Iversen and Soskice’s review emphasizes two crucial questions: the sources of change in capitalism (and, hence, of growth) and the compatibility between democracy and markets.

Their new book Democracy and Prosperity attributes the origins of today´s capitalism to (democratic) politics. Governments, foreseeing the potential of technological change (with either full foresight— before it happened—or partial foresight, when it was incipient), altered the policy environment accordingly, leading to the current economy. Although theoretically possible, that explanation seems empirically implausible. We have no evidence that any government relied on specific ideational models connecting the reforms introduced in the 1980s with the world of today: Thatcherism was a (coherent) neoclassical response to economic decline and, as such, agnostic about the specific technological consequences of deregulating the economy. Likewise, both the weak performance of southern Europe (including France) and the continuing anxieties of German industrialists and policy makers about their incapacity to fully compete with US companies at the new technological frontier further belie the “policy foresight” explanation.

By looking at the full history of industrial capitalism in Democratic Capitalism at the Crossroads, I show, instead, that technological progress (mostly resulting from a learning-by-doing process involving profit-seeking entrepreneurs and engineers) has been the main driver of change, especially by defining what human skills are complementary to the dominant productive machinery of the era. Nineteenth-century Manchester firms used unskilled labor. Twentieth-century Detroit companies relied on semiskilled labor in factories, resulting in a more equal organization (and distribution of returns). Today’s Silicon Valley technologies favor high-skilled labor while making semiskilled labor’s performance of routine tasks redundant. Nevertheless, mine is not a story of technological determinism. First, economic change is embedded in a social and institutional matrix, where the crucial problem, which I have discussed analytically in Political Order and Inequality (2015), is in fact the protection of growth against those who, not having generated any, want to appropriate it. Second, I describe the relationship between technology and politics as one defined, to employ Toynbee´s forgotten but still useful terminology, by a sequence of challenges (generated by technological progress) and responses (of policy makers deciding how to adapt to a constantly changing environment).

To Iversen and Soskice, that relationship (between capitalism and democracy) is “symbiotic.” Yet, as I insisted in my initial review, we cannot conclude from the way in which both related to each other during the middle decades of the twentieth century that they had been compatible before (they had not) or that they will be after (they may not be for a given level of technological disruption). Because the future is essentially unknowable—even though it may be sometimes predictable—I deliberately avoided siding with either techno-optimists or techno-pessimists. Instead, I attempted to dissect the parameters that have determined and will determine the chances of democratic capitalism: the race between technology and education, the nature of capital ownership, the way in which the majority (itself affected by technological change) may respond (given the political institutions in place). I do this both for the North and (a less discussed topic in the literature) the whole South. Overall, I anticipate a lot of turmoil ahead. Still, I also see that our current levels of wealth (and a relatively large democratic stock) ought to allow us to respond to any future challenges successfully.