In a climate of concern about the future of capitalism and democracy, this book provides a robust defense of both. Capitalism and democracy, Torben Iversen and David Soskice argue, are mutually reinforcing, and the combination has been remarkably successful over the past century. In what will probably be the most discussed part of the book, they anticipate that the symbiotic pair will continue to thrive, overcoming the challenges posed by populism and inequality. Democracy and Prosperity provides a challenge to those who believe that capitalism is increasingly unable to fulfill the needs of broad swaths of society and that democracy is creaking under the strains of populism.

Three key arguments drive their analysis. First, the state is central. Capitalism requires a state that imposes competition upon business, ensures cooperative relations between labor and business, and invests in public goods (especially education and training). Second, the number of voters who benefit from policies promoting advanced capitalism is large enough to be decisive, thus incentivizing governments to maintain a healthy economy. Third, the advanced sectors of the economy depend upon networks of high skill workers embedded in specific locations and institutional frameworks. This means that the most important sectors of advanced capitalism are immobile; the world is not flat.

The authors apply this framework in successive chapters to the rise of democracy, the era of the Fordist production paradigm, and the information/ knowledge economy. Education and skills are central to the story, as industrialization required an educated workforce, which, in turn, mobilized and demanded a political say. But paths differed: “proto-corporatist” systems, growing out of guild systems, developed strong unions, proportional representation electoral systems, and powerful left parties; “proto-liberal” countries developed fragmented craft unions, majoritarian systems, and weak labor parties along a more elite-driven trajectory. These paths represent the origins of “varieties of capitalism.” In the Fordist era, complementarities across skilled and unskilled workers fostered broad political coalitions that led to redistribution, falling inequality, and high class mobility in both varieties. However, the knowledge economy broke this link, as clusters of networked, highly educated workers located in cities became increasingly delinked from lower skilled workers in declining areas. This de-linking, and a reduction in social mobility, laid the groundwork for populist appeals, as the “left behind” no longer feel represented and are frustrated by the lack of mobility.

Many readers, I suspect, will be tempted to jump to the chapter on populism. Here, their broadly optimistic analysis—the key idea being that the decisive voter has a stake in the advanced sectors and will ensure that government maintains a competitive environment—raises some questions. First, can governments be relied upon to create a regulatory framework that ensures competition in new industries? It would be interesting to engage this analysis with that of chroniclers of declining competition and increased concentration in the new sectors, as documented for the United States in Thomas Philippon’s 2019 book The Great Reversal. Second, democracy and capitalism may survive, but if broad swaths of the population are left out, is this democratic capitalism as we have known it in the post-Depression era? Unless the political system responds to the needs of the left behind, democratic capitalism will have taken a turn for the worse. Third, much of the analysis focuses on an index of populist values, discounting the importance of the populist vote. But surely it is the vote that ultimately matters, and here surging populist parties in countries such as Finland, Sweden, and Austria—which the analysis suggests should be relatively immune because of a more equitable distribution of education and skills—is surely troublesome.

Iversen and Soskice have written an ambitious, challenging book that synthesizes several strands of research into an overarching narrative and provides a challenging, contrarian analysis of the current ills of capitalism and democracy that will drive debate and research in the coming years.