Can Capitalism and Democracy Co-exist?

The headline is probably more provocative than the article. This is more a rumination than an actual argument. I need to start by defining some terms, I think, in order to make it clear what I am and am not talking about. These are not academic definitions, and I suspect any political scientists, economists, or sociologists are going to cringe reading them, but I do think that they describe, colloquially, the realities well enough for discussion.

Capitalism is not, for the purposes of this discussion, a market economy. Rather, when I speak of capitalism, I speak of what we sometimes think of as late- or end-stage capitalism. To me, this is best thought of as a form of economics where the owners of capital are the primary beneficiaries of the economy and almost exclusively the drivers of economic activity. It is characterized by monopolies and near monopolies, privatized profits but socialized losses (through bailouts, government contracts, and government subsidies), a swamping of political speech by a handful of donors, regulatory capture, the erosion of quality of life for workers, and increasing wealth inequality.

Democracy is not just the mechanical process of counting the votes of those who are allowed to vote. The Soviets did that, and no one in their right mind would consider that a democracy. For a democracy to be meaningfully a democracy, in my opinion, there need to be several more conditions. People must be able to choose their representatives, not have their representatives choose them. Different perspectives that respect democratic norms (i.e. no, we do not have to respect people who say that others should not be allowed to vote or that genocide is a-okay) should not be swamped by campaign finance rules. Losers should peacefully submit to having lost. Losers should have an opportunity to win the very next election. The government should have limited powers to interfere with religion or other associations. Astute readers will notice that the United States — and many democracies worldwide, especially in the English speaking world — do not fulfill most, if any, of those conditions. Capitalism is likely the reason why.

Capitalism, as practiced today, is a winner take all contest, where monopolies are the end goal. In the words of Peter Thiel, competition is for losers. And since competition is for losers, democratic competition is also for losers. Capitalism encourages being the only winner, and being the only winner permanently. If you lose, you can go out of business. if you allow competition, then others can take money and market share, making your position more precarious than it needs to be. Capitalism, as practiced, almost requires you to be completely dominant to survive. Is it any wonder that people who are capitalists try and apply those same rules to other aspects of their lives?

In addition, once you have won it is both easy to believe you are special and an almost psychological imperative. It is hard for people to admit, especially in a winner take all society, that they were lucky or had a head start in any way. And if you are special in business, then does it not stand to reason that you are special in other areas? Even if you don’t believe that — and none of our titans of industry seem to have that level of humility — the power of the government is extremely tempting. Having control of the government means having control of the markets, and having control of the markets means that you almost cannot lose. Democracy be damned — you have a business to run. Even if you don’t want that kind of power, it is likely your competitors and other titans of industry would — how can you stand back and take the chance that they will obtain it?

Democracy, then, likely cannot survive an economic system where capitalists, those who own capital, reign supreme. Capitalism’s natural end state is a monopoly or near-monopoly. Money flows to the top, and those at the top are likely to believe that they deserve to be in control. Even if they don’t believe themselves to be special, they almost certainly understand the power of the government and understand that they need to be in control of that power, for self-protection if nothing else. Leaving the economy in control of the people who own capital almost inevitably leads to the corruption of democracy. The capitalists will use their power to elect people and judges who will bend the rules toward their needs and desires. The more they twist society to their benefit, the more power they will have, and the more power they have, the more they can twist society to their benefit. Democracy cannot survive that kind of spiral.

This is not to say that the economy must be entirely state controlled. Not having an outlet for people to build some level of non-governmental power can also lead to abuses — look at almost every communist government in history for example. Nor is it to say that there is no value in a market based economy. But neither private striving nor a market economy requires privileging capital. People can form businesses and grow to a size where, in conjunction with other like-minded people, they can influence the government without warping it. Worker owned collectives or businesses can compete in a market economy just as well as shareholder owned firms can. More importantly, societal, democratic control of the economy is an obvious and necessary condition to maintain a democratic government. Allowing people to amass economic power means allowing them to amass political power and sooner or later, they come to warp the government to their own ends.

Lately, some centrist Democrats have pushed back furiously on the victories of the left, wondering how anyone could possibly defend being a democratic socialist. The answer should be obvious — you cannot have a democracy without democratic control over the economy. Capitalists, almost inevitably, won’t let you keep your democracy if you let them control the economy.