When Francis Fukuyama famously proclaimed the “end of history” and the triumph of western liberalism in 1989, his assertion reflected an assumption so obvious that he hardly bothered to argue it–that the “free” market and political democracy are two sides of the same coin.

Just over two decades later, as the western world is increasingly under challenge politically, culturally and–not least–economically, that assumption cannot be sustained. What Fukuyama failed to foresee was that the major threat to western economic and political hegemony, as well as to western culture and values, would come from within–from the forces liberated and empowered by “free-market” doctrines to the point where they are able to override and ignore the safeguards supposedly guaranteed by democratic governments.

The whole point of democracy, after all, was that the otherwise overwhelming power of those who would dominate an unregulated “free” market could be restrained and offset by the legitimacy and political power conferred on government through the democratic process. But when it became accepted that market outcomes should not be challenged, that rationale was undermined.

Perhaps the most important single step in this process was the removal of exchange controls at the end of the 1970s. When international capital was free to move wherever it wished in search of lower costs and therefore higher profits, the balance of power between capital and government was hugely altered. Henceforth, governments could no longer prescribe to capital the conditions that had to be met; it was now governments that had to sue for terms.

International investors could now demand, as the price of essential investment, that their demands be met. And whereas governments were still accountable to their electorates, international capital could act quite irresponsibly. A shift in calculations as to where the highest profits could be made could mean the precipitate withdrawal of capital, with governments left to pick up the pieces.

In Myths, Politicians and Money, I seek to explain the consequences of these changes and the powerful impact they have had on our fortunes. Many western leaders have been so dazzled by the fortunes made by successful businesses that they have tried to run countries as though they were businesses. The market has been assumed to be infallible, not least in the United Kingdom, and business leaders have been deferred to in the belief that they know…

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