 Thanks for joining. We're delighted to welcome back to the IIEA, Mark Wolf, chief economics commentator at the Financial Times, who today will discuss the topic of his forthcoming book, The Crisis of Democratic Capitalism. Martin needs a little introduction, so let me be brief. He's been writing for the AFT since 1987. He's written numerous books and received numerous awards. I suspect that many of the hundreds of people who signed up to today's presentation share my view that there is no columnist in any newspaper anywhere in the world whose analysis has been as valued as Martin's over the years. A few quick details before the talk. Martin will speak for about 20 minutes or so, and then we will move to a Q&A with the audience. Both the talk and the Q&A are on the record. You'll be able to join the discussion using the Q&A function on Zoom, which you should see on your screen. Please feel free to send your questions in throughout the session as they occur to you adding your name and affiliation. Please also feel free to join the discussion on Twitter using the handle at IIEA. So with that, Martin, thanks again for joining us. We look forward to your talk. So thank you very much. It's a great pleasure to be with you again if only virtually, which at least has the advantage that the traveling is less of a burden. So I'm going to try, and I probably will fail to summarize my overall view of where we are with our democratic capitalist system, what I think of as the core operating system, systems of the modern west, and I use the west very broadly. As you can imagine, clearly includes countries like Japan and South Korea and many others. What has gone wrong? And it seems to me pretty clear something has. I'm going to try and stick to 20 minutes, so it will be really very cursory. And for the full details, you will probably have to read the book, but we can go into some of it in the Q&A. I was thinking it's useful when one is talking to explain what one's going to talk about. So I'm going to divide my conversation into three parts, where we are now. Second, why are things going wrong? And what is to be done? Third, so let me start with the beginning. Liberal democracy, which is defined as democracy, a law-governed democratic system which protects individual civic and personal rights and has fair elections with a suffrage, which is universal or near universal among all adults, did not exist two centuries ago anywhere. And one can argue that it really didn't exist anywhere until the end of the 19th century. New Zealand was the first country to give men and women equal political rights. But broadly, we can say that something more and more democratic emerged in the 19th century. This became increasingly common form of government in the 20th century with fits and starts. And by about 2005, roughly 60% of the world's 200 countries had plausibly democratic systems, though very, very imperfect ones. Since 2005, 2006, there has come what Larry Diamond, a very famous scholar, a very authoritative scholar of this, working at Stanford and the Hoover Institute, calls a democratic recession with the rise of populist autocracy across emerging economies. The backsliding, quite obvious in former countries, the countries that used to be part of the Soviet Union and its wider empire, particularly in Eastern Europe, and worst of all, a clear erosion of trust in democratic norms in core Western countries, including European countries, but particularly the US. And in my book, I provide lots of evidence from the World Value Survey of a progressive devaluing of democratic norms among our citizens and particularly disturbingly younger citizens. 2016 finally was a sort of anus, a sort of anus horribilis with the election of Donald Trump, who was pretty clearly not very interested in what we would call liberal democracy and has made it even clearer since then, how little interested he has in its fundamental norms. And of course, there was the Brexit referendum, which in some ways one can think of as democratic. But the history of referenda, alas, is very clear that they are so often used as a tool of tyranny and tend to exacerbate profound conflicts among citizenry. Because essentially of the disintermediation of the central intermediating institution of modern democracy, which are parliaments, and these weren't created by accident, they perform a very valuable function in forcing the sort of discussion, negotiation and permanent compromise necessary for democratic stability. And of course, this has got much worse in my view, particularly in the US, we can discuss later where we are in the UK, and with the US in what was in my judgment and certainly not only mine, and attempted coup by the president, the then president, who insisted long before the election even happened that it was going to be stolen, continued to insist that it was stolen, fomented a riot designed to overturn the results, which didn't happen. But then some certainly got essentially all of his party to agree that the electoral system was so profoundly tainted and corrupted that essentially it had to be modified to make sure that Republicans won. And I think that's where we are now. So why has this happened? Well, to answer that question, we need to I think go back to first principles or at least both first principles and history. And perhaps the most obvious point is that a liberal democracy, a system in which people genuinely respect the rights of others, respect the legitimacy of opposition, insist on fair elections and accept the results of those elections willingly and happily in the knowledge that their opposition is or are also legitimate members of the political community. This is a very, very fragile structure. Indeed, sort of the first great book of political theory in Western history, Plato's Republic, describes in great and unfortunately, rather sobering detail how demagogues are able to manipulate what was then, of course, a mass democracy with voting by all citizens, but still the basic principle apply, how a demagogue can easily manipulate the passions of the people to persuade them to make him a dictator. And of course, that has happened many, many times since and it's happening today. One can think of plenty of examples today of people who have turned or are turning democratic systems into dictatorships by essentially eroding all the norms and institutions that make a democracy possible. Then let us look so that that's the fragility point. We should always be aware of this. The second point is how did our universal suffrage democracies emerge? And the interesting thing about this is that they emerged out of market economies and particularly they emerged out of the rather brutal market economies of the Industrial Revolution. As I said, in 1800, there were no democracies and of anything that we would regard as democracies, even in the U.S., the franchise was so fantastically restricted as essentially to be a pure oligarchy. Why did the Industrial Revolution generate this massive impulse towards democracy, towards the insistence that all citizens or at least an increasingly wide proportion and ultimately all adults should be citizens, full citizens? I think there are a number of reasons for this. One was prosperity. As people became richer, they moved beyond just trying to survive day to day to demanding more sense of value from society in themselves. Partly because of the social conflicts, mass industrialization engendered and particularly the emergence of the industrial labor force and the unionization of the industrial labor force. Partly because of the need to educate the population, became central for the economy and also increasingly for the polity and of course educated people demanded more of a say. But I think even more fundamentally, part of the market economy is the end of the old tradition of ascribed status of a society in which your position economically was ascribed, essentially by the position you were born into. And of course, the industrial market economy ended all that and made it impossible to sustain that. And once you've got rid of ascribed status in the economic system, it's really hard to maintain it in the political system in my view. So what emerged then is a strange sort of marriage, what I call the marriage of complementary opposites between a democratic political system and a market economic system with of course mixed economy but essentially a market driven economy. And as I suggested historically and in certain crucial respects also ideologically, they're mutually supportive. But they also of course have quite obviously and that's why I say they're complementary opposites. They need each other but they are profoundly different in crucial respects. First of all, and these are very important, democracy rests on a core egalitarian idea, everybody has one vote. The say of people should in principle be the same, I stress in principle, but of course capitalism doesn't pretend to generate egalitarian outcomes, though it gives a promise not so much the reality of some degree of equality of opportunity. And of course democracy is rooted in a national community, it's inherently local and exclusive. It is for the citizenry who are defined body of people in law. While capitalism, if it's given a chance and Marx himself has some wonderful things to say about this, is global. I mean if you allow capitalism to go, it will go abroad. It always has done, sometimes it's dragged armies with it and created empires, sometimes it hasn't, but it isn't naturally purely national. And that creates part of these things that I've just said are part of the profound tensions between a democratic system and a capitalist system. And so the tensions can be absolutely destructive if we have too much democracy and demagogic politics of the most irresponsible kind, we tend to generate a failing economy. But if you get unbridled capitalism, you're likely to emerge with an immensely wealthy plutocracy, which essentially controls the political system through its money and influence. You get a clientelist sort of political system and that's also not a democracy. And so they are functioning liberal democratic capitalist system depends on getting the balance between these various elements right. And in particular, I've come to the view, and this echoes a very famous remark of Aristotle's, if you allow the middle class to be eroded too greatly. And the polity increasingly becomes one with a large mass of relatively poor, relatively poor and embittered people on the one hand, and a small number of immensely wealthy and powerful people on the other, the democratic system is very unlikely to survive. That's, I think, that's what Aristotle thought. And I think the experience of Latin America over many, many decades, or indeed centuries, strongly underlines this. And you then get these cycles of demagogy, autocracy and plutocracy I've mentioned. Now, I never thought any of that analysis was likely to be relevant to Western countries, Western European countries, America or Britain. But it seems to me that that is indeed what has happened. In the analysis of what's gone wrong, a lot of emphasis has understandably been put on the cultural war symbolism of social conflict. And I have no doubt that the cultural war symbolism is to a degree real. But I also think that in very important ways, it's not so much superficial as the consequences of the loss of the sense that people have of being part of the same community, which has come from profound economic transformations, some of which we had no control over, like the massive deindustrialization and with it, the associated transformation of the position of labor in our societies. But some of them were clearly choices, choices. And another thing was more broadly the impact of technology, which clearly generated very big shifts in demand for skilled labor as against less skilled labor. So for a long period, these things had an important effect. But I also argue in my book that we've allowed the emergence many of our economies of a form of rentier capitalism, diminished competition, financialization of our economies, which has exacerbated greatly the trends towards inequality. And that has meant that very large proportions of our population over long periods have really not enjoyed rising standards of living. And that's been dramatically true in the US. And it's been very true in the UK now for quite a long time. Then in that context, along came the financial crisis. And we now have a lot of evidence, a lot of political science evidence, that big financial crises are immensely politically destabilizing. We saw it in the 1930s. And we've seen it again on a lesser scale, because it was much better managed in our economies in the last 15 years since the financial crisis. Because one, there are shops that everybody can see. And two, because it is so obvious that the people in charge, particularly some of the wealthiest and most powerful people in charge, didn't know what they were doing. And they were rescued. And this is, of course, immensely embittering for the population. And I think it's pretty easy to see why a figure like Donald Trump should have emerged as the Republican candidate after that, although it took a little while for that to happen. And the danger of all this is that we get trapped too in a Latin American cycle of instability with autocratic demagogues emerging and destabilizing our political systems. And we are seeing this pretty clearly in some significant countries in the West, not just in emerging and developing countries. So finally, my last three or four minutes, what is to be done about these trends, which I suggest are very deep. It's much easier to define, I think, what needs to be done than to explain how we get there. Broadly speaking, we need to go back to what was understood in the middle of the 20th century, and I think has been perfectly obvious reasons to some degree forgotten. We need a form of democratic capitalism, which delivers both what are seen to be competent and responsive governments, democratically accountable governments, but also widely shared prosperity. And I stress both the prosperity and the widely shared. And this will require, I think, changes in policy and politics, but changes that are really going to be very, very difficult to achieve, which is why at the moment I'm somewhat pessimistic, at least in some places, about how easy it will be to rectify the problems we so obviously see. In economics, my sort of idea is we have to provide basic security to everybody. We have to work very hard on, much harder than we have been, I'm thinking, particularly in the US and UK, on equality of opportunity, where there's lots of evidence that rising inequality has tended to make a quality of opportunity weaker to diminish it. We need to be able to sustain steady growth of productivity, of output per head. It's not possible, I think, to sustain democracy without a sense of prosperity, but I don't think the zero growth economy is really politically feasible from this point of view. And we are clearly going to, when I talk about security, an crucial part of this, we're going to have look at things like the gig economy, the precarious, to some call it, and think about how we can make jobs more secure and make people feel that they can actually plan their lives. These economic policy changes are going to be very difficult to do, particularly in an environment in which basically in most countries, the possibilities for significantly rising tax revenues are very limited and we are going to have to continue to trade with one another because for most of our economies, the possible exception of the US, but even there it's true, prosperity depends so much on maintaining international commerce again, maintaining international commerce. And politics, we all, we need to look very carefully at how we fund politics. I think that's a crucial element. We need to look at the role of social media and whether some characters of social media can be managed and attenuated. I like the idea of citizens' juries to examine important controversial issues, as I think you did in Ireland with abortion. I think that's a very important contributor to potential success, bringing people together. And the final thing I would say is all this has to be done while we have international cooperation because we face these huge global challenges above all climate change. And we have to do this in the context, partly because of the things I've talked about, of a cumulative breakdown in relations between the Western world and China, which represents, if you like, a polar opposite version of capitalism, what I call bureaucratic, autocratic capitalism. So this is a very brief overview of the way I think about where we are and where we've got to. And I think the challenges are here right now. And in some cases, really quite daunting and frightening. I should probably have been aware of how real these dangers were long ago, but I became really worried about six, seven years ago. But I think we have to recognize that our system of governance is under enormous challenge. And we have to respond to that challenge if liberal democracy and market capitalism are continued to function well, individually and collectively together, that is to say. And that's what I have to say. Thank you.