The theme of this book is that the debate about market versus state is outdated. To create prosperity for all, it must be a mixture of the two. Creating the right mixture is difficult and can be disruptive as the pendulum swings from one to the other.

The author gives context in outlining recent economic history. The nineteenth century hailed the expansion of capitalism and the market and per capita GDP rose sharply. Market dominance declined with the World Wars and the depression. The Soviet Union founded an economy centrally led by the state, the USA launched the New Deal with large government investment, as did Germany. Many industries were nationalised. Post war government expenditure increased in many industrialised countries, as did tax.

By the 1980s countries with the highest level of government control were in trouble. Markets opened up again with privatisation and the liberalisation of trade. After 1989 capitalism seemed unstoppable; then came the crisis of 2008.

Capitalism is successful in part because of its decentralisation. The market system can create prosperity but there are external and internal limits to the system. The author explores these extensively with clear examples. Individual and collective good are often different, leading to difficulties which are described and illustrated here; the more successful the market system the greater the chance that governments will try to limit its excesses as in the case of tackling global warming and responding to the crash of 2008.

Since the 1990s government expenditure as a proportion of GDP has tended to fall so fewer resources are available for public goods, and a discrepancy has arisen between collective and individual well being. The regulatory system then tries to respond but this is often difficult to implement, as for example with CO2 emissions.

The book also looks at the way monetary union has fundamentally changed the nature of national governments in the eurozone with financial markets becoming more powerful and governments being dependent on the goodwill of unelected officials, a structural problem which he argues is untenable in the long term.

The author shows that governments spend an increasing amount on social security to redistribute income (around half of all government expenditure). There is a trade off between equality and efficiency, which means Governments can only go so far with redistribution before prosperity is reduced. The author explores linear theories of capitalism and concludes that the history is cyclical not linear. Piketty’s theories about the rises and falls of capitalism are discussed and the criticisms of his findings evaluated.

The financial crisis of 2008 had the same basic causes as the crisis of 1929 but the aftermaths have been completely different due to the different responses of governments and banks.

Pessimistic and optimistic scenarios for the future are outlined in the light of there always being government/market pendulum swings. Damage to the environment and increasing inequality are seen as the key drivers of both scenarios. Worldwide country cooperation to limit both (unlikely, perhaps) could lead to the more optimistic outcome.

This important book should be widely read especially by politicians and policy makers. It provides food for thought and vital messages for us all.