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The Issue Behind Our Issues

Many commentators nowadays rely on a narrative in which weak productivity growth, populism, and a rising China are threatening the very survival of Western liberal democracy. Yet most of the commonly identified causes of Western discontent are in fact symptoms of a deeper intellectual breakdown.

LONDON – As the chair of the Royal Institute of International Affairs (Chatham House), I recently hosted an offsite event with some of the organization’s strongest supporters, research staff, and other leaders. I left with a clearer view of three of the biggest issues of our time: slowing productivity growth, anti-establishment politics, and the rise of China.

Generally speaking, the reason that we have so many “issues” is that the international capitalist model has stopped functioning as it should, particularly in the years since the 2008 financial crisis. This has become increasingly apparent to many Western voters, even as experts have struggled to understand the precise nature of the economic and political shifts underway.

According to the economic textbooks that I grew up with in the 1970s, successful businesses within a market-based system should deliver profits to their equity owners, which in turn should lead to stronger investment and rising wages. At the same time, the potential for profits should attract new market entrants, which in turn should erode the incumbents’ profitability, fuel competition, and spur innovation.

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