The past 12 months have been bewildering, at least for those who assumed after 1989 that the world could look forward to a future of unequalled prosperity. Protests, often led by middle classes, erupted or intensified not only in economically damaged countries such as Greece, Spain and Thailand. They rattled relatively competent stewards of globalised economies in Chile, Brazil and Turkey.

Slowing growth in India and China, the poster countries of globalisation, fuelled creeping authoritarianism and different, but equally anachronistic, Maoist revivals. Toward the end of the year, the president of the richest country in the world called economic inequality as “the defining challenge of our time” and the pope, denouncing a “deified” free market, emerged as the most prominent critic of contemporary capitalism.

The signs are unambiguous. Almost 25 years after the intellectual and political collapse of communism, another – and by far grander – narrative of promised progress is unraveling: that of liberal capitalism. The real rivalry in the Cold War was between these two economic systems, summed up by the “kitchen debate” between Richard Nixon and Nikita Khrushchev in 1959 in Moscow. Nixon stressed the great choice and quality available to American consumers. Khrushchev claimed that the joys of materialism were more equitably shared in his country: “In Russia,” he said, “all you have to do to get a house is to be born in the Soviet Union. ... In America, if you don’t have a dollar you have a right to choose between sleeping in a house or on the pavement”.

Of course, the Soviet Union with its sclerotic bureaucracy proved incapable of delivering the goods, despite having industrialised successfully and rapidly. But the revolutionary fantasy of remaking the world did not die with communism. Since 1989, journalists and editorial writers, politicians and businesspeople in the West have shared a simple faith: that liberal capitalism, now unopposed, would spread around and enrich the world.

Although more intellectually respectable, this vision reflected the same quasi-religious faith in predestination that communism did. In December 2001, recalling the mood of the decade after the end of the Cold War, Don DeLillo described how “the dramatic climb of the Dow and the speed of the Internet summoned us all to live permanently in the future, in the utopian glow of cyber-capital”.

All that was needed, even for countries arriving very late to the modern world, was the same cocktail that seemed to have worked for the West: minimal governments, free markets, and the hard work and ingenuity of self-motivated individuals.

A long history of state intervention in markets and support to strategic industries was traduced, as I wrote in my previous column, in order to bolster the myth of self-regulating markets and self-reliant entrepreneurs. As the great American critic (and US President Barack Obama’s favourite philosopher) Reinhold Niebuhr never ceased to point out, “When economic power desires to be left alone, it uses the philosophy of laissez faire to discourage political restraint upon economic freedom”.

But there was always a problem with this idea of progress directed by the invisible hand of free markets: It could only be persuasive so long as growth was on an upward trajectory and appeared to be spreading its benefits widely.

For large, populous countries such as India and China, it was always going to be difficult to realise an ideal of national wealth and power that had its origins in the successful Western colonisation of vast lands and appropriation of resources in the 19th century. Many among their freshly politicised populations have discovered that self-regulating markets and the trickle-down effect are about as likely to produce widespread prosperity as socialistic central planning.

The free market ideology of individualism doesn’t look very convincing when big corporates and special interests are revealled to have been in profitable alliance with politicians all along. It is this hoax of power that many people, middle class as well as poor, have awakened to an interconnected but deeply unequal world.

The year ahead will no doubt further unnerve those who cling to the millenarian fantasy that only free markets can save the world.


Pankaj Mishra is a Bloomberg View columnist