Christopher Jones has a straightforward thesis. Economists invented the concept of infinite economic growth which makes unsustainable demands on the natural world. As the global economy grows, so does the negative impact on the environment. More activity means more pollution and harmful climate changing emissions. The only way to live on the planet in a genuinely sustainable way is to accept limitations in economic growth. Few would dispute the idea that there is a real tension between the level of economic activity and the impact on the planet, although innovations have allowed greater consumption with less environmental impact. There is little merit in increasing wealth if the result is a planet which can’t support the current level of human life. John Stuart Mill’s hope that abundance would lead to better lives as focus moved to the good from the useful remains an attractive prospect.
The strengths of this work are also its limitations. Jones covers in detail the history of academic American economics. For those interested in how the ideas of Simon Kuznets, Paul Samuelson, Robert Solow, Joan Robinson, William Nordhaus, Paul Romer and many others relate to each other, this provides a useful guide. Jones explains clearly how the tension between the desire for economic growth and sustainability have been explored from Malthus and Mill to ecological economics and green growth. He is particularly strong in exploring the way that the school that developed around Robert Solow and Paul Samuelson at MIT, and their models which sought to analyse the factors which account for economic growth, came to dominate academic economics. He focuses on the development of GDP as the key metric for national economic activity and how it has come to be a key element in political discourse. Jones provides a useful reminder of the history of global attempts to reduce global warming from the enthusiasm of the Earth Summit in Rio de Janeiro in 1992 to the disappointments in the same city twenty years later. He concludes that the ‘fixation with growth instead of better lives and healthy ecosystems is apparent in sky-rocketing levels of inequality’ and that ‘growth must give way to degrowth’.
This analysis may be more persuasive to an American audience with high incomes. However, given that environmental concerns are global, his rather parochial approach is problematic. Narrowly, one may wonder if Jones is inclined to exaggerate the role of academic economists. Whether they ‘invented’ the idea of growth being infinite or rather sought to explain the evident step change in global economic performance after the industrial revolution is less important. More significant is the failure to engage substantively with the experience and perspective of the majority of the world’s population in Asia. While Jones bemoans increasing inequality in America, he gives no attention to the astonishing reduction in poverty in Asia, for instance.
He recognises that the arguments for ‘degrowth’ have received little support from mainstream economists but shows little interest in why this is the case or in how his ideas would be put into practice. He calls for growth to be ‘targeted to those who need it most, and away from those who do not’. That may be hard to disagree with in principle, but we hear nothing as to how this objective would be achieved apart from vague calls for more focus on how wealth is distributed. With egalitarian redistribution the world economy would have to quintuple for every person on the planet to be as well off as the average Dane. For every person to reach the line of poverty in the developed world ($30 a day), the world economy would have to double. [1]
Moreover, the author’s focus on America seems to blind him to the impact of economic growth elsewhere. Jones completely fails to engage with the crucial question of how an affluent global north can expect a relatively poorer global south to deny themselves the benefits of economic growth. It might be unrealistic to expect an answer, but to fail to recognise such a key challenge undermines the value of this work. It is particularly disappointing that Jones describes the argument for ‘degrowth’ as being straightforward. It may appear so from an American perspective, but perhaps much less so for those still emerging from poverty.
The economics of comparative advantage have been demonstrated on a global scale by the transfer of manufacturing activity from higher cost American and European economies to those with cheaper labour in Asia. This aspect of globalization has been an engine for significant improvements in living standards for those employed and cheaper goods for consumers (perhaps especially the poorest Americans). This has caused dislocation and distress in communities (comparatively wealthy communities in an international context) which have seen factories close, but Jones has little to say about these trade-offs.
By contrast, he is concerned about growing inequality in America, although unusually, he seems rather to assume this and does not provide a reference in support of his assertion. (Andrew Lilico’s review of The Myth of American Inequality by Phil Gramm, Robert Ekelund and John Early is interesting in this regard.)
This focus on America finds expression in a weakness in dealing with the rest of the world. Citing a 1988 article by Robert Lucas, Jones claims that India’s economy, from the perspective of 1980, ‘had grown only 1.4 per cent over the preceding two decades’. Lucas in fact suggests that ‘rates of growth of real per capita GNP’ had averaged 1.4% per year over that period. This may be no more than a lack of attention to detail, but it does not encourage confidence. The same is true of a suggestion that the elder Malthus was alive in the 1970s. For a work by an academic, this book is rather uneven in quality and perhaps not the ‘scholarly miracle’ claimed by J R McNeill in a blurb for the book.
The book is strong on the way that ideas around the tension between growth and the natural world have developed but disappointing in adding nothing useful to the debate on how our generation should approach these issues. There is arguably little merit in reducing economic activity and the related emissions in America and Europe if they are simply to be exported to Asia. To suggest that accepting the end of economic growth is straightforward, while not at least recognising that this is unlikely to be accepted by much of the world, reduces the value of the work. If the reader is interested in the history of the study of economics in America, and the way that thinking on the tension between economic growth and the environment has developed, this book contains much useful material. The suggestions for change are perhaps less compelling.
[1] See Ritchie, H. (2024) Not the End of the World: How We Can Be the First Generation to Build a Sustainable Planet. Chatto & Windus. Pages 34-5.
Andrew spent his career with PricewaterhouseCoopers where he was a partner for more than 25 years. He led a variety of the firm’s businesses both in the UK and globally, with a focus on the pharmaceutical industry. He also led the firm’s work on explaining corporate taxation to civil society and the public. Since retiring from PwC he has completed a master’s in history at Oxford and is hoping to undertake further research. He is also a trustee at the London Handel Society and the Open Spaces Society.
Cass Sunstein has written what may be the most lucid and unembarrassed defense of liberalism in recent memory. On Liberalism is at once a philosophical meditation, a political testament, and a quiet act of intellectual recovery. In an age when the word ‘liberal’ is either wielded as an accusation or whispered with apology, Sunstein offers something rare: a confident, humane, and historically informed affirmation that liberalism remains the best moral and political framework we have.
‘Festschrifts’ may be uneven, but manifestos rarely are—and this short, tightly reasoned book is nothing if not a manifesto. Sunstein begins from the premise that liberalism, properly understood, is not the ideology of any faction but a moral vision grounded in freedom, equality, and dignity. ‘Liberalism is a big tent,’ he writes, ‘but it is also a fighting faith.’ His is a creed of pluralism and restraint, of reasoned disagreement and institutional humility. Throughout, his tone is that of the patient teacher rather than the polemicist: confident without arrogance, passionate without bitterness.
Sunstein structures his argument around six cardinal principles: freedom, pluralism, security, equality, the rule of law, and opportunity. Each principle receives a concise yet profound exploration, enriched with historical insight and contemporary resonance. This is no abstract taxonomy; it reads more like a meditation on civilization itself. Sunstein insists that these values were not conjured from ideology but forged through centuries of moral conflict and political experiment. They are, he reminds us, ‘the slow achievements of human decency.’
He returns repeatedly to his intellectual hero, John Stuart Mill, whose On Liberty becomes for him the liberal catechism. Sunstein’s Mill is not the sterile rationalist of caricature but a passionate moral romantic, convinced that individuality is the flame that sustains civilization. The passages on Mill’s courage—his insistence on defending free thought even when it scandalized his age—are among the most stirring in the book.
Hayek and Rawls also make appearances, not as combatants but as partners in conversation. Sunstein treats Hayek’s spontaneous order and Rawls’s distributive justice as complementary rather than contradictory. This capaciousness of spirit is one of Sunstein’s chief virtues. He refuses to reduce liberalism to a party platform. Like Mill’s, his liberalism is both moral and experimental: an ongoing inquiry into how human beings can live together without coercion and with dignity.
What distinguishes On Liberalism from other recent defenses of the creed—Fukuyama’s or Pinker’s, for instance—is its realism. Sunstein’s liberalism is neither sentimental nor technocratic. It is, in his own phrase, ‘freedom with seatbelts’: confident in human agency but mindful of its limits. The author of Nudge remains attentive to the psychology of choice, arguing that freedom is not mere non-interference but the cultivated ability to make good decisions within a just and enabling framework. Markets, he insists, are indispensable to liberty, yet they must be tempered by law and animated by conscience.
This realism extends into his treatment of governance. The discussion of Franklin D. Roosevelt’s ‘Second Bill of Rights’ is exemplary. Sunstein interprets these social and economic rights not as a betrayal of classical liberalism but as its completion, a recognition that liberty without security can be a cruel illusion. Here his liberalism proves both moral and muscular, insisting that compassion and competence are not opposites but allies.
What gives this book its particular charm is its tone: Sunstein writes as a moralist in the best sense—not to lecture, but to elevate. Quoting Germaine de Staël’s call for ‘a lever against egoism,’ he suggests that liberalism, rightly understood, is an ethic of generosity. Freedom requires self-restraint; tolerance is not indifference; civility, far from weakness, is a civic virtue.
He is at his most eloquent when he turns from theory to temperament. Liberalism, he argues, is not only a political creed but a psychological posture: a preference for conversation over coercion, persuasion over purity, humility over hysteria. He concludes one reflection with Rawls’s understated line from A Theory of Justice: ‘Purity of heart, if one could attain it, would be to see clearly and to act with grace’—a sentence he takes as the very essence of the liberal spirit.
The later chapters engage the challenges of our present age: populism, nationalism, digital tribalism, and the collapse of trust in institutions. Sunstein does not scold; he reasons. Liberalism, he concedes, has sometimes seemed weary or complacent. Yet its promise remains the most humane path between authoritarian discipline and revolutionary fervor. What is needed, he suggests, is ‘freedom with fire’—a moral energy without moralism, conviction without cruelty.
In his closing ‘Epilogue: Fire and Hope,’ Sunstein sounds almost pastoral. Liberalism, he writes, ‘is not a creed of cold reason but of faith in improvement—faith that reason and decency can coexist.’ That faith may seem quaint today, but Sunstein wears it with sincerity and grace. His optimism is not naïve; it is hard-won.
And yet, the reader may feel a lingering unease. Liberalism’s problem has never been its ideals but its optimism—that freedom and equality, individuality and solidarity, can always be harmonized. Sunstein’s ‘big tent’ sometimes feels like a moral circus: everyone is welcome, provided they follow the rules. Liberalism’s greatest temptation is procedural perfection, the belief that decency can replace depth. When politics becomes mere management and conscience mere sentiment, something vital withers.
Still, this is not an external critique but a filial one. Sunstein himself acknowledges liberalism’s contradictions as inseparable from its vitality. On Liberalism is both defense and confession: an admission that the creed is perpetually unfinished, forever balancing liberty and order, reason and passion. The miracle, he suggests, is not that liberalism has survived its crises—but that it continues to offer a vocabulary of hope in an age of exhaustion.
On Liberalism is not a book for cynics or ideologues. It is a work of intellectual courage, written with clarity, warmth, and historical intelligence. Sunstein’s liberalism is moral without moralism, rational without reductionism, principled yet pragmatic. The book deserves to be read by anyone who believes that the center of civilization is still worth defending—not because it is safe, but because it is, however precariously, free.
In the end, Sunstein’s liberalism is less a political doctrine than a moral temperament: a quiet faith that humanity is improvable, that reason can temper rage, and that freedom, properly tended, can still burn bright—without burning down the house.
‘On Liberalism: In Defense of Freedom’ by Cass R. Sunstein was published in 2025 by The MIT Press (978-0-262-55018-4). 186 pp.
Jan C. Bentz is a lecturer and tutor at Blackfriars in Oxford, and an Associate Member in the Faculty of Theology and Religion with interests in how medieval metaphysics shaped modern thought. He also works as a freelance journalist.
In his Nobel Prize lecture, Ronald Coase said: ‘a large part of what we think of as economic activity is designed to accomplish what high transaction costs would otherwise prevent’.
Think of the retail sector, for example. Its sole function is to reduce transactions costs – not to produce anything tangible. If you want a roast chicken dinner in the absence of retailers, you would go to a farm to buy a chicken; another farm to buy a cabbage; another to buy potatoes; and so on. The so-called transactions costs of collecting up the ingredients would be enormous, far greater than the actual costs of the ingredients themselves.
Of course, the internet has transformed retailing by finding a way to reduce transactions costs without the need for a visible retail store. Indeed, in general, changes in technology that change transactions costs can lead to radical changes in industrial structure.
The financial sector also exists to reduce transactions costs and the retail and financial sector between them are around one-sixth of the economy. It may seem a lot to spend on something as intangible as reducing transactions costs. But imagine the alternative.
Universities also exist, though only in part, to reduce transactions costs. An individual who wants higher learning (whether for practical reasons or to expand his or her mind) could put together the elements without a university. In theory, we could have organisations that sold syllabuses and reading lists. You could sign up for lectures given by freelancers. You could get together with some people studying the same subject and a freelance professor and have some discussions. You could try to find a way to signal to employers that you have actually acquired some knowledge. But imagine the costs of doing this.
A university saves you the bother by bringing all this together: you pay the fee and hope to have a structured programme, appropriate reading lists, other students to talk to, competent professors, assessment and certification under one roof.
Our education sector used to be much more diverse. Elements of the above were available in a range of different institutions (professional bodies, correspondence course providers, teacher training colleges, worker educational associations, municipal training colleges, private training colleges, polytechnics, university colleges and, for just a few, universities).
Will AI radically change transactions costs and thus give rise to significant changes in the sector? The answer is probably ‘yes’. Almost certainly, AI will not just change how universities do what they already do. If universities simply plan on this assumption, the whole sector will be in trouble. As Fr. Stephen Wang suggested in another context, AI may find radical new ways to achieve intermediate (and, in this case, end) objectives. Perhaps there will be unbundling of what universities do. Perhaps we will go back to the diverse range of institutions that used to exist, albeit in a different form.
There may be some disciplines where the accumulation of technical knowledge is especially important and where a provider can use AI to provide excellent guided reading, syllabi, pedagogical materials, assessments, certifications, and so on, which can be supplemented by discussion groups, also organised by the provider, using AI to bring together the most appropriate people. These discussion groups may be based in the workplace, the local area, or be online. Subjects such as law and business may be especially appropriate for this approach. Professional bodies can do the certification. This does not mean that learning for its own sake, debate or discussion of higher-level principles, and so on, will not happen. They can happen in other forums, both to complement the technical education and assessment process and as a form of continuing professional development.
This leads to the question of where Cardinal John Henry Newman’s vision of the university fits in. Some would say that this has broken down over many decades and that the modern university looks nothing like Newman’s vision. I would argue, instead, that the university has expanded to take on many functions other than the provision of Newman-style education. It is not that the university has dropped Newman, it has acquired other functions. Perhaps the development of AI will lead those other functions to be done better in other learning contexts – or by universities using different models of provision.
St. John Henry Newman, declared by the Catholic Church as a co-patron saint of education recently, famously produced ‘The Idea of a University’. The key features of such an institution are as follows: the acquisition of knowledge for its own sake; a university that teaches all subjects and integrates theology as the lynchpin of all subjects; it cultivates the character of the student so that they develop a critical intellect not limited to a specialism; personal contact with tutors; and separation of teaching and research. As it happens, certification is not essential to any of this. Indeed, if education is for its own sake, certification might be regarded as redundant. In reality, many people combine many objectives of education when they undertake a degree.
It is easy to see that these characteristics of education necessitate genuine human interaction between students, and between students and teachers. However, they do not only have a place within a university, though the second of them is, perhaps, challenging for other institutions. Many of these Newman characteristics are, today, apparent in the programmes of organisations outside the university sector. Often, such programmes are, as in past times, financed philanthropically with professors giving their time for free – after all, the process is just as enriching for teachers as it is for students.
For example, we already see hints of this approach in think tanks and other organisations such as the Prosperity Institute, Alliance Defending Freedom, the Acton Institute, the Institute of Economic Affairs (working with the Vinson Centre at the University of Buckingham), the London Jesuit Centre, the Thomistic Institute and many other organisations. These programmes provide useful skills as well as intellectual enrichment without certification. They involve higher learning, discussion in peer groups and with mentors, all guided by university professors. The Centre for Enterprise, Markets and Ethics has a mini version of such programmes linking the study of economics to Christianity.
It is easy to see how think tanks, and Churches, might – indeed, perhaps should – develop such programmes further, always remembering that, in a Christian context, personal interaction is vital, and technology should be kept in its place.
But what about the future of universities? The different functions of universities could be undertaken in different institutions in an AI world. Businesses, such as BPP, are well placed to provide technical education very effectively across a number of fields.
But the multi-purpose university is not dead. However, reflection is needed. When a revolution such as AI happens, as Fr. Stephen Wang explained, we do not just need to look at AI-enhanced ways of doing what we are doing. The important questions are: ‘What are the intrinsic features of the service we are offering?’ and ‘How can these intrinsic features be best provided in an AI world in different fields – vocational, technical, teacher training, liberal arts, physical sciences, and so on?’
I suspect that, if the multi-purpose university is to survive, it will have to house different approaches to education and training under one roof (perhaps, a partly virtual roof). Diversified institutions exist in a number of sectors – think of banks, for example, with their wealth managers, traders, investment managers and banking service providers: these are all very different types of service. There will also be plenty of room for niche institutions in this new world. The development of AI should force universities, charitable education providers, business providers, professional bodies and think tanks to think about what the distinct essential elements in higher learning are and then consider the best ways to deliver them. Whether the regulators and funding framework will allow education to evolve in response to new technology is another question, of course. If they do not, they may find that the sector they are regulating and funding shrinks.
Philip Booth is professor of Catholic Social Thought and Public Policy at St. Mary’s University, Twickenham (the U.K.’s largest Catholic university) and Director of Policy and Research at the Catholic Bishops’ Conference of England and Wales. He is also Senior Research Fellow and Academic Advisor to the Centre for Enterprise, Markets and Ethics.
The timing could hardly be better. Elisabeth Braw’s Goodbye Globalization: The Return of a Divided World was published just as Donald Trump returned to the White House, and it has lost little of its pertinence in the year since then. And yet Braw, an Atlantic Council fellow delivers a deeper message. Trump isn’t the cause of deglobalization. He’s merely the symptom of a much deeper malaise that the Western establishment spent three decades pretending didn’t exist.
The book’s central thesis is brutally simple. The globalization project that dominated from the fall of the Berlin Wall until roughly the mid-2010s is already dead. Braw traces the story chronologically, from the giddy optimism of the 1990s through to today’s fractured world order. Back then, we were assured that opening up trade with China would inevitably lead to political liberalization. Beijing would discover the joys of democracy once its middle class got rich enough. Meanwhile, integrating Russia into the global economy would prevent any return to Cold War tensions. Financial deregulation would spread prosperity. Supply chains spanning multiple continents would deliver ever-cheaper goods to grateful consumers.
It all sounded fantastic in the economics faculties and corporate boardrooms. Out in the real world, however, it did not work out quite so well. Manufacturing workers in the West watched as their jobs vanished to China. Entire communities were hollowed out. The promised retraining programmes turned out to be worthless. The nineties offered plentiful opportunities, but there were plenty of people who were left behind.
What makes Braw’s account particularly valuable is her willingness to name names and tell human stories. This isn’t some dry academic treatise. She’s spoken to executives, policymakers, and ordinary workers across the globe. The result is a book that comes vividly to life with the full cast of characters who shaped this era.
The financial crisis of 2008 should have been the wake-up call that something was not working. Instead, the elites doubled down. Yes, there were problems with financial integration, but surely the answer was more regulation, not less interconnection? Then came Brexit. Then Trump’s first presidency. Then Covid, which revealed just how dangerously dependent Western nations had become on Chinese manufacturing for everything from pharmaceuticals to personal protective equipment. Russia’s invasion of Ukraine, with tacit Chinese support, delivered the final blow. Suddenly, all those smart people who’d been lecturing us about the virtues of economic interdependence had to confront an awkward reality: authoritarian regimes don’t share our values and will happily weaponize trade relationships when it suits them. Who could have guessed?
Braw documents how China has used its dominance of supply chains and critical materials to pursue strategic advantages. An increasingly authoritarian China’s control over products and materials needed for the energy transition has created dependencies that Western governments are only now scrambling to address. But it’s rather late in the day to suddenly discover that outsourcing your entire industrial base to a geopolitical rival might have downsides.
The book excels at explaining why plenty of leaders have concluded that globalization simply isn’t working anymore. Supply chains are vulnerable. National security has been compromised. Domestic social cohesion has frayed as entire regions were sacrificed on the altar of cheaper consumer goods and fatter corporate margins. So what comes next? For Braw, the answer is ‘friendshoring’. The idea is straightforward: trade should continue, but primarily with countries that share Western values of human rights, free markets, and the rule of law. Build supply chains through allied nations. Accept that this will mean higher costs, but gain security and resilience in return.
It’s a sensible enough prescription, though one can’t help wondering if it’s practical. Most countries quite sensibly want to trade with everyone. Consumers choose the best value products, which is precisely why Chinese electric vehicles are proving so popular despite Western politicians’ huffing and puffing. Raising tariffs to force friendshoring will increase costs for ordinary people and risk making Western industries permanently uncompetitive. Likewise, the Trump administration seems keener on battling with Europe than China. There is not much sign of ‘shared values’ in its tariff schedules.
Still, Braw deserves credit for facing up to uncomfortable truths. The West was naive and arrogant in assuming liberal democracy would inevitably spread alongside McDonald’s franchises. The assumption that economic integration would automatically produce political convergence was always wishful thinking dressed up as sophisticated analysis. The book won a gold medal at the 2024 Axiom Business Book Awards, and it’s easy to see why. This is sharp, well-researched work that cuts through decades of conventional wisdom to explain how we arrived at this fractured moment. Braw writes with authority but also wit, making complex geopolitical developments accessible without dumbing them down. As Trump imposes sweeping tariffs and the EU erects barriers against Chinese imports, we need clear-eyed analysis of what deglobalisation actually means for economies, businesses, and ordinary people. Braw provides exactly that.
Her conclusion is bracing: the world is dividing once again into competing blocs, but international cooperation remains possible if we’re more realistic about who we’re dealing with. The era of naive globalization is finished. What replaces it depends on whether Western nations can rebuild industrial capacity, strengthen alliances, and accept that cheap stuff from authoritarian regimes comes with a price tag that goes far beyond the sticker on the shelf. It’s going to be expensive, difficult, and politically fraught. But then, perhaps we should have thought of that before we outsourced our future to Beijing.
‘Goodbye Globalization: The Return of a Divided World’ by Elisabeth Braw was published in 2025 by Yale University Press (ISBN: 978-0-300-28263-4). 352pp.)
Matthew Lynn is an author, journalist and entrepreneur. He writes for The Daily Telegraph, The Spectator and Money Week, is the author of the Death Force thrillers, and is the founder of Lume Books.
Scholars ranging from Milton Friedman to Paul Krugman have argued that liberal democracy and market capitalism are ‘symbiotic twins’: each requires the other. Yet there is increasingly a sense that the relation is becoming abusive. Martin Wolf sees a crisis, and his diagnosis is sweeping and urgent: elites must reform the system, and soon, before it collapses.
But Wolf’s prescriptions depend on cooperation, or at a minimum consent, from the very elites he sees as causing the crisis in the first place. This is a common problem in ‘Public Choice’ analysis, the part of political economy where this reviewer works. Systemic problems need not reflect any irrational or mistaken behavior on the part of actors in the system. Appallingly, it is precisely the self-interested, narrowly ‘rational’ choices being made by those with the power to effect change that ensure that change will be difficult.
Wolf brings together political theory, growth and distribution data, financial history, and current events to explain how shocks (financialization, the global trade and technology wave, and social media dynamics) weakened the democratic-capitalist symbiosis. The book is well-reasoned, but fails (in this reviewer’s opinion) to understand the pathology of the codependence between capitalism and democracy.
Wolf’s account focuses on what he calls ‘pluto-populism’, which he sees as having four main features. The first is ‘pseudo-populist rhetoric,’ where super wealthy candidates or their pet parties publicly adopt populist language—though likely not policies—blasting corrupt elites and presenting themselves as the only possible saviors of the interests of ‘the people’. The second is plutocratic policy priorities once those parties gain office. They cut social program spending, and slash taxes and regulations that constrain the wealthiest segments of society: Once in power, the policies enacted serve the interests of the extremely rich.
The third feature is a ‘bait and switch’: to cover the betrayal on economic policies, pluto-partisans inflame cultural grievances by focusing on immigrants, minorities, or (in the U.S., in particular) out-of-touch university faculties and Hollywood stuffed shirts. Fourth, and ultimately most dangerously, the pluto-partisans actively weaken democratic institutions, because they know their ersatz populist rhetoric cannot permanently disguise their self-serving policy choices. Again, from a U.S.-centered perspective, this would mean extreme gerrymandering, and dismantling restrictions on torrents of money entering and influencing politics.
It is hard to tell if Wolf thinks this is a particular, historically contingent, empirical description of the process or if he believes the problem is inherent in demo-capitalist systems. I agree with his view that only liberal democracy reconciles efficiency with personal freedom and accountability. This is an important counterweight to calls, from the left and the right, to sacrifice liberal democracy to address the crisis.
One might note that, even if one accepts the merits of Wolf’s claims, there are blinders for some important outside ‘shocks’ in the recent period. The rise of China as a global economic superpower, the expansion of social media in politics in ways that don’t even require money, and the disruptive forces resulting from artificial intelligence, have all destabilized the system. The fact that there is political and economic chaos need not lead us to infer that a cabal of super-rich Bond villains are controlling and directing the process behind the scenes.
That said, the broad strokes of the crisis portrait painted by Wolf ring true. But in agreeing with that diagnosis, this reviewer is much less persuaded by Wolf’s prescription. His ‘solution’ is the usual progressive dog’s breakfast of aggressive industrial policy, antitrust, forcible takeover of corporate governance, stronger social insurance and place-based support, more effective public administration, and insulation of democratic institutions from outside influence, especially real political campaigns where money can be spent to level the pitch against concentrated government power.
Look: the reason there is too much ‘money in politics’ is that there is far too much politics in money. Constitutional restrictions on the ability to take, manipulate, and redistribute wealth would be more effective in separating economic power from political power, and more supportive of democratic institutions. Giving property rights the same status as political rights would separate the two spheres more effectively, and with better results. However, that ‘solution’ would require that elites in Congress give up the lucrative right to be corrupted, and that elites in the corporate world give up the right to do the corrupting. Even though the solution is simple, it is not easy.
A recent book by Ruchir Sharma, What Went Wrong With Capitalism? (Munger review, CEME review) is instructive in this regard. Sharma notes that the story of ‘austerity’ and cuts in social programs—a story Wolf embraces—is entirely fabricated. In fact, government spending has gone up steadily, in real terms, per capita, and as a proportion of GDP. There have not been cuts in social spending; the ‘cuts’ have only been reductions in the anticipated rates of increase. Austerity is, in short, a myth: government spending has grown steadily, and mostly on a straight trend, since 1960.
As a result, Sharma contends, productivity has slowed, inequality has widened, and economies are increasingly dominated by large, entrenched firms (oligopolies or ‘zombie’ firms) that suppress competition. But the direction of causation is not ‘plutocracy ruins democracy,’ but rather ‘democracy invites crony capitalism, because elected officials benefit from corruption.’ That is, the driving force is the unfettered domain of ‘democratic’ industrial policy and taxpayer-sponsored giveaways. In this view, modern capitalism was ‘ruined,’ because the democratic system, driven by self-interested elected officials, has found it useful (and profitable!) to expand state power over the private sector
But there is a problem. Capital has come to depend on these infusions of cash-amphetamines, focusing on increases in deficit-financed state spending rather than investing in production and research on new products. The solution is to block democratic governments from putting a thumb on the scale in subsidizing and supporting favored industrial sectors or companies, not to expand that control. It must be noted that the decline in any capacity of corporate leaders to self-govern, based on a sense of morality and ethics, is partly a justification for state regulation, but it is also likely caused by state overreach. If we want less intrusion from the state, we’ll need to require more capacity for moral virtue for private leaders.
The problem with the ‘austerity narrative’—which is, as noted above, empirically ludicrous—is that it privileges the sorts of ‘solutions’ that actually caused the problem in the first place. Wolf, and those who argue from that perspective, have no hope of solving the problem of the rocky marriage between democracy and capitalism. A wise counselor would advise instead that the couple learn to define some boundaries and give each other some space.
‘The Crisis of Democratic Capitalism’ by Martin Wolf was published in 2023 by Penguin (ISBN 978-0-141-98583-1). 496pp.
Michael Munger is Pfizer/Pratt University Professor of Political Science and Economics at Duke University. He is a past President of the Public Choice Society, and works at the intersection of commerce and politics.
Back to Budget Basics
Providing Christian commentary on the recent budget is not especially easy. There was a measure to remove the two-child cap on Universal Credit payments that was welcomed by many Christians. But the rest of the budget was really a collection of bits and pieces with many deferred tax rises, on which it is difficult to provide a Christian analysis.
Some Christians might welcome the significant increase in gambling taxes which will bring in relatively little revenue. However, even if we regard gambling as an ‘occasion of sin’ (to use the Catholic terminology), it does not follow that governments should tax or regulate it more. Taxes in this area can lead to serious problems of black markets. They also land squarely on the shoulders of the less-well-off.
One of the reasons for a succession of budgets which have involved tinkering around the edges is that the level of debt and social spending on the growing elderly population is so high, with the result that Chancellors of the Exchequer have been focusing on shoring up revenue – or at least attempting to do so. We thus have a situation where people are simultaneously complaining about record levels of taxation, a squeeze in welfare provision to people of working age and to children, problems in the provision of public services, and rising levels of debt. All these complaints have merit. Indeed, one of the problems is that we seem to demand incompatible policies from politicians: we should, perhaps, whatever our political sympathies, pause for a moment and empathise with politicians. Maybe we demand too much.
Budgetary Demands
A time of crisis is a good time to go back to fundamentals. The Catholic Bishops’ Conference of England and Wales did that recently with the publication of Render unto Caesar, which included fine chapters from CEME staff members. Below I will highlight four areas from the document which merit further reflection from Christians. I will start with a major challenge and then move on to what could, in a sense, be regarded as responses to the challenge.
The UK, in common with most other developed countries, has a historically large peacetime national debt. This is a burden we are imposing on future generations and, as Christians, we should be able to shed light on this topic. Whilst the subject is complex, it can be regarded as an injustice if a government consistently spends more than it takes in taxation without very good reason. Today, we spend the same on debt interest as we do on education and this has a real cost in terms of the tax burden on families. If the impact on disposable income leads to social conflict, government indebtedness injures the common good and human dignity. Indeed, people may misattribute blame for falling living standards to vulnerable groups such as migrants, thus undermining both the common good and the dignity of those groups.
Related to this problem of the government debt are the promises made to future generations of older people in terms of future pensions and healthcare provision. The projections of the government’s Office for Budget Responsibility suggest that our national debt will explode to around 350% of national income on current policies because of those obligations – and that is on pretty optimistic assumptions. No advanced provision was made by way of some sort of capital fund when these promises were made. It was just assumed that the number of younger people would always be sufficient to support the system. It was never realised that fertility rates might plummet, and people would live longer. These plummeting fertility rates are, in and of themselves, something which the Church might be concerned about. Does our society support family life? We will come to that topic below.
There is no shortage of examples where the common life of society and social peace have totally broken down as a result of high levels of government indebtedness. I hope that we are not going to relive that in the West, but we might.
Taxation
But what about taxation? Let us consider three areas.
It can be argued that we have a very bad and inefficient approach to climate change policy. For around 100 years, economists have favoured taxes designed to reflect environmental harms caused by consumers or producers. Interestingly, the last two popes have done so too – in papal encyclicals Laudato Si’ and Caritas in Veritate. For example, Laudato Si’ mentions the ‘obligation of those who cause pollution to assume its costs’. This is a question of both distributive justice and economic efficiency. What politicians tend to do when it comes to climate change policy is to come up with incredibly complex and expensive methods of reducing carbon emissions rather ineffectively because they are frightened of the electoral consequences of explicitly taxing carbon emissions (for example by putting value added tax on domestic fuel consumption and using the revenue to reduce other taxes paid by the less well off). Once again, we should make it easier for politicians to do the right thing in this respect.
Another area which is ripe for reform is the relationship between local and central government. We cannot look through the lens of the Catholic principle of subsidiarity or the Calvinist principle of sphere sovereignty without being critical of the centralisation of government in the UK. This really involves delegation of certain powers to local authorities from central government. We must reform government so that at a variety of levels (starting with parishes and towns) local communities can have true responsibility in a whole range of areas and not just act as branch offices of national government.
Taking the principle of subsidiarity one step further, we should also ask whether we have a tax system that is designed to ensure that families can flourish. In the UK, unlike in countries such as France and Germany, the concept of the family is largely ignored in the tax system which is based on individual rather than household income, so that families in which one adult undertakes caring responsibilities rather than paid work are strongly discriminated against.
The way in which the tax and welfare systems interact penalises marriage and family formation – especially for people on low incomes. Figures produced by Marriage Care show that fewer than a quarter of low earners marry. And it is at low levels of earnings that the tax and welfare system are least conducive to marriage and family life. Christian teaching on the nature of marriage and the family would suggest that our tax system is fundamentally flawed and should be reformed.
We should remember, as Christians, that our obligations to the poor do not end when we have paid our tax bill. The early Church fathers gave pretty stark warnings about the duties of the rich. Riches can be ruinous of the soul. We must use our wealth to promote the common good whether through business, philanthropy, social enterprise or otherwise. In turn, the state should not take all our wealth from us. It should tread lightly and leave room for philanthropy and civil society (including Church) solutions to poverty and the promotion of welfare. This also involves having a tax system which encourages philanthropy. As it happens, that is one thing our tax system does get right.
Philip Booth is professor of Catholic Social Thought and Public Policy at St. Mary’s University, Twickenham (the U.K.’s largest Catholic university) and Director of Policy and Research at the Catholic Bishops’ Conference of England and Wales. He is also Senior Research Fellow and Academic Advisor to the Centre for Enterprise, Markets and Ethics.
The Centre for Enterprise, Markets and Ethics (CEME) is pleased to announce the publication of:
Markets and the Environment:
Free Market Solutions to Environmental Problems?
John Kroencke
(PDF)
Web-friendly and divided into sections (clickable endnotes):
Is large-scale government intervention the only way to address environmental problems, such as climate change, over-fishing and particulate pollution? Markets and the Environment argues that markets are just as likely to be the solution. Assuming a simplistic dichotomy between markets and environmental protection can lead to the naïve conclusion that problems are ‘market failures’ of a kind which government intervention will be able to seamlessly correct by restraining market forces.
Instead, real-world comparative analysis is needed, which weighs the performance of alternative institutional and governance arrangements. The report explains and adopts the fundamental concepts of economics to examine both environmental problems themselves and policy approaches to addressing them. It develops a rigorous argument which draws on Coasean insights about transaction costs and the reciprocal nature of externalities.
After building up from the principles, it demonstrates how market-based solutions can achieve environmental goals more efficiently than traditional command-and-control regulations. That is, it is the solution to environmental problems often lies in introducing, not restraining, market forces. In some cases, government policy stands in the way of property rights and markets emerging, but in the toughest cases market-based regulation informed by economics offers a way forward and has had successes where implemented.
ISBN: 9781910666296
Dr John Kroencke is Senior Research Fellow at the Centre for Enterprise, Markets and Ethics. He joined the Centre in 2021 after completing his PhD in Economics at George Mason University. He spent the 2020–21 academic year as a final-year Fellow at the Centre for the History of Political Economy at Duke University. In 2023 he authored Private Planning and the Great Estates which explored the capacity of large landowners to capture spillover effects and engage in long-term planning by looking at the large urban estates of aristocratic and institutional landlords in inner London. John’s research focuses on the history of economics and on the intersection of markets and policy.
Environmental sustainability is a central challenge for humanity. In areas of the United Kingdom water has been rationed in two of the last four years, partly because we have not managed to build a major reservoir for over 30 years. Not only greenfield, but also brownfield land on which housing could be built to ease our chronic shortage lies undeveloped. Fish stocks in some important species have dropped to dangerously low levels with high government-set catch levels aiming partly to preserve the UK’s fishing fleet. The carbon emissions strategy pursued by all recent governments has put the goal of achieving net zero by 2050 within reach, albeit at considerable, but perhaps now reducing, cost.
The first fruits of CEME’s programme on the economics and ethics of the sustainability challenge are published today. Markets and the Environment, by our Senior Research Fellow, Dr John Kroencke, considers what economic theory and the history of environmental policy tell us.
If we accurately grasp the scale of the challenge, we will immediately have strong feelings. One reason is that, once the fragility of the ecosystems in which we live is exposed, we see how precious they are. In Christian ethics we express this by saying that humankind and the world in which we live our earthly lives is part of a single created order, which the Creator lovingly holds in being. In the poetry of Genesis 1, God saw all that he had made, and it was very good.
A second reason is that sustainability challenges give us an insight into our own mortality and limitedness. In the earthier imagery of Genesis 2, our earthly bodies are of the same stuff as the dust of the earth. In that sense dust we are, and to dust we shall return.
A third reason is that we see stark trade-offs. The goods of conserving or regenerating ecosystems appear to conflict with other social goods. That is certainly a feature of all the UK challenges mentioned above. In these trade-offs we seem to face a certain loss, either of one kind of good, or of the other. We fear these losses in prospect. When they happen, they grieve us.
These strong feelings can lead us into one of two unhelpful responses. The first could be called environmental absolutism. We all feel that sometimes. Looking at some part of the planet, which particularly strikes us at that moment in all its preciousness and fragility, we have what seems like a moment of moral clarity. We can make no trade-offs. The very idea of cost-benefit analysis seems out of place. ‘Conserve or regenerate this at all costs,’ we feel, ‘and let the heavens fall.’
Yet we do have to make trade-offs, not only between environmental and other social goals, but even between different environmental goals. So we need not only moments of moral clarity, but also a worked through ethics and theology which is integrated with, not insulated from, economic thought.
Another unhelpful response is at the other extreme: what could be called laissez-faire fatalism. I suspect we all have moments of that too. It’s just too difficult, we feel, to work out these difficult trade-offs. If we try, there will be too much conflict, too much ‘politics’. Or, in a different version, the costs of environmental protection seem just too vast to contemplate: intuitively ‘it is just not worth it’. Surely ‘the market’, if left to itself, can work it out. Or can’t the economists just make the problem go away?
But that response will not work either. When we talk to economists about ‘leaving it to the market’, or indeed to them, they will first tell us that the losses in value caused by environmental harm will be in many cases far higher than the potential gains from the activities that cause it. They will tell us also about externalities and market failures. They will be disinclined to tell us what our environmental goals should be, and instead offer us efficient ways to achieve goals which we put to them.
They will also tell us that this kind of fatalism risks legitimising positions which have nothing to do with economics at all, but are rather forms of political posturing and the instrumentalisation of environmental policy for a broader ‘culture war’. This is one way one could see the 2024 manifesto pledge of the Reform Party to axe the UK’s Net Zero target, or the pause on renewable energy projects on federal land in the US. Economists can help us to get the economics right, but only if the politics and ethics of the debate permit that.
Once we accept that we need to think both economically and ethically, we then need to avoid two mistakes in how we do so. The first could be described as market-phobic. It is markets, some might say, which have created these problems. Do we not all agree that environmental goods are often public goods? Do they not often function as externalities to markets in other goods, which therefore inevitably fail to value them? Should we not then use market mechanisms as little as possible in addressing them? Should we not look instead to decisions by politicians and government officials to design the necessary actions, such as reductions in pollutants or emissions, and command and enforce them through the coercive power of the state?
The problem with this response is that it both exaggerates the ability of the state to do this with any efficiency, and overlooks the potential gains from well-shaped markets. A well-shaped market will harness large amounts of real-time information, even as that remains decentralised. It will summarise this in the rich, responsive information of price signals. These will enable diverse and dispersed individuals and groups to align their voluntary actions. By preserving existing property rights, or generating new ones, it will provide incentives for enterprise and innovation.
This type of potential has often been lost due to crude regulation, such as: opposition to zonal pricing for energy; regulated prices for water use; and the failure to develop more than an embryonic market in credits for nutrient run-off caused by much-needed house building. On the other hand the extraordinary growth of solar energy generation in Texas, stereotypically a place of ‘cowboy’ spirit and free-market principles, illustrates the power of a well-shaped market.
A second mistaken response could be described as market-fundamentalist. Have we not learned from other sectors of the economy, others might say, of the perils of government control of economic activities? Do we not know the challenges of intermittent, centralised decision-making, and the likelihood of political capture of the process? Therefore a market solution is always to be favoured. The role of government should be as limited as possible, shaping a market with the largest possible scope, and leaving it to run.
The problem with this response is that it confuses a general, ideological claim with a specific, empirical one. Ideologically one can believe that markets generally have great benefits, while at the same time insisting on the need to consider what institutional arrangements will in fact best address each specific environmental challenge.
A better way than these is suggested by the insights which won Ronald Coase a Nobel Prize in Economics. These are considered by John in Chapter 2 of his report. If we consider the relative merits of addressing an environmental challenge through governmental command and control, or through community-based self-governance, or through a market system, this should be seen as a choice between institutional arrangements.
The relative efficiency of these depends in large part on what economists call transaction costs. Coase’s contribution was to emphasise their significance. They include costs: to gather information about needs, counterparties, costs and prices; to establish property rights, whether over fish or water; to draw up, negotiate, monitor and enforce agreements; and to resolve disputes. These costs exist in all kinds of institutional arrangements, but in different patterns.
In Chapter 3 John develops Coase’s insight and applies it to environmental regulation. Since the pattern of transaction costs differs in each context, different institutional arrangements will be superior in different contexts. The arrangement selected can best be seen as an emergent solution to a specific environmental problem.
This has implications for business-people. Sometimes they fear they will be perceived as complicating political solutions designed to cut-through and connect with the strong feelings mentioned at the outset. But John’s report implies that a more complex and nuanced debate is likely to be in the public interest. There is no substitute for close, comparative analysis. We need to relinquish the doctrinaire stances through which someone might try to short-circuit decision-making by, for example, putting trust always in the state, or always in an impersonally and abstractly conceived market.
At other times business-people fear that policy-makers or the public will see them as advocating for market solutions only because they suit them. Coase’s thought yields a framework for policymakers and citizens to distinguish proposals which offer efficient solutions, from narrowly self-interested arguments. This enables the formation of the durable coalitions needed to support long term investments. For example, on nutrient neutrality a well-designed market overcoming barriers to win-win trades between existing polluters and homebuilders could attract broad support.
The need is for a real-world approach which keeps initial assumptions down, takes the trouble to understand the context without pre-emptively ruling anything in or out, and prioritises arrangements which best promote flourishing and welfare.
That allows the re-integration of economics with ethics. It certainly introduces an ‘anthropological’ element. In choosing between state, community or market solutions we will need to attend to what kind of state, community or market will in practice exist. That will depend in part on what kind of people are making decisions in the state, community or market, and how they relate to one another.
As Christians we have particular insights to offer. The impossibility of outsourcing our personal ethical responsibilities wholly to state or market arises from the irreducibly personal call God makes on our lives. Each of us must respond to the call to follow the way of Christ. We have each been given a will and a mind. With these comes the ability to make our own decisions – and an accountability for them.
The primary commitment to the welfare of our neighbours, rather than to any form of ideology, including economic ideology, is seen in the command to God’s exiled people to attend to their context and to work to improve it: to ‘seek the welfare of the city where I have sent you… and pray to the Lord on its behalf’ (Jeremiah 29.7). Indeed our cities in all their diversity do need our prayers – as does the City and its economic and commercial institutions – as well as our government and other communities.
We know that markets work, but also that they work in different ways in different contexts. Perhaps it’s time for some of us to stand up as ‘Christian Coaseans’, committed to tackling environmental challenges, and committed also to the hard work of comparing solutions and championing the most effective.
Revd. Dr. Philip Krinks is the Director of CEME.
This is a spectacular book whose title only hints at its true ambition. Economist Richard Langlois brings depth to both the overarching framework and to finely crafted historical details. The book’s broad scope and rigorous analysis across 816 pages (a mere 550 pages of main text with extensive endnotes) can only be hinted at in a review.
At heart, Langlois offers a retelling of the conventional view of the rise of the managerial corporation that Alfred Chandler wrote on nearly fifty years ago in The Visible Hand. Chandler’s triumphalist account of the large, multidivisional, vertically integrated corporation was published in 1977, ironically just as the shifting economic sands and corporate raiders were already beginning to transform corporate life. Until that decade, the story seemed one of linear progress away from personal, entrepreneurial capitalism and toward managerial experts. This theme of a competent managerial elite replacing the messiness of the invisible hand of the market extended beyond the business world to policy and politics more broadly. This context is not lost in the book, and Langlois evokes the broader zeitgeist, drawing on the words of figures such as Herbert Croly and John Kenneth Galbraith.
Langlois’s core task is to explain the rise of managerial corporations in the late 19th and early 20th centuries in light of the fact that market forces later dismantled these same large corporations in the late 20th and early 21st centuries. He does this with a deceptively simple theoretical argument and detailed economic history to substantiate his claims. I’ll examine these dimensions in turn.
The theoretical argument is straightforward. Building on the foundational work of Ronald Coase, we know that economic activities are organized within firms when the cost of achieving them via market transactions would be higher than organizing within the firm. That is, the visible hand of an integrated firm replaces the invisible hand of market relations when it is profitable for it to do so.
Langlois argues that large corporations proliferated in the late nineteenth and early twentieth centuries not because they were a permanently superior institutional form, but because they filled a temporary institutional gap. Rapid technological change outpaced the development of market-supporting institutions—the legal frameworks, financial markets, and infrastructure that enable decentralized coordination. In this environment, integrated firms could organize complex production more efficiently than fragmented markets could. These corporations weren’t naturally better at resource allocation; they were simply the best available solution given the institutional constraints of their era. By the late twentieth century, as market-supporting institutions matured, the advantage of large integrated firms diminished, and many were dismantled or reorganized.
After an introductory chapter introducing the main concepts and the nuanced argument of the book in précis, the eight additional chapters and the long epilogue are arranged chronologically. The author deftly weaves a narrative that combines corporate, intellectual, and political history all analyzed through the mind of an economist who has read the empirical economic literature on relevant topics. At various stages, Langlois explains the role of these different forces on the organizational form of the corporation. The result is a synthesis—patchwork in parts—of the various threads needed for this multifaceted undertaking. Readers may get mired in the detail at times, but the amazing thing about Langlois’ enterprise is that he pulls it off and the result is a magisterial book that deserves to be read widely.
These varied threads are necessary because Langlois argues for the role of contingent history in the rise of the Chandlerian corporation. The role of government misapprehensions about business practices played a serious part in the tendency towards certain types of structures. Technological change and economies of scale can explain some industries, but the phenomenon was much broader. Furthermore, the continued dominance of the Chandlerian corporations is explained by the absence of sophisticated decentralized markets the development of which was hampered by antitrust efforts and shocks. There was a reason the market forces which rose at the end of the 20th century did not emerge in midcentury: the chaos of economic turbulence, world war and cold war. The space for an efficient make-or-buy decision was necessarily closed down when, as was often the case, the courts decided that contracts necessary for external contracting decisions are anticompetitive, or the empowered regulator like the Interstate Commerce Commission or Federal Communications Commission intervenes.
In the nineteenth century, commentators increasingly distinguished between closely held businesses and large businesses. Any history stresses the role of the railroad in the rise of professional management, but Langlois brings to life the economics of the business and the politics surrounding it. Through antitrust and regulations like those on the railroads, government changed the optimal institutional structure. Work in economic theory and history has helped explain the practices of businesses that contemporary legislators and regulators dismissed as anti-competitive.
Langlois’s argument is in summary that the business practices which led to government intervention were often efficiency-enhancing and the policy response was often harmful. When this included things like banning contracting practices this led to more business being done within the firm. This rather bold argument is aided by copious references to work in economics on 19th and 20th century business practices and the implications of government policy, making scholarship on this available to the general readers for the first time.
Perhaps most important for understanding the middle of the 20th century is the string of shocks, namely the two wars with unprecedented levels of war planning and the Great Depression that happened in the first half of the century. In general, these contingencies shifted the decision to bring elements within the firm instead of purchasing on the market. The years between 1914 and 1973 can in fact be viewed as the high watermark of state planning. As more time separates this period from the present, a conception of the degree of state planning and the worldview of the managerial elite in politics, economics, and business is lost.
Among the many terrible events, Langlois calls the Great Depression, the signal catastrophe and ‘a worldwide cataclysm that would alter the history of the century in the US more fundamentally and profoundly than even its two brutal wars’ (page 186). He argues, with supporting evidence, that for the United States the century’s worst year was 1933—the second dip in the Great Depression. Between the peak in 1929 and the low point in 1933 the Dow Jones dropped some 86 percent. Over this same time unemployment rose from 4 percent to 25 percent and estimates suggest that real per capita output dropped by 29 percent to a level not seen since 1901.
Drawing on the consensus in the literature, Langlois argues that this catastrophe was not caused by inherent features of capitalism that make it prone to break down or particular features of the 1929 crash itself but was the fallout from bad policy ideas which he dissects in detail. The crucial set of facts is that the Federal Reserve failed to act appropriately when it allowed the money supply to shrink and thereby unleashed the horrors of debt deflation. Beyond this central problem, the government attempted (among other things) to keep wages from falling in a delusional idea that high wages would allow the surplus of goods to clear. Many of the most egregious attempts of the New Deal were stopped by the courts, but there was a more general attempt to control markets.
In a key summarizing passage Langlois says of the Depression and war years:
The Second World War placed resource allocation even more firmly in the hands of the government and ushered in far more comprehensive nonmarket controls. Between fall 1929 and the end of World War II, prices in the United States often transmitted either false information or no information at all about relative scarcities, and many of the institutions upon which market exchange depended were hampered or destroyed. It is against this background, and not against a counterfactual backdrop of thick and well-functioning markets, that we must explain and appraise the rise of the large American corporation in the middle years of the twentieth century.
In a very interesting chapter, Langlois shows how dynamic market forces similar to those of the 1970s and beyond were already emerging in the 1920s but were diminished by the crisis. Across different industries innovative entrepreneurs were able to access capital and generate complex contracting networks solving assorted economic issues. General Motors and other companies (unlike Ford which because of its eccentric founder was steadfast in remaining optimized for the previous environment) would take advantage of responsive, modular supply chains. Even companies like DuPont sourced their patents not in the famous research labs of the midcentury but from acquisition. Much of this energy would become concentrated in the large corporations not because of their superiority as Chandler claimed, but because they were the only ones to survive the Depression. New restrictions on banking and forms of contracting limited new entrants and startups. Furthermore, the capacity of large firms to internally finance led to the growth of R&D departments at DuPont, GM, GE and others.
As Langlois writes:
The Depression and the policy responses to it had decisive consequences for the American corporation…. The dramatic monetary contraction, along with the failure of the Fed to act as an adequate lender of last resort, led to an amplifying cascade of bankruptcies and bank failures… this had the effect of destroying much of the capacity of the banking system, and of the financial system more generally, to supply financial intermediation. Small firms, which needed to rely on external capital markets, felt the effects far more than large firms, which could rely on internal financing and had close ties to large banks. Thus the Depression initiated or accelerated shakeouts in many industries. In some industries the process was Darwinian, with the most productive firms surviving; in others, survival depended simply on access to capital. At the same time, the New Deal instituted an unprecedented regime of price supports and entry restriction in financial, labor, and product markets. (187-88)
Absent these events one wonders how different the corporate world would have looked in the 1950s and 1960s.
Another merit of the book is the way it reflects on the way antitrust regulation, industrial policy and scientific and technological progress interacted and on the ideological and political context for them. Odd Progressive ideas underlay aspects of antitrust legislation and decisions of the FTC; odd monetary ideas underlay the decisions of the Fed. The science of industrial practices, whether in steel production or electronics, developed rapidly. Government and industry were closely intertwined in both world wars, and he discusses industrial policy at length in an even-handed but negative way. Another component of many chapters is Langlois’s focus on the role of finance, whether J.P. Morgan through the House of Morgan in earlier chapters or leveraged buyouts in the later chapters. Langlois also examines the form of pyramidal holding companies which was viewed as suspect by Progressives and partially banned in the New Deal. The demise of that form (unlike in the rest of the world) plays some role in explaining the American integrated firm and later conglomerates.
This level of historical detail and context makes the past come alive. Its coverage of the more recent past stands out as well. While the first 400 pages of the main text take readers from Standard Oil to Mad Men, the last 150 pages cover deregulation, disintermediation, and the rise of VC-backed startups. In the past decades, numerous books have been written about the revival of liberal thinking in the 1970s. Until that decade, for a variety of reasons, the story seemed one of linear progress away from personal, entrepreneurial capitalism and toward managerial experts. Many of these works suffer from depicting the changes as merely the actions of a few choice actors rather than a more widespread and diverse set of changes rooted in a disillusionment with the status quo. One illustrative example that Langlois discusses is the role of Ted Kennedy, no market fundamentalist, in the deregulation of trucking, rail, and air travel.
One of many dimensions to the book is that Langlois is seeking to undermine what he sees as a broader Progressive vision of society (he explains American Progressivism in detail and contrasts different varieties) that runs up to the present. The introduction and epilogue contain some understandably pointed remarks about the contemporary efforts by those on the right and left who have sought a more muscular state to regulate businesses. Many of these figures make explicit historical claims and hearken back to Progressive efforts to restrain the dominance of big business via antitrust and regulations banning practices like self-preferencing by Amazon. Building on the work of others, Langlois shows many ways in which past attempts failed to understand the efficiency of practices they villainized and how state regulation often empowered big business against markets and consumers. In doing so, he illuminates both past failures and the risks of repeating them. General readers may disagree with the broader view and specialists might have issues with one of the many episodes he covers, but The Corporation and the Twentieth Century is a tour de force.
‘The Corporation and the Twentieth Century: The History of American Business Enterprise’ by Richard N. Langlois was published by Princeton University Press in 2023 and came out in paperback in 2025 (978-0-691-24753-3). 816pp.
John Kroencke is a Senior Research Fellow at the Centre for Enterprise, Markets and Ethics. For more information about John please click here.
The Centre for Enterprise, Markets and Ethics was pleased to hold an event on 13 November 2025
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Economic historians have a growth preoccupation. The Industrial Revolution and its causes play the leading role in most prominent books in the field. And there are many other works that seek to explain the absence of an industrial revolution elsewhere in the world.
It is refreshing therefore to read a book that is not about the causes of industrialization but its consequences. If we reach back to the past, say, 200 or more years ago, two dramatic transformations are visible: one is the abundance of material goods and transformative technologies due to industrialization; the second transformation is the rise of large, modern, welfare states.
Walker Hanlon’s book The Laissez-Faire Experiment addresses this second transformation. He asks two fundamental questions: ‘First, how well did limited government in mid-19th century Britain work? Second, why was limited government abandoned in favor of the more interventionist government found in the U.K., and essentially all other developed countries, today?’
Hanlon’s argument is elegant and simple and it is grounded in standard economic theory.
The main problem facing the British economy in the early 19th century was dismantling the inefficient policies of the pre-Napoleonic war era, i.e., the fiscal-military state of the 18th century which protected large land-owners and relied on local and ad hoc institutions. Hanlon suggests that laissez-faire was an appropriate economic philosophy in this context: ‘across the first half of the nineteenth century, Britain’s laissez-faire system was successful. Economic growth was booming, and the benefits were accruing not only for the rich but also for average workers. Technological progress continued at a rapid pace. As a global power, Britain was unmatched.’
But, as the Industrial Revolution unfolded, the costs associated with this policy of non-interference mounted. For example, rapid urbanization brought new problems of overcrowding, sanitation, disease control, and pollution. There was a large health penalty to urban living in the 19th century.
Hanlon provides a compelling empirical assessment of the economic problems that led British policymakers to adopt a more interventionist series of policies. Increasingly severe market failures in the form of externalities from pollution, or asymmetric information in a range of markets, made government intervention potentially welfare enhancing.
The book is admirably clearly written. First, Hanlon presents the relevant economic analysis, which will be familiar to those who have taken Intermediate Micro or Public Economics, outlining the main explanations for market failure: information problems, monopolies, credit constraints, public goods, and coordination problems. Each chapter then considers different applications of the general principles, and provides a survey of relevant literatures in economic history, for example the literature on child labor regulations or urban public health.
The chapter on unemployment insurance, for example, condenses a tremendous amount of information and evidence into just a few pages. One charge that classical liberals have made against the modern state is that unemployment benefits and insurance crowded out the many forms of charity and private insurance that were commonplace prior to the welfare state.
Indeed, Hanlon discusses the wide array of traditional and occupation-based non-government forms of insurance available prior to 1850. He then, however, explains how the rise of large, geographically concentrated industrial agglomerations based on a single industry, such as cotton textiles in Lancashire, changed the problem of insuring workers. Neither family, locality-based, nor occupation-based forms of unemployment insurance, could deal with a general downturn in cotton textiles.
Overall, the book offers an exemplar of how to write a modern work of economic history. I wouldn’t hesitate in recommending this book. Beyond an economic history audience, it is an important book for anyone interested in understanding the rise of the modern state in the 19th and 20th centuries.
Nonetheless, as I discuss below, I want to push the implications of the book’s arguments a little further and explore some aspects of the debate which Hanlon perhaps neglects.
Having lavishly praised The Laissez-Faire Experiment as a work of economic history, my more critical comments will focus on the implicit political economy of the book and its treatment of economic ideas.
First, and I think intentionally, Hanlon’s treatment of what he calls ‘a laissez-faire philosophy’ is remarkably flat. I say intentionally as Hanlon clearly wants to focus on the economic history. From this perspective, too much engagement with the literature on the history of ideas would be distracting. So, he uses laissez-faire as a short-hand to refer to what is often called classical liberalism, essentially the idea of limited government and a general presumption of liberty.
This is entirely understandable and indeed defensible. Nonetheless, there is a price to taking this approach, which I will attempt to cash out below.
First, there is the use of the term laissez-faire as a shorthand. Classical liberalism has never been identical to laissez-faire because classical liberal thinkers have always recognized areas where government intervention is required.
Hanlon doesn’t really defend his use of laissez-faire as shorthand. But this approach overstates the degree of elite consensus and underestimates the extent to which there were competing intellectual traditions in 19th century Britain.
It is true that many of these positions came together in favoring a limited state in the mid-19th century, but it is precisely by recognizing that they were not a coherent ‘philosophy’ that we can appreciate why some of the leading figures also came to push for more technocratic interventions in society. A case in point would be Edward Chadwick. Chadwick was both a utilitarian follower of John Stuart Mill and a founder of modern public health and policing and he was more than willing to abrogate private property rights to achieve an improved societal outcome.
Hanlon’s narrative is of liberal, laissez-faire inclined policymakers and thinkers confronting the reality of widespread market failure and externalities and gradually adapting their policies and intellectual principles. He writes that ‘government intervention during the nineteenth century was not the work of a group of ideological collectivists. Rather, many interventions were the work of laissez-faire adherents who nevertheless believed that intolerable or inefficient conditions exist and were open to the possibility of experimenting with various forms of government intervention’. My feeling is that a deeper investigation of the ideas and writings of the classical economists and associates like Chadwick will reveal a more forthright commitment to policies of amelioration and improvement, rather than what is conventionally meant by the term laissez-faire.
Moreover, as Colin Holmes documented more than 50 years ago, something recognizable as a doctrine of laissez-faire did exist in the mid-19th century but it was never the animating principle of the British elite or government. Opposition to great government involvement in society could be animated by traditional ‘small c’ conservative principles. We don’t get a sense of this opposition (no John Ruskin or Thomas Carlyle, for example) in The Laissez-Faire Experiment.
Acknowledging this does not weaken Hanlon’s argument, but it would strengthen our understanding of the issues at hand in 19th century Britain.
My second comment concerns the treatment of political economy in the rise and fall of laissez-faire.
In general, Hanlon’s treatment is broadminded. He doesn’t assume that the existence of widespread market failures automatically translated into policies that could by assumption correct for those failures. Aware of the role played by both ideology and interests, he rather argues that the market failures that were exacerbated by industrialization ‘created opportunities for efficiency-enhancing government intervention’. Many factors would be critical in determining the extent to which these opportunities were realized.
Hanlon provides a similarly nuanced discussion of the shift towards more government activism at the end of the 19th century. He draws on recent historical scholarship to discuss the extent to which the example of the German welfare reforms and the pressures of war and imperial competition pushed policymakers away from laissez-faire.
Nonetheless, this part of the argument was less compelling than the first part of the book where Hanlon provides a systematic account how the new industrial economy generated all kinds of new externalities.
There is a reason for this. The type of evidence that Hanlon does a great job of assembling is very convincing in demonstrating the existence of market failures. He combines rigorous evidence with economic theory. But he doesn’t have an equivalently powerful framework for discussing how and why certain policy decisions were made.
In his conclusion, Hanlon tackles some of the big questions raised by his account: ‘is there evidence that the expansion of British government intervention . . . was misguided?’. Hanlon provides evidence that this was not so. He contends that policymakers followed experience and were not led by public opinion.
There is a risk here that the political economy of the 19th century does not get the full attention it deserves. Political economy is about heterogenous preferences and Hanlon’s framing in terms of an unmet nascent demand for education or for regulations abstracts from these conflicting preferences. Hanlon appreciates that government policies do not always achieve their aims. But political economy considerations are only occasionally mentioned, for example in explaining the failure to tackle coal pollution.
In contrast, conflicting political interest groups were prominent in earlier accounts of the rise of the state in late 19th century England. Holmes noted that what was traditionally seen as the high-point of laissez-faire ideology, the mid-19th century, was in fact a period of centralization and increased regulation, a point that Hanlon’s narrative and data in fact substantiate. But the role of conflict between different interest groups is not a major theme in The Laissez-Faire Experiment. And this also limits the ability of Hanlon to speak to developments in the 20th century, when much larger and more interventionist states emerged.
None of these comments take away from the fact that The Laissez-Faire Experiment is a great work of economic history and a major achievement. All subsequent scholarship will have to engage with it and will no doubt build upon its findings.
‘The Laissez-Faire Experiment: Why Britain Embraced and Then Abandoned Small Government, 1800-1914’ by W. Walker Hanlon was published in 2024 by Princeton University Press (978-0-691-21341-5). 504 pp.
Mark Koyama is Professor of Economics at George Mason University. He writes extensively about economic growth and institutions.
