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wonderpup

Can Democracy And Capitalism Really Co-Exist?

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We have a habit of thinking that in some way Capitalism and Democracy are somehow synonymous- that they are a complementary pair. But is this actually true?

After all a defining characteristic of Capitalism is that there will be a relatively small number of relatively rich people and a much larger number of relatively poorer people- this uneven distribution of wealth being the source of the 'capital' that makes the thing work- you need some rich people to act as the pools of investable wealth that gives the system it's energy.

But on the other hand a defining Characteristic of a Democracy is that the will of the majority prevails- at least this is how it is supposed to work.

So if we were to take a pure form of Capitalism and subject it to the rule of a pure form of Democracy we would expect that soon afterwards that Capitalist system would cease to function because the demos would act to eliminate those pools of capital by voting to redistribute them to itself. More simply- any blatant disparity in wealth between the wealthy elite and the masses would be arbitraged away via the democratic process as politicians competed for votes by promising to capture that 'excess' wealth and redistribute it.

In theory then no capitalist system could for long survive in a democratic environment- the two systems seem utterly incompatible because the former requires a degree of inequality that would not be sustainable if power were to reside solely in the hands of the latter- the great unwashed would simply use their mandate to eliminate that wealth disparity via confiscatory taxation.

Which poses the question- if Democracy and Capitalism are in fact incompatible why do we think they are virtually indistinguishable?

Well the fact is that I cheated when I set up the question- I inserted the word 'pure' into my analysis- purity being the antithesis of corrupt. The reason-I think- that the apparent incompatibility between our financial system and our governance system does not lead to collapse is because both are corrupt- or more accurately their interoperation is lubricated by a layer of corruption that penetrates both simultaneously.

The truth is that we have neither free market Capitalism or true Democracy- what we actually have is a hybrid, a system in which the democratic process is systematically undercut by the wealth of the elite, who deploy that wealth to obfuscate and frustrate the democratic process in a myriad of ways; they use it to control media and thus the perceptions of the voters, they use it to buy influence via their contributions to political parties and they use it to influence in countless ways the day to day functioning of the institutions that are the cutting edge of democracy itself- blunting that edge sufficiently to ensure that their wealth is protected.

So from this viewpoint the corruption of Democracy by Capital is not a bug, it's a feature. In fact it's more than that- corruption is essential to the way our system works- it is the immune system that defends the status quo from dangerous purity.

A contemporary illustration of this immune system in action can be seen in the way it has reacted to the election of Jeremy Corbyn. If we were to distill the multiplicity of attacks on Corbyn what would their essence be? What is the core message being disseminated about the new labour leader?

Simply this- he is too pure- his ideas are dangerous not because they are in themselves evil but because they represent a perspective that is perilously naive and simplistic.

Put another way the real problem with Corbyn is that he is not corrupt enough- he fails the essential test of a viable political leader which is the willingness to embrace the necessity of the systemic corruption of the democratic process by the elite.

Corbyn-like all politicians- claims to believe in democracy- the difference is that unlike most other politicians people think he actually means it- and this is a threat so potent that at least one army general has speculated that if he were elected prime minster the outcome might be a military coup.

Nothing is more dangerous to a status quo based on systemic corruption than an honest man- which is why the entire firepower of that system will be focused on the destruction of Corbyn and his ideas- the last thing we need running our democracy is man who actually believes in democracy- such a man will be the ruin of us all- or at least those of us who have a vested interest in ensuring that democracy remains carefully confined to it's current role as an opiate to dull the anger and resentment of those who have little or no reason to love the system as it is but who can be persuaded that a trip to the polling booth every five years is all that system needs to justify it's manifest and seemingly intractable inequities.

Edited by wonderpup

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Thatcher got fairly close.

And b4 many say say she created the bank bubble. She didn't. Brown did.

Edited by Killer Bunny

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I think the two are incompatible over the longer term.

Eventually what seems to happen is that capitalists want to own politics as well as everything else, or at least optimise social/economic conditions for themselves. So you get widespread corporate capture of government. It takes a highly politically engaged populace to prevent this.

Personally, I think Thatcher knew exactly what she was doing, and the likely eventual outcome - which certainly happened under Labour's watch.

Edited by StainlessSteelCat

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Does capitalism have to look like a small number of rich people bank rolling a greater mass of workers? That definitely still exists but there are plenty of counter examples where the common man can create new value with education.

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Does capitalism have to look like a small number of rich people bank rolling a greater mass of workers? That definitely still exists but there are plenty of counter examples where the common man can create new value with education.

Also with crowd funding type structures, individuals with large amounts of capital can be replaced with lots of people with a small amount to some extent. Also its interesting that some of the worlds most successful businesses were originally kicked off with relatively small amounts of capital - google, apple, microsoft, dell etc although granted its not so easy with some other sectors as it is with IT.

Edited by goldbug9999

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Capitalism needs a sympathetic benign dictator to stop eat eating itself. Of course should a dictator get replaced by someone not so benign ...

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Does capitalism have to look like a small number of rich people bank rolling a greater mass of workers? That definitely still exists but there are plenty of counter examples where the common man can create new value with education.

The problem is always one of control and power. Wealth was forcibly distributed/acquired to/by noble men after the Magna Carta allowed for a more equitable rule of law. The black plague enabled the idea of salaries, (as Mr Armstrong has postulated) as it forced competition for labour. Until that point Labour was simply given food and shelter.

Fast forward to today, technically, the older population's pension money is meant to be spent of projects which benefits future society as a whole, provide employment for the young and provide retirement income to live out their days, In reality, the people in control of this spending have for years taken larger and larger cuts to increase their assets today at the cost of the future of millions in retirement. Since pension mathematics is considered "boring" to the general populous they don't care that they will be very poor due to theft for 25 previous years. Suffice to say, a 1% increase in pension costs is a 50% reduction in your total pension - as a rule of thumb. To compound that, senior politicians have been merrily spending promises to deliver since the guilt of WW2 with no intention of paying any money back ever. So, with an aging population, not only was the pension money reduced thanks to fund managers, there's actually none left at all - so we borrow to pay pensioners.

So capitalism doesn't always have to be a wealthy elite, it can just be inter generational wealth passed on with reasonable management and planning for what society would need for future generations e.g Suez canal mk2 or renewable energy research etc. Unfortunately, thanks to human greed it almost always comes one elite wealthy group against the masses, mainly because you need to pay for elections and people actually believe (like a religion) in the causes of the Tories, Labour. Lib Dems etc. This belief is simply used again them every time in order for the elite to back the winner and continue their agenda regardless of who is in power, except for marginal changes to the veneer of society.

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This is an interesting question, but we would first need to introduce capitalism and democracy. This country and certainly the US, have neither.

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Capitalism does work if a line is drawn........give people capital on a plate and they will take it and expect more where that came from......democracy should mean majority rule, but when the majority can see some are getting money for nothing (usually out of others hard work) they eventually will not stand for it, no matter how many crumbs that are thrown to them......for it to work it all comes down to a fair and balanced system where the temptations to grab as much as possible is removed......some people can't be trusted.

Edited by winkie

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This is an interesting question, but we would first need to introduce capitalism and democracy. This country and certainly the US, have neither.

Apart from this, it's clear that the democracy should be limited to all things non-economic, i.e. the ones where there is no marker possible. In a broader sense, the answer to the original question of the thread is a fat NO.

The problem is that the bulk of people perceive "democracy" (or have been brainwashed into perceiving it that way) as something inherently good and impossible to live without. Limited democratically elected government's scope is a necessary evil to preserve capitalism or market based reallocation of resources.

B.Franklin gave a pretty clear and succinct explanation as to why democracy as such is immoral and inherently evil:

“Democracy is two wolves and a lamb voting on what to have for lunch."

There's a very fine balance between the necessary government's scope to preserve the marketplace from various cockroaches and the situation where there's is too much of government.

As Erroll said, we don't anyway have either in place. Couldn't agree more. And the governments these days are generally the cockroaches principal that are attacking the market rather than making sure they work to the benefit of the society.

On another side-note - yes, in capitalism, there would be inequality in income, of course. The alternative to consider is an equally poor society across where the general public's living standard is many times lower than that of a cleaning lady in a market driven economy. Empirical evidence abound for anyone keen to see it.

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Capitalism does work if a line is drawn........give people capital on a plate and they will take it and expect more where that came from......democracy should mean majority rule, but when the majority can see some are getting money for nothing (usually out of others hard work) they eventually will not stand for it, no matter how many crumbs that are thrown to them......for it to work it all comes down to a fair and balanced system where the temptations to grab as much as possible is removed......some people can't be trusted.

See the Franklin's quote on the two wolves and a lamb. The fine line is separating the government from economics as much as from religion/church.

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This is an interesting question, but we would first need to introduce capitalism and democracy. This country and certainly the US, have neither.

The neoclassical free market model has been dominant internationally now for four decades. Both US and UK govts, the IMF and World Bank, continue to subscribe to its hopelessly failed agenda - privatisation, deregulation and globalisation - albeit latterly with New Keynesian modifiers. The executive of the Labour Party (including Gordon Brown) signed up in the early nineties, a decade or so after the Conservative Party. Margaret Thatcher was instrumental in this transformation, of course, she herself having been turned by representatives of the Mont Pelerin Society at the IEA in the mid 70s.

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I think "neoclassical free market model" is misleading. Consider Mirowski's "Never Let a serious crisis go to waste" (I think he is the leading critic and expert on neoliberalsm). He explains that neoliberals believe the government has to intervene to create markets and make them perfect. This is in contrast with the free market position or liberal position according to which markets can be simply left alone.

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Which poses the question- if Democracy and Capitalism are in fact incompatible why do we think they are virtually indistinguishable?

I don't think we do. I believe that true democracy is essential to maintain a Capitalist and Free Market economy. In most countries with good social cohesion democracy, capitalism, free markets and social engineering (socialism in other words) go hand in hand.

Unfortunately our 'democracy' is pretty much broken and this has led to cronyism, lack of regulation and an abandonment of the rule of law when applied to the Elites.

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The outcomes of democracy are not clear under democracy. One may conclude that it is natural for the majority to vote for redistribution and therefore for redistribution to occur, and moreover for capitalism to be severely restrained or removed completely. However in some countries politics is dominated by other things (e.g. the culture wars in the USA). This could just be what people really care about, or it could be part of an ideological strategy by elites.

Also the poorer people may believe, rightly or wrongly, that they are better off under capitalism than alternatives. They may even believe people are entitled to their income and/or inherited wealth. (Again these ideas could be part of an ideological effort by elites or not)

Pure democracy will only necessarily lead to redistribution if there are no other political or economic mechanisms in play and everyone knows that nothing matters besides the distribution of resources (i.e. there are no coordination problems, no questions of institutions or organisations).

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This is an interesting question, but we would first need to introduce capitalism and democracy. This country and certainly the US, have neither.

I guess my point was that only by arriving at the current hybrid in which money buys power which in turn distorts the free market can we maintain the illusion that we have a 'democratic capitalism'-something that in reality seems to be a self contradiction.

What we actually have at present is 'free market democracy' in which political power is a resource that can be purchased like other resources, provided this is done discreetly via things like ownership of influential media organs or campaign contributions.

The result is that we have neither true free markets or true democracy- we have an uneasy conflation of both in which money corrupts politics and politics corrupts markets.

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The outcomes of democracy are not clear under democracy. One may conclude that it is natural for the majority to vote for redistribution and therefore for redistribution to occur, and moreover for capitalism to be severely restrained or removed completely. However in some countries politics is dominated by other things (e.g. the culture wars in the USA). This could just be what people really care about, or it could be part of an ideological strategy by elites.

Also the poorer people may believe, rightly or wrongly, that they are better off under capitalism than alternatives. They may even believe people are entitled to their income and/or inherited wealth. (Again these ideas could be part of an ideological effort by elites or not)

Pure democracy will only necessarily lead to redistribution if there are no other political or economic mechanisms in play and everyone knows that nothing matters besides the distribution of resources (i.e. there are no coordination problems, no questions of institutions or organisations).

Of course it's impossible to prove a counter factual- maybe a Demos sufficiently divided among itself on cultural lines would tolerate high levels of wealth inequality up to a point- but would Capitalism really survive it's cyclical recessions and depressions in a scenario where no opportunity existed for the elites to influence the outcome of the vote and the complexion of the resulting administrations?

There's no way to be certain of course. What we can say however is that the current Elites find Democracy sufficiently threatening to feel the need to create a plethora of institutions, 'Think Tanks' ect to ensure their views are propagated- and the amount of money in Politics also strongly implies that the last thing the elites want is a truly democratic outcome over which they have no control.

It's also worth pointing out just how irrelevant democracy is in places like Greece where we see a direct threat to the financial system- The Greeks could vote as much as they liked but it was the interests of the financial system that won that confrontation- so when the gloves come off we can clearly see that Democracy is a cosmetic rather than tangible reality- even in the land of it's birth.

Edited by wonderpup

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I think perhaps the most important thing to remember is that human nature prevents us from having a pure form of anything, democracy, capitalism, socialism, communism...

It will somehow "corrupt" any ideal, from those who have no interest/intelligence to fully participate, to those who lie and deceive, to those who seek absolute power.

If there was pure capitalism, someone would invent democracy to give the bottom x% the idea that they have a voice and that somehow they might become a member of the y%. Otherwise the bottom x% will apply capitalist ideas and invest in heavy lumps of wood which will used to generate a substantial yield (from the y%).

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wonderpup - I think the emphasis is wrong there. It's not a case that we could think of some odd cases where democracy leads to redistribution, or abandoning capitalism or whatever. Rather there is no reason to believe democracy will lead to any particular alternative.

Do you think any really existing democracy has ever lived up to the ideal?

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I think perhaps the most important thing to remember is that human nature prevents us from having a pure form of anything, democracy, capitalism, socialism, communism..

You're right of course- the question is; is this a good thing or a bad one?

For example, the key accusation against Corbyn seems to be precisely that his ideological purity is in itself a clear and present danger to the nation- he is in that sense regarded as a dangerous extremist- which rather strongly implies that in general we want our leaders to be corrupt and not so pure as to actually take their own ideology too seriously, lest this unadulterated infusion bring down the system, which seems to operate on the basis that no one actually believes in what they are saying.

So we have a pseudo free market system overseen by a pseudo democratic system in which everyone pays lip service to both but no one- save a relative minority on both sides- really believes in.

But the paradox is that the fiction that we do believe in both seems important in it's own right- we play this strange game whereby we all pretend that we have free markets and democracy while in reality we have neither.

Why is that?

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'Should we have bailed out the banks ?' That's the 'capitalism vs democracy' question that springs to mind.

re: Corbyn, I don't agree with the honesty/purity thing. Not so say that he isn't (have no idea tbh) - Its just that the problem is we've allegedly reached a post-Thatcher political consensus that Corbyn doesn't agree with.

Not that I agree with Corbyn's politics, but at least he seems to be addressing the substance our problems rather than flailing around blaming / exploiting whatever has feck all to do with them.

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wonderpup - I think the emphasis is wrong there. It's not a case that we could think of some odd cases where democracy leads to redistribution, or abandoning capitalism or whatever. Rather there is no reason to believe democracy will lead to any particular alternative.

Do you think any really existing democracy has ever lived up to the ideal?

Yet isn't one of the claims made for Democracy that it does in fact lead to more fair and more equal societies? Granted this may itself be no more than myth- but it's a myth that seems to exercise real power over the minds of the Elites who spend a great deal of money trying to ensure this fair and equal society does not come about.

To be fair perhaps I should have posed my original question in a different form; Can the ideologies of Capitalism and Democracy really co exist? Can you have an economic ideology that views inequality as a kind of virtue alongside a Democratic ideal that sees inequality as a problem to be mitigated if not entirely eliminated?

At the level of ideas at least we can agree-I think- that the Capitalist and the Democrat have a problem- the former sees inequality as a necessary evil while the latter tends to see it as just an evil. At the very least the Democrat would argue that his system is the most fair and most egalitarian of all, while the Capitalist would insist that some inequality is a good thing in that it stimulates hard work and innovation.

So this marriage between Capitalism and Democracy is kind of an odd pairing- certainly not the match made in heaven that it's so often made out to be. To listen to some of the more rabid free market ideologues you would think that free markets actually gave birth to democracy, that somehow you could not have a democratic state without free markets, which is nonsense- people vote on things all the time without needing to sell each other stuff to legitimize the process.

To answer your last question; I don't think any democracy has ever lived up to it's ideals- and the same is true for any free market. There has never been a truly democratic society nor a truly free market- and this is why they work- in their pure form both would probably be impossible to live with.

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re: Corbyn, I don't agree with the honesty/purity thing. Not so say that he isn't (have no idea tbh) - Its just that the problem is we've allegedly reached a post-Thatcher political consensus that Corbyn doesn't agree with.

To disagree with a widely shared world view is to be to 'pure'-too ideological- in the minds of those who hold that shared view. The thing about any political ideology is that it defines reality for those who believe in it, so they then argue that they are not ideologues but realists!

And by extension anyone who does not share their ideology must be someone who is failing to grasp reality, since reality is that which is described by their ideology.

So in the minds of those who disagree with him Corbyn appears not merely as an ideological opponent but as a man who has lost touch with reality- making him a very dangerous man indeed to be put in charge of the country.

The truth is that all definitions of political reality are ideological in nature which means that anyone who does not share our ideology is almost by definition a dangerously deluded individual who must not be allowed to get their hands on power because they are too mentally unstable to govern. And the more divergent their ideology is from our own the more insane they will appear to be.

The near hysteria that has greeted Corbyns election from some corners of the media is partly synthetic but partly quite genuine I feel- he seems to arouse genuine anxiety in the minds of some that his views are so extreme, so out of contact with reality as they define it that he is a genuinely dangerous individual.

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Which poses the question- if Democracy and Capitalism are in fact incompatible why do we think they are virtually indistinguishable?

Well the fact is that I cheated when I set up the question- I inserted the word 'pure' into my analysis- purity being the antithesis of corrupt. The reason-I think- that the apparent incompatibility between our financial system and our governance system does not lead to collapse is because both are corrupt- or more accurately their interoperation is lubricated by a layer of corruption that penetrates both simultaneously.

You refer to “pure capitalism”, but I’m not convinced that actually exists, even in theory. It might be useful to note that classical economists often treated capitalism as having both good and bad characteristics, and even being a means to some kind of non-capitalist ends. Marx is the obvious example, but Adam Smith made a point of distinguishing between rent-seeking and productive behaviour. Reading Smith, you get the impression that capitalism is a tool that when used correctly, can achieve a greater good. Something outside of, and greater even than capitalism itself. It’s the neo-classical economists that dismissed the distinction between entrepreneurship and rent-seeking and treated capitalism less as a mechanism to achieve a greater good, and more as an article of faith - an ends in itself.

So it’s perhaps more accurate to say that neo-classical economics, or neoliberalism is what is ultimately incompatible with democracy. The reason that we have come to believe that the neo-classical model is ‘pure’ capitalism is because we have lived for 40 years under its rule, and its doctrine of taxing productive work and untaxing inheritance, monopoly and rentierism. We have therefore lost the ability to imagine an alternative that doesn’t involve some kind of ‘pure’ socialism instead - hence the rise of the likes of Jeremy Corbyn.
It’s more than a little ironic that all these warnings of how government would ultimately lead us down the ’road to serfdom’ have in fact - via a laissez-faire blindness to parasitic rent-seeking behaviour - resulted in governments leading people, and in the case of Greece, an entire nation, towards debt servitude. Some kind of demographically-driven socialist backlash seems inevitable in this context.

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