Capitalistic Democracy

There is a too often unchallenged assumption that seems to exist—especially among business minded people—such as that markets are the preferred mechanism for everything.  Clearly, markets are not everywhere applicable, especially were equal opportunity is the intent.

Why don’t most professional sport leagues use the market mechanism when drafting players?  The NFL, for example, gives the losers first pick in the draft each year.  Why?  Simply, the league would be absent of widespread rivalry and become boring.  Why?  Because there is an auto-correlative nature to competition and markets—that is winners are more likely to be winners. As a result opportunity would be limited for all but those at the top.  The business of the NFL would self-destruct if the selection of talent followed an unfettered market-driven process—if those with the most got the most.   The viability of the (entire) league is enhanced when opportunity is afforded to the ‘have-nots’ by overcoming the auto-correlative nature of competitive markets.

Knocking Off Opportunity

Why is opportunity important for a society?  The simplest and most direct reason is that bettering one’s life is greatly dependent upon opportunity—no opportunity means slim-to-no chance.  Of course competence, talent and effort play a role, but these absent of opportunity will not likely produce fruit.

In theory, American society is based upon the principles of democracy where the ultimate aim is to optimally allow each individual the right to life, liberty and the pursuit of happiness.  In this context, liberty would afford one the freedom to improve his/her condition. While this does not mean that everyone should have equal outcomes, it does mean that everyone should have equal access, equal opportunity.

Accompanying the widening household income gap is a general state of affairs that can be characterized as: economic instability, unemployment, impoverishment, homelessness, environmental degradation and educational decline.  Richard Wilkinson and Kate Pickett reveal in their book The Spirit Level that unequal societies present more homicide, more obesity, more mental illness, more people incarcerated, poorer general health in society and a lower life expectancy.  Clearly, with the United States being the second most unequal society, in these findings there’s no happiness for most within American society!   It seems in regards to many of these, either opportunity is not taken, and thus wasted, or the access to opportunity is limited.

Ideologically, America is a society of the people, for the people and by the people—yes a democracy.  At minimum this should afford individual citizens equal say and yes equal opportunity—if it is the land of opportunity.  However, in practice it appears to be a government: of those with access, for those with access and by those with access.  Why is it that access and thus opportunity, is disproportionately afforded to those bearing gifts—to the tune of $9.6 billion/year? What is the cause of this incongruity between theory and practice?

Here a Market, There a Market, Everywhere a Market

Has a belief in the omnipotent power of markets caused us to structure everything as such, where payment of money brings satisfaction of need? Have those in authority—commonly referred to as the leadership—shunned (their) responsibility to ensure that individual citizens have equal opportunity?  Have they turned to the invisible hands of the market as a replacement for responsible action?  If those advancing the market as a solution to our ills are successful, then there will be no one held responsible.  It will all be a puppet play with those pulling the strings securely hidden behind the market mirage that we the people, through our cooperation, help sustain.

The difficulty we have with government is not that government is too big or that it is turning everything into public property (i.e. socialism) or that it is taking over everything (i.e. fascism), it is that it is dishonest and corrupt!  As noted by Eugene Fama , a pro-market economist (University of Chicago), “regulators get captured by the people they are supposed to be regulating; this is ‘not unusual, it happens all the time’.”  The real issue is not so much big versus small government it is good versus bad government.

Capitalistic democracy is in effect plutocracy—a government of, for and by the (very) wealthy.  It is a market-driven government where winners get to choose.  Yet markets have no place in societal affairs!  This type of government is a self-serving government; one that avoids transparency, public disclosure and that serves only those with access—those who bear gifts—while mollifying the rest.

A self-serving, corrupt and non-transparent (i.e. secretive) money-for-favors-driven government, no matter the size, is a threat to the viability of a democratic society, as well as its economic system.   Thomas Jefferson wrote to John Taylor in 1816, “I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

Markets can be very effective, but they are not everywhere applicable. In other words, could it be that capitalistic principles have infiltrated and compromised the very practice of democracy?

17 thoughts on “Capitalistic Democracy

  1. Gregory, that was a very stimulating and thoughtful post. As to the question with which you concluded it, it is quite apparent to me that what Jefferson feared has materialized, and has been manifest for a long time. C. Wright Mills wrote a great book in 1956 titled “The Power Elite,” in which he demonstrated the manner in which the plutocracy had taken command of our democracy. Even back then it was apparent that our society was run by an elite that exercised hegemony over increasingly atomized masses comprised of people who were busy trying to be “successful” in middle-class terms, being distracted by “celebrities” and sports, and becoming increasingly apathetic about the communities they lived in.

    Ironically, the very success (if you’re looking at it from the standpoint of the plutocrats) of this process has produced the mess we’re in right now. It has also produced widespread alienation and distrust of government and big business. I surmise that, as we speak, there is more than one “tea party” going on. If the economy doesn’t begin to generate domestic employment soon, it could get ugly. In a way, if that caused more people to engage the political process, it would be a healthy thing for our (in-principle) democratic society.

    • Rick as you point out it has been with us–to varying degrees–for quite some time, even Lincoln fought against this.

  2. I comment partly from a UK context, but not entirely. I enjoyed your article and it set many thoughts going. I was not minded to respond until I watched CNBC Squawk Box yesterday evening where there was a discussion of Bob Madoff which to me was far too sympathetic towards him and at one point almost questioning of if he had actually done anything really wrong in the great scheme of things.

    I am very pro small and medium sized business, and I see the opportunity for these to thrive being removed.

    “There is a too often unchallenged assumption that seems to exist—especially among business minded people—such as that markets are the preferred mechanism for everything…”

    Your opening comment valid, but I feel this is only quite recent phenomenon and was first seen in the early 1980’s with the Thatcher / Reagan years. These pair were heavily influenced by several economists, including but not limited to Alan Walters and Milton Freidman. What strikes me is what exactly was going on in US and British elite universities and places of research that their influence went unchallenged. In France and many other European countries there was much resistance to there views.

    To me in the 1980’s the business community in the UK was like a generation of people who had precipitated the 1960’s permissive society, that had grown up and got serious in rather unpleasant way and were now arguing not for free love and flower power but unrestrained business and market behaviour.

    In many respects I feel we will go on paying socially and financially for a very long time for the selfishness of the 60’s and early 70’s generation who by and large are now the “establishment” of today.

    My UK perspective is that he “right wing or Conservative and the centre Liberal aspect of British politics from the earliest times up to the mid 1970’s was dominated to a large extent by a largely landed aristocracy and elite. You may not think this was very democratic. They regarded people who made money in industry, commerce and business with some considerable mistrust and contempt and perhaps even more effectively than the trade union movement made sure the excesses of business were curbed. In the absence of electoral franchise of much of the working class they drove through much reforming legislation regarding working conditions and pay. They took the view that for certain key aspects of national infrastructure that the market and business should have no control of such matters, examples included, the post office, water supply, telecommunications, and most importantly much of weapons and armaments manufacture. The socialists in 1946 and 1947 actually nationalised key swathes of British industry, the centre and the rights argument against such was that the State had no business being involved in such directly trade or commercial activities. The right at that time certainly did not argue for privatisation of traditionally owned state owned assets. This all changed in the 1980’s
    The paragraph below I lifted from the web, to me it sums up what happened in the 1980’s
    The privatization of public assets was combined with deregulation of finance in an attempt to fuel economic growth. Notably, in 1979 Geoffrey Howe abolished Britain’s exchange controls to allow more capital to seek profits overseas and the Big Bang of 1986 removed many restrictions on the activities of the London Stock Exchange. The Thatcher government encouraged the growth of the financial and service sectors to replace Britain’s ailing manufacturing industry. Susan Strange called this new financial growth model, flourishing in Britain and America under Thatcher and Reagan, “casino capitalism” – as speculation and trading in financial claims became a more important part of the economy than industry.[99]
    Prior to the 1980’s the activities of big business in the UK were even treated as a possible threat to National Security. The Department of Trade and industry which kept and eye on commerce and industry was soon disbanded. I understand that in the US the secret service still has responsibility for protecting the Dollar and I am surprised they have not overtly intervened.

    My own thoughts are that for democracy flourish we need a well informed and well educated electorate. I do not believe that that condition actually exists any where in the world.

    As I learn more I am even more staggered in the UK and European context how easy and inexpensive it is for big business to influence politicians and government officials. I assume the same exists in the USA. In Europe a swathe of legislation has been passed by government in connivance with big business, that small business has not got a hope in hell in compiling with and which will cause their elimination. I even start to question if the International Standards Organisation really understands the consequences of some of their standards

    • John in America the conflict over the interplay of business and society has a long history. President Lincoln probably the first US president to advance the idea of economic opportunity for the average citizen to attain middle class standard of living (yes the American Dream)–even then there was opposition to this very notion. By the early 1900’s Social Darwinism (i.e. Herbert Spencer’s survival of the economic fittest), laissez-faire thinking (i.e. unfettered free-wheeling business) had contributed to a growing gap between the rich and the poor and the famous crash of 1929. We do repeat history when we don’t understand its cause. When the tail wags the dog trouble is always ahead.

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