Nowadays, liberal democratic capitalism has seen its defenders declining, given that people are starting to support alternative models such as nationalism and authoritarian capitalism.
Nevertheless, it has proven itself to be the most efficient system that has ever existed. It promotes a free market economy, globalization and leads to economic growth. Associated with a democracy where government intervention is present but has its powers limited, it aims to maximize justice in society.
On the other hand, illiberal nationalism opposes itself to globalization, immigration and technological revolution which are very important factors for the world’s evolution. Under an authoritarian capitalistic regime government intervention is strong and can sometimes take away individuals’ freedom.
So, it is necessary to take measures in order for people to restore hope on liberal democratic capitalism, more specifically measures that reduce the inequality gap between the rich and the poor.

Controversy over the efficiency of the liberal democratic capitalistic system has been felt amongst both citizens as individuals and as nations. Questions as to whether it is the best economic and political system began to arise. Capitalism is an economic system that can be associated to different political regimes such as democracy or authoritarianism.

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In the modern days, defenders of liberal democratic capitalism have been declining. One could held responsible the common disbelief in the system as the factor to blame for its decreasing supporters. Such mistrust was mainly generated as the benefits of the system were not explicit to the public, specifically those who have basic levels of education. Thus, the need for resorting to other systems appeared, not because they find them better, but because they are unhappy with the current situation. The election of president Donald Trump in the USA and even the Brexit referendum and the latest Italian polls in Europe, illustrate just that. Such occurrences show the increasingly attractiveness of nationalism. Also, the authoritarian capitalism present in China and lately, in Russia, can be seen as a political rival to the liberal democratic capitalism.

Therefore, and as the author suggests, measures should be taken to prove that liberal democratic capitalism works for everyone, making people believe in the system again and showing it is the best system, at least until today.


Capitalism is an economic system where private entities possess the production factors with the goal of maximizing profits. Capitalism’ engine is society’s consumption. To succeed, it requires a free market economy. Capitalism leads to the best products at the best prices, given the fierce competition between firms operating in the market. So, incentives to innovation and hard work (due to the existence of bonuses) allow for economies to grow, increasing GDP and societies’ standards of living. 2 Nevertheless, capitalism’s essential role is not only to generate money, but also to fulfill citizens needs. Prosperity isn’t defined by money, but by the more and better solutions that come from the better allocation of resources a capitalistic market is able to achieve. As an example, today we have antibiotics that save lives. 8

Moreover, capitalism is characterized for the controlled government intervention. As so, the market allows for monopolistic firms to set high prices. Also, capitalism is largely criticized by expanding the inequality gap between the rich and the poorer. Negative externalities such as pollution are ignored. Besides, the excessive production can lead to the scarcity of natural resources. 13


By joining forces, democracy is able to attenuate many of capitalism’s disadvantages. As Charles Kennedy, Former Member of the UK’s Parliament refers “Three simple words – freedom, justice and honesty. These sum up what the Liberal Democrats stand for”. 10 Democracy exists to restrict the government’s power, in order for citizens to be treated in accordance to the rules set by the representatives of those citizens. Democracy’s main goal is to maximize justice and reflect upon society’s decisions. It allows citizens to achieve growth and fairness, decreasing the inequality gap. Democracy also grants the access to public goods and combats externalities.

Nevertheless, for the government to exercise what was previously mentioned, it needs money, which justifies the need for taxes. To reduce the impacts of capitalism, consumers must be responsible. One might be seen as a consumer who wants to maximize returns or as a citizen who wants to minimize consequences that arise from transactions made as consumers. As so, an alteration in the laws of work, increasing workers power of negotiation might raise prices. The consumer in me would disapprove of such measure, however, the citizen in me will approve the higher price since it translates into better work conditions. In the role of citizens we must be careful enough to try and reduce social costs whilst keeping prices as low as possible. 15 8

Summing up, liberal democracy defends that individuals are able to provide social welfare to all citizens, being the government only necessary as a judge when mistakes happen. The development of democracy leads to liberalism in political questions and to capitalism in economic questions. 4


Since the second world war democratic capitalism has lost some of its followers. Specially those who are unhappy and unable to understand its benefits. Thus, alternative systems such as nationalism and authoritarian capitalism are seen as new threats.


Illiberal Nationalism’s presence in the western world is becoming every day more and more felt, through Donald Trump’s election, the Brexit referendum and in the Italian polls with the triumph of the Five Stars movement.

As the author refers, the three major economic factors that make nationalism overlap capitalism are the structural economic changes, the economic insecurity (high unemployment and poor wage growth), and also structural changes due to the technologic revolution. As these are three great factors to the worlds’ evolution, nationalism presents itself as a large threat as it is gaining supporters by the hour.

Under nationalism, the government controls the economy with the intuit of promoting the interests of the nation. Its defenders are indifferent as to whom possess the production factors (whether it is the government or private corporations) as long as they empower the country. This way, it gives priority to domestic businesses, defending the national economy over the global commerce. 3 The United States were the greatest example of a free capitalistic market, however, with Donald Trump’s election, the country is leaning itself towards a more nationalist system. As he once said: “We will make America strong again. We will make America proud again. We will make America safe again.” 16 And we will make America great again.”. Accordingly, several measures are already being enforced to protect its economy and their global implications have already been felt. The US president pulled his country out of the TPP (an agreement between the US and Asian countries) as he considers that the free market with these countries would prejudice national workers, specially in the industrial sector as they were losing their jobs and seeing their wages stagnant. In addition, the Trump administration threat of research budget cuts was intended to force universities to limit the number of foreign students, as he considers the US would be paying to educate brilliant students who would eventually return to their origin countries. 9

In my opinion, nationalism doesn’t account for global well-being, but only of each country individually, which makes everyone worse off. This because, a free global market is, in general more beneficial for citizens (as we saw in classes on the politics of the new trade deal). In the education case, particularly, the US would be educating students with great capacity that would attend global necessities. Thereby, “It is not easy to see how the more extreme forms of nationalism can long survive when men have seen the Earth in its true perspective as a single small globe against the stars.”, Arthur C. Clarke, a famous science writer. 7


Another great threat to the liberal democratic capitalism, seen in a more political field which also has economic implications, is the authoritarian capitalism. This model has been collecting adepts. According to data divulged by the IMF, economic growth in capitalistic authoritarian countries has reached an average of 6,28% in the last 15 years, whilst liberal democracies reached an average of only 2,62%. 11 Such model is largely supported by China and Russia, where the government assumes an important role in the economy. In China, state owned enterprises account for more than 40% of total GDP as of 2013. 1 Under this regime, the government can utilize the scarce resources in an inefficient manner given the fact that its objective is no longer the maximization of profits. The state can sometimes make wrong decisions, spending its budget on inefficient projects. 5 By practising the authoritarian capitalism, the government is able to control technology and other oppressive resources as we can see in China through the “Great Firewall of China” which protects and blocks Internet contents. Therefore, states’ intervention removes liberty from people to act. Both in Russia and in China, ambiguous are the declarations on democracy, as sometimes it is claimed as a long-term goal. 14

Nevertheless, government intervention is necessary as mentioned before, but it must be as limited as possible. One of its main goals is to reduce the inequality gap, which could be done by ensuring equal access to education for all population, having well designed labor market policies with a high minimum wage (however, one must not forget that really high minimum wages might lead to unemployment), and by levying taxes and changing transfer systems. 12 Last but not least, measures must be taken to break the vicious cycles that geography is responsible for (countries have different resources from one another). As so, we must take advantage of countries that have a lot of skilled labor and combine it with the natural resources that exist with great variety in others. The world would then benefit of such earnings.


“Capitalism is the worst form of economic management, except for all those other forms that have been tried from time to time.” by Winston Churchill, Former British Prime Minister. 6 However, it is necessary to adopt more radical economic policies, specifically in what respects the inequality gap between the rich and the poor in each country and in the world, as to decrease defenders of nationalism. Once nationalism ideals are already spreading in Europe, if this spreading rate continues to increase, implications for the EU might be disastrous and one could only guess the beginning of the end of such an important economic integration.

Stepping on to the next rival, authoritarian capitalism is characterized by an excessive government intervention that takes away individual freedom. Under a democracy, the state only intervenes when absolutely necessary, and so, its powers are limited. Nonetheless, it is still necessary for the promotion of fairness to citizens.

Summing up, and, as the author suggests, it is necessary that people start to believe in a liberal democratic capitalistic system again as way of not going against globalization, technological evolution and free markets, but towards them.


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