In this podcast, I discuss with John Christensen how capitalism and democracy have come apart, and why this was not an accident.

Together, we explore the growing fracture between democratic accountability and economic power, and the role of James Buchanan in shaping the ideas behind it. Public choice theory, which he created, claims to defend freedom, but in practice, we argue that it works to constrain democracy and protect wealth from challenge.

As a result, we examine the idea of the “night-watchman state,” where government exists primarily to defend property rights, not people. We also look at how tax havens, created in this form, shift power away from nation-states, creating a race to the bottom on tax, regulation, and rights.

Along the way, we discuss how the language of government itself is being reshaped by far-right thinking of the sort promoted by Buchanan, with terms like “fiscal responsibility” being used to justify policies that are deliberately designed to harm the most vulnerable.

This is not abstract theory. These ideas influence governments, institutions, and everyday life.

If you want to understand why politics feels broken, and why inequality keeps rising, this conversation explains what is really going on — and why it matters.

This is the audio version:

As is usual with our podcasts, there is no transcript because I believe they would be too long to be useful. I have, instead, created this summary of the discussion:

In this podcast, I set out, with my old friend John Christensen, who was a co-founder of the Tax Justice Network, to explore what I think is one of the most important and least understood developments in modern political economy: the growing fracture between capitalism and democracy, and the deliberate intellectual project that drove it.

John began by locating the issue historically. He explained that, for much of the post-war period, there appeared to be a workable accommodation between capitalism and democracy. That settlement, built on the legacy of Roosevelt's New Deal and the welfare states created in Europe, constrained capital and delivered rising living standards. But, as he noted, that accommodation had been breaking down for decades, and in his view, it decisively fractured after the global financial crisis of 2008.

From there, we turned to the intellectual roots of this breakdown. John introduced the influence of James Buchanan, whose work on public choice theory has been central to undermining democracy. I agreed, and I suggested that what we were really dealing with was not economics in any meaningful sense, but a political project designed to protect wealth from democratic challenge.

To explain that, John introduced the idea of the “night-watchman state”, which he described as a minimalist state whose only purpose was to defend property rights, particularly those of the wealthy, and to enforce those rights, if necessary, through coercion. This is not a state concerned with welfare, equality, or public provision. It is, in effect, a state designed to serve capital.

I added that, in practice, many tax havens already use this model. They have little real productive activity but host vast claims on wealth generated elsewhere. These jurisdictions demonstrate how the protection of capital can be separated from the production of value, and how political systems can be structured to serve those who own assets rather than those who create them.

We then explored the ideological inversion that lay at the heart of this project. I introduced the concept of DARVO — deny, attack, and reverse victim and offender — to describe how proponents of this worldview portray themselves as victims. In their narrative, it was not workers who have been exploited in the current world order, but wealth holders, who they claim are oppressed by taxation and regulation. This is, as I argued, a form of deliberate gaslighting: a systematic inversion of reality designed to disorient public understanding.

John agreed and expanded on this by explaining how public choice theory reframed democracy itself as a threat. In Buchanan's formulation, democratic majorities always seek to tax the wealthy, and therefore, mechanisms have to be created to constrain democratic decision-making. What appears to be a theory about empowering the public is, then, in reality, a doctrine designed to limit public power.

This was where I brought the discussion into a UK context. I argued that many institutional features of our current system, including independent central banks and fiscal rules, are direct expressions of this thinking. These mechanisms remove economic decision-making from democratic control and place it in the hands of technocrats, or ensure it is constrained by arbitrary rules. The effect was to limit what elected governments can do, regardless of public need or preference.

John reinforced this point by citing Nancy MacLean's Democracy in Chains, which documented how Buchanan's ideas were funded and disseminated through a network of think tanks backed by wealthy interests, including the Koch brothers. These institutions, from the Cato Institute to UK bodies like the Institute of Economic Affairs, played a critical role in embedding these ideas in political discourse.

We then reflected on our own direct encounters with this network, particularly through our work challenging tax havens. I recalled debates with figures such as Dan Mitchell of the so-called Center for Freedom and Prosperity, where the same arguments were repeatedly deployed: that markets were optimal, that taxation was theft, and that regulation was harmful. These claims, we both agreed, were not grounded in empirical reality but were ideologically driven assertions, repeated until they gained traction.

A key theme that emerged was the role of tax havens in this broader project. John explained how these jurisdictions facilitated a “race to the bottom” in tax and regulation by allowing capital to move freely while labour could not. I added that this asymmetry decisively shifted power towards capital, undermining nation states' capacity to govern in the public interest.

We also discussed how weak political systems in tax havens have allowed laws to be passed with minimal scrutiny, something John had witnessed firsthand in Jersey. This highlighted a crucial point: democracy is not just being eroded at the national level but is being bypassed altogether through offshore structures.

From there, the conversation broadened to consider the wider consequences. John argued that, by the time of the 2008 crisis, large corporations and financial institutions had effectively captured political systems, media, and even parts of civil society. I agreed and added that professional enablers, particularly the Big Four accounting firms, have played a central role in constructing and maintaining the offshore system that has underpinned this shift in power.

We also reflected on how language itself had been captured. Redistribution has been framed as discrimination; public services have been dismissed as bureaucracy. The result has been a political discourse in which meaning has been obscured, and debate has been distorted.

Throughout, we returned to the central figure of Buchanan. Both of us were clear that his work, despite his Nobel prize, was not a neutral contribution to economic theory but a political intervention designed to constrain democracy. It lacked empirical grounding and functioned more as an article of faith than a testable theory.

I concluded by drawing a distinction I considered vital. This was not an argument against markets or private enterprise per se. It is an argument against a form of capitalism that concentrates wealth and power in the hands of a few at the expense of the many. This system, as we argued, is incompatible with democracy.

In that sense, the podcast was both a diagnosis and a warning. The ideas we discussed are not abstract; they have shaped the institutions and policies that governed our lives. If we were to rebuild a democratic economy, we first have to understand how and why it has been undermined.

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