The 20th century saw the rise and fall of fascism and communism – one went with a bang and the other with a whimper.  At the turn of the millennium many in the West were convinced that we were facing the end of history, with Francis Fukuyama telling us as much in 1989.  For a decade or more many in the West felt confident that markets and democracy had won at last and the world would live in an era of peace and prosperity.  In 1996, Thomas Freidman even came up with the “Golden Arches” theory to describe the new era of peace since no two countries with a middle class large enough to support of McDonald’s had ever gone to war (this theory was put to rest with the 2008 Russia-Georgia conflict).

History, however, seems to be carrying on.  The ideological battle of the 21st century will be fought between “good capitalism” and “bad capitalism.”  The characteristics of each system are laid out in a 2008 book of the same name by William J. Baumol, Robert E. Litan, and Carl J. Schramm.  The differences between these types of capitalism the authors make might seem minor (one might say a market is a market after all), but it is certain that the world will not be as peaceful as earlier declared as long as these systems are competing against one another.  We can already see the strains between nations with large firm/entrepreneurial capitalism and authoritarian/oligarchic capitalism in the daily headlines and in the text of WTO complaints.

Like the Cold War before it, the next war will not be fought on battle fields or even in the hearts and minds of the citizens of the world.  It will be fought with cold hard facts delivering answers to the questions – can the economy deliver growth, do citizens have a chance to rise from poverty based on their merit, how efficient is the allocation of labor and capital, and are the rules of the game stable enough to encourage growth.  The nations whose political and economic systems that can answer these questions best will be the ideological victors of the 21st century.

Themes: conflict, market economy

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