Martin Wolf, the esteemed chief economic commentator at the Financial Times, requires little introduction. Regarded as the gold standard of financial and economics journalism, Wolf’s latest book, The Crisis of Democratic Capitalism serves as a wake-up call for democratic nations. In it, he highlights the faltering marriage between democracy and the market economy, exposing democratic nations to the perils of profoundly anti-democratic forces. In an exclusive interview with BizNews, Wolf delves into his background and how it has shaped his perspectives, illuminating the concerning backsliding of democracy and proposes remedies to reverse this decline ‘before it is too late’. Reflecting on South Africa, a country for which he penned his “saddest but perhaps best column” in the early 2000s, Wolf laments the predatory and non-productive elite that is not creating new wealth. The leadership’s unbelievably difficult task, he says, has deteriorated. He emphasises that South Africa’s path to success necessitates the economy to grow at 5% a year and the incomes of the poorest should grow at 7or 8%. – Linda van Tilburg
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Relevant timestamps from the interview
- 00:00 – Introductions
- 00:46 – Martin Wolf recounts his life so far
- 04:26 – Wolf on the close ties between the rises of industrialisation, capitalism and democracy
- 10:05 – On the current crisis of democratic capitalism
- 15:24 – On the effect of this crisis on developing nations such as SA
- 19:04 – On the state of South Africa
- 25:17 – On the solutions to the crisis of democratic capitalism
- 28:18 – Concludes
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Excerpts from the interview
There are very few really perfect democracies left
So, what often happens nowadays, somebody gets elected. He, it’s basically always a he, gets elected with the promise that he will look after his supporters. They are the only legitimate people. Nobody else counts. He will put himself forward as a great leader. It’s not a fascist move, but it’s more individual and personal. He will then put his cronies into all the key positions in the legal system, in the judiciary, in the economic ministries, in the Department of Justice, whatever that may be called, in the police, in the army. So, all these institutions are full of people loyal to him personally, not to the institutions of the state or even to the party and he will be able to use those, including control of the media, enjoyed directly by himself or by his cronies. He will be able to win elections without any difficulty, and he becomes essentially a permanent ruler, a personal fiefdom. Usually, these systems are corrupt, not very effective, but they’re quite good at buying off the opposition. You can see them in Turkey now, you saw an attempt at it, I would argue, with Mr Zuma in South Africa, I think you can see increasing signs of it, alas, in Modi’s India, Bolsonaro in Brazil got very close to it but didn’t quite manage it.
What is really worrying is that you can see some signs of this or very similar parts of this in really important democracies and the most important is America, where Donald Trump clearly falls into this category, though thank God he’s pretty incompetent at it and the American system is relatively difficult to subvert. We can see other figures. Marine Le Pen in France might play a similar role in future. So, this is a general phenomenon. And it links with what is often called the rise of populism.
Read more: Clem Sunter: SA at economic crossroads – Election ’24 parallels pre-94 watershed
Wolf’s saddest and best column – the most difficult country to establish a democracy
I wrote what I sometimes think was the saddest, but also perhaps best column I’ve ever written and this was in 2000, I think. That was after my first visit to South Africa, which was fascinating and of course, at a very crucial stage in the history of the country. I argued that the political achievement of the transition was extraordinary and it was pretty obvious that Mandela was a truly extraordinary man. That was completely obvious. But the economic inheritance and also the social and political inheritance were probably the most difficult any country trying to establish a democracy because, in addition to being one of the two most unequal countries in the world, the other being Brazil with an incredibly small, very wealthy oligarchy. In addition to that, of course, there were the problems that this division was racial as well as economic, and that racial division was, of course, associated with decades and decades and decades of racial repression. So, the economic conditions were those of an extreme plutocracy with the overwhelming bulk of the population having little economic resources and very poor economic prospects, terrible unemployment. But in addition to that, the state that had created that and the economy that had created that was in a very profound way and for perfectly obvious reasons, illegitimate. So, it seemed to me that overcoming this was a great danger, difficult, and the most likely development would, if the economic problem was not solved, be one in which the majority with the vote would increasingly put their trust in demagogic leaders who promised to share the wealth out from the established oligarchy among everybody. So, it seemed to me that there was a terrible danger that what would happen to South Africa, is what happened to Zimbabwe.
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South Africa needs another extended period of heroic leadership and pro-poor growth policies
I think it can be avoided, but only if a very radical, pro-growth economic policy was pursued, the aim of which will be to create, as the Chinese so successfully did, but in much easier circumstances, a new economy around the old. But that new economy could not be a sort of transfer of the wealth state. It had to bring in new entrepreneurs from around the world, develop and industrialise outside the chains of the existing system. I always recognise that doing this will be very, very difficult. In the early years policy was relatively good in terms of macro-economics, but this sort of micro-economic gamble that Deng Xiaoping took, was impossible in South Africa. So, all I can say is it seems to me the conditions now haven’t got better. The rent extraction by newcomers, quite understandable rent extraction by newcomers seizing their share of the spoils of the elite economy, has occurred. So, the elite is more bi-racial as I can see it now than it used to be. But it’s still, unfortunately, a largely predatory and non-productive elite. It is not an elite creating new wealth in large quantities. It’s extracting resources and the unemployment figures that I read and the poverty figures that I read and the education figures that I read are obviously scary. So, it needs another extended period of heroic leadership. One of the tragedies, if you look at the countries that have been successful in these situations, you need a long period of stable, intelligent, popular rule by an immensely far-sighted, trusted and competent leader and I suppose some of my friends who knew him much better than I do, I’ve never met him, thought Cyril Ramaphosa would be that man but I’m afraid that doesn’t seem to me from my limited knowledge to be the case. Obviously, he’s better than I think Zuma was, but the truth is that the leadership of the country has an incredibly difficult task anyway, just unbelievably difficult, it has deteriorated from the first president.
Read more: FT’s Martin Wolf: What I learnt in my days on the mountain in Davos
The solution for the democratic capitalism crisis is shared growth
In all these countries you need widely shared growth, you need growth that benefits the masses. The great difficulty is that you want the South African economy to grow at 5% a year and you want the incomes of the poorest among the South Africans to grow 7 or 8% a year. That would change everything, absolutely everything and it sounds ridiculous, but the Chinese did it for 1.3 billion people. It’s pretty staggering, isn’t it, and for some substantial period, though not more recent, the Indians did it, too. It’s not inconceivable that in developed countries now that sort of growth is impossible, but it’s not really needed because we’re already pretty rich. So, for us, a combination of redistribution of wealth plus more pro-growth policies and better social insurance policies,
I am still optimistic that India can do it, and that Turkey can do it. I think Brazil can do it. All these countries have substantial opportunities. Argentina could even do it, even though it constantly messes up. Chile did it for quite a long time. But it’s hard to get the economics and the politics to work together. That’s, in a way, the core of my book, about half of my book, is about getting the economics in the politics to work together again and when it isn’t working, it means recreating or creating a lot of institutions that function.
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