Capitalism and/or democracy

Robert J Samuelson writes in Newsweek about what he considers to be a fundamental conflict between capitalism, by which he means a system of free market economy, and democracy. He thinks there’s a built in opposition between capitalism’s desire for change on one hand, and democracy’s desire for security and status quo rising from demands of special interest groups on the other. To prove his point he looks at the Japanese and German elections – two countries in dire need of change towards a more capitalist system, and two countries that – in his estimation – voted for slow change if they voted for change at all.

Dick Erixon comments on the article saying (in my translation):

…if we take a look at the grand perspective nation states are a relatively new idea in human history. As is democracy and the welfare state that, within national borders, have promised more and more benefits for it’s citizens, often payed for by future generations (like the old Swedish retirement program). Is it possible to uphold the balance between capitalism and state activity? Does democracy inevitably lead to ever shrinking economic freedom? Does democracy lack brakes?

Unfortunatly at least the German election points in this direction. To even breath about renewal leads to immediate loss in elections. Democracy can only produce one kind of policits: the one that leads to economic totalitarianism. And, if so, to the end of capitalism and welfare.

It’s an interesting discussion, especially for those of us who considers democracy to be of fundamental value and who also realises that a capitalist economy will lead to the best economy and is also the most just of economic systems. I think Samuelson and Erixon are wrong. It’s certainly true that it’s difficult to win elections on right wing reformist agendas, especially if there’s no acute sense of crisis among the people. People are, for understandable reasons, unwilling to give up benefits that they have, for promises of a better future – especially when that future will require something from them in order to fulfil those promises. The fact that there is no such thing as status quo is not an easy message to get through.

But I still remain optimistic. It is obviously true that, if there is a sense of crisis, people are willing to elect leaders who offers a real means to get them out of it. The elections of Thatcher in the United Kingdom, and of Reagan in the the United States, proves this. To win with such an agenda without a crisis though is indeed difficult and requires a lot of hard work and – highly important – a way to present this idea of free markets and deregulation as something positive and not just as a quick fix to problems. I think it can be done. Hopefully someone will prove me right.

2 thoughts on “Capitalism and/or democracy”

  1. Mr. Samuelson makes some interesting points, particularly with respect to the obvious causal relationship between economic freedom and widespread prosperity. However, his analysis will remain very incomplete without clarification of several terms. First, his use of the term “democracy,” which is, in fact, very antithetical to capitalism. Capitalism is based on the principle of voluntary trade by mutual consent, and democracy is “rule by many.” I’ll refer the author to “The Federalist Papers” for a full description of “tyranny of the majority.” Popular opinion cannot determine the difference between right and wrong, and so democracy finds various interest groups imposing their will upon individuals in so many ways as to be uncountable. This is neither freedom nor capitalism, but a bastardized mixed economy built upon a solid foundation of coercion and government force.

    The only ethical form of government that is compatible with the principles of capitalism is a constitutional republic, whereby individual freedom of action is guaranteed by a document that is impenetrable by popular opinion or voting. It must be made clear the US Constitution was a bold attempt, but certainly does not satisfy this requirement.

    Capitalism, as such, has never been properly practiced. So without clarifying his definition of democracy, and by putting forth a very subjective definition of capitalism that could mean almost anything but capitalism, Mr. Samuelson has done quite a nice job of pointing out the failings of the West’s predominant socio-economic system: statist socialism. Yes, there is a total conflict between capitalism and democracy, and it can only be resolved by implementing laissez-faire within a constitutional republic that requires a separation of business and state. In a free country, what I do with my wealth (the result of my individual capacity for productive achievement) is none of the government’s business. Period.

    I would also be very interested in Mr. Samuelson’s detailed description of exactly what he means by capitalism’s “injustices.” Mr. Samuleson’s presumption that this claim is fact, without providing any supporting evidence, should not go unchallenged.

    -Jason Somer $

  2. Sorry for taking some time before putting this comment on the webpage. I didn’t notice until just now that it needed approval, since usually comments are posted immediatly.

    Without thinking too much about it I must confess that you do have a point here. To start with what you write in the end about the injustices of a pure capitalist system I agree with you. Mr Samuelson owes the reader an explanation of what he means here — if he simply means to point to the fact that a capitalist system (potentially) leads to strongly diffentiated incomes, he is wrong to consider it an injustice, in particular without explaining why this would be so. I should admit that I’m not familiar enough with Mr Samuelson to know what his positions are on this.

    Also I think you’re probably right about the conflict between pure capitalism (or whatever one might prefer to call it) and democracy. Still it’s not impossible for an electorate to choose a government that strives towards a minimal state such that it can protect the capitalist economy from rogues, but admittedly that’s not very likely to happen.

    Personally I used the word “capitalism” a bit sloppily here, and meant — without any strict definition — rather a “fairly capitalistic system” rather than a fully one. Perhaps a bit careless of me, but on the other hand a system that strives in this direction seems to be what is likely to be achievable.

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