Session 10: Capitalism & Democracy
On the privileged position of business: George Bernard Shaw, Major Barbara (1905), Act III:
UNDERSHAFT [with a touch of brutality] The government of your country! I am the government of your country: I, and Lazarus. Do you suppose that you and half a dozen amateurs like you, sitting in a row in that foolish gabble shop, can govern Undershaft and Lazarus? No, my friend: you will do what pays us. You will make war when it suits us, and keep peace when it doesnt. You will find out that trade requires certain measures when we have decided on those measures. When I want anything to keep my dividends up, you will discover that my want is a national need. When other people want something to keep my dividends down, you will call out the police and military. And in return you shall have the support and applause of my newspapers, and the delight of imagining that you are a great statesman. Government of your country! Be off with you, my boy, and play with your caucuses and leading articles and historic parties and great leaders and burning questions and the rest of your toys. I am going back to my counting-house to pay the piper and call the tune."
Session 10. A Moral Argument for Capitalism, and Its Difficulties: A Relatively Free-Market System Is a Necessary Condition for Democracy. (1) Why Capitalism Is Always Observed to Accompany any Enduring Wide-Suffrage Democracy. (2) Why Big Business Always Has Enormous Political Power in Advanced Capitalism. (3) How The Market in a Capitalist World Punishes any Democratic Attempts to Evade Market Forces or Globalization.
Read first: Adam Przeworski, "Capitalism, Development, and Democracy," Brazilian Journal of Political Economy 24 (2004): 487-499. [ClassesV2]
Gives evidence that capitalism is a necessary condition for democracy, that it is not sufficient for democracy, and outlines a mechanism explaining why we observe that all long-lasting democracies with universal suffrage have been capitalist, and not centrally-planned or state-owned in economic production. Democracies, in this mechanism, are more likely to last if they are capitalist with a decent standard of living: in that situation, both rich and non-rich voters realize they can lose their economic goods if they turn away from capitalism to some other system of economy that respects private property far less. But if the society's economy is centrally-planned or state-owned, or is capitalist but with a very low standard of living, then people have strong economic incentives to topple the democracy.
Then read: Charles E. Lindblom, "The Privileged Position of Business," "Consequences for Polyarchy," Politics and Markets, pp. 170-201. [ClassesV2]
Then: Charles E. Lindblom, "The Market as Prison," Journal of Politics 44 (1982): 324-336. [ClassesV2]
So you’d like to know more…
Charles E. Lindblom, "Market and Democracy," Politics and Markets, pp. 161-170. [At bottom of this page]
Asks Przeworski's and Friedman's question: why do no observed regimes that can plausibly be called democratic or
popularly-controlled attempt central planning of production in peacetime? Answers that it is because the leaders of
business and the majority of the wealthy have a particularly privileged place in the politics of market democracies,
and a strong economic incentive to fear central planning, since it would probably greatly undercut continued high
returns to their wealth. Hence, they have the power and the motive to prevent a market democracy's ever seriously
attempting peacetime central planning. And they do so, whether intentionally or unintentionally.
Robert A. Dahl, "What Does Large-Scale Democracy Require?" "Why Market-Capitalism Favors Democracy," "Why Market-Capitalism Harms Democracy," On Democracy (Yale University Press, 1998), pp. 83-91, 166-179
[At bottom of this page]
Explains why market capitalism is favorable to democracy up to the level of polyarchy--electoral democracy with
universal suffrage and civil liberties--but after that, works to prevent attempts at more and deeper democracy. It
creates economic growth and a large middle class, which central planning does not do as reliably. Moreover, it does
this far more efficiently than central planning. But because it generates and protects economic inequalities, which
inevitably spill over into protected political inequalities, it prevents further and deeper democratization. Also
specifies the core features of polyarchy.
Thomas Piketty, Capital in the Twenty-First Century, trans. A Goldhammer (Belknap Press, 2014)
A thorough presentation of the evidence that capitalism tends to large economic inequalities and concentration of
wealth in the hands of a minority. Explains the fundamental causes of this tendency, and the mechanisms by
which the concentration is carried out.
Richard W. Miller, "The Concept of a Ruling Class," Analyzing Marx: Morality, Power, and History (Princeton University Press, 1984): 101-141
Expounds a stronger claim than Lindblom's privileged-position thesis: the [capitalist] ruling-class thesis: that the capitalist owner-managers rule the capitalist state.
Ralph Miliband, The State in Capitalist Society (Merlin Press, 2009 [1969])
Probably the most famous exposition, application, and defense of the capitalist ruling-class thesis.
Robert L. Heilbroner, "The Power Structure," Between Capitalism and Socialism: Essays in Political Economics (Random House, 1970): 247-257
[At bottom of this page]
Considers one of the leading attempts to find empirical support for the [capitalist] ruling-class thesis: G. William
Domhoff's Who Rules America?, itself an updated version of C. Wright Mills's The Power Elite. Admires Domhoff's
overwhelming case that the positions of public and corporate authority in the US are mostly occupied by people from a
small tightly-knit and highly overlapping elite (though one that allows admission to some not to the manor born). But
points out that this does not prove that this elite rules in the sense crucial for skepticism about democracy: that when
this elite's interests conflict with those of the non-elite, its interests are generally made official policy of government.
Domhoff and Mills before him have no real proof that this holds true.
John Kenneth Galbraith, American Capitalism: The Concept of Countervailing Power (Transaction, 1993 [1952])
Argues that while, in the early 20th century, business firms were getting ever bigger and gobbling up competitors, this
size-increase was being balanced by the increase in size of unions and government, which tended to block and oppose
some of the demands of big business and its owner-managers.
Frederic L. Pryor, "Capitalism and freedom?" Economic Systems 34 (2010): 91-104. [ClassesV2]
Tests the claim that we don’t observe a strong commitment to democracy without substantial commitment to capitalism. Finds that although this holds true around 2000, it may not have held true in the 19th century, when a number of countries (e.g., Costa Rica) had a pretty good record on democracy relative to their contemporaries but were not very committed to capitalism.
Peter L. Berger, "Capitalism and Political Liberties," The Capitalist Revolution: Fifty Propositions about Prosperity, Equality, and Liberty (New York: Basic Books, 1986), pp. 72-89.
Offers a mechanism to help explain why we observe that all lasting electoral democracies with universal suffrage are capitalist. Basically: capitalism offers escape hatches from state power, while state-ownership socialism doesn’t. Develops further the mechanism sketched by Friedman in "The Relation between Economic Freedom and Political Freedom." But is the choice only between capitalism and state-ownership socialism?
John Dryzek, Democracy in Capitalist Times (Oxford University Press, 1996 , pp. 24-39, 77-83.
Argues that the capitalist state cannot be made fully democratic: it will always successfully resist any reform that conflicts with reproducing capital or with the continued existence of the state.