The Fourth Revolution, Micklethwait & Wooldridge

Alexander Privitera

Commerzbank AG

Alexander Privitera a Geoeconomics Non-Resident Senior Fellow at AICGS. He is the head of European affairs at Commerzbank AG. He focuses primarily on Germany’s European policies and their impact on relations between the United States and Europe. Previously, Mr. Privitera was the Washington-based correspondent for the leading German news channel, N24. As a journalist, over the past two decades he has been posted to Berlin, Bonn, Brussels, and Rome. Mr. Privitera was born in Rome, Italy, and holds a degree in Political Science (International Relations and Economics) from La Sapienza University in Rome.

Events of the past few months have once again proven that, in today’s world, defining what a rules-based order is has become increasingly difficult. In fact, the world order increasingly looks more like world disorder, to echo a title of a forthcoming book by Henry Kissinger. Challenges to western democracies both from within the system as well as from outside show no signs of abating. The Arab Spring has turned into an Arab nightmare, darkened by power grabbing generals and Islamic extremists. Russia has finally abandoned any pretense of being interested in becoming an integral part of the so-called “West,” and in Asia, nationalism and autocratic regimes often seem to be gaining the upper hand over liberal democracies. Even in Africa, not long ago praised for its progress—mostly economic—things seem to be going into reverse. South Africa, which only twenty years ago seemed to be on the verge of becoming a beacon of the western, modern, liberal order, risks slipping back, its state infected with cronyism and corruption. Latin America offers a mixed picture, but where progress was very tangible only a few years ago, such as in Brazil, people are increasingly frustrated and angry with their elected government and the level of its corruption.

Indeed, seen from any Western capital, the second decade of the twenty-first century is proving to be even more challenging than the first one. The recent financial crisis and the damage inflicted to the real economy has further fueled doubts about our societies. In the United States, traditional skepticism about government institutions, locked into what appears to be a state of permanent and paralyzing political warfare, is getting stronger. Despite the economic recovery, most citizens feel that inequality is rising, opportunities shrinking, and the country is still very much on the wrong track.

In Europe, voters have taken aim at established parties in recent elections and voiced rising concerns about a powerful and non-democratically elected bureaucracy in Brussels.

All this has fueled a debate over whether the state in the West has become dysfunctional and if there is anything that can be done to stop and reverse the decline of the liberal order. John Micklethwait and Adrian Wooldridge, respectively editor in chief and management editor at The Economist, have attempted to do just that in a short but brilliant new book, The Fourth Revolution. They have resisted the temptation to declare the patient dead or in need of drastic amputation. But they also dismiss calls of those who see the recent financial crisis as the proof that modern capitalism needs taming and an even stronger role for the government. Instead they try to find a new balance between capitalism and the role of an efficient, democratic state by retracing the evolution of the modern state back to its origins in seventeenth century Britain.

The authors identify three crucial developments in the evolution of the modern state: the first linked to Hobbes and the discovery of the power of the central government, the Leviathan; the second represented by the liberal revolution of John Stuart Mill; and finally, the third based on the development of the welfare state, which came about in response to rising expectations about what services the state should offer to its citizens. The search heralds a champion, William Gladstone, the four-time British prime minister, who in the midst of the industrial revolution in the nineteenth century adapted the British state to the challenges of its time. It was the triumph of small government, confined to performing well-defined and limited tasks, but doing so extremely well. According to the authors the Gladstonian approach cannot provide a blueprint for the reforms needed in today’s world, but its philosophy of public restraint does. Since attempts in the West to tame big government having failed—and this very much in spite of the Reagan and Thatcher revolutions of the 1980s—Micklethwait and Wooldridge look elsewhere for elements that can help the Western, liberal state to survive and return to serve its citizens more effectively.

They find some answers in authoritarian Asian countries that have developed efficient technocracies, others in Nordic nations that have reduced the size of their once bloated governments while at the same time preserving crucial services—thanks in part to more effective private public partnerships. Wooldridge and Micklethwait could have added the largely successful German experience of the social market economy to the mix, but perhaps they will dedicate more time to the German model on the
pages of The Economist.

But overall, they get it exactly right. The authors praise the advantages of devolution, which in EU parlance is known as subsidiarity. Indeed, some of the few shining examples of success in the West are to be found at the local level, in cities such as New York. At the same time certain centralized elements of a well-functioning state need to be preserved and protected from direct and constant public meddling, often disguised as democratic accountability. Central banks, for example, would cease to function properly for the general interest if citizens were allowed to block their work at every juncture. Only through their independence can they perform their duties.

The authors have little patience for what has happened in the name of democratic accountability in recent decades. Poll-driven democracies don’t function properly. The book’s call for a return to the bygone Gladstonian era is therefore first and foremost an urgent appeal for a return to the roots of representative democracy, one in which the state is democratically controlled, but still allows for medium to long-term decisions in the name of the general interest.

This book will neither please advocates of big governments nor those who think that any form of central government should be dismantled. But it will prove very satisfying for all of us who think that government still has a role to play, but needs to undergo major surgery.

The views expressed are those of the author(s) alone. They do not necessarily reflect the views of the American Institute for Contemporary German Studies.