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Martin Wolf is right. Capitalism is delivering rampant inequality, leading democracy to generate populist demagogues appealing to economically excluded voters. Wolf’s core argument is powerful and could have better been stated more succinctly. Instead, he has produced a very long book, with frequent repetition, strings of indigestible facts and unchallenged assertions. Journalists inevitably write with headlines, sound bites, and short sharp provocative assertions, but a book full of this style lacks deeper more nuanced development of the argument. Wolf spreads his attention extremely widely, and therefore too thinly. He repeats simplistic claims such as that the 1970’s OPEC-led stagflation ‘discredited Keynesian macroeconomics’ (p57, p120), when it did no such thing.
This becomes particularly evident in his summary dismissal of proposals such as basic income, which he calls a ‘delusion’ (p278). Stating that a UK basic income of £11,200 per adult would cost £580 billion or about 25% of GDP, and is therefore unaffordable and that ‘that is all there is to say about this idea’ (p283) is superficial and trivial. He equally dismisses his colleague Martin Sandbu’s more refined proposal. In static analysis, writers like Malcolm Torry and Stewart Lansley have shown that basic income schemes can be revenue neutral and achieve progressive redistribution. The further dynamic case that automation reduces labour income per unit of output, requiring increased non-labour income is equally ignored. Recent macroeconomic modelling by Cambridge Econometrics has demonstrated the stability of a basic income proposal funded by debt-free sovereign money. Nor does Wolf cover the inadequacies of targeted benefits whose means-testing is intrusive and humiliating, and whose withdrawal tapers lead to infamous unemployment and poverty traps, as well as low take-up rates.
Wolf calls for ‘new ideas’ (p218), and then summarily dismisses them. He does the same to Jason Hickel whose views, Wolf claims, will lead to tyranny (p222). He is scathing proposals for a happiness or well-being index to replace GDP but then uses the concept approvingly on the next page (p228-9). He admits that his analysis of immigration is ‘a crude analysis’, and yet he considers it sufficient to denounce the idea that the free movement of people is like free trade in goods and services as ‘nonsense’ (p263).
Wolf is a member of the elites he eschews. He is a Davos man and a Bilderberg member. His book’s credits and acknowledgements list the great and the good. He is very influential. His book will sell well and is already an Amazon best seller. It is therefore disappointing that he uses this power to dismiss others who have no such access, or right of reply. It contradicts a core part of his own message on the concentration of power (he proposes ‘ending special privileges for the few’, p289 which ‘threaten democracy, p290). It crushes the debate we so desperately need. It would be more consistent to his ideals for Wolf to arrange a symposium and invite contributions from those whose views he rejects.
Wolf points out that immense household debt has funded consumption (p99). Real incomes have stagnated or fallen (p102). He shares a view with his colleague Martin Sandbu that economic inequities have driven political disenchantment (chapter 4). He suggests that technological innovations enhancing productivity were one-offs, but he fails to explain why there is a constant stream of such one-offs (p123). He claims that restaurant waiters can’t be automated, ignoring the QR code ordering spreading quickly in the sector (p126). He acknowledges ‘the problem of structurally deficient demand’ (p145), and the ‘overhang of excess debt’ (p147), citing his friend Lawrence Summers (p240).
Wolf’s corrective proposals when they come are vague. For the economy, he proposes competition (although he regrets its impact on his own sector of the media, p298), education, technology, political engagement, and localism (p219)! He skates over the potential for direct money creation to fund government expenditure (p242) failing to note that it is already the de facto case when central banks buy huge swathes of government debt whilst being themselves government-owned, rendering a zero net debt position. He says we need ‘good jobs’ (p264) even though automation makes them much less available. Work, as Wolf says, ‘may cease to be a reliable source of satisfactory incomes for most people’ (p270). It’s only on page 301 that Wolf joins the urgent twin needs to ‘ensure everyone a decent income’, and curtail public debt. His answers are to prevent tax evasion (p305), and introduce a carbon tax, which is ‘a no brainer’ (p306), whilst a wealth tax ‘might be worthwhile’ (p307). ‘It’s reasonable to be of two minds on the tax deductibility of gifts’ (p309). A rejoinder to all this would be that a basic income proposal funded by direct monetary financing is the credible best solution, but Wolf allows neither.
His discussion of democratic change fails to lead to any resolution of the choices between first-past-the-post and PR, between referenda and representative democracy, but recommends the creation of various levels of citizen institutions, and a ban on anonymous comments and posts on social media! (p243). He recommends patriotism as the shared value of the national community (p373), but this begs the question of the values any country embraces. Better to embrace virtue itself.
Many of us will agree with the motivation of Wolf’s diagnostic and proposal but would prefer a more open-minded debate.
