[Salon] ‘Never Too Much’: The Crisis of Democratic Capitalism Guest Post by Trevor Jackson

‘Never Too Much’ Trevor Jackson https://www.nybooks.com/articles/2025/01/16/never-too-much-the-crisis-of-democratic-capitalism-wolf/?printpage=true January 16, 2025 issue If globalization has allowed elites to remove themselves from democratic accountability and regulation, is there any path toward a just economy? Reviewed: The Crisis of Democratic Capitalism by Martin Wolf Penguin Press, 474 pp., $30.00 Illustration by Matt Dorfman Something has gone terribly wrong. In his 2004 book Why Globalization Works, the economics journalist Martin Wolf wrote that “liberal democracy is the only political and economic system capable of generating sustained prosperity and political stability.” He was articulating the elite consensus of the time, a belief that liberal democratic capitalism was not only a coherent form of social organization but in fact the best one, as demonstrated by the West’s victory in the cold war. He went on to argue that critics who “complain that markets encourage immorality and have socially immoral consequences, not least gross inequality,” were “largely mistaken,” and he concluded that a market economy was the only means for “giving individual human beings the opportunity to seek what they desire in life.” Wolf wrote those words midway through a four-decade global expansion of markets. Throughout the 1980s in Britain, the United States, and France, governments led by Margaret Thatcher, Ronald Reagan, and François Mitterrand set about privatizing public assets and services, cutting welfare state provisions, and deregulating markets. At the same time, a set of ten policies known as the “Washington Consensus” (because they were shared by the International Monetary Fund, the World Bank, and the US Treasury) brought privatization, liberalization, and globalization to Latin America following a series of sovereign debt crises. In the 1990s a similar set of policies, then known as “shock therapy,” suddenly converted the formerly Communist economies of Eastern Europe and the Soviet Union to free markets. Around the Global South, and especially in the rapidly industrializing countries of East Asia after the 1997 financial crisis, “structural adjustment” policies that were conditions for IMF bailouts again brought liberalization, privatization, and fiscal discipline. The same policies were enforced on the European periphery after 2009, in Portugal, Ireland, Italy, Greece, and Spain, again, either as conditions for bailouts or through EU fiscal restrictions and restrictive European Central Bank policy. Today there are far more markets in far more aspects of human life than ever before. But the sustained prosperity and political stability that these policies were meant to create have proved elusive. The global economy since the 1980s has been riven by repeated financial crises. Latin America endured a “lost decade” of economic growth. The 1990s in Russia were worse than the Great Depression had been in Germany and the United States. The austerity and high-interest-rate policies after the 1997 East Asia crisis restored financial stability but at the cost of domestic recessions, and contributed to political instability and the repudiation of incumbent parties in Indonesia, the Philippines, and South Korea, as they did again across Europe after 2009–2010. Global economic growth rates in the era of globalization have been about half what they were in the less globalized postwar decades. Around the world, violent racist demagogues keep winning elections, and although they all seem very happy with the idea of private property, they are openly hostile to the rule of law, political liberalism, individual freedom, and other ostensible preconditions and cultural accompaniments to market economies. Both democracy and globalization seem to be in retreat in practice as well as in ideological popularity. Or, as Wolf writes in his new book, The Crisis of Democratic Capitalism: Our economy has destabilized our politics and vice versa. We are no longer able to combine the operations of the market economy with stable liberal democracy. A big part of the reason for this is that the economy is not delivering the security and widely shared prosperity expected by large parts of our societies. One symptom of this disappointment is a widespread loss of confidence in elites. What happened? Martin Wolf is probably the most influential economics commentator in the English-speaking world. He has been chief editorial writer for the Financial Times since 1987 and their lead economics analyst since 1996. Before that he trained in economics at Oxford and worked at the World Bank starting in 1971, including three years as senior economist and a year spent working on the first World Development Report in 1978. This is his fifth book since moving to the Financial Times. The blurbs and acknowledgments are stuffed with central bankers, financiers, Nobel laureates, and celebrity academics. The bibliography contains ninety-six references to the author himself. Wolf’s diagnosis is impossible to dispute: “Neither politics nor the economy will function without a substantial degree of honesty, trustworthiness, self-restraint, truthfulness, and loyalty to shared political, legal, and other institutions.” But, he observes, those values have run into crisis all over the world, and, especially since about 2008, people feel even more than before that the country is not being governed for them, but for a narrow segment of well-connected insiders who reap most of the gains and, when things go wrong, are not just shielded from loss but impose massive costs on everybody else. He describes in detail the mistaken policies of austerity in the US and Europe, the rise of a wasteful and extractive financial sector, the atomization and immiseration of formerly unionized workers, the pervasiveness of tax avoidance and evasion, and the general accumulation of decades of elite failure. Most people have accurately realized “that 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.” And thus his conclusion: “Without ethical elites, democracy becomes a demagogic spectacle hiding a plutocratic reality. That also is its death.” Forty years of the corruption of our plutocratic elites has now led to what he views as an alarming populist reaction. Voters, especially young ones in the core democratic capitalist countries, have lost faith in the power of markets and liberalism. Serious international rivals have also emerged, in the forms of “demagogic authoritarian capitalism” in places like Turkey and Russia, and “bureaucratic authoritarian capitalism” in China, and Wolf views these systems, unlike earlier systemic rivals like communism, as serious threats. Liberal democratic capitalism is in danger both from within and without. It’s a grim picture, and one that nearly any reader of any political persuasion can agree with. But for Wolf, these epochal global crises do not require radical change. The motto of the book (as he puts it) is “Never too much,” and he maintains that “reform is not revolution, but its opposite.” He is consistently contemptuous of any sort of structural change, quick to invoke despotism as the inevitable outcome of utopian thinking and to cite Edmund Burke on the inhumanity and impossibility of rebuilding society around first principles. Instead, he prefers “piecemeal social engineering,” an idea that he adopts from the unconventional libertarian philosopher Karl Popper, and that he takes to mean “change targeted at remedying specific ills.” His targeted solutions for the specific ills that constitute the global crisis of democratic capitalism run from the anodyne to the surreal. Examples of the former include the idea that “public sector cash-flow accounts should be complemented with worked-out public sector balance sheets and accrual accounts,” or the need for corporations to have “excellent accounting standards” and diligent, independent auditors. Both are very reasonable proposals, and perhaps, at the margin, they really would erode the grip of plutocracy. Others are standard repressive-technocrat fare. He rejects free higher education because too many people would go to college, imposing too high a fiscal burden on governments, and he doubts whether taxpayers should have to guarantee tertiary education as a universal right. He thinks there should be “controls on immigration that recognize the potential economic gains while also being politically acceptable and effective.” He thinks that defined-benefit retirement plans should be replaced by large-scale defined-contribution plans run by trustees who “would be allowed to adjust pensions in light of investment performance.” It is difficult to imagine many people democratically choosing a system in which unelected trustees could cut their pensions when the stock market does poorly, and there are good reasons to think that education is advantageous to both capitalism and democracy. Some of his other ideas are at least as utopian as a campaign speech by Bernie Sanders or Jeremy Corbyn. Take this one, intended to address the problem of tax havens: “If, for example, the US told its tech companies that the price of locating profits in countries with low corporation tax would be that they could no longer operate in the US market, this nonsense would stop overnight.” Or consider his idea (adapted from his colleague Raghuram Rajan) that countries that emit more carbon than the global average should pay into a shared incentive fund that would be redistributed through cash transfers to countries in the Global South. Or the idea that executive compensation is likely to be “reconsidered” anytime soon, or that moderation and expertise will persuade employers to “treat their employees with dignity and respect.” He thinks it is essential that miners in the Democratic Republic of the Congo should share in the benefits of cobalt they mine, and be treated with care and respect by mining companies and elites alike, and he thinks there is a reformist way to achieve that. We might agree on the desirability of all these things, but it is hard to imagine the political process that ends with the American government credibly telling Google or Apple that they can no longer operate in the US market. What is the moderate, piecemeal path that leads to child slaves in the DRC being treated with dignity and respect? How do we get from here to a world where the US government pays into a global climate change fund that sends cash to sub-Saharan Africa? Sure enough, the chapter that follows Wolf’s economic reform proposals is about politics, and the reader might well expect a practical, workable theory of political change, including some mechanism to explain who will do his piecemeal social engineering, and how. Wolf does not have one. He has a few equally unlikely ideas for political reform: maybe younger adults should have more votes than older ones, or, in a surprising convergence with the sweaty imagination of J.D. Vance, parents should get votes for their children, so that elections will better take the future into account. He likes the idea of an “appointed house of merit,” made up of “people of exceptional achievement” in the arts, business, sports, and various other pursuits, because “there can be great value in unelected senates, properly constructed and run. A second elected house seems far less useful.” The reader is left to speculate on the moderate process for abolishing the United States Senate and replacing it with an unelected body of superior individuals. At the very least, it is an unlikely plan for saving democracy from plutocrats. This most disappointing moment of the book is also its most chilling, because what Wolf does instead of explaining a plausible theory of political change is spend eight pages describing and rebutting various criticisms of democracy itself, beginning with the notion that voters are tribalist, ignorant, and unaware of their own interests. This tells us something about who he believes his audience to be. Unlike other books about the sorry state of the world, most of which end with a chapter that attempts to think about how to obtain or access political power in order to effect economic change, Wolf’s assumes that his readers already have power, and that they need to be convinced that there is anything worthwhile about having democracy. The best he can do is the old Churchillian cliché: Democracy is the worst system, except for all the others. Churchill said that in a 1947 parliamentary debate against Labour’s proposed reform of the House of Lords. That was also the year of Indian independence—something Churchill spent decades opposing, claiming that democracy was impossible “East of Suez.” Wolf’s true goal is moral exhortation. He has absolutely no interest in removing the current elites or replacing them with others, and certainly not in trying to create a society without elites, or with elites whose powers to do harm are systematically curtailed. Instead he hopes to encourage our profligate elites to more virtuous behavior. He would prefer that they follow the rule of law instead of exercising contempt toward regular people. He would like them to exhibit “a substantial degree of honesty, trustworthiness, self-restraint, truthfulness, and loyalty to shared political, legal, and other institutions.” He wants, in short, to awaken the conscience of the global bourgeoisie and to produce a virtuous class consciousness that will render it capable of solving the problems it has created for itself. He fears that it is unconsciously generating its own gravediggers, in the twin forms of resentful populist demagogues and a more efficient Chinese state capitalism. It’s easy to agree with Wolf about what has gone wrong, but when did it happen? When did our decision-makers and opinion formers lose their moral bearings? Virtuous elites have long proved difficult to manufacture. The first attempt that comes to mind is that of Petrarch, who in the fourteenth century believed that the corrupt and unjust world around him was the result of a moral decline in Christendom. Specifically, he thought the medieval law schools of Bologna and Padua were teaching the worldly natural sciences and Aristotelian dogma instead of morality, so he argued for a new form of education, the studia humanitatis, or what we now call the humanities. The subsequent long arc of elite moral education, from Renaissance humanism to Enlightenment public virtue, generated the kind of Burkean elites whom Wolf seems to miss. He calls 1870 the “dawn of the age of democratic capitalism,” an age of suffrage and good governance that came about because “market capitalism demanded a more egalitarian politics.” Those claims would no doubt come as a surprise to the disenfranchised women and unpropertied men of the late nineteenth century, let alone the millions of subjects in Britain’s colonial empire. The elites of the British Empire, universal holders of robust humanities education, presided over wars, famine, extractive colonial economies, and occasionally outright genocide. They may have had a shared loyalty to political and legal institutions, but those institutions were violent, unequal, and exploitative. Wolf does not mention those things, but even his story of “professional government” consciously creating (since the 1870s) global markets in land and labor and developing systems of commercial competition and monetized economies hardly sounds like an example of piecemeal, targeted social change. The people who lived through the rise of democratic capitalism experienced it as a revolution, not moderate social reform. For Wolf’s historical account to work, a set of property-owning elites who spent centuries producing liberalism, democracy, and free markets had to collectively lose their moral compasses sometime in the past two decades. The deeper possibility, unthinkable to Wolf, is that free-market capitalism and liberal democracy may have nothing to do with each other—or may even contradict each other. Wolf calls economics and politics “symbiotic twins,” which shows a poor grasp of both symbiosis and zygosity; he goes on to describe capitalism and democracy—specific versions of economics and politics—as inhabiting a “difficult marriage.” But they proceed from entirely different premises. Democracy is predicated on formal, substantive equality: one person, one vote. Capitalism is not, and is incompatible with substantive equality, because it is composed of workers and owners, success and failure, rich and poor. Capitalism is about self-interest and private gain; democracy is about public interest and civic responsibility. Capitalism’s moral justifications revolve around deservedness, efficiency, and individual risk-taking, none of which are important justifications for democracy. Capitalism is predicated on atomized individuals, democracy on shared publics. Even the idea of freedom, which Wolf takes as essential to both, is radically different in each case. Private property, which is at the core of capitalism, is fundamentally opposed to unfettered freedom, because property involves the ability to exclude all other human beings from some part of the world. I am not free to live in your house, or even perhaps to walk across your land. I am not free to eat your dinner, even if I am starving and you intend to throw it away—even if I cooked it. Hence the basic insight of Amartya Sen and Jean Drèze that famines can take place without anyone’s property rights being violated. Freedom in capitalist markets entails the freedom of property owners to use and dispose of their property, including the freedom of business owners to run their businesses as little dictatorships, not as representative polities. You do not elect your boss, let alone vote on your wages or working hours. The political scientists Corey Robin and Alex Gourevitch have argued that workplaces are fundamentally places of unfreedom—many workers do not even have enough individual liberty to decide when to go to the bathroom without their bosses’ permission. The notion that capitalism and democracy are mutually harmonious is a relic of cold war ideology. Contrary to Wolf’s belief, nineteenth-century capitalism did not widely overlap with democracy: the British Empire and the United States were not places with egalitarian universal suffrage. Proponents of market liberalism from John Locke onward worried constantly that universal suffrage would simply mean poor people voting to expropriate the property of the wealthy. Little wonder that nineteenth-century opponents of capitalism referred to themselves as “social democrats.” They understood socialism as a project for expanding democracy beyond the artificially curtailed political sphere to the social and the economic. The enthusiasm with which the United States overthrew democratically elected leaders with even moderately socialist leanings in places like Guatemala, Iran, and Chile in the cold war era also seems to suggest that free markets were quite compatible with political dictatorship well into the recent past. The marketization and globalization of the world since the 1970s is often referred to as the era of neoliberalism. The word “neoliberalism” appears once in Wolf’s book, to refer to how “freer markets” are described by their opponents. Scholars like Quinn Slobodian, Dara Orenstein, Amy Offner, Sam Wetherell, and Laleh Khalili have detailed at length the ways that neoliberal economic policies have worked to insulate property ownership from democratic politics in the postcolonial age. They have shown the reliance of globalized production on a variety of economic zones with laws, regulations, and systems of accountability different from those of their host polities and separated from democratic accountability. They have also followed the enthusiasm that free-market fundamentalists like Friedrich Hayek and Milton Friedman had for apartheid South Africa, colonial Hong Kong, Singapore, and other places that had little relationship to democracy or individual freedom. If capitalism and democracy are not fundamentally dependent on each other, then there is no crisis “of” them as a coherent system. The capitalism part seems to be doing just fine. The problem is the threat that unfettered capitalism poses to democracy, and specifically, the inability of the ideology of political liberalism to contain that threat. As the political theorist Brian Judge argues in his superb book Democracy in Default (2024), modern liberalism has constituted itself around a denial of the need for distributive conflicts. Instead of open conflict over resources and rewards (which is common to other forms of political ideology), liberalism puts its faith in things like education, technology, expertise, and, ultimately, market forces to indefinitely postpone those conflicts. As he puts it, “‘The market’ is a discursive construct operating within liberalism that reconciles the inherent tension between private property and universal consent.” For decades now, the ideology of free-market liberalism has obfuscated the ongoing distributive conflicts of the world, but it has not blunted the material suffering of the people on the losing end. Since the 2008 crisis, the reality of ruthless distributive conflict has become impossible to ignore, but the failure of market liberalism to reconcile political equality and economic inequality has produced a global crisis of legitimacy and a growing constituency amenable to antiliberal figures like Trump, Orbán, Modi, and Bolsonaro. In his inability or unwillingness to see these contradictions, Wolf cannot reason his way out of the exact set of ideologies and policies that produced the crisis in the first place. The substance of this book demands one kind of review, but it is not just any book on the predicaments of our moment. It was written by Martin Wolf, one of the most prominent advocates for the neoliberal transformation of the world. The book opens with the statement (drawn from his acceptance speech for a lifetime achievement award) that Wolf’s “opinions have altered as the world has unfolded.” Rereading Why Globalization Works in light of The Crisis of Democratic Capitalism does not reveal many alterations of opinion. Both books have a preface entitled “Why I Wrote This Book,” and both prefaces set the stage with the story of Wolf’s parents fleeing the Nazis, which led them to cherish democracy and individual liberty. Both books maintain that states and markets are necessary for each other, and specifically that liberal democracy and market globalization are symbiotic, albeit also in constant tension. Both rely on a sketchy historical narrative involving canonical figures like Aristotle, Plato, Hobbes, and Locke to back up the claim that private property is the fundamental condition for political liberty. Both books conceive of Wolf’s opponents as a broad antimarket constituency of ill-informed utopian dreamers who would immediately become icy Stalinists upon gaining power. Wolf has changed his mind on three main subjects: corporations, finance, and inequality. In 2004 he described critics of multinational corporate power as engaging in “a collective hysteria” and “a series of paranoid fantasies.” While he still thinks that “the ability and willingness of multinational companies to move their capital and know-how across frontiers” has on balance been a positive thing, he now concedes that it has been disadvantageous to workers. In 2004 he thought the purpose of corporations was to add value by using cheap resources (including people) otherwise outside of the global market economy. He now thinks that corporate liability needs to be strengthened and corporate political influence has gone too far, whereas in 2004 he argued that corporations had far less power than governments and that they merely represented one set of influencing forces among many. In 2004 he agreed that the frequency of financial crises in the preceding decade had imposed large costs and political setbacks on the project of globalization. But despite many blunders and painful experiences, he maintained that “emerging-market economies should ultimately plan to integrate into the global capital markets.” Today he notes that “the financial sector wastes both human and real resources. It is in large part a rent-extraction machine.” In 2004 he acknowledged that inequality had “apparently risen” in high-income countries, but thought that globalization’s contribution to this trend was unclear, and its main consequence had been poverty reduction. Today he notes that from 1993 to 2015 the top one percent captured over half of all increases in real pre-tax incomes, and he concedes that wealth is a source of power, through political influence, media ownership, philanthropy, and so on. There is a more striking contrast: in Why Globalization Works, he argued that most of the charges of the antimarket critics—whom he called, quoting the economist David Henderson, “new millennium collectivists” and who included people ranging from the British philosopher John Gray to the journalist Naomi Klein to the right-wing demagogue Pat Buchanan—were the result of too little rather than too much globalization. In The Crisis of Democratic Capitalism, he finds that the many problems of today’s rentier economy are “principally the outcome of failures of liberalization—above all, a failure to think through the institutional context for markets. The prevailing assumption was that the free pursuit of self-interest is enough on its own: it is not.” Wolf does not say that any of his earlier critics have been proved right by subsequent events. He was not wrong; “the prevailing assumption” was. In these moments, Wolf uses the distinctive elite construction that the journalist William Schneider named the “past exonerative.” It’s that unmistakable mix of passive voice and past tense that people with power use to say things like “mistakes were made” or that extrajudicial drone murders “have been authorized.” Wolf does this both when his side has done something horrible that he cannot admit and when the other side has done something undeniably good that he cannot acknowledge. Thus we find that “colonial empires disappeared,” “trade unions have greatly weakened,” and “the factories disappeared in the old industrial locations.” The revolutionary struggles for power that these phrases embody are thus rendered invisible. Wolf’s favored method of historical investigation is to begin with a reference to the ancient world free of any contextual background, followed by an ideological generalization about the nineteenth or twentieth century. Here’s one: The principal answer [to the crisis of democratic capitalism] is the hollowing out of the middle classes, identified by Aristotle almost twenty-five hundred years ago as the core constituency for a constitutional democracy. Or another, but in reverse order: The idea of the perfectly ecological human is quite as much a delusion as Trotsky’s communist superman. Just consider the mass extinctions that followed humanity’s first arrival in Eurasia and the Americas back in prehistoric times. These adventures in historical analogy and the frequent absence of any human agent serve to make Wolf’s highly ideological opinions appear to be timeless facts. Policies that might otherwise seem to be expressions of ruthless class interest are reframed as basic truths known or prevailing assumptions held by competent, reasonable people, who served to implement and safeguard them from dreamers and despots. But if they are reasonable truths, Wolf is left unable to explain how they have led to such unreasonable ends and empowered such unreasonable people. Our elites have not suddenly become morally abhorrent; the financial globalization that Wolf championed has allowed them to remove themselves from democratic accountability, state regulation, and communities of obligation. It has also decimated countervailing powers such as organized labor, working-class political parties, and capital controls. The market never was “permeated” by the values of duty, fairness, and decency: it was constrained by nonmarket forces. Wolf has spent his career arguing that reason and freedom demanded the removal of those constraints. And here we are. The epigraph to chapter 8 of The Crisis of Democratic Capitalism is Warren Buffett’s famous quote that “there’s class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning.” In the twenty years since the publication of Why Globalization Works, the rich have won their war on the working class, and as Polybius famously did not write about the Romans at Carthage, they have sown the fields with salt so that nothing can grow. Now their tribune wanders the desert they have made, and urges moderation. Trevor Jackson Trevor Jackson is an economic historian at the University of California, Berkeley. He is the author of Impunity and Capitalism: The Afterlives of European Financial Crises, 1690–1830. (January 2025)