In the United States I think we are often taught to see capitalism and democracy as part of a single beneficent system, and that they are inseparable– you can’t have one without the other.
On this Independence Day, a holiday to remember freedom and democracy, I want to share an extended quote from Erik Olin Wright who points out five ways in which freedom and democracy are actually impaired or damaged by capitalism.
The claim that capitalism harms democracy and freedom is more complex than simply proposing that capitalism is opposed to freedom and democracy. Rather, the logic is that capitalism generates severe deficits in realizing the values of democracy and freedom. Capitalism promotes the emergence and partial development of both freedom and democracy, but it obstructs the fullest possible realization of these values. Five arguments are especially salient.
First, the way the boundary between the public and private sphere is drawn in capitalism excludes crucial decisions that affect large numbers of people from participating in democratic control. Perhaps the most fundamental right that accompanies private ownership of capital is the right to decide where and when to invest and disinvest. The decision by a corporation to move production from one place to another is a private decision, even if closing a factory in the United States and moving it to a country with cheap labor and lax environmental regulations devastates the lives of people who previously worked in the factory and destroys the value of housing in the surrounding community. The people in the devastated community have no rights to participate in the decision despite it affecting their lives deeply. Even if one argues that this concentration of power in private hands is necessary for the efficient allocation of capital in a capitalist economy, the exclusion of these kinds of decisions from democratic control unequivocally still violates the core democratic value that people should be able to meaningfully participate in decisions that affect their lives.
Second, private control over major investments creates constant pressure on public authorities to enact rules favorable to the interests of capitalists. The threat of disinvestment and capital mobility is always in the background of public policy discussions, and thus politicians, regardless of their ideological orientation, are forced to worry about sustaining a “good business climate.” The fact that the interests of one class of citizens have priority over others violates democratic values.
Third, wealthy people have greater access than non-wealthy citizens to political power. This is the case in all capitalist democracies, although wealth-based inequality in access to political power is much greater in some countries than in others. The specific mechanisms for this greater access are quite varied: contributions to political campaigns; financing lobbying efforts; elite social networks of various sorts; outright bribes and other forms of corruption. In the United States, it is not just wealthy individuals, but also capitalist corporations that face no meaningful restrictions on their ability to deploy private resources for political purposes. This violates the democratic principle that all citizens should have equal access to participate in controlling political power.
Fourth, capitalist firms are allowed to be organized as workplace dictatorships. An essential power of private ownership of businesses is that the owners have the right to tell employees what to do. That is the basis of the employment contract: the job seeker agrees to follow the orders of the employer in exchange for a wage. Of course, an employer is also free to give workers considerable autonomy in the workplace, and in some situations this is the profit-maximizing way of organizing work. And some owners may grant significant autonomy to workers as a matter of principle, even if this does not maximize profits. But the owner still has the fundamental power to decide when to allow such autonomy. This violates the principle of self-determination that underlies both democracy and freedom.
Finally, the inequalities in wealth and income intrinsic to capitalism create inequalities in what philosopher Philippe van Parijs calls “real freedom.” Whatever else we might mean by freedom, it is the ability to say “no.” A wealthy person can freely decide not to work for wages; a poor person lacking an independent means of livelihood cannot reject employment so easily. But freedom as a value goes deeper than simply the ability to say no; it is also the ability to act positively on one’s life plans. Capitalism deprives many people of real freedom in this sense. Poverty in the midst of plenty not only denies people equal access to the conditions for a flourishing life; it also denies people access to the resources needed for self-determination. (Wright, 2019, pp. 32–34).
Once you start paying attention to what is going on around you in the US it is difficult not to see how capitalism has concentrated power in the hands of a few, who are not acting altruistically to grant workers autonomy, but are instead coordinating amongst themselves to consolidate power, in an effort to control and preserve the status quo, in the face of the changes required to avert climate catastrophe for the next generation that are growing up right now. Because of its unquestioned celebration of capitalism, the United States is increasingly veering off course into the exact opposite of a democracy, and threatening to take its neighbors with it.
As its partner holiday Juneteenth reminds us, freedom is not something that has been fully achieved, or that is evenly distributed. There is still much to do to realize the collective ideals that we remember on July 4th. Let’s enact them together instead of apart. It is still possible to redraw, reconnect and reimagine our markets and publics. There are more of us than there are of them.
Update: the day after writing this I happened to listen to this podcast episode which details the role of capital in the American Revolution and the drafting of the US Constitution. It was sobering to learn how, even at the beginning, the interests of capital were known to be at odds with democracy.