first came across John Gray when I was an undergraduate at Oxford. In those days (late 1970s) he was very much part of the 'New Right' movement, but he has since recanted and is now one of the New Right's most formidable opponents. This book is a case in point. Unmistakably the political tone of Gray's writing and thinking is high-Tory. In keeping with this he brackets the current attempt at imposing free-market capitalism upon the world, with the prior attempt to foist Soviet-style communism on the hapless peoples of Eastern Europe and South East Asia.

Strange as it may seem these two attempts at global social engineering have the same roots in the Enlightenment thinking of a previous age. Socialism (albeit in its deformed Stalinist form) is merely the flip side of liberalism. Of course such Utopian projects were and are bound to fail. He argues: 'What Utopias have in common is more fundamental than their differences. In their cult of reason and efficiency, their ignorance and their contempt for the ways of life they consign to poverty or extinction, they embody the same rationalist hubris and cultural imperialism that have marked the central traditions of Enlightenment thinking throughout its history.'

Such sentiments might have come straight from Edmund Burke or Thomas Carlyle. But this should not be taken as an implied criticism of Gray. High-Tory arguments are cogent enough precisely because their central hypothesis - viz., human imperfectibility - is confirmed in everyday lived experience. It is indeed a difficult task to argue against such a bleak view of the human condition when almost every positive idea which has been tried during the twentieth century has ended in failure - partial or total.

Writing in a style which is both lucid and readable Gray situates his arguments historically and in so doing exposes the utter provincialism of New Right ideology. It is axiomatic that the ideas which are associated with free-markets, globalisation, and so forth, now enjoy a regional if not global hegemony: from the USA to New Zealand, from the UK to Russia. But these theories are wretched artefacts; nothing less than an intellectual and academic disgrace; ideological fantasies of the most crude and ahistorical kind. One by one Gray demolishes these myths.

Specification I. The free-market is natural and conforms to human nature. Gray writes. 'The laissez-faire policies... in mid -19th century England were based upon the theory that market freedoms are natural and political restraints on markets are artificial. The truth is that free-markets are creatures of state power and persist only so long as the state is able to prevent human needs for security and the control of economic risk from finding expression. Encumbered markets are the norm is every society, whereas free-markets are a product of artifice, design and political coercion... The free-market is not pace the New Right a gift of social evolution. It is a by-product of social engineering and unyielding political will. It was feasible during the 19th century only because... functioning democratic institutions were lacking.'

Specification II. All societies are converging towards the American free-market model and we have arrived at the end of history. This nonsense is given short shrift by the author. 'To think that history would end because the conflict between ephemeral Enlightenment ideologies - liberalism and socialism - had come to a close exhibits a parochialism that is hard to credit. It is the telling mark of intellectual and political life toward the end of the century that such absurd speculation could ever have seemed credible.'

Specification III. John Kenneth Galbraith's notion of 'The Culture of Contentment.' In American parlance - strictly for the birds. The Galbraithian view of a largely contented US polity in which a minority underclass are an unfortunately excluded segment may have been true during the 1980s, but cannot be sustained in contemporary America. Here in possibly the best and most chilling chapter of the book, Gray offers us a glimpse of the new 'civilisation' of actually existing free-market capitalism and one possibility of our own future development.

The New Deal tradition which began with Roosevelt prior to World War II carried on without any break up until the Presidency of Jimmy Carter in the late 70s. The fact that two Presidents - Eisenhower and Nixon - were Republican did not shift the consensus. It was Nixon after all who once declared 'We are all Keynesians now.'

During this period American political life was dominated by the East Coast liberal elites and Southern Dixiecrats. The New Deal consensus was firmly entrenched in both the thinking and institutions of pre and post-war American: Morganthau's Treasury Department and the 'Fed'. The election of Ronald Reagan in 1980 changed all of this. The neo-conservative ascendancy in the US began with Reagan eerily in parallel with the neo-liberal rise of Thatcher in the UK. This triumph of Wall Street over Washington meant that along with the UK , the US would be the first testing ground and flagship of the post-New Deal order. The results have been devastating: 'To think of late 20th century America as a culture of contentment is anachronistic. America today is not a society in which an affluent majority looks on with complacent disdain at an underclass mired hopelessly in poverty and exclusion. It is a society in which anxiety pervades the majority. For most Americans the ledge of security on which they live has never been so narrow ... America has become a divided society in which an anxious majority is wedged between an underclass that has no hope and an over-class that denies any civic obligations.'

Additionally, the post-modern anarcho-capitalisms - the US and Russia - which militantly eschew the welfare state end up with a repressive penal-police state. In Gray's terms the USA has become an 'incarceration' state. By the end of 1994 some 5 million Americans were under some type of legal restraint. According to official figures around 1.5 million were in jail: a rate of 373:100,000. This compares with a rate of 103:100,000 when Reagan was first elected President in 1980.At the start of 1997 approximately 1 in 50 adult American males were behind bars and about 1 in 20 was on parole or probation. This is ten times the rate in European countries.

Other classic neo-liberal hypotheses - embourgeoisiement, culture of poverty/dependency - receive similar treatment. For this we owe Gray a debt of gratitude.

Having said this, however, some of Gray's arguments are surprisingly crude and deterministic. He seems, for example, to share the commonly held view that the process of globalisation has reached a point of unstoppable momentum; social democracy, protectionism, Rhineland capitalism, have all been rendered obsolete by this phenomenon.

The globalisation juggernaut will continue to flatten everything in its path. Such views, bearing as they do a strong resemblance to mechanistic Marxism, are usually associated with neo-liberal ideologues, or simply repeated parrot fashion by Economist readers who don't know any better. It is almost as if Gray is falling victim to those ideas which are the very target of his polemic.

He argues that purely national responses to globalisation in the form of Keynesian deficit financing and full employment policies cannot work in the global competitive environment and must now be considered defunct. Well this is hardly new. We have known this since the ill-fated Mitterrand experiment in the early 80s. But it may well be the case that within a regional trading and currency bloc - the EU - it would be possible to construct institutional and monetary bulwarks against global economic and financial pressures.

Gray seems to imagine that social-democracy is impossible because global bond markets will view such a development askance: '... an integrated EU equipped with a single currency and fiscal policy could not escape (my emphasis) the consequences of competition with highly educated, low-wage workforces that European reunification and Asian industrialisation have forced on it... unregulated world currency markets with a chronic allergy to policies of job-creation through public borrowing will sell the European currency and provoke a crisis... European social-democracy has been removed from the agenda of history.'

So there we are: game, set and match to the forex and bond dealers. I suppose that we should all become post-modern aesthetes from now on ! No, I don't think so. The strength and power of the globalisation leviathan seems exaggerated. 'A colossus with feet of clay' as Lenin once said of imperialism. In addition if we examine in greater detail the globalisation hypothesis we will see that the term itself is one of the great misnomers of contemporary political economy. In fact some 3/4 of trade and investment (direct and portfolio)as well as currency speculation takes place between the 'Triad' of developed industrial blocs: NAFTA, EU and East Asia. Whilst most of the centre-left and left focus on sweat shops in low-wage venues, multinational capital avoids really low-wage production sites and also avoids investing in most developing countries. Nearly 2/3 of the world's population concentrated in the underdeveloped world is written off as far as foreign investment is concerned.

Furthermore, within the 'Triad' most trade and investment is intra-regional. Most of Britain's trade and investment is with the EU. This hardly constitutes a globalised international economy; 'Triadisation' might be a more apposite description. The regionalised nature of the new International political economy means the EU is in a position to become an autarchic regional economic and currency bloc.

This may not be to everyone's liking, and may be waved aside as fantastic by others but it does demonstrate that alternatives to globalisation exist; political will can prevail over particular historical trends (which in any case are nothing more than the expression of other prior political choices). Western Europe can escape, just as Japan thumbed its nose at GATT (now the World Trade Organisation - WTO) since the war and in so doing escaped the baleful consequences of the free-market by practising protectionism. A social-democratic Europe, perforce protectionist, is a possibility.

It is also worth noting that far from being irresistible, footloose speculative capital can be faced down. For even with an open European economy and financial system it is by no means inevitable that the cosmopolitan money men will always get their own way. George Soros and his pals may have made a pile and wrecked European Monetary Union when they forced sterling and the lira out of the ERM, but they came a cropper when they tried it on with the French franc a short time later. In a similar manner the Multilateral Agreement on Investment MAI has been successfully stymied by concerted political opposition.

All of which suggests that history is an outcome of political will and conflict rather than some unstoppable natural process. Gray seems prone to make too many of these types of assertions and begs a number of questions. In Chapter 4 'A New Gresham's Law' he argues that deregulated market systems fatally undermine regulated social market economies. Deregulated firms and economies have cost advantages which cannot be matched by social-market economies. One example is paying for environmental costs.

'A global free-market operates to externalise costs that better (social-market) regimes have internalised. In environmentally sensitive economies tax and regulatory policy is designed so that firms are required to pay for the costs their activities impose on societies and the natural world. This has long been the case in continental Europe. Global free-markets put heavy pressure on such policies. Goods produced by environmentally accountable firms cost more than similar goods produced by enterprises that are at liberty to pollute.'

This is of course a non-sequitur; but the logic is clear enough. What is true of pollution costs is also true of other costs; health, holidays, social insurance and so forth. Thus the sweatshop is intrinsically more efficient - in costs terms - than regulated capitalism; bad capitalism will therefore drive out good capitalism.

This view however is out of kilter with the facts of the situation. For bad capitalism is riven with systemic weaknesses which result in inefficiencies, including cost inefficiencies. What might be regarded as factor advantages - low-wages, low social overheads - can and do become factor disadvantages in the sense that the 'bad' capitalist has no incentive to upgrade their physical and human capital and in so doing in crease the productivity level and reduce unit labour costs. Free-market deregulated economies are almost always low productivity economies. This is because poor investment performance results precisely from a low-wage, equity dominated system, and predictably, low investment results in low productivity and economic decline. Low wages will also tend to restrict the level of aggregate demand forcing the economy to operate below full (optimum) capacity which again will force up unit costs. Deregulated economies - UK, US - both have poor investment and productivity records and both have been in long-run decline. Both also have long-term and chronic balance of payments problems which are an indubitable indicator that both are simply uncompetitive on world markets. The Anglo-American trade deficits are mirrored by Japan and Germany's trade surpluses.

In the last contest between laissez-faire and regulated capitalism - laissez-faire lost. This is not to say that it will be the same this time around. Maybe, maybe not. In politics anything is possible. It is just that it seems strange that Gray at times argues in a style redolent of 'historical inevitability' and seems sometimes mesmerised by the apparent power and inexorable nature of the new global leviathan. Very odd for a high-Tory. Theory should be subordinated to facts and not the other way around.