JKJ;K'K'Keynes and was practiced in many states from the end of the Second
World War until the crises of the mid-1970s. The collapse of central
planning was not brought about by the work of a group of fanatical liberal
thinkers; it was a logical result of the inherent contradictions of the
collectivist model, particularly its inability to build viable economic systems
and raise per capita incomes, and its failure to promote democracy.
Wolf ’s critique is rooted in the thinking of Hayek and Mises, with an
emphasis on the insurmountable restrictions on the flow of information
that are inherent to all statist models for running complex societies.
Within this framework, Why Globalization Works is also a cold, rational,
and convincing defense of classical liberal values. The relationship
between the market economy and individual rights constitutes the base
of all liberal democratic systems; its underpinnings are both ethical and
practical. The survival of such a complex and fragile system of social
organization demands a strong state (an idea drawing on scholars from
Adam Smith to Douglass North), but one which limits its functions to
three areas: first, the provision of public goods (those that markets cannot
provide); second, the internalization of externalities, which can also be
thought of as providing remedies for market failure; and third, to help
people who, for a number of reasons, do worse from the market or are
more vulnerable to what happens within it than society finds tolerable.
Apart from the classic function of the state—the protection of property
rights—Wolf argues that the second and the third have a “facilitating”
role in the Mill sense of the word; in other words, they must be the
subject of constant review, and must be updated, eliminated, or reduced
if the market develops its own solutions. (There is, of course, the question
of whether the provision of certain services by the state determines
whether or not alternative...