Capitalism and democracy

For the first time in human history, a system that can be called capitalist is dominant over the entire globe. Such a system is conventionally defined as consisting of legally free labor, private ownership of capital, decentralized coordination and pursuit of profit. One does not need to go far back into the past, or to have a great knowledge of history, to realize how unique and novel this is. Centrally planned socialism was only recently eliminated as a competitor. And nowhere in the world can be found un-free labor playing an important economic role, as it did until some 150 years ago. Such is the hegemony of capitalism as a worldwide system that even those who are unhappy with it and with rising inequality whether locally, nationally or globally have no realistic alternatives to propose. "De-globalization" and a focus on the "local" is meaningless because it would do away with the division of labor, a key factor of economic growth. Surely, those who argue for "localism" do not wish to propose a major drop in living standards. Forms of state capitalism, as in Russia and China, do exist, but this is capitalism nevertheless in which private profit motive and private companies are dominant. Increasing inequality of income, however, undercuts some of capitalism's mainstream ideological dominance by showing its unpleasant sides which is the exclusive focus on materialism, a winner-take-all ideology, and disregard of non-pecuniary motives. But since no ideological alternatives currently exist and even less, political parties or groups to implement them, the hegemony of capitalism looks pretty unassailable. Of course, nothing guarantees that it would look like that to the coming generation, for new ideologies can be invented. But this is how it looks to a reasonable observer today.

One of the most basic principles of democracy is the notion that every citizen’s preferences should count equally in the realm of politics and government. A key characteristic of a democracy is the continued responsiveness of the government to the preferences of its citizens, considered as political equals. But there are a variety of good reasons to believe that citizens are not considered as political equals by policymakers in real political systems. Research findings shows that wealthier and better-educated citizens are more likely than the poor and less-educated to have well-formulated and well-informed preferences and significantly more likely to turn out to vote. They are much more likely to have direct contact with public officials, and much more likely to contribute money and energy to political campaigns. These disparities in political resources and action raise a profound question. In a political system where nearly every adult may vote but where knowledge, wealth, social position, access to officials, and other resources are unequally distributed, who actually governs?

One aspect of political inequality is the disparity between rich and poor citizens in political participation. Studies of participatory inequality seem to be inspired in significant part by the presumption that participation has important consequences for representation. Inequalities in activity are likely to be associated with inequalities in governmental responsiveness. Meanwhile, statistical studies of political representation have found strong connections between constituents’ policy preferences and their representatives’ policy choices. However, those studies have almost invariably treated constituents in an undifferentiated way, using simple averages of opinions in a given district, on a given issues, or at a given time to account for representatives’ policy choices. Thus, they shed little or no light on the fundamental issue of political equality.

The sustainability of democratic capitalism is already a different question. Note first that these two words - democracy and capitalism - were not often combined in history. Capitalism in the absence of democracy has been a common feature throughout history. This was the case not only in Spain under Franco, Chile under Pinochet, or the Congo under Mobutu, but also in Germany, France and Japan. It even occurred in the United States via the exclusion of blacks from the body politic and in England with its severely limited franchise based on ownership of property at levels sufficient to include only the elite. Thus, it does not take huge leaps of imagination to see that capitalism and democracy can be decoupled. And inequality can play an important role in that. It already does so by politically empowering the rich to a much greater extent than the middle class and the poor. The rich dictate the political agenda, finance the candidates who protect their interests, and make sure that the laws that are in their interest are voted in (not in our country).

The American political scientist Larry Bartels finds that United States Senators are five to six times more likely to listen to the interests of the rich than to the interests of the middle class. For the poor, there is no discernible evidence that the views of low-income constituents had any effect on their Senators' voting behaviour. Both democracy and the middle class are being hollowed out.

In effect, it is not for nothing that since Aristotle, and more recently since Tocqueville, the middle class was seen as the bulwark against nondemocratic forms of government. It was not by some special moral virtue, embodied among the "middlemen," that a person who has, for example, ceased to be rich and become middle-class would suddenly prefer democracy.

It is simply that the middle class had an interest in limiting the power of the rich so that they would not rule over them and of the poor so that they would not expropriate them. Large numbers of a middle class also meant that a lot of people shared similar material positions, developed similar tastes and tended to eschew extremism of both the left and the right. Thus, the middle class provided for both democracy and stability. All of this is under attack by rising inequality. The middle class in Western democracies is today both less numerous and economically weaker relative to the rich than it was 20 years ago.