“If we don’t grow up, and I don’t see much sign of it at the moment in either the West or in China, I think we are going to blow up the world. So in a way the book is a paean to praise democracy and capitalism, but it’s equally as much a plea for stepping back to say what we are fighting about isn’t important enough to blow up the world.
We have got to find a way of managing our societies internally and our relations with one other externally which creates a better and more decent world…I think it is naive to think that we can manage a traditional world of traditional international power relations among the current superpowers without risking complete destruction.”
Welcome to the Hale Report! My guest for our 42nd episode is Martin Wolf, senior economics commentator for the Financial Times and author of a new book with an intriguing title, The Crisis of Democratic Capitalism. It is a deeply thoughtful, erudite exploration of some ideas that might be troubling, such as whether the economic and political system we presently enjoy is sustainable. Or even worse, are we headed for destruction?
If this all sounds pessimistic, I believe that Martin Wolf is in fact an idealist. This weekend I hope you will enjoy listening to his highly relevant reflections on where we find ourselves today. We had a delightful conversation, including how as the child of refugees and a student of the classics, he first became interested in economics.
Just some of my questions:
You make an amazing statement: “I find myself doubting whether the US will still be a functioning democracy by the end of the decade.”
There are many elements of democracy: elections, participation, protection of civil rights, and the rule of law, as Larry Diamond has written. But isn’t there something else that has eroded? In the US at least, is the failure of the state to protect both jobs and property rights at the heart of populism? We have plenty of jobs now, but crime is an enormous issue.
You quote Dani Rodik’s Trilemma: Global economic integration, Sovereignty, and Democracy. Does China, which makes no pretense at being at a democracy have an advantage?
China has a planned economy, and Japan has an industrial policy yet is still a democracy. Do you think the US and the UK need to follow Japan’s example?
What ails Britain? Was Brexit a lethal blow? You recently wrote that the UK should emulate Singapore.
Instead of the end of capitalism and democracy, have we reached a new stage of development based on slower growth? In your book you quote another podcast guest of mine, Robert Gordon at Northwestern, who says that the easy productivity gains have already happened. At this stage is it impossible to expect more?
What is the role of demographics? Population growth is slowing, birthrates are declining, and in 2022 China actually had negative population growth. Has there ever been an example of economic growth during a period of population decline?
Is what we are experiencing a failure of ideas or are the causes more concrete? Malaise, or actual deterioration? Or a failure to communicate?
What do you see as the long-term impact of Covid on the world economy-and capitalism?
The US seems to be following the Chinese playbook on self-sufficiency and protecting local industries. Many of the new security initiatives such as CHIPS and IRA have a domestic content requirement, as President Biden outlined in his State of the Union address. Do you think this is a problem? Does protectionism harm democracy?
What is your general view about sanctions as an effective trade tool?
Why are international institutions so weak? Why is the WTO failing at adjudication between the two largest economies?
The “Common Framework” for EM debt: Will poor countries get caught in the crossfire between the US, China, and Russia?
You dedicate your book to your grandchildren. What will the 22nd century look like?
I am extremely grateful to Martin Wolf for joining me for this podcast, and my thanks as well to the people behind the scenes who make EconVue possible, Managing Editor Ying Zhan and our producer, Sam Fu.
February 2023 / Penguin Press
The Crisis of Democratic Capitalism
From the chief economics commentator of the Financial Times, a magnificent reckoning with how and why the marriage between democracy and capitalism is coming undone, and what can be done to reverse this terrifying dynamic.By Martin Wolf @ Financial Times (subscriber content)
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The Hale Report with Martin Wolf: Episode 42