Torben Iversen - Democracy and Prosperity: The Reinvention of Capitalism in a Turbulent Century

DEMOCRACY AND PROSPERITY

Democracy
and Prosperity

Reinventing
Capitalism through
a Turbulent Century

Torben Iversen and David Soskice

PRINCETON UNIVERSITY PRESS

PRINCETON AND OXFORD

Copyright 2019 by Princeton University Press

Published by Princeton University Press

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Jacket art: Joseph Stella (18771946), Old Brooklyn Bridge, c. 1941.

Oil on canvas. 193.67 173.35 cm. (76 68 in.) Museum of Fine Arts, Boston.

Gift of Susan Morse Hilles in memory of Paul Hellmuth, 1980.197

All Rights Reserved

Library of Congress Control Number: 2018949305

ISBN 978-0-691-18273-55

British Library Cataloging-in-Publication Data is available

Editorial: Eric Crahan and Pamela Weidman

Production Editorial: Leslie Grundfest

Jacket/Cover Design: Carmina Alvarez

Production: Erin Suydam

Publicity: Tayler Lord

Copyeditor: Emily Shelton

This book has been composed in Adobe Text Pro

Printed on acid-free paper.

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

CONTENTS

The Politics of the Knowledge Economy and the Rise
of Populism 216

TABLES AND FIGURES

PREFACE

This book started from our discussions of a paradox.

Yet despite its importance it has been curiously little discussed in the academic literature.

On the one hand, the last century of advanced capitalism in the developed world has been one of deep and conflictual instability: two world wars (as well as Vietnam and Korea), technological revolutions, massive social and economic transformation, the collapse of the white colonial empires, fascism, the rise and then fall of the communist bloc and the Cold War, and two great financial crises with subsequent extended deep recessions.

On the other hand, this same developed world of advanced capitalism in this same last century has been spectacularly successful in any remote historical comparison in massively raising living standards, in widely diffusing education, and in remaining highly egalitarian in comparison to states elsewhere. Equally it has been a century in which democracyestablished in all the then industrialized countries by the early 1920shas remained in place (leave aside the 193545 exceptions).

As we see it, the advanced capitalist democracies, for all their instability and social problems not least at present, have been remarkably resilient and effective over this whole period. What we want to understand in the book is what mechanisms have driven that resilience and effectiveness over this long century.

In seeking to understand this resilience we want to propose a theory of advanced capitalist democracy, covering its many different forms. Of course, we make much use of the large body of work on varieties of capitalism. But the goal of the book is to develop an overall framework theory of how advanced capitalism works in the different advanced democracies. With the theory we address the key question of resilience.

This is a central historical question. Moreover, if the mechanisms are understood, they may also shed light on the questions that trouble thoughtful observers today: the rise in inequality, the consequences of globalization, the financial crisis, the growth of populism, the meaning of Brexit and Trump, and so on.

Whatever the analysis of current problems, our understanding of the long term has become reasonably clear from our research over the last decade or so. Very broadly, democracy and advanced capitalism have been symbiotic in the advanced nation-states. Democracies positively reinforce advanced capitalism and well-functioning advanced capitalism reinforces democratic support. In our framework theory advanced capitalism is driven by the advanced democratic nation-state: democracy drives advanced capitalism. And in this process the autonomy of the advanced nation-state has increased even as globalization and mutual dependence have risen.

This is very far from any received view.

The great theorists of advanced capitalismamong them Marx, Schumpeter, Hayek, Polanyi, and Poulantzasall saw its relation to democracy as deeply problematic, although from very different political vantage points. The same is true of major contemporary commentators, notably leading Marxists including Streeck and Piketty, but also Buchanan, Tullock, and other public choice theorists, on the right of the political spectrum. More generally in the political economy and political science literatures, a very widespread assumption is that the interests of capital and labor are opposed. We have come to a different conclusion.

What, then, are the key elements of the symbiotic relationship? We see three: