In this provocative book, Anatole Kaletsky re-interprets the financial crisis as part of an evolutionary process inherent to the nature of democratic capitalism. Capitalism, he argues, is resilient. Its first form, Capitalism 1.0, was the classical laissez-faire capitalism that lasted from 1776 until 1930. Next was Capitalism 2.0, New Deal Keynesian social capitalism created in the 1930s and extinguished in the 1970s. Its last mutation, Reagan-Thatcher market fundamentalism, culminated in the financially-dominated globalization of the past decade and triggered the recession of 2009-10. The self-destruction of Capitalism 3.0 leaves the field open for the next phase of capitalism’s evolution. Capitalism is likely to transform in the coming decades into something different both from the totally deregulated market fundamentalism of Reagan/Thatcher and from the Roosevelt-Kennedy era. This is Capitalism 4.0.
Capitalism 4.0
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Book Description
In early 2009, many economists, financiers, and media pundits were confidently predicting the end of the American-led capitalism that has shaped history and economics for the past 100 years. Yet the U.S. economic model, far from being discredited, may be strengthened by the financial crisis.
Editorial Reviews
Review
Literary Review, July 2010
“Hugely ambitious…. The overall impression is startlingly original. Kaletsky offers a genuinely new take on the credit crunch.”
The Economist, July 8, 2010
“Pedants will find plenty to quibble about in Mr Kaletsky’s analysis of the past, let alone his predictions.. But his book is full of clever insights. For sheer intellectual chutzpah and creativity, it is well worth reading.”
Financial Times, July 18, 2010
“Provocative…. There are now many – too many – books on the credit crunch. Kaletsky’s considerable achievement is to put these events in a perspective that looks back to history and forward to an extended future, and to do so in a framework which goes far beyond a chronology of events. His book is a major contribution to the debate on the nature of the market economy that needs to follow the practical failures of market fundamentalism.”
About the Author
Anatole Kaletsky is editor-at-large of The Times of London, where he writes a column on politics, economics, and international relations. Kaletsky was a full-time journalist for The Times, Financial Times, and The Economist from 1976 until 1998 when he expanded his activities to include economic forecasting and financial consulting.
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49 of 54 people found the following review helpful
Format:Hardcover
Anatole Kaletsky's key aim is to demonstrate that modern capitalism does not break, but bend in times of "existential" crises (p. 191). Like democracy, modern capitalism has an inherent institutional and political flexibility at its core (pp. 2; 19-20; 35; 311). This evolutionary ecosystem has reinvented and reinvigorated itself through rare crises for the last 250 years (pp. 3; 26; 36-37).
Modern capitalism has more staying power than its critics on both Left and Right usually want to give it for two key reasons:
1. Capitalism has been able to overcome its own contradictions allowing it to undergo radical change (pp. 2; 5; 21; 34-35; 52-53; 82; 157; 201-208; 246; 269-270);
2. Ambition, initiative, individualism, and competitive spirit are embedded in human DNA (pp. 1-2; 20; 22; 25; 41).
Kaletsky reminds his audience that the critical distinction between crises in capitalism and crises of capitalism is often overlooked. Crises in capitalism represent what Joseph Schumpeter called the process of creative destruction through which a group of businesses and industries are reorganized through the regular economic cycles of booms and busts (p. 34). In contrast, crises of capitalism have an impact on the broader capitalist system itself, shake economic assumptions and political beliefs, and cause far-reaching changes both within and between states (pp. 37-38).
The necessary metamorphosis of the capitalist system is at its most difficult when it is close to breakdown. The interest groups that have wealth and power under the threatened existing iteration of modern capitalism defend ruthlessly the status quo under the pretext that any attempt to change their cherished system is doomed to failure (pp. 9; 22-24).
To facilitate the understanding of this extraordinary resilience of modern capitalism, Kaletsky subdivides its history into what he calls the four ages of capitalism. The changing relationship between government and private enterprise has been the clearest feature of capitalism's evolution from one phase to the next (pp. 4; 192). Kaletsky further subdivides the first three ages of capitalism into several sub-periods to capture the key developments that occurred in each of these periods (pp. 43-54). Some historians will argue with Kaletsky's timeline and the way he regroups events to come up with these first three ages. The author notes on this subject: Unlike history, economics relies on simplifications and stylized facts (p. 44).
During Capitalism 1 that lasted from 1776 to the 1920s, economics and politics were to a large extent two distinct realms of human activity and emotion (pp. 3; 43-44). Governments intervened in the economy to collect taxes, mainly to pay for wars, and protect influential political interests without undermining both private property and the profit motive (pp. 4; 44-45). These interventions were expected to disappear over time as a result of a "natural" evolution towards liberalism and free trade. Managing economic activity and employment was excluded from the duties of the state (pp. 45; 159-161).
Capitalism 2 that found its genesis in both the Bolshevik revolution and the Great Depression lasted for about 40 years (pp. 3; 49). Strong belief in benign, omniscient governments and an instinctive distrust of markets, especially financial markets, were the dominant features of this phase of capitalism (pp. 161-168).
Capitalism 3 gestated in the global inflation of the late 1960s and 1970s and was unleashed onto the world under Ronald Reagan and Margaret Thatcher (pp. 3; 51; 53; 76; 80). Capitalism 3 was the antithesis of Capitalism 2, reflecting a firm belief in benign, omniscient markets and an adamant distrust of governments (pp. 3-5; 85-102; 128-155; 168-180; 195). Capitalism 3 got the coup de grace with the bankruptcy of Lehman Brothers in 2008 (pp. 1; 124; 130; 136). Kaletsky notes paradoxically that the wealth created under Capitalism 3 was to a large extent illusory and much smaller than the wealth created by the government-led high-tax capitalism of the 1950s and 1960s (pp. 12-13; 268).
Kaletsky argues that instead of separating government and private enterprise, capitalism 4.0 will bring them in closer relationship (pp. 8; 31; 190-196). Experimentation and pragmatism will color public policy, economics, and business strategy, even it means uncertainty, ambiguity, and inconsistency (pp. 8-9; 26; 30; 40; 200; 258; 279; 306; 318). Kaletsky expects that capitalism 4.0 to exist for 30-40 years before making room for capitalism 5.0 (p. 331).
The main value of Kaletsky's book lies in his framing of the key features of capitalism 4.0 that is emerging around the world in the aftermath of the 2007-2009 crisis (pp. 3, 7):
1. Shrinkage of government size, despite an expansion of government responsibilities and influence (pp. 10; 266; 270; 274-275);
2. Sharper distinction between the twin goals of taxation, i.e., revenue raising and redistribution. Choices between higher taxes and cutbacks in social entitlements or big reduction in all other discretionary public activities are inevitable (pp. 231-245; 271-272; 278; 287-290);
3. Convergence of heath care toward a mixed public-private model (pp. 10; 282-287);
4. Higher education more likely to become more market-oriented (pp. 10; 271; 281-282);
5. Expected privatization of many public services such as postal service and infrastructure (p. 270);
6. Tightening of financial regulations and resumption of the 1980s model of floating currencies (pp. 10; 222-228; 250; 256; 270; 291-301; 329-331);
7. Competition rather than convergence between the Chinese and Western models of politico-economic development (pp. 11; 257; 304-313; 315-317);
8. Business support for government subsidies and taxes directed at specific (say, manufacturing) industries or sectors due to massive amount of industrial restructuring expected to happen worldwide (pp. 314-315; 317-318; 322). Structural unemployment in the U.S. cannot be solved without an assertive industrial policy that complements free trade (pp. 250-259; 317);
9. Rationalization of the consumption of raw materials and fresh water through taxation (pp. 196-200; 317-329).
Kaletsky concludes by saying that if the necessary reforms happen, American-led democratic capitalism will reemerge as the most successful and attractive political-economic model for both advanced and emerging economies (pp. 12, 33; 312-313).
Modern capitalism has more staying power than its critics on both Left and Right usually want to give it for two key reasons:
1. Capitalism has been able to overcome its own contradictions allowing it to undergo radical change (pp. 2; 5; 21; 34-35; 52-53; 82; 157; 201-208; 246; 269-270);
2. Ambition, initiative, individualism, and competitive spirit are embedded in human DNA (pp. 1-2; 20; 22; 25; 41).
Kaletsky reminds his audience that the critical distinction between crises in capitalism and crises of capitalism is often overlooked. Crises in capitalism represent what Joseph Schumpeter called the process of creative destruction through which a group of businesses and industries are reorganized through the regular economic cycles of booms and busts (p. 34). In contrast, crises of capitalism have an impact on the broader capitalist system itself, shake economic assumptions and political beliefs, and cause far-reaching changes both within and between states (pp. 37-38).
The necessary metamorphosis of the capitalist system is at its most difficult when it is close to breakdown. The interest groups that have wealth and power under the threatened existing iteration of modern capitalism defend ruthlessly the status quo under the pretext that any attempt to change their cherished system is doomed to failure (pp. 9; 22-24).
To facilitate the understanding of this extraordinary resilience of modern capitalism, Kaletsky subdivides its history into what he calls the four ages of capitalism. The changing relationship between government and private enterprise has been the clearest feature of capitalism's evolution from one phase to the next (pp. 4; 192). Kaletsky further subdivides the first three ages of capitalism into several sub-periods to capture the key developments that occurred in each of these periods (pp. 43-54). Some historians will argue with Kaletsky's timeline and the way he regroups events to come up with these first three ages. The author notes on this subject: Unlike history, economics relies on simplifications and stylized facts (p. 44).
During Capitalism 1 that lasted from 1776 to the 1920s, economics and politics were to a large extent two distinct realms of human activity and emotion (pp. 3; 43-44). Governments intervened in the economy to collect taxes, mainly to pay for wars, and protect influential political interests without undermining both private property and the profit motive (pp. 4; 44-45). These interventions were expected to disappear over time as a result of a "natural" evolution towards liberalism and free trade. Managing economic activity and employment was excluded from the duties of the state (pp. 45; 159-161).
Capitalism 2 that found its genesis in both the Bolshevik revolution and the Great Depression lasted for about 40 years (pp. 3; 49). Strong belief in benign, omniscient governments and an instinctive distrust of markets, especially financial markets, were the dominant features of this phase of capitalism (pp. 161-168).
Capitalism 3 gestated in the global inflation of the late 1960s and 1970s and was unleashed onto the world under Ronald Reagan and Margaret Thatcher (pp. 3; 51; 53; 76; 80). Capitalism 3 was the antithesis of Capitalism 2, reflecting a firm belief in benign, omniscient markets and an adamant distrust of governments (pp. 3-5; 85-102; 128-155; 168-180; 195). Capitalism 3 got the coup de grace with the bankruptcy of Lehman Brothers in 2008 (pp. 1; 124; 130; 136). Kaletsky notes paradoxically that the wealth created under Capitalism 3 was to a large extent illusory and much smaller than the wealth created by the government-led high-tax capitalism of the 1950s and 1960s (pp. 12-13; 268).
Kaletsky argues that instead of separating government and private enterprise, capitalism 4.0 will bring them in closer relationship (pp. 8; 31; 190-196). Experimentation and pragmatism will color public policy, economics, and business strategy, even it means uncertainty, ambiguity, and inconsistency (pp. 8-9; 26; 30; 40; 200; 258; 279; 306; 318). Kaletsky expects that capitalism 4.0 to exist for 30-40 years before making room for capitalism 5.0 (p. 331).
The main value of Kaletsky's book lies in his framing of the key features of capitalism 4.0 that is emerging around the world in the aftermath of the 2007-2009 crisis (pp. 3, 7):
1. Shrinkage of government size, despite an expansion of government responsibilities and influence (pp. 10; 266; 270; 274-275);
2. Sharper distinction between the twin goals of taxation, i.e., revenue raising and redistribution. Choices between higher taxes and cutbacks in social entitlements or big reduction in all other discretionary public activities are inevitable (pp. 231-245; 271-272; 278; 287-290);
3. Convergence of heath care toward a mixed public-private model (pp. 10; 282-287);
4. Higher education more likely to become more market-oriented (pp. 10; 271; 281-282);
5. Expected privatization of many public services such as postal service and infrastructure (p. 270);
6. Tightening of financial regulations and resumption of the 1980s model of floating currencies (pp. 10; 222-228; 250; 256; 270; 291-301; 329-331);
7. Competition rather than convergence between the Chinese and Western models of politico-economic development (pp. 11; 257; 304-313; 315-317);
8. Business support for government subsidies and taxes directed at specific (say, manufacturing) industries or sectors due to massive amount of industrial restructuring expected to happen worldwide (pp. 314-315; 317-318; 322). Structural unemployment in the U.S. cannot be solved without an assertive industrial policy that complements free trade (pp. 250-259; 317);
9. Rationalization of the consumption of raw materials and fresh water through taxation (pp. 196-200; 317-329).
Kaletsky concludes by saying that if the necessary reforms happen, American-led democratic capitalism will reemerge as the most successful and attractive political-economic model for both advanced and emerging economies (pp. 12, 33; 312-313).
27 of 31 people found the following review helpful
3.0 out of 5 stars
Useful, but Overlooks the Dramatic Future Impact of Technology
September 11, 2010
Format:Hardcover
Capitalism 4.0 offers a useful analysis as far as it goes, but I think it completely misses the structural changes that are likely to come about as a result of accelerating technology and the dramatic impact those changes will have on the nature of capitalism. Like most of the books that deal with the financial crisis, Capitalism 4.0 has entire sections devoted to the impact of financial innovations, but absolutely nothing about the impact of technical advances in the real economy. For example the words "technology" and "automation" do not appear in the index.
Advancing technology and globalization have resulted in stagnant wages for most people in the U.S. for decades, even as housing, healthcare and education costs have been soaring. To a significant extent, the lack of wage-based income growth was probably an important driver of the housing bubble because buying a home represented the only way for average people to get ahead. Economists, including the author of this book, completely miss that connection between the bubble/financial crisis and real-world technological advance. The reality is that many of the problems being suffered by capitalism are due to a glut of labor brought on by automation technology and globalization. That reduces the bargaining power of all workers and drives down wages and consumer purchasing power.
Prior to the current crisis, average people were able to maintain consumption via credit, but those days are over and we now face a potential crisis of diminished consumer demand that could tip us into a deflationary spriral. It's important to realize that technology is continuing to accelerate. The problems that we see already will only get worse in the future.
For a great overview of this issue--and a focus on the future rather than the past--I'd strongly recommend this book: The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. It shows how advancing technology will very likely lead to structural uemployment and even more extreme concentration of income into the hands of the few. As someone who works in the technology field, I'm convinced that the trends described in this book are already well underway and underlie, at least in part, the current crisis. As "The Lights in the Tunnel" points out, this problem may ultimately be so big that it defies conventional solutions. I highly recommend that anyone concerned about the future of capitalism check out this book and give these issues some serious thought.
Advancing technology and globalization have resulted in stagnant wages for most people in the U.S. for decades, even as housing, healthcare and education costs have been soaring. To a significant extent, the lack of wage-based income growth was probably an important driver of the housing bubble because buying a home represented the only way for average people to get ahead. Economists, including the author of this book, completely miss that connection between the bubble/financial crisis and real-world technological advance. The reality is that many of the problems being suffered by capitalism are due to a glut of labor brought on by automation technology and globalization. That reduces the bargaining power of all workers and drives down wages and consumer purchasing power.
Prior to the current crisis, average people were able to maintain consumption via credit, but those days are over and we now face a potential crisis of diminished consumer demand that could tip us into a deflationary spriral. It's important to realize that technology is continuing to accelerate. The problems that we see already will only get worse in the future.
For a great overview of this issue--and a focus on the future rather than the past--I'd strongly recommend this book: The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. It shows how advancing technology will very likely lead to structural uemployment and even more extreme concentration of income into the hands of the few. As someone who works in the technology field, I'm convinced that the trends described in this book are already well underway and underlie, at least in part, the current crisis. As "The Lights in the Tunnel" points out, this problem may ultimately be so big that it defies conventional solutions. I highly recommend that anyone concerned about the future of capitalism check out this book and give these issues some serious thought.
1 of 1 people found the following review helpful
By brado
Format:Hardcover
The author does a great job pulling economic perspectives from various views. Although it can be slightly unsettling that the author does not share his personal views, he does however explain what he thinks the only route of progress will be - compromise. We will not have a pure free-market system and we will not have a pure socialistic system.
The phase of capitalism we have entered will continue to better the world and improve living standards, because capitalism is an adaptive system - it will always find a way to work in an inefficient world.
The phase of capitalism we have entered will continue to better the world and improve living standards, because capitalism is an adaptive system - it will always find a way to work in an inefficient world.
Most Recent Customer Reviews
4.0 out of 5 stars
A refreshing perspective
Anatole Kaletsky's book is a break from the norms of world of economics. He analyses both capitalism and communism, and argues successfully that system is a combination of both. Read more
Published 1 day ago by Ernie_Dingo
5.0 out of 5 stars
compelling analysis of 2007-2008
This book minces no words, and lays what really happened leading
up to the Great Depression, and how the calamity evolved. Read more
up to the Great Depression, and how the calamity evolved. Read more
Published 7 months ago by dws
1.0 out of 5 stars
A waste of time
This book is 80% conjecture and hypothesis, 10% undocumented examples (the bibliography is lacking), and 10% just naive folly. Read more
Published 15 months ago by E. jameson
1.0 out of 5 stars
Revisionism for Keynes Worshipers
This book begins as an intelligent and provocative review of major turning points in economic thinking in the United States. Read more
Published 16 months ago by getdough
2.0 out of 5 stars
Pedantic
Mr. Kaletsky has obviously spent a lot of time reporting on policy and economics. He knows what he writes about, and I have complete faith in his reporting of the facts. Read more
Published 24 months ago by J. C. Shepard
4.0 out of 5 stars
Good Read On A Possible Future
An excellent book on the way forward from the Credit Crunch and the collapse of market fundamentalism. Read more
Published on February 10, 2011 by David S. Wellhauser
5.0 out of 5 stars
Fantastically Intuitive
Definitely one of my top three books of all time. This book is like "World Politics" by Calvocoressi for capitalism. Read more
Published on November 13, 2010
5.0 out of 5 stars
Heady ride through the history and future of capitalism
Capitalism is dead; long live capitalism. That's the central tenet of veteran business journalist Anatole Kaletsky's instructive, perceptive tome. Read more
Published on October 4, 2010 by Rolf Dobelli
3.0 out of 5 stars
capitalism 4.0 = socialism 101
See the review by serge van steenkiste for a very good summary of the
capitalism 4.0 The book, however, is a mixed bag. Read more
capitalism 4.0 The book, however, is a mixed bag. Read more
Published on August 21, 2010 by irwinbo
Front Cover | Front Flap | Table of Contents | First Pages | Index | Back Flap | Back Cover | Surprise Me!
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