Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Thursday, November 17, 2016

Capitalism and democracy: the strain is showing

Is the marriage between liberal democracy and global capitalism an enduring one? Political developments across the west — particularly the candidacy of an authoritarian populist for the presidency of the most important democracy — heighten the importance of this question. One cannot take for granted the success of the political and economic systems that guide the western world and have been a force of attraction for much of the rest for four decades. The question then arises: if not these, what?

A natural connection exists between liberal democracy — the combination of universal suffrage with entrenched civil and personal rights — and capitalism, the right to buy and sell goods, services, capital and one’s own labour freely. They share the belief that people should make their own choices as individuals and as citizens. Democracy and capitalism share the assumption that people are entitled to exercise agency. Humans must be viewed as agents, not just as objects of other people’s power.

Yet it is also easy to identify tensions between democracy and capitalism. Democracy is egalitarian. Capitalism is inegalitarian, at least in terms of outcomes. If the economy flounders, the majority might choose authoritarianism, as in the 1930s. If economic outcomes become too unequal, the rich might turn democracy into plutocracy.

Historically, the rise of capitalism and the pressure for an ever- broader suffrage went together. This is why the richest countries are liberal democracies with, more or less, capitalist economies. Widely shared increases in real incomes played a vital part in legitimising capitalism and stabilising democracy. Today, however, capitalism is finding it far more difficult to generate such improvements in prosperity. On the contrary, the evidence is of growing inequality and slowing productivity growth. This poisonous brew makes democracy intolerant and capitalism illegitimate.

Today’s capitalism is global. This, too, can be regarded as natural. Left to themselves, capitalists will not limit their activities to any given jurisdiction. If opportunities are global so, too, will be their activities. So, as a result, are economic organisations, particularly big companies.

Yet, as Professor Dani Rodrik of Harvard University has noted, globalisation constrains national autonomy. He writes that “democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three but never have all three simultaneously and in full”. If countries are free to set national regulations, the freedom to buy and sell across frontiers will be reduced. Alternatively, if barriers are removed and regulations harmonised, the legislative autonomy of states will be limited. Freedom of capital to cross borders is particularly likely to constrain states’ ability to set their own taxes and regulations.

Moreover, a common feature of periods of globalisation is mass migration. Movement across borders creates the most extreme conflict between individual liberty and democratic sovereignty. The former says that people should be allowed to move where they like. The latter says that citizenship is a collective property right, access to which citizens control. Meanwhile, businesses view the ability to hire freely as invaluable. It is not merely unsurprising that migration has become the lightning rod of contemporary democratic politics. Migration is bound to create friction between national democracy and global economic opportunity.

Consider the disappointing recent performance of global capitalism, not least the shock of the financial crisis and its devastating effect on trust in the elites in charge of our political and economic arrangements. Given all this, confidence in an enduring marriage between liberal democracy and global capitalism seems unwarranted.

So what might take its place? One possibility would be the rise of a global plutocracy and so in effect the end of national democracies. As in the Roman empire, the forms of republics might endure but the reality would be gone.

An opposite alternative would be the rise of illiberal democracies or outright plebiscitary dictatorships, in which the elected ruler exercises control over both the state and capitalists. This is happening in Russia and Turkey. Controlled national capitalism would then replace global capitalism. Something rather like that happened in the 1930s. It is not hard to identify western politicians who would love to go in exactly this direction.

Meanwhile, those of us who wish to preserve both liberal democracy and global capitalism must confront serious questions. One is whether it makes sense to promote further international agreements that tightly constrain national regulatory discretion in the interests of existing corporations. My view increasingly echoes that of Prof Lawrence Summers of Harvard, who has argued that “international agreements [should] be judged not by how much is harmonised or by how many barriers are torn down but whether citizens are empowered”. Trade brings gains but cannot be pursued at all costs.

Above all, if the legitimacy of our democratic political systems is to be maintained, economic policy must be orientated towards promoting the interests of the many not the few; in the first place would be the citizenry, to whom the politicians are accountable. If we fail to do this, the basis of our political order seems likely to founder. That would be good for no one. The marriage of liberal democracy with capitalism needs some nurturing. It must not be taken for granted.

Original Article
Author: Martin Wolf 

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