The Path Forward: Constrained Prosperity Economics

Why a Simple Return to the Past is Not the Answer
The manifest failures and frictions of 21st-century global capitalism have, understandably, led some to call for a return to older, seemingly more straightforward economic models. The most prominent of these are socialism and communism, ideologies that promise to remedy the inequalities of capitalism by placing the means of production under collective or state control. However, a clear-eyed assessment of the 20th century reveals that these systems, while born from a genuine desire for a more equitable world, have consistently failed to deliver on their promises. In practice, they have swapped the problems of capital for a host of different, and often more severe, pathologies.

The election of Mamdani in New York is an experiment worth watching: whether he reverts to cliched and disproven socialist ‘solutions’ or will be able to find a genuinely new path remains to be seen. But the fact that a socialist Muslim manages the city scarred by 9/11 is testament to the fact that people are willing to gamble a lot on a new world order.

Centrally planned economies, the hallmark of both socialist and communist states, have proven to be notoriously inefficient. By replacing the dynamic, decentralized pricing mechanism of the market with the rigid hand of a bureaucratic planning apparatus, they have consistently struggled to allocate resources effectively. The Austrian economist Ludwig von Mises, in his seminal work on the “economic calculation problem,” argued that a complex, modern economy is simply too vast and dynamic to be managed by a central authority. Without the information conveyed by market prices, planners are unable to make rational decisions about what to produce, how to produce it, and for whom. The result is a system that is prone to chronic shortages, surpluses, and a misallocation of resources on a massive scale. The Soviet Union, for example, was plagued by chronic shortages of consumer goods while simultaneously producing vast quantities of low-quality, often useless, industrial products. Without the profit motive to drive innovation and the threat of competition to enforce discipline, state-owned enterprises became complacent and technologically stagnant. Furthermore, the concentration of immense economic and political power in the hands of the state has, time and again, led to authoritarianism and the suppression of individual liberty.

The pursuit of a collectivist utopia has too often ended in the grim reality of the gulag, the laogai, or the killing fields. Therefore, the path forward cannot be a retreat into these failed ideologies. The challenge is not to destroy the engine of capitalism, but to tame it; not to abolish markets, but to embed them in a framework of shared values and collective interests.

The historical record is littered with the wreckage of centrally planned economies. The Great Leap Forward in China, a disastrous attempt to rapidly collectivize agriculture and industrialize the country, led to a famine that killed tens of millions of people. The Khmer Rouge regime in Cambodia, in its fanatical pursuit of an agrarian communist utopia, systematically murdered a quarter of its own population. Even in less extreme cases, such as the socialist states of Eastern Europe, central planning led to economic stagnation, environmental degradation, and a pervasive sense of cynicism and despair. The fall of the Berlin Wall in 1989 was not just a political event; it was a powerful repudiation of a failed economic model.

Through decidedly not free-market practices like BEE, DEI, not to mention Affirmative Action and recently asset expropriation without compensation, South Africa has destroyed its economy from an African powerhouse to a dung heap of corruption with every economic indicator going south.

The Core Principles of a Blended Approach: Constrained Prosperity Economics
The solution lies not in revolution, but in evolution. We propose a blended economic model, “Constrained Prosperity Economics,” that seeks to preserve the dynamism and innovative capacity of market-based capitalism while embedding it within a set of pragmatic constraints designed to align the pursuit of profit with the broader goals of human well-being, social stability, and environmental sustainability. This model does not seek to replace the market, but to correct its inherent blind spots and mitigate its self-destructive tendencies.
Of course, the recommendations below are at a macro level – the reality is that a change of direction will require much experimentation and negotiation, and in some cases wholesale rewriting of for instance tax laws.

The core principles of Constrained Prosperity Economics are as follows:

Learning from Real-World Hybrids
This vision of a blended economy is not a utopian fantasy. It is grounded in the real-world experience of countries that have successfully combined the dynamism of market capitalism with a strong commitment to social equity and public welfare. The Nordic countries, for example, have consistently ranked among the world’s most prosperous and equal societies. They have achieved this by combining a vibrant free-market economy with a comprehensive social safety net, high levels of taxation, and strong labour unions that ensure a fair distribution of economic gains [4].

Germany’s model of “social market economy” offers another powerful example. A key feature of the German system is co-determination, which gives workers a significant voice in the management of the companies they work for by mandating their representation on corporate boards. This has fostered a more collaborative and long-term approach to corporate governance, one that balances the interests of shareholders with those of employees and the broader community [5].

Even Singapore, often cited as a bastion of free-market capitalism, has a strong element of state guidance in its economic model. The government has played a proactive role in identifying and promoting strategic industries, investing in infrastructure and education, and ensuring a stable and predictable business environment. This has allowed Singapore to achieve remarkable economic success while maintaining a high degree of social cohesion [6].

These models are not without their own challenges and trade-offs. The Nordic countries have had to grapple with the fiscal pressures of an aging population and the challenges of integrating a large immigrant population. Germany’s consensus-based model can sometimes be slow to adapt to rapid economic change. And Singapore’s state-led model has been criticized for its restrictions on political freedom and civil liberties. However, these models demonstrate that it is possible to create a more inclusive and sustainable form of capitalism, one that harnesses the power of the market for the benefit of all. Constrained Prosperity Economics seeks to draw on these lessons to create a new global economic consensus for the 21st century.

Let's delve deeper into the specifics of these models. The Nordic model, for instance, is characterized by a “flexicurity” system that combines a flexible labor market with a strong social safety net. This allows companies to adapt to changing market conditions by hiring and firing workers as needed, while also providing generous unemployment benefits and retraining programs to help workers transition to new jobs. This creates a dynamic and resilient labor market, one that is able to weather economic shocks and to support workers in a rapidly changing economy.

Germany’s co-determination system has been credited with fostering a more long-term and stakeholder-oriented approach to corporate governance. By giving workers a voice in the boardroom, it helps to ensure that companies take into account the interests of all stakeholders, not just shareholders. This has led to a greater emphasis on long-term investment, innovation, and workforce development, and has helped to create a more stable and equitable economy.

Singapore’s success is a testament to the power of a strategic and forward-looking state. The government has played a key role in identifying and nurturing new industries, from electronics to biotechnology to financial services. It has also invested heavily in education and infrastructure, creating a world-class workforce and a highly attractive business environment. This has allowed Singapore to punch far above its weight in the global economy and to achieve a level of prosperity that is the envy of many larger nations.

Conclusion
The agnostic, borderless nature of capital is, as we have seen, a double-edged sword. It is a powerful engine of progress, but one that, if left unconstrained, can lead to profound social and environmental disruption. The divergent economic paths of the United States and China over the past three decades have laid bare the inherent instability of a global system characterized by asymmetric rules and a relentless race to the bottom. The hollowing out of the American middle class, the rise of precarious labour, and the growing threat of climate change are all symptoms of a model of capitalism that has become dangerously untethered from the values and interests of the societies it purports to serve.

The solution is not to retreat into the failed ideologies of the past, but to forge a new path forward. We must move beyond the sterile debate between state and market and embrace a more pragmatic, blended approach. “Constrained Prosperity Economics” offers a framework for such a model, one that seeks to harness the dynamism of capitalism while embedding it within a set of rules and institutions that promote long-term, shared prosperity. This will require a new social contract between capital, labour, and the state, one that recognizes their mutual interdependence and shared interest in creating a more just and sustainable world.

Forging this new consensus will not be easy. It will require bold political leadership, a willingness to challenge entrenched interests, and a new spirit of international cooperation. But the stakes could not be higher. The future of our planet, the stability of our societies, and the well-being of future generations all depend on our ability to build an economic system that is not only prosperous, but also just, resilient, and sustainable. The time for tinkering at the margins is over. The time for a fundamental rethinking of the rules of the global economy is now.

This will require a new generation of political leaders who are willing to look beyond the outdated dogmas of the left and the right and to embrace a more pragmatic and evidence-based approach to economic policy. It will require a new generation of business leaders who are willing to look beyond the short-term demands of the financial markets and to embrace a more long-term and stakeholder-oriented approach to corporate governance. And it will require a new generation of citizens who are willing to engage in the hard work of democratic deliberation and to hold their leaders accountable for building a more just and sustainable world.

Implementing Constrained Prosperity Economics: A Roadmap
The transition to a model of Constrained Prosperity Economics will not be a simple or straightforward process. It will require a fundamental rethinking of our approach to economic policy, a new social contract between capital, labour, and the state, and a new spirit of international cooperation. This section will outline a roadmap for implementing the core principles of this new economic model.

Rebalancing the Capital-Labor Relationship
The first step in rebalancing the capital-labour relationship is to strengthen the bargaining power of workers. This can be achieved through a variety of mechanisms, including:

• Labour Law Reform: This would involve making it easier for workers to form unions and to engage in collective bargaining. This could include measures such as card-check recognition, which would allow workers to form a union as soon as a majority of them have signed authorization cards, and the repeal of “right-to-work” laws, which undermine the financial stability of unions.
• Raising the Minimum Wage: A significant increase in the federal minimum wage, indexed to inflation, would provide a much-needed boost to the incomes of low-wage workers and help to reduce poverty and inequality.
• Expanding the Earned Income Tax Credit (EITC): The EITC is a highly effective anti-poverty program that supplements the earnings of low-income workers. Expanding the EITC, particularly for childless workers, would provide additional support for those who are struggling to make ends meet.
• Promoting Sectoral Bargaining: This would involve creating a system where unions and employer associations negotiate wages and working conditions for an entire industry or sector, rather than on a company-by-company basis. This would help to level the playing field between companies and to ensure that all workers in a particular industry are covered by a collective bargaining agreement.

Side Note: It is important to recognise that the rapid advancement of artificial intelligence and the growing discussion around Universal Basic Income (UBI) will add significant layers of complexity to efforts aimed at rebalancing the relationship between capital and labour. AI has the potential to fundamentally reshape the nature of work, automate a wide range of jobs, and disrupt traditional career pathways, making it more challenging to safeguard workers’ interests and ensure fair compensation. Meanwhile, proposals for UBI—while offering a possible safety net in an era of technological disruption—raise important questions about funding, social cohesion, and the role of work in society. Navigating these emerging challenges will demand innovative policy solutions and a willingness to rethink long-standing assumptions about employment, productivity, and the distribution of wealth in a new economic order.

Reforming Corporate Governance
The second step is to reform corporate governance to ensure that companies are managed for the long-term benefit of all stakeholders, not just shareholders. This can be achieved through:

• Co-determination: This would involve requiring large companies to have worker representation on their boards of directors. This would give workers a voice in the decision-making process and help to ensure that their interests are taken into account.
• Employee Stock Ownership Plans (ESOPs): This would involve providing tax incentives and other forms of support to encourage the creation of ESOPs, which give workers an ownership stake in the companies they work for. This would help to align the interests of workers and shareholders and to create a more equitable distribution of wealth.
• Reforming Executive Compensation: This would involve taking steps to rein in excessive executive pay, such as by giving shareholders a greater say on executive compensation packages and by closing the tax loopholes that encourage companies to pay their executives in stock options.

Building a Fairer Global Economy
The third step is to build a fairer and more sustainable global economy. This can be achieved through:

• Reforming the WTO: This would involve reforming the rules of the WTO to allow countries to protect their labour and environmental standards. This could include measures such as a “social clause” that would allow countries to restrict imports from countries that do not respect basic labour rights, and a “climate waiver” that would allow countries to implement carbon tariffs and other measures to combat climate change.
• International Tax Cooperation: This would involve working with other countries to crack down on corporate tax avoidance and to ensure that multinational corporations pay their fair share of taxes. This could include measures such as a global minimum corporate tax and a system of public country-by-country reporting.
• A “Fair Capital Bloc”: This would involve creating a new bloc of democratic nations that are committed to upholding a common set of standards on labour rights, environmental protection, and intellectual property. This would create a level playing field for trade and investment and would help to ensure that capital flows to the most genuinely productive and innovative companies.

Investing in the Future
The fourth step is to make the public investments that are necessary to build a more prosperous and equitable future. This can be achieved through:

• Infrastructure Investment: This would involve a major investment in our nation’s crumbling infrastructure, including roads, bridges, public transit, and the electrical grid. This would create jobs, boost economic growth, and improve the quality of life for all Americans.
• Investment in Research and Development: This would involve a major investment in basic and applied research, particularly in key areas like renewable energy, artificial intelligence, and biotechnology. This would help to ensure that the United States remains at the forefront of technological innovation.
• Investment in Education and Workforce Development: This would involve a major investment in our nation’s education system, from early childhood to higher education. This would also involve a major investment in workforce development programs, such as apprenticeships and sectoral training programs, to help workers acquire the skills they need to succeed in the 21st-century economy.

Potential Challenges and Criticisms

There is no panacea, and we must be realistic about the limits of our foresight. The best we can do is to ensure that any changes we introduce are accompanied by robust mechanisms for ongoing monitoring and measurement, and to make a genuine commitment to remedy or roll back those changes if they produce negative or unforeseen outcomes. Flexibility and accountability must be at the core of any reform effort.

it is important to acknowledge that the transition to a model of Constrained Prosperity Economics will not be without its challenges and criticisms. Some will argue that the proposed reforms will stifle innovation and economic growth by placing too many constraints on the market. Others will argue that the proposed model is a form of “crony capitalism” that will lead to a new set of distortions and inefficiencies. Still others will argue that the proposed model is simply a repackaging of old-school social democracy, a model that has been in retreat for decades.

These are all valid concerns, and they deserve to be taken seriously. However, we believe that the risks of inaction are far greater than the risks of action. The current model of global capitalism is unsustainable, both socially and environmentally. It is fuelling a rise in inequality, a decline in social mobility, and a growing sense of political alienation. It is also driving us towards a climate catastrophe that threatens the very future of our planet. The time for tinkering at the margins is over. The time for a fundamental rethinking of the rules of the global economy is now.

We do not claim that Constrained Prosperity Economics is a panacea for all of our problems. It is a work in progress, a set of ideas that will need to be adapted and refined over time. But we believe that it offers a more promising path forward than the failed ideologies of the past. It is a path that seeks to harness the power of the market for the benefit of all, to create an economy that is not only prosperous, but also just, resilient, and sustainable.

Conclusion: Forging a New Economic Consensus
The 21st century has been defined by a series of profound and often contradictory economic forces. We have witnessed the incredible wealth-generating power of global capitalism, a force that has lifted billions from poverty and spurred technological innovation at an unprecedented rate. Yet, we have also seen the dark side of this same system: a relentless hollowing out of the middle class in the developed world, a dangerous rise in economic inequality, and a looming environmental crisis that threatens the very foundations of our civilization. The central argument of this article is that these are not disconnected phenomena, but rather the predictable consequences of a model of capitalism that has become dangerously untethered from the values and interests of the societies it purports to serve.

At the heart of this dilemma lies the agnostic nature of capital. In its purest form, capital is a dispassionate and borderless force, seeking only the highest and most efficient return. This agnosticism, while a powerful engine of progress, is also the source of the system’s most profound weaknesses. In a world of asymmetric rules, mobile capital, and financialized markets, the relentless pursuit of profit can lead to a race to the bottom in labour and environmental standards, a hollowing out of the industrial base, and a dangerous disconnect between the financial economy and the real economy. The divergent economic paths of the United States and China over the past three decades have laid bare the inherent instability of this system. The U.S., with its relatively open and rule-based approach, has seen its industrial base erode and its middle class stagnate. China, with its state-directed model of capitalism, has achieved explosive growth, but at a significant social and environmental cost. This has created a global economic order that is not only unfair, but also unstable and unsustainable.

The solution is not to retreat into the failed ideologies of the past. The centrally planned economies of the 20th century, with their chronic inefficiencies and authoritarian tendencies, offer no viable alternative. The challenge, therefore, is not to destroy the engine of capitalism, but to tame it; not to abolish markets, but to embed them in a framework of shared values and collective interests. This article has proposed a blended approach, what we have termed “Constrained Prosperity Economics,” which seeks to do just that. This model is not a utopian fantasy, but a pragmatic and evidence-based framework that draws on the real-world experience of countries that have successfully combined the dynamism of market capitalism with a strong commitment to social equity and public welfare.
Side Note:
The (white) Afrikaner community of Orania is an interesting case study too. It is built on tightly integrated set of core values, and they describe their system of governance as ‘communitarian’. They operate as a free market, interact normally with the rest of South Africa and are subject to its laws. They also rely heavily on volunteers and community input, but control very determinedly who owns land, who moves into the community (to the extent of being accused of racism) and the rules of governance. Whether they will be allowed to succeed, is another matter altogether, because I suspect the predominantly black government will perceive any successes they have as a stark reminder of their own failures.

The core principles of Constrained Prosperity Economics are threefold. First, it seeks to rebalance the relationship between capital and labour by strengthening the bargaining power of workers, reforming corporate governance, and promoting a more equitable distribution of economic gains. Second, it seeks to build a fairer and more sustainable global economy by reforming the rules of international trade and finance, cracking down on corporate tax avoidance, and creating a new bloc of democratic nations that are committed to upholding a common set of standards. Third, it seeks to make the public investments that are necessary to build a more prosperous and equitable future, including investments in infrastructure, research and development, and education and workforce development.

Forging this new economic consensus will not be easy. It will require bold political leadership, a willingness to challenge entrenched interests, and a new spirit of international cooperation. It will require a new generation of political leaders who are willing to look beyond the outdated dogmas of the left and the right and to embrace a more pragmatic and evidence-based approach to economic policy. It will require a new generation of business leaders who are willing to look beyond the short-term demands of the financial markets and to embrace a more long-term and stakeholder-oriented approach to corporate governance. And it will require a new generation of citizens who are willing to engage in the hard work of democratic deliberation and to hold their leaders accountable for building a more just and sustainable world.

The stakes could not be higher. The future of our planet, the stability of our societies, and the well-being of future generations all depend on our ability to build an economic system that is not only prosperous, but also just, resilient, and sustainable. The time for tinkering at the margins is over. The time for a fundamental rethinking of the rules of the global economy is now. The path forward will be challenging, but it is a path we must take. The choice is not between capitalism and socialism, but between a form of capitalism that serves the few and a form of capitalism that serves the many. The choice is ours to make.

References[4] Investopedia. (2022). Understanding the Nordic Model: Benefits and Drawbacks. https://www.investopedia.com/articles/investing/100714/nordic-model-pros-and-cons.asp [5] Harvard Law School Forum on Corporate Governance. (2021). What Does Codetermination Do?. https://corpgov.law.harvard.edu/2021/06/29/what-does-codetermination-do/ [6] Atlantic Council. (2026). Singapore must shift from state-led expansion to productivity-led growth. https://www.atlanticcouncil.org/in-depth-research-reports/report/singapore-must-shift-from-state-led-expansion-to-productivity-led-growth/