Can We Fix Capitalism?

A migrant domestic worker from the Philippines, Hong Kong, 2015
Bruno Barbey/Magnum Photos
A migrant domestic worker from the Philippines, Hong Kong, 2015

For enthusiasts of capitalism, democracy and the market are said to be handmaidens. Both depend on the rule of law. Both express aspects of liberty, prizing opportunity and mobility. During the era of classical liberalism, which began in the late eighteenth century, free commerce and political freedom advanced in tandem. Monarchies gave way to republican rule; open markets replaced royal monopolies and inherited privileges. For about a century the franchise gradually expanded, and markets became the primary mode of commerce. The brand of democratic capitalism that emerged in the West after World War II included not just those earlier hallmarks but such liberal values as tolerance, compromise, and enlarged civic participation, as well as regulatory and social welfare policies to buffer the less savory tendencies of markets. Modern capitalism reflected a grand social bargain.

When communism collapsed in 1989, the fall of the Berlin Wall was heralded as ushering in a golden age in which liberal capitalism would be triumphant. Needless to say, things haven’t worked out quite as expected. The social compromises of the postwar welfare state have given way to more primitive forms of capitalism that in turn invite angry reactions by the citizenry. Demagogues have channeled this anger. Today, some form of capitalism is ascendant nearly everywhere. But liberal democracy is in big trouble.

Instead of creating a new golden age, corrupted capitalism has produced alliances between autocrats and oligarchs, epitomized by the regimes of Putin and Trump, who both reinforce societies that were already becoming less liberal and more unequal. This is the pattern not just in countries with weak or nonexistent democratic traditions, notably Russia and China, but in the very heartland of liberal democracy, the United States of America. Contrary to standard assumptions about liberalism, autocratic capitalism also coexists and interacts with enlarged global trade, making it harder to defend living standards in democratic nations that once protected their workers and citizens by regulating markets.

In a cycle of reactivity, ordinary people turn not to social democracy—now at its weakest point since World War II—but to the vicarious and counterfeit satisfactions of extreme nationalism. That in turn permits autocrats to pose as populist champions of a mystical People, diverting attention from the economy’s concentrated wealth and rigged rules. This unexpected twist in the fraught relationship between democracy and capitalism is the signal event in the political economy of our age.

In Capitalism, Alone, the economist Branko Milanovic tries to make sense of what has occurred and what the future holds. The book is erudite, illuminating, and sometimes exasperating. Capitalism has prevailed, he writes: “One system will come to rule the entire globe.” But what kind of capitalism? His story is divided into two parts. The first contrasts meritocratic…


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