The Human Truth Foundation

Free-Market Capitalism and Democracy

By Vexen Crabtree 2019

#capitalism #democracy #government #politics

Free-market capitalism can bolster democracy by allowing large numbers of the citizenry to mobilize economically and socially1,2, creating a business class that can influence government and thus feed into the democratic system1. But pure capitalism creates more losers than winners, and welfare services social programmes must be run by the government to protect the people against capitalism's negative side. Mitigations must also be put in place to protect democracy itself against the spectre of government becoming purely focused on business interests3. Donations to politicians and parties must be meticulously publicized and similar legal requirements must exist for politicians and political entities to reveal all business interests. In short, free-market capitalism can raise the quality of life and wealth of entire nations, but, it must be regulated if democracy is to be maintained.


1. Benefits

#capitalism #commercialism #communism #economics #politics

Free-market capitalism can bolster democracy by allowing large numbers of the citizenry to mobilize economically and socially1. From its rise in the 18th century, capitalism has created an "independent class of businesspeople... who are now the dominant force in every advanced society"4. Together, they have the power and motivation to influence government and provide an alternative powerbase against overbearing government1, thus feeding into the democratic system. Capitalism can raise many people out of poverty and allow the financing of personal freedoms and collective empowerment.

Capitalism fosters production efficiency2, tends to perform better than state-controlled enterprises in general, and in particular, is superior to communist systems. Democracies have also been attached to market-based systems of production because it "places minimal restraints on economic liberty, thus augmenting personal autonomy"2.

But pure capitalism isn't the only facet required to ensure stability. Note the following positive description of capitalism by Schumpeter:

There never was so much personal freedom of mind and body for all, never so much readiness to bear with and even to finance the mortal enemies of the leading class, never so much active sympathy with real and faked sufferings, never so much readiness to accept burdens, as there is in modern capitalist society; and whatever democracy there was, outside of peasant communities, developed historically in the wake of both modern and ancient capitalism.

"Capitalism, Socialism, and Democracy" by Joseph A. Schumpeter (1942)5

Unfortunately, this was followed by World War Two, which ushered in a disastrous economic period. This shows us that capitalist development, without political and international stability, is weak, and is best developed alongside strong pushes for international collaboration and international rule of law.

2. The Risks to National Democracy

#capitalism #democracy #government #politics

Unregulated capitalism can undermine and destroy democracy. For example, large corporations have wilfully ignored climate science, suppressed health concerns regarding some of the worst carcinogens, embraced large scale labour abuses and tax evasion on huge scales, and have often acted irresponsibly - all in the name of making money. With money comes influence and power - so the risk comes is that if the business class becomes the sole focus of politicians, then the government is no longer caring for all social classes, and is therefore no longer democratic3. Likewise, inequalities of wealth can lead to a widespread loss of autonomy and quality of life and create power disparities that can permanently suppress and disadvantagize large portions of society. For these reasons, government needs to be well-funded and secure enough to resist the pressures that come from powerful organisations, and needs to be able to force such companies to comply with law.

3. Multinational Corporations Versus Democracy: The Fight Between Commercialism and Nation States

#commercialism #democracy #EU #government #multinationals #politics #UK #UN

The era of globalisation has seen capitalist corporations grow into international organisations, often with greater resources and wealth than entire countries.

Modern large corporations can outmanoeuvre governments and therefore evade the law6, leading to weaker governments7,8. If one country tightens up quality control, industrial regulation or raises employee benefits, modern companies can easily move production abroad9. Governments are under pressure to not improve legislation.10. The heads of large companies have massive power over staff, employment, industry, national economies and the environment and yet are not elected nor publicly accountable for their actions (which are sometimes damaging to large numbers of people11). Supranational organisations like the UN and the EU provide a counterbalance. For example "the EU has taken on multinational giants like Microsoft, Samsung and Toshiba for unfair competition. The UK would not be able to do this alone"12. By encouraging governments to work in tandem, and because they are staffed by those on the pay roll of elected governments, such international politics can bring democracies back into power13,14.

Book CoverNation-states, some argue, are too small to be able to influence global change, and too large to respond effectively to the pressures for increased flexibility and competitiveness, or as Giddens put it 'too small to solve the big problems, but also too large to solve the small ones'.

"A Globalizing World? Culture, Economics, Politics" by David Held (2004)15

We clearly need multinational governmental bodies to control multinational corporations. Not only will this bring capitalism back under the protective arms of democracy, but it will also solve the second problem identified by Held and Giddens: It will allow national governments to concentrate more on the small problems of national well-being.