by Torben Iversen and David Soskice

Book Cover: Democracy and Prosperity; Reinventing Capitalism through a Turbulent Century (2019)
Editions:Hardcover: $ 29.95
ISBN: 9780691182735
Pages: 360
ISBN: 9780691188874

It is a widespread view that democracy and the advanced nation-state are in crisis, weakened by globalization and undermined by global capitalism, in turn explaining rising inequality and mounting populism. Democracy and Prosperity, written by two of the world’s leading political economists, argues this view is wrong: advanced democracies are resilient, and their enduring historical relationship with capitalism has been mutually beneficial.

For all the chaos and upheaval over the past century — major wars, economic crises, massive social change, and technological revolutions — Torben Iversen and David Soskice show how democratic states continuously reinvent their economies through massive public investment in research and education, by imposing competitive product markets and cooperation in the workplace, and by securing macroeconomic discipline as the preconditions for innovation and the promotion of the advanced sectors of the economy. Critically, this investment has generated vast numbers of well-paying jobs for the middle classes and their children, focusing the aims of aspirational families, and in turn providing electoral support for parties. Gains at the top have also been shared with the middle (though not the bottom) through a large welfare state.

Contrary to the prevailing wisdom on globalization, advanced capitalism is neither footloose nor unconstrained, so Democracy and Prosperity argues: it thrives under democracy precisely because it cannot subvert it. Populism, inequality, and poverty are indeed great scourges of our time, but these are failures of democracy and must be solved by democracy.

Reviews:Martin Wolf on Financial Times wrote:

"democracy and the advanced market economy are symbiotic. This combination has, they argue in Democracy and Prosperity, proved astonishingly successful over the past century and, in all probability, will continue to be so. Their thought-provoking thesis has three core elements. First, the state is central. [...] It has not been the market against the state, as many believe, but the market with the state. [...] Second, in an advanced economy, the educated and the aspirational are a large and highly politically engaged element in the population. Such people will tend to vote for parties and people they consider economically competent. Finally, the skills on which advanced businesses (and so advanced economies) depend are embedded in networks of people who live in specific locations. Companies are, as a result, quite immobile. Only the less skilled parts of their operations are footloose. [...] Democracy then is stable, so long as governing parties are able to satisfy the bulk of the middle classes. The latter will insist they gain a good share of rising prosperity. That is, however, quite consistent with persistent indifference to the fate of the relatively poor. This analytical framework illuminates five puzzles, the authors argue: the so-called 'middle-income trap'; the coexistence of integrated economies with durable differences among them; the marriage of democracy with advanced modern capitalism; the existence of distinct paths to democracy; and the contemporary rise of populism. [....] This analysis deepens understanding of what a successful modern economy is and how it relates to democracy. But it also raises three big questions. The first is whether the advanced countries are able to bind their populations together. [...] The second question is whether artificial intelligence might destroy the economic advantages of today’s localised networks of skilled human beings. [...] The third question is whether the people at the top of the income distribution might pull away decisively from everybody else."

Edward Hadas on Reuters wrote:

"The authors, Torben Iversen and David Soskice, do much more than rebut the idea that state and market are always in opposition. The politics professors at Harvard University and the London School of Economics also dismiss the conventional wisdom that there is an inherent conflict between capital and labour. And that is not all. In just over 250 pages, they explain that the political strength of multinational corporations is often exaggerated, provide a stylised history of almost two centuries of political conflicts in about two dozen advanced economies, explain how the development of electronics has changed both the economy and the political balance, and discuss the appeal and limits of populism. There is no question about the book’s ambition. However, its intellectual framework is disappointingly modest. The authors assume that economic considerations are the sometimes hidden foundation of absolutely everything in politics. What they call the 'material basis' of society lies behind the desire for freedom, peace, national greatness, justice and a quiet life. [...] This reductive approach hampers the book. However, three of its central claims are basically persuasive. First, democratic governments and competitive markets really do get along. [...] Second, democracy can be expected to evolve along with the economy. [...] Finally, globalisation does not doom national politics. [...] Democracy and Prosperity tries to do too much with too weak intellectual tools. The overreach can easily obscure the book’s significant accomplishment."

Lecture by Soskice

David Soskice delivered a Max Weber Lecture titled "Advanced Capitalism, Advanced Democracies and National Autonomy: Symbiotic Most of the Time" inspired by this book:

Relevant Links

Table of Contents of Democracy and Prosperity

  1. Introduction
  2. Two Paths to Democracy
  3. The Rise and Fall of Fordism
  4. Knowledge Economies and Their Political Construction
  5. The Politics of the Knowledge Economy and the Rise of Populism
  6. Conclusion: The Future of Advanced Capitalist Democracies

About Torben Iversen and David Soskice

Torben IversenTorben Iversen is the Harold Hitchings Burbank Professor of Political Economy at Harvard University. His books include Women, Work, and Politics and Capitalism, Democracy, and Welfare.

David SoskiceDavid Soskice is School Professor and Professor of Political Science and Economics at the London School of Economics. His books include Macroeconomics: Institutions, Instability, and the Financial System (with Wendy Carlin) and Varieties of Capitalism (edited with Peter A. Hall).