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The Ungovernable Economy

Trevor Jackson, interviewed by Irza Waraich

This article is part of a regular series of conversations with the Review’s contributors; read past ones here and sign up for our e-mail newsletter to get them delivered to your inbox each week.

“Capitalism is predicated on atomized individuals, democracy on shared publics,” writes Trevor Jackson in the Review’s January 16 issue. Reviewing Martin Wolf’s The Crisis of Democratic Capitalism, Jackson examines capitalist democracies past and present to find where the economic system of capitalism and the political system of democracy have aligned and where they have diverged. He is particularly interested in the history of policies designed to revitalize economies and nations after an economic crisis and charts the way these policies have privatized gains and socialized losses. But Jackson also insists that these events—both the crises and the state’s responses—must be understood as historically contingent, lest “expressions of ruthless class interest are reframed as basic truths.” Without considering the contemporaneous debates about class and conditions of economic inequality, he argues, we won’t understand how crisis continues to be the order of the day.

Jackson is an economic historian and teaches history and political economy at UC Berkeley. Though his research focuses on early modern Europe, he has taught courses on capitalism and inequality, the history of economic crises, and the history of economic thought. A regular contributor to the Review, Jackson has written about cryptocurrency, student debt, and economic bubbles. He is the author of Impunity and Capitalism, and his writing has also appeared in Dissent, The Baffler, and The Nation.

I recently spoke with Jackson about his research interests in early modern Europe, the evolving relationship between capitalism and democracy, and different interpretations of historical analogy.


Irza Waraich: What initially drew you to research the economic history of early modern Europe? 

Trevor Jackson: It was in part interest and in part accident. Accident in the sense that I once thought I’d become a development economist, and so I did a degree in what was known as the “political economy of late development” at the London School of Economics. There’s not a lot of undergraduate teaching in economic history, so this was the first time I encountered that material, and I found it fascinating.

Early modern Europe is one of the great focal points of economic history research. That’s where we tend to think capitalism, the industrial revolution, and the modern economy originated. The era has attracted a great deal of attention from economic historians over the years, and so it turned out to be an ideal place to learn the tools, techniques, ideas, concepts, and arguments of economic history writ large.

What specific parallels do you see between early modern capitalism and today?

One of the first things that comes to mind is in the eighteenth century, when the institutions of what today we would call financial capitalism were created. There was a great deal of anxiety among contemporaneous observers that the ability to create fortunes based on movable, intangible capital would allow the owners of those fortunes to remove themselves from communities of obligation. They would no longer be bound by the laws and customs of the nations where they resided or were citizens, because they could always leave and take their capital with them. That was perceived as a corrosive threat to the social order. 

That conflict in turn became part of what I would call a crisis of political legitimacy for the old regime in Europe, which had governed the economy and society for centuries and which was, by the eighteenth century, facing mass upheaval and public critique. That conflict seems to me to be similar to our own moment: when I look at the world around us, I perceive a gigantic crisis of political legitimacy.

In your review, you write that Wolf argues that “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, as he acknowledges, these institutions are in crisis all around the world. How might globalization be reimagined to prioritize both global economic equality and democratic stability?  

We can see that the globalization we got beginning in the 1990s has a few specific characteristics: it hinged on privatization, as well as the liberalization of capital accounts or trade policies—and essentially everything the International Monetary Fund calls “macroeconomic stability,” meaning balanced budgets and low rates of inflation. Those policies have been very good for the free flow of capital and for the creation of a truly gigantic global financial sector. They have been less good for middle- to lower-income people in rich countries, and they have not delivered high rates of economic growth. 

Economists who pushed these policies were very willing to recognize, as they say, that there are “winners” and “losers.” Even now, many of them are willing to admit that the winners have been far more concentrated and the losers have been far more numerous than they had anticipated. The degree of the loss—of jobs, of security, of social prestige—and the particular political interpretation of its causes—blaming immigrants, say—have turned out to be much more corrosive to democratic culture than these economists had anticipated. 

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Essentially, the globalization that we’ve seen has been a project of class domination, and it was very successful. We could think creatively about other forms of global economic integration that come with built-in redistributive mechanisms to compensate what we might crudely call the losers of market integration. But what a project of global integration that is driven by a different class imperative might look like is a little unclear, in part because the postwar decades of rapid economic growth and relatively equal income distributions in the West were predicated on capital controls, which were a feature of the Bretton Woods monetary system that made it difficult to move capital rapidly across international borders. That meant owners of capital were stuck with whatever democratic political compromises were made domestically, the classic example being the very high taxes of the 1950s and 1960s. 

This worked because you could tax owners of capital, and it was very hard for them to leave with their capital. That meant they had an incentive to reinvest profits and expand production at home to keep unemployment low. With low unemployment labor is relatively powerful, and this creates a kind of shared community of obligation subject to the same democratic accountability. That just isn’t viable anymore. Without those capital controls, it’s possible for capital to absent itself from a community of obligation. So how do you return to those capital controls? What kind of global economic integration could you have if capital isn’t mobile? These are very difficult political questions. But I’m not sure that integration is the thing to prioritize over, say, democratic accountability or equity. 

Wolf refers to economics and politics as “symbiotic twins” and links capitalism with democracy, while also acknowledging the tension between them. What, exactly, does he aim to accomplish with this theoretical coupling? 

I don’t want to read his mind too much, but there are several elements to this concept. One is that I think he wants to say that there is a necessary, maybe even causal, connection between democracy and capitalism. Now that is a very classic, usually politically somewhat right-wing claim that we can see throughout the twentieth century. Milton Friedman makes many claims of this sort, that the causal direction originates in capitalism, then to democracy, which is to say that the individual freedoms of capitalism are necessary for democracy to exist. 

Now that’s a set of claims that I’m very skeptical of. However, the strongest version of Wolf’s argument would be the question, “Can we think of democracies that are also not capitalisms?” My thinking is that there’s not just one thing that is capitalism and one thing that is democracy, but rather each of those words refers to a whole set of institutional practices that can exist in different forms at different levels of complexity based on different scales of social organization.

Democracy might be a political arrangement in which more than periodically there are free and fair elections; it might be a whole set of political cultures about deliberative decision-making and the consent of the governed, the participation of the people and how they are ruled. All of the things that constitute a process (rather than a kind of event) might be what we want from a democracy. Capitalism, in turn, takes a wide variety of forms, ranging from the kind of ruthless free-market capitalism of the United States to a more constrained 1950s and 1960s Scandinavian social democracy, to a more violent eighteenth-century (and earlier) form. I am skeptical that we see any kind of reliable, necessary connection between these two concepts. 

I can think of lots of cases of capitalisms that are not at all democratic, which is exactly the problem that Wolf is trying to solve. So if those formations exist, we can see that in lots of cases, democracy is in fact extremely limited. Think of the property requirements that conditioned suffrage in the nineteenth century—not to mention the exclusion of women, the exclusion of Black people, the continuing exclusion of immigrants—or how democracy coexisted with slavery in the nineteenth-century United States. I am just not sure that there is any such thing as a necessary, ideal version of these modes of social organization. I think they are always contested processes that can be changed, can be put in tension with one another, can be mutually supportive or contradictory.

In your 2024 essay for the Review on the history of economic crises, such as the many “panics” in the nineteenth-century US, you argue that the lessons derived from these events are often shaped in complicated ways by politics. How can scholarly discussions about these crises more effectively address the biases of economic history? 

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That is a challenging question. My instinct is to say that more history is always preferable to less, and that a wider set of examples of historical analogy is better than a narrower set. In this I’m influenced by the great economic historian Barry Eichengreen, who has an excellent book called Hall of Mirrors, where he compares the Great Depression to the financial crisis of 2008. One point he makes is that when we reason by historical analogy, we risk fooling ourselves into only seeing what we think is the same about the past, rather than recognizing what’s different about our current moment. We might draw a relatively limited set of analogies that might be erroneous. Maybe the Great Depression was the wrong analogy for 2008. Maybe we should have thought of the panic of 1907. But not many people know about the panic of 1907, and it’s not in anyone’s mind as the archetypal precedent.

Thinking about history less as a set of lessons to be applied and more as a creative process, or a way to denaturalize the world around us and think with a very wide horizon about the potential set of changes that could take place, this opens up a radical, expansive sense of possibility. We realize that the future is actually far less bounded than we tend to believe.

You’ve expressed skepticism and uncertainty about the Trump administration, particularly in its relationships with billionaires. How might his ties to billionaires and their interests shape the near future of economic policymaking? 

I think we should never believe historians when they predict the future. But there’s a great deal of concern and uncertainty about what is going to happen, particularly around democracy. Capitalism seems much less under threat. It is important to think about the future of democracy by focusing on the billionaires. This is by far the richest administration ever assembled, with the most billionaires on the transition team, in the Cabinet, and so on. It’s striking how unhinged this project of class rule is. On the one hand, it’s very easy to be alarmist and to say, well, look, we had more than a decade of open political contestation after the 2008 crisis in which the range of possible political outcomes was up for grabs. We saw a great proliferation of protest movements, different types of politics, and it’s now coalesced around an open, ruthless project of class despotism. And that’s quite terrifying. 

But on the other hand, it’s also true that in his first term Trump largely failed to achieve most of his objectives, up to and including overthrowing the 2020 election. The only thing he did successfully was cut taxes for billionaires. It’s easy to imagine there will be another tax cut for them now. There’s another part of me that’s willing to think there will be some destruction and some petty grifting as these billionaires use their control of public power to drive money to themselves. That is also terrifying because for a very long while we’ve had no meaningful legislation addressing climate change, inequality, and any of the pressing issues of our time. It’s now been decades of dithering, and I don’t know if we have more time. 

In my more pessimistic moments, I sometimes think this is the response to climate change, this is what the responses to the diminished expectations of economic growth are going to look like: a ruthless, zero-sum struggle for the control of a shrinking pie. The billionaires have far greater resources, far better coordination, and a far better sense of their class interest than anybody else. We have fooled ourselves into thinking that the response to climate change and inequality was in some way going to be a socially egalitarian and democratically decided one, rather than a struggle for control, power, and resources.

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