017]
- All liberals are hypocrites. I know because I am one - Quartz - February 7th, 2017 [February 7th, 2017]
- '9th Circus'? Scholars Say Court's Liberal Rep Is Overblown - ABC News - February 7th, 2017 [February 7th, 2017]
- Economic freedom - Wikipedia - February 8th, 2017 [February 8th, 2017]
- Liberal land - Richfield Reaper - February 9th, 2017 [February 9th, 2017]
- Liberal groups file lawsuit to block Trump's deregulation order - Washington Examiner - February 9th, 2017 [February 9th, 2017]
- Strategies for Saving the Liberal Arts - Inside Higher Ed (blog) - February 9th, 2017 [February 9th, 2017]
- This day in Liberal Judicial ActivismFebruary 9 - National Review - February 9th, 2017 [February 9th, 2017]
- The Marco Rubio knockdown of Elizabeth Warren no liberal media outlet will cover - Conservative Review - February 9th, 2017 [February 9th, 2017]
- Wisconsin Gov. Scott Walker proposes surprisingly liberal budget - Chicago Tribune - February 9th, 2017 [February 9th, 2017]
- Why the liberal world order is worth saving - Irish Times - February 9th, 2017 [February 9th, 2017]
- Tim Scott reads racist tweets by 'liberal left' over support for Jeff Sessions - Washington Times - February 9th, 2017 [February 9th, 2017]
- Five tips on having a safe conversation with your liberal spouse or conservative brother - Fox News - February 10th, 2017 [February 10th, 2017]
- Why Liberal Policies Are Terrible For Young People - Power Line (blog) - February 10th, 2017 [February 10th, 2017]
- Trevor Bauer goes on long rant defending tweet about liberal bias - Yahoo Sports - February 10th, 2017 [February 10th, 2017]
- Liberal Tolerance: Sen. Tim Scott Reads His Hate Mail On Senate Floor For Supporting Sessions As AG - Townhall - February 10th, 2017 [February 10th, 2017]
- Claws Out For Ivanka Trump Show Liberal Love For Women Is A Sham - The Federalist - February 10th, 2017 [February 10th, 2017]
- Trump Takes a Running Whack at the Liberal Interventionists - The Nation. - February 10th, 2017 [February 10th, 2017]
- Networks Swoon Over GOP 'Feeling the Wrath' of Liberal Town Hall Protesters - NewsBusters (blog) - February 11th, 2017 [February 11th, 2017]
- Liberals, don't fall into the right's 'identity politics' trap - The Guardian - February 11th, 2017 [February 11th, 2017]
- Liberal pledge: Revamp for 69 outdated schools in $560 million spend - Perth Now - February 11th, 2017 [February 11th, 2017]
- Indians swept by Liberal in WAC action - Hays Daily News - February 11th, 2017 [February 11th, 2017]
- Trump's attacks on the press and how the liberal media myth has empowered him - Salon - February 11th, 2017 [February 11th, 2017]
- The Paranoid Style of Anti-Trump Politics - National Review - February 12th, 2017 [February 12th, 2017]
- What the Liberal-One Nation preference deal could mean at the ballot box - ABC Online - February 12th, 2017 [February 12th, 2017]
- Finley: Left bites Ivanka's liberal hand - The Detroit News - February 12th, 2017 [February 12th, 2017]
- A new, liberal tea party is forming. Can it last without turning against Democrats? - Washington Post - February 12th, 2017 [February 12th, 2017]
- Since When Is Being a Woman a Liberal Cause? - The New York ... - New York Times - February 12th, 2017 [February 12th, 2017]
- This liberal Brooklynite is on the hunt for conservative friends - New York Post - February 12th, 2017 [February 12th, 2017]
- Small-l liberal voters have been abandoned in the race to the right - The Sydney Morning Herald - February 12th, 2017 [February 12th, 2017]
- Rich, Liberal Celebrities Lecture and Claim to Stand for 'We the People' at the 2017 Grammys - NewsBusters (blog) - February 13th, 2017 [February 13th, 2017]
- WA One Nation candidates refuse to preference Liberals - ABC Online - February 13th, 2017 [February 13th, 2017]
- India's liberal bubble has shrunk to irrelevance in the age of Narendra Modi - Quartz - February 13th, 2017 [February 13th, 2017]
- Liberal superhero Justin Trudeau is not immune to the forces of Trump - CNN - February 13th, 2017 [February 13th, 2017]
- A new satire must emerge one that breaks out of the liberal bubble - The Guardian - February 13th, 2017 [February 13th, 2017]
- A liberal Tea Party, the pope helps spring a terrorist and other notable commentary - New York Post - February 13th, 2017 [February 13th, 2017]
- At Ole Miss, a Liberal Agitator's Education - New York Times - February 13th, 2017 [February 13th, 2017]
- Liberal Frenzy: 'Impeach' Trump; 'Traitor! Resign by Morning' - CNSNews.com - February 14th, 2017 [February 14th, 2017]
- Chelsea Clinton future run for political shunned by liberal activists ... - Washington Times - February 14th, 2017 [February 14th, 2017]
- One Nation could gain more than the Liberals from Western Australia seats deal - The Guardian - February 14th, 2017 [February 14th, 2017]
- Conservatives: Walker's budget plan is anything but 'liberal' - Watchdog.org - February 15th, 2017 [February 15th, 2017]
- Trump Says Liberal Media 'Going Crazy With Blind Hatred' - Daily Caller - February 15th, 2017 [February 15th, 2017]
- I'm a bleeding-heart liberal cleric but the Church of England must not accept gay marriage - Telegraph.co.uk - February 15th, 2017 [February 15th, 2017]
- What's a Liberal to Do When His Spouse Is a Trump Zealot? - New York Times - February 15th, 2017 [February 15th, 2017]
- Liberal Activists Join Forces Against a Common Foe: Trump - New York Times - February 15th, 2017 [February 15th, 2017]
- John Howard backs Liberal preference deal with One Nation in WA - The Guardian - February 16th, 2017 [February 16th, 2017]
- Liberal ex-MP who called party a 'gay club' likely to be kicked out - The Australian Financial Review - February 16th, 2017 [February 16th, 2017]
- New Liberal PAC Targets Democrats for Primaries - NBCNews.com - February 16th, 2017 [February 16th, 2017]
- 'Liberals will continue to lose': Bill Maher defends Milo Yiannopoulos booking after panelist boycotts - Washington Post - February 16th, 2017 [February 16th, 2017]
- Whatever happened to liberal Democrats, anyway? - Chicago Tribune - Chicago Tribune - February 16th, 2017 [February 16th, 2017]
- Sportswriting Has Become a Liberal Profession Here's How It Happened - The Ringer (blog) - February 16th, 2017 [February 16th, 2017]
- If the Church of England continues to smother liberal Anglicans, it is heading for a split - Telegraph.co.uk - February 16th, 2017 [February 16th, 2017]
- Major liberal group opposes Gorsuch confirmation - USA TODAY - February 16th, 2017 [February 16th, 2017]
- The True Origins of the Phrase 'Bleeding-Heart Liberal' - Atlas Obscura - February 17th, 2017 [February 17th, 2017]
- Liberals, Tories spar over Islamophobia motion in full-day debate - The Globe and Mail - February 17th, 2017 [February 17th, 2017]
- Where Have All the Liberal Democrats Gone? - Townhall - February 17th, 2017 [February 17th, 2017]
- Vicious attacks on Ivanka Trump exposes liberal hypocrisy - The Hill (blog) - February 17th, 2017 [February 17th, 2017]
- Can Emmanuel Macron win? Why France is ripe for a liberal resurgence - New Statesman - February 17th, 2017 [February 17th, 2017]
- Victorian Liberals: factional fight exposes deep divisions - The Age - February 17th, 2017 [February 17th, 2017]
- 10 Unfortunate Liberal Myths Conservatives Often Believe - Observer - February 17th, 2017 [February 17th, 2017]
- Terri Lovell: Liberal oppression - Santa Clarita Valley Signal - February 17th, 2017 [February 17th, 2017]
- Where's the liberal outrage over civil liberties in the Flynn case? - Minneapolis Star Tribune - February 18th, 2017 [February 18th, 2017]
- Liberal, conservative Jews in US increasingly divided over Trump - Chicago Tribune - February 18th, 2017 [February 18th, 2017]
- Anti-Islamophobia debate might define both Liberals and Conservatives - CBC.ca - February 18th, 2017 [February 18th, 2017]