David Abraham (#6: Liberal Democracy and Capitalism)

(University of Miami)

Three views of the relationship between capitalism and liberal democracy

The first is that they stand in a positive relationship and are good for each other. This is a staple of thinking among conservatives. Often, they conflate Rechtstaatlichkeit with liberal democracy, but their broader argument is that individual freedoms and group interests are best secured in a competitive choice, market economy. “Choice” is the key to market liberalism.

The second is that the relationship is indeterminate. The inequality of market outcomes in capitalism and the one person, one vote of liberal democracy may or may not get along depending on circumstances that cannot be generalized.

The third is that capitalism and liberal democracy stand in contradiction to each other because the relationship of inequality to equality is not really indeterminate: one must give way to the other. Any equilibrium can only be temporary

This 3d position was endorsed already in the mid-19^th century by both conservatives and radicals. The Tory Historian Thomas Macaulay and Karl Marx, both writing after the 1848 revolutions and Chartist uprisings agreed that universal suffrage could destroy free market capitalism and, for Macaulay, liberty as well. If the masses all voted, they would simply take it away from the haves.

For Marx, universal suffrage would advance democracy and reduce hyper-exploitation but would not be enough. Elections under bourgeois democracy often served to legitimate existing power structures rather than challenge them.

Capitalism and democracy follow different logics: unequally distributed property rights on the one hand, equal civic and political rights on the other; profit oriented trade within capitalism in contrast to the search for the common good within democracy. Capitalism, in short, is not democratic; democracy not capitalist.

Social welfare capitalism: the golden age of coexistence?

In the second half of the twentieth century, an increasingly organized form of capitalism proved particularly compatible with democratic politics in Western Europe, North America and Japan. This was the result the labor-friendly needs of postwar rebuilding as well as of an increasingly expansive, interventionist welfare state that interfered with the capitalist economy by regulating, stabilizing and equalizing it. The “Keynesian welfare state” emerged in certain European countries as a form of social capitalism. A strong interdependence developed between the state and the market, between democratic and economic institutions and the capitalist economy. Economic actors were multiply embedded, regulated and socially obligated sometimes with a “tripartite neocorporatism.” Elements of democracy were introduced into the economic system in some settings, such as codetermination and workers’ councils. Rapid economic growth in the years following the war, the shocking experience of the Great Recession, and political catastrophes during the interwar years legitimated all this. The challenge to the Western model of capitalism by Soviet-style actually existing socialism also mattered. This period proved to be the zenith of coexistence between social capitalism and social democracy.

Financialization and the End of Peaceful Coexistence:

Since the fiscal crises of 1970s, capitalism has changed in a way that challenges its compatibility with democracy. The turn toward deregulation and globalization, and the rise of financialization have been key forces. Beginning with Thatcher and Reagan in the early 1980s, there have been concerted efforts among most capitalist economies for more deregulation under the threat of investment strikes and races to the bottom with resulting unemployment and decline in real living standards, etc. The financialization of capitalism since the 1980s has broken the precarious capitalist-democratic compromise. Deregulated and globalized markets have inhibited the ability of democratic governments to govern. Absent democratic and economic reforms, democracy slowly transforms into oligarchy, formally legitimized by general elections. Rights and opportunities for political participation dwindle whiles socioeconomic inequality challenges the core principle of equality in participation, representation and governance.

But none of this is popular with voters. What the Trumpists realized is that classic Reaganism as a legitimatizing strategy failed as an electoral alternative to progressive neo-liberalism McCain and Romney lost badly, after all. Trumpists focused on the progressive part of neo-liberalism – DEI, “gender ideology,” the supposed privileging of Black people and immigrants – and inflamed a Panik im Mittelstand and portions of the working class. MAGA provides a popular base for Trump’s elite. These come from several groups of capital: a Silicon Valley-Wall Street group that wants full deregulation so that it can perpetually innovate and use AI to eliminate workers; classic anti-New Deal conservatives; fossil fuel circles who wish to destroy what remains of trade unionism and environmentalism; and portions of venture capitalism harboring fantastic anarchist visions of decentralized private tyrannies. How long this coalition can be held together within a framework of electoral democracy remains to be seen.

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