The Dance Between Democracy and Capitalism

Jan 25

Jan 25 The Dance Between Democracy and Capitalism

Throughout history, there have been various political and economic systems that have metamorphosed into the systems that drive the politics and economies of the world today, ones of which are democracy and capitalism, whose prevalence can’t be denied, and one school of thought believes that they both go hand in hand… Do you think so, too?

Democracy and Capitalism: Unfiltered

To understand this school of thought better, we must break its elements down. So, what are democracy and capitalism?

Democracy comes from the Greek words "demos," meaning people, and "kratos" meaning power; so democracy can be thought of as "power of the people": a way of governing which depends on the will of the people. (Democracy - Manual for Human Rights Education With Young People - www.coe.int, n.d.).

While capitalism—originating from the Latin word "capitalis," which means "head of cattle"—is an economic system that maintains that the production of goods and services for the public should remain in the hands of private individuals and businesses, not governments, at the prices that the public is willing to pay, through the law of supply and demand and competition. (Nickolas, 2023)

The Birth of Democracy and Capitalism

Democracy was first born in the 5th century BC in Athens by the ancient Greeks. Their democracy was direct, meaning that the people themselves met, discussed questions of government, and then implemented policy. With the passing of time, many forms of democracies have emerged as there are many democratic nations in the world, but one thing that's common between modern systems of democracy is the use of representatives of the people, which is indirect democracy, where elections are used to select representatives who the people send to govern on their behalf. Such a system can lay some claim to being "democratic" because it is based on the equality of all (one person – one vote) and the right of every individual to some degree of personal autonomy.

As for capitalism, It arose largely sometime in the late 17th century with the rise of the Industrial Revolution. Capitalism involved reorganizing society into social classes based on ownership of capital (in other words, businesses) rather than ownership of land, which led to us having the capitalist and working classes. Now, the system prioritizes the endless accumulation of capital, which means that people and firms are accumulating capital to accumulate still more capital, a continual and endless process. (Wallerstein, I. M., 2011)

Democratic Capitalism

This marriage between democracy and capitalism is deemed harmonious as the flourishing markets and giving the people the freedom of choice allow for a happy, content state. It is a dynamic complex of economic, political, moral-cultural, ideological, and institutional forces that assumes pluralism, as it recognizes that individuals have differing opinions and interests and allows them to associate freely to further those interests. (Younkins, n.d.)

Democratic capitalism is based on consent by the people, limited government power, and a legal order that protects individuals’ rights and voluntary exchange. The ideas of a free market economy and political democracy stem from the same reasoning and the same moral-cultural values, institutions, and assumptions, as enlightened self-interest; hard work and perseverance; self-reliance and self-control; thrift and saving; the right to acquire and enjoy wealth; and belief in justice, honesty, duty, and an objective moral order to maximize social welfare by making the market more humane and the government more efficient.

So, What is the Problem Between Democracy and Capitalism?

As we all know, not all marriages are perfect; there are always some disagreements and hurdles to overcome. Some claim these hurdles to be the COVID-19 pandemic, Putin’s invasion of Ukraine, or crony capitalism. Meanwhile, others claim it to be a moral-cultural sphere matter. The moral-cultural sphere provides values that give order and moral direction to society, such as family, religion, education, and social and cultural institutions. Regardless, the one thing that is agreed upon by all concerned is that the hurdles facing democracy and capitalism are all due to exogenous sources; democracy and capitalism themselves are not culprits for these problems.

The COVID-19 Pandemic’s Effect on Democracy and Capitalism

The pandemic threatened capitalist economies globally as underfunded and aging health systems across the capitalist world crumbled whilst the global stock markets and economic activities faltered despite the panic-stricken expedients of many governments to support them. The first signs of this global crisis were reflected by the decline in industrial production and an increase in unemployment, where the laboring class was the one put in the shooting range, with no say in that matter, due to declining rates of trade and international travel. (Alexiou, 2021)

Putin’s Invasion of Ukraine and its Effect on Democracy and Capitalism

European nations are known for their liberal democracy, whereas Russia has come to be known for its authoritarian and oligarchic capitalism, where democracy exists in the US and much of Europe but not at all in Putin’s Russia of 2023. In Ukraine, democracy’s growth in the last thirty years has been particularly volatile and episodic, but also unmistakable, with elements of self-organization unseen in many other places. (Russia, Decolonization, and Democracy - Notes - E-flux, n.d.) But with the war, the impact of sanctions cutting Russia off from the Western financial system, removing trading privileges, and Western corporations pulling out of the country has clearly affected a section of the urban middle class who are linked to the world economy and are more pro-western. However, the devaluation of everyone’s currency, inflation, and the threat of mass unemployment will mainly affect the broad working class.

Crony Capitalism’s Effect on Democracy and Capitalism

Crony capitalism is when the delicate balance that allows for both state and societal autonomy is affected, where individuals and businesses with political connections and influence are favored in ways seen as discriminating to open competition in a free market. Thus, institutions must empower the state with enough authority to provide public goods and enforce legal standards while also limiting excessive power that can lead to authoritarianism and impinge upon personal liberties and autonomy. As the walls separating power and wealth are breaking down, the capitalists are taking control of the state, which, in turn, is affecting democratic capitalism negatively. (Quintas A., 2023)

The Moral-Cultural Sphere of Capitalism and Democracy

The moral-cultural sphere counts as a threat to democratic capitalism as religious justification for wealth accumulation and self-discipline has been largely replaced by a rationalistic belief in material and secular progress as goals in themselves. The resulting tendency is to seek possessions as an end unto itself. Humans are no longer viewed as having fixed natures; rather, the emphasis has turned to the uniqueness of each individual and a subconscious rejection of the old for the new. As a popular example, think about the iPhone. Each year’s iteration is the “best one yet,” and consumers are encouraged to update. Luxuries become necessities, and necessities become rights. Ultimately, the political order is depended on to provide social, political, and economic equality – both of opportunity and outcome. (Alexiou, 2021)

Another School of Thought?

Another school of thought is that capitalism and democracy don’t need each other to blossom and that both systems have flourished with other systems like oligarchic capitalism and socialist democracy. So, how does that come to be?

Democracy and Capitalism are opposites

Democracy is based on the fact that all people are equal and they all have equal rights. Whereas capitalism is based on the difference created between capitalists and labor, hence, the inequality. The former school of thought that opposites (democracy and capitalism) attract and work together is more of an idealistic thought.

As a real-life proof in action, we have China, which is politically authoritarian and has started embracing capitalism through switching to private enterprises, leading it to be the second largest economy in the world that predominantly depends on manufacturing, exports, and investment. In addition to having an extensive workforce, robust governmental backing, infrastructural advancements, and an expeditiously expanding consumer market. (India, 2024)

As for democracy, it is arguably receding, where liberal democracies are transforming into illiberal ones as the expectations of an educated population that would choose the “right” leaders that would compete for votes by appealing to the “median voter,” bringing moderation to previously divided societies is ambushed by the reality that people keep picking the “wrong” leaders, thus, corruption is on the rise and the ruling class can barely comprehend the concerns of our “median voters.” (True Democracy Is Incompatible With Capitalism, 2023)

An example of this is Turkey, where under Recep Tayyip Erdoğan’s rule, the democracy shifted from being a liberal to being an illiberal one. The public votes but the government bats no lash to minorities and individual freedoms. The new president and his party control the body that appoints the judiciary. Furthermore, destabilizing regional developments, especially in Syria, led to the shift to democracy. In particular, the arrival of over 3.5 million Syrian refugees adversely affected Turkey’s domestic politics and economy, such as increases in prices and property rents. Additionally, the arrival of low-paid refugees onto the labor market increased the unemployment rate across the country, notably in southern Turkey, which in turn, has put Turkey in a compromised position with the European Union.

Conclusion

Whether democracy and capitalism go hand in hand or they are bound for a divorce is debatable. There are many schools of thought, and maybe if the aforementioned problems are resolved, then democracy and capitalism will go hand in hand peacefully, leading to the prosperity of societies and nations globally.

Works Cited

Younkins, E. (n.d.). The conceptual foundations of democratic capitalism. http://www.quebecoislibre.org/younkins16.htm

Quintas A. (2023). Martin Wolf: The crisis of democratic capitalism: Penguin Press, New York, 2023, 496 pp, USD 30.00 (hardback). Public Choice, 1–3. Advance online publication. https://doi.org/10.1007/s11127-023-01057-w

Russia, Decolonization, and Democracy - Notes - e-flux. (n.d.). https://www.e-flux.com/notes/540812/russia-decolonization-and-the-capitalism-democracy-muddle

Nickolas, S. (2023, December 10). Capitalism vs. Free Market: What's the Difference? Investopedia. https://www.investopedia.com/ask/answers/042215/what-difference-between-capitalist-system-and-free-market-system.asp#:~:text=Capitalism%20is%20one%20form%20of,gift%2C%20or%20transfer%20the%20property.

Democracy - Manual for Human Rights Education with Young people - www.coe.int. (n.d.). Manual for Human Rights Education With Young People. https://www.coe.int/en/web/compass/democracy#:~:text=The%20ancient%20Greeks%20are%20credited,in%20the%20city%20of%20Athens.

Alexiou, C. (2021). Covid-19, capitalism and political elites: The real threat to humanity. Human Geography, 14(2), 284–287. https://doi.org/10.1177/19427786211012671

India, F. (2024, January 2). The top 10 largest economies in the world in 2024. Forbes India. https://www.forbesindia.com/article/explainers/top-10-largest-economies-in-the-world/86159/1#:~:text=The%20United%20States%20of,magnitude%20of%20a%20nation's%20economy.

True democracy is incompatible with capitalism. (2023, June 17). https://jacobin.com/2023/06/democracy-retreat-capitalism-authoritarianism-crisis

Types of Democracy: Definition & Differences | StudySmarter. (n.d.). StudySmarter UK. https://www.studysmarter.co.uk/explanations/politics/foundations-of-american-democracy/types-of-democracy/#:~:text=Democracy%20is%20a%20political%20system,Many%20other%20subtypes%20exist.