Democracy and prosperity: reinventing capitalism through a turbulent century

Abstract

The fall of the Berlin Wall generated a widespread consensus that democracy had become the only legitimate form of government and that—sooner or later—all countries would adopt it. Since the 2008 economic crisis, belief in the triumphant march of democratic governance has evaporated, and the political systems of advanced nations now look much more fragile than they did in the past. Challenged by new populist movements domestically, they no longer appeal to other countries—many have begun to argue that the alliance between capitalism and democracy is no longer able to deliver on expectations. Torben Iversen and David Soskice do not share these concerns. On the contrary, they argue that the coalition between consolidated democracies and capitalism is solid and prosperous. The keyword they use to describe it is resilience. This quality has allowed advanced capitalist democracies to survive political challenges from competing regimes—notably fascism and communism—and to withstand, despite severe damage, major economic crises, including those in 1929 and 2008. The authors note that cases where wealthy democratic states reverted to authoritarian regimes are the exception. Moreover, the club of consolidated democratic nations has progressively managed to acquire new members, including Japan and South Korea in the east and several countries in southern and eastern Europe.