The recent global financial crisis has made sociologists and politicians think more about the serious problems affecting our economies, says academic Daniel Dayanu in an article on friendofeurope.org.

Why have societies become so deeply divided that it is not conducive to democracy at all? How does rising income inequality affect governance structures? Why is it that “fake news” often takes precedence over real news, and social media plays a nefarious role in this? What must be done to prevent the rule of law from being undermined by “mob rule” when so many people seem to be losing faith in government elites and succumbing to the sirens of anarchism and authoritarianism?

The COVID-19 pandemic, energy and climate crises, Russia’s war in Ukraine, and geopolitical confrontations make it difficult to protect democracy amid social divisions and tensions, disaffected citizens, and mistrust of politicians. It is possible that the lingering effects of recent crises are harbingers of a new turn in the evolution of capitalism.

Throughout its history, capitalism has developed as a social and economic system. This evolution is interconnected with cycles of ideas, public policy and institutional change.

Over time, a mixed economy has emerged in which the public and private sectors coexist, based on market dynamism and entrepreneurship, and the shares belonging to these two sectors vary according to historical circumstances and local conditions. Among the main principles of modern capitalism is the concept of “equal opportunities”. To what extent reality conforms to this principle is an open question and an integral part of re-examining how capitalism works.

The debate that began after the outbreak of the financial crisis more than a decade ago is not necessarily about capitalism and socialism, but about the path of capitalism, the path of a mixed economy, and the path of democracy.

We have the lesson of Communism, a totalitarian regime that should not be judged as something that distorted the Enlightenment project, and the lesson of National Socialism in Hitler’s Germany

Capitalism – when embodied by unrestricted markets, lack of rules/regulations, outright political capture by powerful interest groups, and market fundamentalism – is as detrimental to the functioning of a fair market economy as it is to the functioning of a democracy.

The big stake in the current debate about the future of capitalism is to defend democracy as a liberal political regime – democracy has liberalism in its genes.

It goes without saying that climate change and the energy transition have enormous implications for the functioning of our societies and influence the debate about the future of democracy.

Providing global public goods requires cooperation among global states, despite geopolitical difficulties

The threat of climate change is not new. The sequence of climate events in recent years, from wildfires and melting ice caps to floods and extreme temperature changes, points to a dangerous future for humanity, with possible extinction if nothing is done.

Our behavior and relationship with nature must change. If this is not done, a spectrum of civilizations will emerge in which access to water resources is equated with power – which will foster authoritarian tendencies.

We need to change public policy by strengthening budgets that allow for timely emergency measures, as well as systematic actions that help to withstand severe negative shocks and increase the resilience of economic and social systems. The International Monetary Fund (IMF) emphasizes the need to combat carbon emissions and review public policy for this purpose; a globally implemented carbon tax would be a step forward. In addition, a global agreement on climate change should be supported by both the United States and China to drastically reduce dependence on fossil fuels. Providing global public goods requires cooperation among global states, despite geopolitical difficulties.

With regard to the COVID-19 pandemic, partial lockdowns have revealed the possibility for many companies and government agencies to operate with a significant reduction in the number of employees. Working at home, digitization and new technologies predict radical changes in the activities of many companies. This impact should be seen in the context of the growing number of “failures” due to unrestricted globalization and inadequate government policies.

Automation and artificial intelligence (AI) are having a major impact on labor markets. Mass layoffs will exacerbate social problems and structural unemployment. They experimented with the introduction of a guaranteed minimum wage as a means of preventing excess social tension. Financing a guaranteed minimum income can redistribute income from firms that use robotics (replacing human labor) to those who lose their jobs. Education and training programs should help people find alternative work.

A major challenge is aging, which is straining pension schemes and raising questions about retirement horizons and intergenerational relationships. Aging societies combine economic, social and psychological problems.

Public administration must solve market problems and create public goods on the necessary scale

The recent and current crises, which are seen as serious national security issues, have caused a tendency to increase the presence of the state in the economy.

We must avoid turning our societies into winner-take-all economies!

However, the “return of the state” comes with a risk: since markets alone cannot solve social problems or overcome economic crises, much greater public support will not provide long-term solutions. Large national debts are eloquent evidence of this.

Public administration must solve market problems and create public goods on the necessary scale. For this, states need reliable budgets and higher state revenues, as well as more efficient state spending.

This involves combating tax evasion, severely punishing unethical corporate behavior, modernizing tax regimes, raising taxes for wealthier members of society and fighting tax havens. He also calls for a crackdown on the unjustified rents that some industries, including finance and big pharma, extract from the economy. How to achieve all this is a big question, since vested interests have enormous political influence.

We need a nimble state with limited resources to lift more people out of welfare slavery – to restore their personal dignity and sense of active rather than abandoned members of society. . We also need greater accountability of decision makers.

This is a necessity in the struggle to restore public trust in political leaders and the business elite. Fighting high-level corruption, double talk and hypocrisy is also imperative in the fight to restore trust.

The world is changing due to the redistribution of economic power between countries, and capitalism is undergoing major changes.

We are likely to live through a transition period of great chaos and rising tensions, with the rules of global governance largely relaxed and a “survival of the fittest” response.

Which way is capitalism going?

The challenges of capitalism come not only from the inclinations of some leaders, self-interest and pure power struggle, but also from deeper roots such as globalization and neglect of social aspects.

Certain trends are likely to define capitalism in the coming years:

• governments will be more present in economic life for the purpose of providing public goods;

• industrial policy will grow, not least for reasons of competitiveness and security;

• a new arms race is underway, which will affect the distribution of resources and the structure of the economy; this will involve greater fragmentation and reorientation of the supply chain, as well as trade restrictions in the global economy;

• there will be stronger calls to regulate artificial intelligence that can be harmful to humans and turn it into a threat to existence;

• tax regimes will be revised to make them fairer and increase budget revenues for environmental and industrial policies;

• broader financial regulation will be adopted, including shadow banking and crypto-assets

• inclusion is likely to gain more importance in public policy; and migration will be high on the agenda of governments, as demographic changes and migrant flows can easily destabilize societies.

The debate around the ideal model should be about a form of capitalism that can stimulate more innovation and higher productivity.

If the number of “losers” in economic competition increases, extremist groups will increase their political advantage. If we do not change public policy to create more just societies, xenophobia, chauvinism and racism will strengthen authoritarian and illiberal tendencies, conflicts will spread.

Perhaps our societies have entered a new “tipping point” that may cause additional social and economic wars amid geopolitical confrontations and chaotic events in various parts of the world. There are many signs that indicate this. If so, the fight to protect democracy will be increasingly difficult.