The fans of capitalism often argue that capitalism is the most democratic of economic systems. In my article Can capitalism be truly democratic? I argue that that is an illusion made obvious in the last decade.
The word “democracy” originally means “rule of the people”. The people, however, do not rule in the representative democracies in capitalist societies. Douglas North and his co-authors argue that democratization occurs when the ruling elite decide to transform their personal privileges into impersonal rights shared equally among elites. Implied here is that the superstructure of the capitalist society is constructed by and for the ruling classes.
How capitalist democracy works in reality is described by William Domhoff, who has collected data about the ruling class of the United States since the 1960s. He writes that, “[T]he upper class is rooted in the ownership and control of the corporations that comprise the corporate community. … Playing the role of donors and money raisers, the same people who direct corporations and take part in the policy-planning network have a crucial place in the careers of most politicians who advance beyond the local level or state legislatures in states with large populations.”
So political power is rooted in the ownership of the means of production. Those who own the latter have the power to control production and the society. Historically, this ownership has usually been created in an anti-democratic way, in many cases through outright robbery. After expropriation, the process of accumulation and the increase of wealth has usually been “lawful”. The right of private owners to dispose of and operate the means of production as well as to dispose the profits derived from them is also sacred and inviolable. As Marx wrote in Capital: “[P]roperty turns out to be the right, on the part of the capitalist, to appropriate the unpaid labor of others or its product.”
A number of questions of minor importance can be discussed “democratically,” with the involvement of non-owners, as seen in examples of certain “welfare democracies,” but the function of ownership and the right to multiply private wealth by its means cannot be challenged. The company should always be “competitive,” i.e. profitable enough– who would argue with that? All other issues may be decided democratically. Democracy does not apply to production. In production competition and the profit motive prevail.
Amidst competition, the reduction of unit labor cost is an indispensable condition for earning of profits in the long run and leads to the tendency of the profit rate to fall. The accumulation of capital in the course of market competition increases inequalities between capitals that leads to political conflicts of their different groups for power.
The divergence in the wealth of classes leads to a divergence in the bargaining power of the classes. This continuously erodes the substance of political democracy and reduces democracy to formalities. Thus, even if the institutional system of political democracy expands, real inequality, both political and economic, continues to grow. In fact, the increase of real inequalities shall necessarily influence the formal institutions of political democracy and their operations.
The ultimate cause of social inequalities is the inequality of access to the means of production. In capitalism means of production are in private ownership and take the form of capital. The reproduction of inequalities goes hand in hand with the reproduction of capital. This reproduction has become increasingly globalized since the 1970s, accelerated the accumulation of capital and increased inequalities between capital and labor, as well as within capital and within labor.
With the globalization of cycles of capital accumulation, the expropriation and concentration of value added have become much easier. The collapse of the Eastern European systems in 1989-1992 brought the unrestricted rule of profit motive all over the globe reviving the process of the pauperization of the working class. The institutions of liberal democracy have been either mutilated or emptied by liberalization, deregulation and privatization.
In reaction, people have increasingly turned away from the political establishment and expressed growing dissatisfaction. The decades of free expansion of capital and the global socio-economic and financial crisis have created many enemies of capital of the center both within the group of wage laborers and among the smaller, national capitals. The discontent is voiced in many ways, from popular demonstrations to violent attacks. The inequalities, born by dispossession and accumulation, undermine the stability of the global regime of capital.
To preserve its position, capital has no other choice than to curtail democracy. As class conflicts heightens, the need for authoritarian governance, “preventive fascism,” grows. This implies that liberal democracy may be the best, but not the final, form of capitalism.
Political democracy is an instrument of governing a hierarchical class society. If democracy was extended to production, presupposing common property and a classless society, it would become meaningless and would disappear, giving a way to the self-governance of people.
Annamaria Artner is a senior research fellow at the Center for Economic and Regional Studies HAS (Hungarian Academy of Sciences) Institute of World Economics and professor at the King Sigismund University Budapest.
This article summarizes Annamaria Artner, “Can Capitalism Be Truly Democratic?,”Review of Radical Political Economics 2018.
Image: Cameron King (CC 2.0) Flickr