The ‘Crisis of Democratic Capitalism’

“Democratic capitalism” is in crisis, warns Martin Wolf, chief economics commentator at the Financial Times, in his new book. Such is the severity of this crisis its very survival is in question. Wolf confirms early on that his oxymoronic “democratic capitalism” is shorthand for “free-market capitalism” in which “markets, competition, private economic initiative, and private property” are central. With the economy secured from genuine democratic control by these economic ‘capitalist first principles’, the “democracy” Wolf fears for is the existing parliamentary and presidential systems in Europe and North America, which Wolf calls “liberal democracy”, based on “universal suffrage” and “representative democracy”.

Wolf’s alarm for the future of “democratic capitalism” is significant. He is a far-sighted representative of the ruling capitalist classes, described as “staggeringly well-connected within the elite circles” for whom the FT is written. Wolf has been a leading figure in the World Economic Forum in Davos for nearly a quarter century and has boasted that “I don’t know if there’s any significant central banker I don’t know”.  In Democratic Capitalism, he explores a whole number of vital questions about the future of world capitalism and it is not possible to deal with all of them in a review article. Ultimately, he is grappling with what the CWI has referred to as “the convergent multiple crises” of the system, and, in particular, reflecting on the decline of US imperialism and the certainties its world dominance, especially after the collapse of the Soviet Union in 1991, gave to the capitalist classes of the major imperialist powers in Europe and North America.

Crisis of Confidence

The 2007/08 world economic crisis profoundly shook the confidence of the capitalist classes in the West. Nearly fifteen years later, for many, Wolf included, shaken confidence has mutated into a far more profound crisis of confidence. He laments his complacency post-2007/08. Referencing his 2014 book dealing with the crisis, “I was wrong”, he apocalyptically tells us, “the fire is not next time; it is now. Moreover, COVID and the impact of Russia’s war on Ukraine has made it burn even hotter.” Wolf has written Democratic Capitalism in acknowledgement of the deepening alarm across the capitalist classes for the future of their system and to provide answers to them on the way forward.

The FT’s own laudatory review of Democratic Capitalism went so far as to promise that it would not be “too much of a stretch to see Martin Wolf … as a modern Marx.” It is true that Wolf is familiar with Marxism and, up to a point, influenced by it. At Oxford University Wolf studied under Marxist economist, Andrew Glyn, a supporter of Militant, forerunner of the Socialist Party (the CWI in England & Wales). Wolf recognised his debt to Glyn by speaking at his funeral. This influence creeps into Democratic Capitalism, with Wolf, for example, reproducing a long quote from the Communist Manifesto, which he describes as “one of the most important documents of the nineteenth century”, commenting that Marx and Engels “described the emerging capitalist economy brilliantly”. However, while willing to borrow at times from Marx’s ideas, Wolf rejects his revolutionary conclusions and a conscious anti-revolutionary thread runs through Democratic Capitalism. This reflects that for Wolf the problem of reforming capitalism to avoid the threat of revolution is very much alive, as it always is for serious representatives of the capitalist class.

Central to the capitalist classes’ crisis of confidence has been the rise of Donald Trump from 2016 and the strengthening of right-wing populism in a whole number of countries, fuelling political instability in what Wolf had considered, until now, the “consolidated democracies”. Within the opening pages of Democratic Capitalism, Wolf is railing at Trump for having “no ideological attachments to liberal democracy or free-market capitalism.” For Wolf the rise of Trump was seminal and confirmed that the capitalist classes face a crisis of political representation. It is becoming harder and harder, across the advanced capitalist countries, for them to find stable political parties capable of forming governments to rule in their interests.

The rise of China, whose rulers have, he points out, “rejected the link between capitalism and democracy”, is the international background to Wolf’s “crisis of democratic capitalism”. “The ascent of China” has, he correctly says, “shaken the confidence of the West and confidence in the West”. Wolf compares the situation today to the ‘golden age’ enjoyed by “democratic capitalism” from the 1990s. In just five years, between 1989 and 1994, according to the Polity IV database, which he cites, the number of capitalist democracies increased from 48 to 76. This was largely due to the creation of newly independent states as the Soviet Union broke up, and, in Eastern Europe and parts of Africa and Asia, the ending of one-party dictatorships that had looked toward it as a model. Thereafter, according to Wolf, capitalist democracy’s advance continued, but slowed, reaching 97 countries by 2016. This period, at least up to the 2008 crisis, was the era of capitalist globalisation dominated by US imperialism. With the collapse of the Soviet Union, and the discrediting of its bureaucratically planned economy under one-party totalitarian rule, US “democratic capitalism” stood, briefly, as an unrivalled economic and political model.

Wolf believes that a global “democratic recession” has now set in. Whilst the number of autocracies is not increasing as it did in previous eras of capitalist crisis, such as the 1920s and 1930s, there are more leaders of capitalist countries, who, like Trump, do not feel the need to profess a commitment to US-style “liberal democracy”. Wolf, correctly, names Russia’s Vladimir Putin, Hungary’s Victor Orban, Poland’s Jaroslaw Kaczynski, Brazil’s Jair Bolsonaro and India’s Narendra Modi as examples. Turkey’s Recep Tayyip Erdoğan could also be added to the list. Wolf also observes that the number of what Polity IV terms “anochracies”, i.e. ‘failed states’ of the sort that have proliferated across the Middle East and North Africa, is rising – from 21 in 1984 to 49 in 2016.

Wolf exaggerates the 1990s ‘golden age’ of “democratic capitalism”. In a number of countries “capitalist democracy” was short-lived. In many more the formal adoption of multi-party elections, universal suffrage and greater democratic freedoms did not transform them overnight. Especially in the neo-colonial world political repression remained significant despite their formal introduction. Nevertheless, Wolf’s “democratic recession” describes something real. It is one important reflection of the decline of US imperialism which is no longer the unrivalled model on the world stage and is no longer able to play the same role in underdeveloped neo-colonial states of propping-up governments to contain centrifugal social forces – often by the most anti-democratic methods.

System Undermined

Wolf recognises that his “crisis of democratic capitalism” is “in substantial part the ignition of the slow-burning anger left by the last financial and economic crisis [in 2008], coming, as that did, after a long period of mediocre performance…”. The stagnation of capitalism has meant stagnant and falling incomes for the working and middle class across advanced capitalist countries. Wolf gives useful figures showing that between 2005 and 2014, 65-70% of households in “high-income countries” had “flat or falling real incomes”. In the UK the figure was 70%, in the US 81%, and in Italy a staggering 97%. He also gives figures to show the devastating impact of the 2007/08 World Economic Crisis on growth in GDP per head. By 2018, taking the 1990-2007 trend as the starting point, a trend which Wolf describes as “feeble” to begin with, people in France were 13% poorer than they otherwise would have been, in the US people were 17% poorer, in the UK and Italy 22% and in Spain 24%. Only Germany kept pace with the previous period. The Covid-19 pandemic has now accelerated the shortfall to 32% in Spain and the UK, 28% in Italy and 21% in the US. Alongside this, inequality has exploded and the very top of society has enjoyed a phenomenal accumulation of wealth.

Wolf continues, “People expect the economy to deliver reasonable levels of prosperity and opportunity to themselves and their children. When it does not, relative to those expectations, they become frustrated and resentful. That is what has happened. Many people in high-income countries condemn the global capitalism of the past three or four decades for these disappointing outcomes. Instead of delivering prosperity and steady progress, it has generated soaring inequality, dead-end jobs, and macroeconomic instability.” To this could be added deepening polarisation between the classes. Wolf concludes that “The legitimacy of any system always depends on performance. In the end, people will cease to trust a system that does not work for them.”

Wolf links this basically correct point to the strengthening of right-wing populism. However, he does so in a one-sided way. He glosses over the fact that in the years immediately following the 2008 economic crisis left movements, with elements of populism, were also strengthened. In a number of countries the left advanced further than today’s right-wing populists have yet achieved – for example, Corbynism in the UK and the Syrizia party in Greece. Disappointments in the failures of left-wing populism and ‘soft’ left reformism have now, in a number of countries, reinforced the vacuum of working-class political representation. The weakness of the workers’ movement and the absence of mass working-class parties is the decisive factor in creating the political space for right-wing populism to exploit the anger of working-class and middle-class people.


Wolf recognises that the survival of “democratic capitalism” hinges on reigniting stagnant economies to broadly raise living standards. For this, Wolf says, “We need a radical and courageous reform of the capitalist economy”. He calls for a “New” New Deal offering a “rising, widely shared and sustainable standard of living”. His summary of possible policy changes on welfare spending, unemployment benefits, pensions, student debt etc., not only remain firmly within the framework of capitalism, as is to be expected, but do not go beyond the current limited debates, especially those in the US and UK, and even then, Wolf fails to advocate specific policies. Minimum wages should be raised, but not so high they fuel unemployment. A universal basic income is a bad idea, he believes, but a universal job guarantee is a good one, though he does not propose how it could be implemented. Wolf wants changes to corporate incentives and executive pay and to curb corporate influence on politics. But his only specific proposal is to make the cost of independent corporate audits part of the listing fee on stock markets. Wolf wants more competition but does not say how this might be engendered beyond a general call for governments to “invest”.

Everything Wolf puts forward to reigniting economic growth and underpin his “New” New Deal is some version of Keynesian ‘demand management’. Further, there is not a single new idea. Wolf runs through a list of possibilities that have been the staple of debates in the capitalist media for years: redistribution of incomes to those “who will spend rather than save”, negative savings rates, so-called “helicopter money” transfers, a 100% tax credit for fixed investment, running-up government deficits through “some combination of tax cuts and higher spending” etc.

Having laid out the possibilities, Wolf asks, “So, which of all these alternatives, or what combination, makes sense? The answer is that any of them might do so. They are also all risky.” At this point, it is easy to imagine a collective face-palm from capitalist policy makers at this non-answer. Perhaps Wolf did imagine it when he defensively says, “There exist a host of proposals for dramatic actions, many of which seem to suggest we can find magic wands able to deliver an upsurge in sustainable prosperity. This is unlikely.” He then admits “sadly, we understand only a little about economic growth.”

Wolf’s proposals are a timid Goldilocks pic ‘n’ mix – not too little of this, nor not too much of that; maybe this, or maybe that. They completely fail to live up to his call for “radical and courageous reform of the capitalist economy”. He tries to justify this in his references to the anti-Marxist ideas of Karl Popper, the mid-twentieth-century philosopher, who, like Wolf, championed “liberal democracy” while claiming that Marxism inevitably led to totalitarianism. Wolf’s own “approach to reform”, he tells us, “is that of “piecemeal social engineering”, as recommended by Popper, “not the revolutionary overreach that has so often brought calamity”. Here Wolf tries to reassure the ruling class by making a virtue of necessity. It is also an attempt to lower their expectations, sweetening this bitter pill with an anti-revolutionary flourish.

Capitalism & Democracy

Wolf insists that the capitalist class is the foremost defender and champion of “democracy”. This requires ignoring the existence of capitalist dictatorships and semi-dictatorships across the neo-colonial world, many of which are supported by Wolf’s ‘democratic capitalists’. It also requires ignoring what is happening in many “consolidated democracies”. President Macron in France, for example, used anti-democratic presidential powers to push pension reforms through parliament regardless of majority opposition. In the UK, new ID requirements for voting have been introduced which will make it harder for many to vote and new anti-strike laws have been proposed.

The struggle for democratic rights and the greatest possible democracy under capitalism has always been central to the class struggle. It has been at the heart of recent revolutions and mass movements in the neo-colonial world, for example in Chile, Sudan, Myanmar, Iran and Eswatini. In this era, democratic questions can and will play a central role, even in the “consolidated democracies” of Europe and North America, as they have in previous periods, such as the civil rights movement in the US in the 1960s. The strikers in France, fighting the attack on pensions, found themselves forced to take up democratic questions in order to respond to Macron.

A regime of “universal suffrage” and “representative democracy” poses a constant dilemma for the infinitesimally small capitalist class: how to prevent the working class from using its crushing numerical majority to challenge its ownership and control of the economy. The capitalist class can never form a government with their own handful of votes. Indeed, they do not generally form governments staffed from their own ranks at all. Bankers are busy running banks, industries, factories etc. Capitalists have little interest in governing directly. They know, with exceptions here and there, like Trump, that they cannot be the ‘face’ of the system. The capitalists must find a social base within the middle class and sections of the working class, on whose votes they can rely, and from which a reliable cadre of pro-capitalist politicians can be elevated.

When the capitalists succeed in this, Lenin described capitalist democracy as “the best possible political shell for capitalism, and, therefore, once capital has gained possession of this very best shell, it establishes its power so securely, so firmly, that no change of persons, institutions or parties in the bourgeois-democratic republic can shake it.” Capitalist democracy, in ‘normal times’, Lenin explains, “stealthily shoves aside the poor and is therefore hypocritical and false…”. Wolf unintentionally confirms this point when he describes how “Wealth is also a source of power. Shareholder control over companies gives direct economic power. Wealth exercises influence via philanthropy, ownership of media, and so forth. But wealth also has a powerful direct influence over politics, by funding parties, supporting candidates, buying political advertising, promoting political causes, and paying for lobbying. Thus, high levels of wealth inequality will … corrode a democratic polity.”

Wolf may feign alarm at how capitalism has come to undermine “democracy”. But this has always been the case. Lenin actually anticipated the standard blind spot of capitalist ‘democrats’, saying that the “restrictions, exclusions, exceptions, obstacles for the poor” to participate in capitalist democracy “seem petty, especially in the eyes of anyone who has never known want himself and never been in close contact with the oppressed classes…” This sums-up Wolf’s general attitude.

Marxists would more precisely call “liberal democracy”, bourgeois, or capitalist, democracy, to indicate its contradictory character. In answer to the anti-democratic manoeuvres of the capitalist class and its political representatives, the working class must utilise to the full every democratic space it has prised open within capitalism, defend historic gains whilst pointing to their limits and demanding these be extended, and call out the hypocrisy of the capitalist class as they resist. The social weight of the working class, whilst felt by the capitalist class as an anti-democratic pressure on them, is simultaneously the greatest check on the rolling back of historic democratic conquests.

But during periods of prolonged economic crisis, the precarious equilibrium between the classes that capitalist democracy requires to function in ‘normal’ times is disrupted. Trotsky explained that “the rate of a [capitalist] democracy’s development and its stability is in inverse ratio to the tension of class contradictions.” The cumulative effect of the economic crisis of the past fifteen years, and before, has been to ratchet up class tensions across Wolf’s “consolidated democracies”. This is the material foundation of the ruling class’s crisis of political representation. It is the rupture between the capitalist class and the middle class in particular, in the context of a vacuum of working-class political representation, which has strengthened right-wing populism with destabilising consequences for the capitalist class’s control of society. This is what has moved Wolf to alarm, not a belated realisation of the anti-democratic character of capitalism.


Throughout his book, Wolf shows a high level of (capitalist) class consciousness on the role of “liberal democracy”. However he might try and prettify it, Wolf is conscious that it is capitalist democracy that he wants to strengthen, and, in reality, embraces the idea that “democratic capitalism” should “stealthily shove aside the poor” from politics. He actually gives space to the consideration of the outlandish proposals of the “philosopher” Jason Brennan of Georgetown University to restrict the franchise to the “better informed”. Although Wolf ultimately dismisses Brennan’s ideas, he resurrects their spirit in his own anti-democratic proposal for appointed “houses of merit” composed of “people of exceptional achievement” who would be given the power to “improve and delay” legislation. These would be akin to the UK’s House of Lords, which Wolf explicitly approves of (albeit not its “current system of appointment” he reassures). “There can be great value”, Wolf tells us, “in unelected senates, properly constructed and run.” Extending the same principle to the US, rather than any proposals to remove the completely undemocratic Electoral College, Wolf would prefer “informed insiders to have a big role in choosing candidates for the presidency.”

Wolf is explicit that the real business of governing capitalist society should be the preserve of its elite. “If the needed reforms [to “democratic capitalism”] are to happen”, he tells us, “elites must play a central role. A complex society without elites is inconceivable.” Twice we are told that “safeguarding the fragile achievements of democratic capitalism” is “the responsibility of elites”. By “elites” Wolf seems to mean privileged middle-class layers whose social position derives from the inequalities of capitalism, thus giving them a stake in its preservation. For example, Wolf’s “houses of merit” should, he says, be composed of “people with exceptional achievement in a wide range of civic activities – the law, national and local politics, public service, business, trade unions, media, academia, education, social work, the arts, literature, sports and so forth.” This is hardly a roll-call of working-class occupations. Taken all together, Wolf’s approach is a stunning confirmation of the hypocrisy of bourgeois democracy. Despite pages of fluff about “restoring citizenship”, “education in civic values”, and “inclusive patriotism” Wolf’s concern is to reconstruct a social base for the capitalist class and carefully reinforce the barriers to genuine democratic control over society.

It was Trotsky, in the context of the 1930s, who warned that “The uncontrollable deterioration in the living conditions of the workers makes it less and less possible for the bourgeoisie to grant the masses the right of participation in political life, even within the limited framework of bourgeois parliamentarism.” Wolf appears to be contemplating how far that needs to be pushed today, given the crisis of capitalism and the limited prospects for improving the living conditions of the masses. For now, he is looking in the direction of what could most generously be described as a technocracy. Albeit one that keeps the slaves well-fed and content, something which is not possible on the basis of capitalism. But how fundamentally different is this to the political regime in China, which Wolf condemns, where the ruling elite of the so-called ‘Communist’ Party decides on behalf of the masses what is in their best interests?

This is a warning to the working class about the direction in which even liberals, like Wolf, can move as capitalism’s crisis grinds on. It would be no great leap from Wolf’s conception of “liberal democracy” to giving support to anti-democratic, even Bonapartist, measures in the name of the ‘greater good of society’, in reality, capitalism. Bonapartism is a phenomenon, described by Marx, in which, in periods of sharp class tension, the capitalist state becomes elevated, allowing it to play a relatively independent role, balancing between the different classes, and factions of classes, locked in struggle. A Bonapartist state need not act exclusively against the working class, as it is not just the tension between classes that intensifies in periods of economic crisis. It is also the tensions within classes too – between the different layers, groups and factions of which they are composed. Bonapartist measures can be used against different wings of the capitalist class too. Wolf, for example, clearly believes that the “rentier capitalists”, i.e. the finance wing of the capitalist class, need to be reined-in.

A product of the strengthening of right-wing populism has been the weakening influence of the capitalist classes over the executives and legislatures of governments in a number of countries. This has required extraordinary interventions from outside. In the US, for example, a section of the ruling class wants Trump permanently removed from the political field and has used the Espionage Act against him. In the UK, the short-lived right-wing Truss government, following its ‘mini-budget’, was made unworkable by a ‘no confidence’ campaign within the ruling class. This included, for example, using the Bank of England, the IMF and US President Biden, to ratchet up the pressure on Truss, first to change course and then to resign. However, the vacuum of working-class political representation is crucial in shaping the calculations of how the ruling class responds to right-wing populism. When faced with a choice, it would rather, at this stage, lean on the right against the left, as, for example, the British ruling class did in its support of Boris Johnson in the 2019 election as the only means to defeat Jeremy Corbyn.


Wolf engages in some ideological soul-searching in Democratic Capitalism. He actually begins the book by returning to Francis Fukuyama’s ‘end of history’ – the idea that the collapse of the Soviet Union in 1991 confirmed liberal democracy as the end point of human ideological evolution. Wolf is not the first capitalist ideologue to return to this. Stephen D. King, HSBC’s senior economic advisor, for example, even referred to “the return of history” in the title of his 2017 book covering much the same ground as Democratic Capitalism (see here).

That they return to Fukuyama after nearly thirty-five years confirms what an ideological anchor ‘the end of history’ formed for the capitalist classes. It was a source of self-belief and confidence that allowed an exploiting minority to project the idea that it ruled in the best interests of humanity. Events have smashed that. So why do they keep returning to it? It is because they have nothing new to replace it with. That is why Democratic Capitalism falls so flat. There is no material basis for confidence amongst the capitalist class today. Wolf is like an ageing cynic who revisits the haunts of his youth in a doomed effort to recapture the optimism of earlier times.

It will be no surprise that in re-tracing Fukuyama’s intellectual steps in Democratic Capitalism Wolf arrives at the same ideologically pre-destined conclusion – “democratic capitalism” is still the best possible economic and political system. But in place of Fukuyama’s triumphalism, Wolf is pragmatic, even apologetic, paraphrasing arch-imperialist Winston Churchill to say, “Just as market capitalism is the least bad economic system, so is liberal democracy the least bad political system”.

Democratic Capitalism is ultimately a failure on its own terms. Wolf is trapped by the contradictions of capitalism and has shown no way to overcome them. He does not provide the answers, nor the reassurance to the ruling classes that he set out to. Wolf’s book serves rather as a measure of their disorientation in this era of capitalist crisis and a warning of how they can be prepared to curtail democratic rights, and more, to preserve their rule. It is the social weight of the working class that is the decisive obstacle to the rolling back of previous democratic gains and the decisive social force capable of arresting right-wing populism’s growth. To fully harness this requires organisation, however, adding further urgency to the struggle to build new working-class parties that fight for socialism and genuine democratic control of society.

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July 2023