CAPITALISM
Is a conflict between capitalism and democracy on stage? Some recent books and articles seems to envisage it. But is it real or just another narrative? Moreover, is it true for all democracies or some that they have already bended under an unmatchable game: a low efficiency, often corrupted political system under the false flag of democracy versus a high efficiency, low grade of ethic economic power? Then we have to make some distinctions between the Anglo American system and the Continental European system. Not to mention other parts of the world where "democracy" is just a word to legitimate new oligarchies. Democracy is a complex machine that needs continuous update and is not a model fit-for-all; it needs to be customized.
But let's start to assess the problem with shortcuts.
The supporters of this theory assert that after the emergence of mass democracy after World War II, an inherent tension has existed between capitalism and democratic politics. The slogan is that capitalism allocates resources through markets, whereas democracy allocates power through votes. Maybe it works in such a fashion in a mature democracy like the U.S., but it certainly never worked like that in Mediterranean-style "democracies". Votes and free elections are a sliding door between democratic institutions and civil society. They allow to include what local society produces about human resources and moral attitudes. Without strong ethics as an individual and in public attitude, democracy doesn't work at best or doesn't work at all. Ricardo and Smith theories were not borne for fate in North Europe, where strong ethics have deep roots. Moreover, in democracy satellite areas, often local oligarchies hold the elective "process" by basically deciding who can go through the electoral system and who has to stay out. They control the media system as well.
Another common ground about theorists is that economists and economic scholars have been slow to accept that this tension exists. Instead, they have tended to view markets as a realm beyond the political sphere and to see politics as something that gets in the way of an otherwise self-adjusting system. But actually is not true. For example, Milton Friedman and the Chicago school stated the market needed to be independent from any state influence. It proves that the struggle between the state and market was consistent through time, even before WW2.
During the 1929 financial crisis, the American system took more time to recover than Nazi Germany after 1933. Why? Because in Germany the presence of great finance was weak; even today it is. It makes the political government more stable. And an efficient dictatorship makes it easier to recover due to the faster decisions chain that citizens pay for in terms of freedom, of course. Basically in Continental Europe, the state is more invasive and wider than civil society. In the Anglo American system it is just the contrary. And when we talk about democracy, we have to remember it. Democracy grows better in the second system with a larger and healthier civil society.
It is right that today's world is determined by how democratic politics and capitalism fit together. Politics is not a mistake that gets in the way of markets and should not bend too much under the pressure of economic interests. Democracy is not just a free and fair process of election; it is more complex.
The system was characterized so far by a constant struggle between capitalism and democracy. So why does it seem that things are turning worse? It's simple: because of globalization. Globalization is not bad by nature, but could become bad for people when politicians are corrupted, too ignorant and not efficient to deal with, and are not able to stand by public interests. In addition, globalization made the development system faster than ever, while democracy still fits into the old-style world. It needs a reform. We need a faster democracy. The risk is that it could be less democratic. Another sticking point is that capitalism thinks global, while democracy thinks local. So, it needs a global homogenization of political systems. A slogan: democracy for everybody.
The original sin that turned globalization in the wrong way could lay in an incestuous relation between capitalism and executive power in the U.S. Before the year 2000, the salary trends was bogged down and the political system needed a way to produce wealth for the middle class, already under pressure. The deal was easy rules for finance in exchange for easy money for mortgages. The covenant was more complex, but basically we can resume it in another slogan: houses for everybody. Then the system had several resets. The first one was after 9/11 when the world economy slowed down drastically for a couple of years. Then several world financial crises occurred basically due to the same mistake.
The conflict between capitalism and democracy, and the compromises the two systems have struck with each other over time, has shaped our contemporary political and economic world. After WW2, democracy set the rules, taming markets with the establishment of protective labor laws, restrictive financial regulations, and expanded welfare systems. But in the 1970s, a globalized, deregulated capitalism, unconstrained by national borders, began to push back. Today, capital markets and capitalists set the rules that democratic governments must follow. The outcome was that the middleclass was squeezed in the U.S. and Europe and boomed in Asia and Africa, without a compelling update of their political systems in Africa and the Middle East and political reforms underway in Asia. So it is better explained as the backlash of xenophobia and the rise of populist parties, as well as Donald Trump appeal. As inequality has widened and real wages for the majority of people have stagnated—all the while, governments have been bailing out wealthy institutions.
Now that populism and xenophobia emerge as a reaction to some byproducts of globalization mismanagement, and the market system brought even unprecedented prosperity all over the world, but with strong inequalities, a solution could be a midway: a better ruling of capital free flow and a more efficient system to defend ordinary people's interests. Maybe this is just wishful thinking.
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#capitalism
#democracy
#economy
