And Acknowledgments

This paper has largely been about the free enterprise system and how it can be reformed to ensure the often unacknowledged prosperity that capitalism has helped to create can be sustained and extended. To conclude, however, I'd like to say something that some might think is tangential, subsidiary or even irrelevant but which significantly motivates why I’ve written this paper. The reform of capitalism is not just about economic competitiveness or social justice. It’s also about restoring the place of America and its freedom-loving allies in the world. If the Anglo-Saxon, European and Japanese brands of capitalism continue to exhibit relative decline at the expense, for example, of the Chinese form of state capitalism it won’t just be prosperity that will suffer. The extension of democracy, the rule of law and human rights depends upon the countries that most embody those principles being strong enough to inspire emulation from other still developing and emerging countries. Economic capability also underpins US power in international organisations, in bilateral diplomacy and in trade policy.

Adding up to a quarter of a century of decline three American presidencies in succession have to lesser or greater extents failed. Bill Clinton took a "holiday from history", dithering over the Balkans, Rwanda and the growth of al-Qaeda for example. Anti-Americanism reached new heights during the presidency of George W Bush. The mishandled Iraq war, accusations of torture and the Guantanamo Bay controversy hurt the United States’ standing in the world. Then came Barack Obama’s election and, for many – notably the Nobel Peace Prize committee, giddy hopes of a fresh start. The failed “reset” of relations with Russia leading to the civil war in Ukraine; the botched changes to a planned missile defence shield for Poland and the Czech Republic; the unpunished crossing of the red line use of chemical weapons by the Assad regime in Syria; the rise of ISIS in an abandoned Iraq; a controversial nuclear deal with Tehran; and the recent re-escalation of violence between Israelis and Palestinians have dashed hopes of something new.

The United States is an unhappy country at the end of the Obama years with fringe candidates like Donald Trump and Bernie Sanders reflecting the fact that two-thirds of Americans think their country is no longer heading in the right direction. The rest of the world also worries that America might be on the wrong track. The banking shocks of 2008 didn’t just hurt America’s economic standing but too many nations and people now wonder if America and the “American way” are the future. Few have been more explicit about this than the “illiberal” Hungarian prime minister Viktor Orbán (to use his own self-description). Speaking last year, Mr Orbán declared that “the most popular topic in thinking today is trying to understand how systems that are not Western, not liberal, not liberal democracies and perhaps not even democracies, can nevertheless make their nations successful.” “The stars,” he continued, “of the international analysts today are Singapore, China, India, Russia and Turkey.” His arguments are questionable. His lists of “stars” is very questionable – while Singapore still shines brightly the others are fading fast. But with so much dysfunctionality – even gridlock - on Capitol Hill, racial tension, after three disappointing presidencies over one quarter of a century, and with so much gloom from the American people it is at least understandable that Orbán – a man who kills pigs with his own hands and turns them into sausages – is increasingly willing to turn away from the American model and to get down and dirty with the likes of Russia, China and Saudi Arabia. Many in Latin America, Africa and Asia think the same as Budapest – reorientating their policies away from Washington and its worldview. Two years ago, in a moment of candour and perhaps foolishness, even Justin Trudeau, Canada’s new prime minister, identified China as the country he most admired. "There's a level of admiration I actually have for China,” he said, “their basic dictatorship is actually allowing them to turn their economy around on a dime."

We shouldn’t exaggerate America’s problems, of course. It remains the world’s richest and most innovative nation. It remains the nation described by the poet Emma Lazurus in The New Colossus. Her words are engraved on the lower pedestal of the Statue of Liberty:

“Give me your tired, your poor,

Your huddled masses yearning to breathe free,

The wretched refuse of your teeming shore.

Send these, the homeless, tempest-tossed, to me:

I lift my lamp beside the golden door.”

For all of capitalism’s troubles people are still yearning to live in the United States of America. More people are trying to leave Mexico for America than are trying to leave any other country in the world for any other. The flows from China, India and the Philippines to America are all enormous. People are also queuing up to get into Australia, Britain, Canada, Germany and, for example, New Zealand. For all of the many weaknesses in the western model of capitalism it is still a magnet for those seeking freedom, prosperity and security - for those yearning to breathe free. But millions are also migrating to the fast-growing Middle Eastern nations. Competition for talented migrants as well as for supremacy in modelling economic development and political governance is intense. History hasn’t ended. Liberal democracy hasn’t triumphed. Reforming our model of democratic capitalism so that it delivers prosperity for all matters and it matters in more ways than one.


As a columnist for The Times I'm always conscious of the danger that I rarely research a topic for more than a few days before the news agenda moves me on to the next, fresher topic. I’m grateful to the Legatum Institute and its financial supporters, therefore, for giving me the opportunity to pause and think at greater length about this great topic of the future of capitalism. I’ve been given complete freedom to explore the topic in my own way and have made some conclusions that some at Legatum will not endorse. At a time when activists on both the Right and the Left demand purity it has been a privilege to work for a think tank that has given me such space to think so freely. I’m especially grateful to Sian Hansen and Cristina Odone who recruited me to write this paper and to Harriet Maltby for her advice. Special mention should also go to Iain Martin and his team at the website, Zac Tate and Rachel Cunliffe. At CapX I’ve been able to road-test much of the thinking that has gone into this report. I should also thank the British Business Secretary, Sajid Javid MP; the former leader of the Liberal Democrat party, Lord Ashdown of Norton-sub-Hamdon; and the former Chief Rabbi of the United Hebrew Congregations of the Commonwealth, Lord Sacks for accepting my invitation to set out their own thinking about the future of "democratic capitalism" at three private seminars at the Legatum Institute’s London offices. Their contributions and the responses of other participants in those seminars inspired much of what I’ve written although, as always should be made clear, I take sole responsibility for the ideas and observations that follow.