….So we should see today’s turmoil as a predictable response to the breakdown of one specific model of global capitalism in 2008. Judging by past experience, a likely outcome could be a decade or more of soul-searching and instability, leading eventually to a new settlement in both politics and economics.
This is what happened when the elections of Margaret Thatcher and Ronald Reagan followed the great inflation of the early 1970s, and when the American New Deal and the “rough beast” of European rearmament emerged from the Great Depression. Each of these post-crisis settlements was marked by transformations in economic thinking as well as politics.
The Great Depression led to the Keynesian revolution in economics, alongside the New Deal in politics. The inflationary crises of the 1960s and 1970s provoked Milton Friedman’s monetarist counter-revolution, which inspired Thatcher and Reagan.
It therefore seemed reasonable to expect the breakdown of deregulated financial capitalism to trigger a fourth seismic change (Capitalism 4.0, I called it in 2010) in both politics and economic thinking. But if global capitalism really is entering a new evolutionary phase, what are its likely characteristics?
The defining feature of each successive stage of global capitalism has been a shift in the boundary between economics and politics. In classical nineteenth-century capitalism, politics and economics were idealized as distinct spheres, with interactions between government and business confined to the (necessary) raising of taxes for military adventures and the (harmful) protection of powerful vested interests…..