James Whitehead

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Is Capitalism compatible with Democracy?

Is the Capitalist economic system really compatible with democracy?

Or do the contradictions within capitalism itself (eg, low wages to increase profitability, yet high earners needed to buy products) create a system in which democracy cannot function successfully?

Could it be argued that a democratic system would function better in a Socialist economy?

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    Feb 14 2012: There must always be a palpable tension between government and industry. Without it, the reason for government (the care and safety of the people who comprise a given society) becomes lost to GDP numbers and issues of financial solvency (as interpreted by outside interests). Historically, societies that have failed in maintaining that tension have failed to survive, and yet it's as if we persist is believing that good government is akin to good business - which just isn't true and has historically never been the case.

    Regardless of all that, what we call Capitalism is an elite government welfare system, where the moneyed and powerful siphon money and power from societies through the government bureaucracies that they built. Most of their theft is bureaucratic in nature, and is the result of managing the way that laws and regulations are specifically implemented and specifically enforced (or not enforced, as the case may be). The Executive Branch is where these manipulations occur, and deep within the bowels of each agency that is tasked with monitoring and ensuring compliance of regulatory law.

    In fact, it's not that small business is regulated to death, it's that big business owns the regulatory enforcement mechanism to the detriment of emerging business competitors. Do an org chart of the CIA sometime, and it'll amaze you how often Wall St. brokerage firms are the training ground for that agency' most powerful and entrenched bureaucrats. Those seasoned pros tasked with interpreting general policies as specific and targeted action items.

    In each state and federal agency, the same can be seen when doing org charts. Layers of capitalism's most stable successes firmly planted within agencies that are tasked with determining the regulatory compliance of their very own industries of origin, and directing investigations where companies within those industries have been in violation of those regs.

    We don't have capitalism, so who knows if democracy clashes with it.
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    Feb 10 2012: If democracy is about the people, in which everyone is deemed to be equals, and capitalism is about the individual, then it would be pretty tough to have a system that will fulfill both needs......
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      Feb 12 2012: I would argue that Capitalism and Democracy, are yin and yang... Eternally struggling to decide what works best for the people... and it's the worst system in existence... Except of course, every other system humanity has yet tried. To me Capitalism keeps the game going, and keeps the carrot on the stick, while democracy decides the rules of the game. I read the classics a bit too much for modern day economists though. I'm pretty sure capitalism without democracy would be just as bad, if not worse, than communism ever was.

      We are all, individual people, after all.
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    Mar 4 2012: Perhaps communism might work on a small commune scale not a national scale where people are free to come and go.
    Capitalism seems to motivate innovation and effort fairly well.
    Suggest the issues are when it is left to its own devices.

    Most political systems aim to balance competing interests.
    A decent democracy or government/political system takes the hard edges off capitalism.
    Health and safety laws
    Tax collection to redistribute some wealth
    Financial regulation
    Environmental regulation
    Royalties if
    Company law etc

    As we have many times, unregulated or poorly regulated capitalist/financial systems end up badly for most.

    Effective political systems and governments also support business in meaningful ways:
    Trade agreements
    IP protection

    Some democracies do this better than others.

    Compatible may not be the right word, but an effective democratic system can be pretty good leveraging capitalism to the benefit as many people as possible.

    Agree with most of the comments that communism or as close as we got in USSR and China was a failure on a national scale.
  • Feb 11 2012: Capitalism is no longer compatible with anything and neither is money.
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    Feb 10 2012: a socialist economy that is controlled by the state WHICH IS DEMOCRATICALLY ELECTED....... Private companies are not elected, therefore un-democratic... no?
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      Feb 10 2012: Yes, you have an democratically elected government but if it has the money what reasons do you have to think it will gonna leave the power when the time comes ?
      Just notice historically : the most tyrannies was established with the help of the people ; for example : the Bolshevik Revolution 1917, The Thirty Tyrants ..... .
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        Feb 11 2012: Which is why it is always human greed and corruption that undermines and abuses the system. Communism works on paper, people get in the way ;-)

        I guess in an ideal world, once the system has been established and the frameworks are in place to maintain it, the ideal leader would step down from power, although it could be argued that the type of person needed to lead a revolution is also not the type of person to give up power!
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          Feb 11 2012: I don't think we can afford ourselves to think at an ideal world when it comes about politics , money ............ I know you agree with me .

          We have to solve the problems we have :human greed and corruption ; how ? I don't have an fully answer but I think the best way is : a restricted capitalism in a democratic system .
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    Feb 10 2012: "Could it be argued that a democratic system would function better in a Socialist economy?" This is nonsense , a socialist economy is a economy controlled by the state; there is no reason that when you have the money to not try to get the power too , in this case we gonna have to forget about any democratic system .

    "Is the Capitalist economic system really compatible with democracy?" Depends on what kind of capitalism are you talking about . For example if we talk about a restricted by the government kind of capitalism I think the answer is yes.
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    Feb 10 2012: The result where in almost all democratic environments 2% control 80% of the wealth must yield the answer. BUT at the same time in a non democratic environment like China Capitalism thrives and has achieved what no form of governance has achieved. More than 500 million people have been lifted from pretty deep poverty to complete economic self sufficiency in less than 25 years. So what is the learning?
    The difference explains the reason. An individual cannot hold up societal needs because of individual rights. That is blasphemous to us but we have the results.
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    Feb 9 2012: wasn't there another topic with the exact same title?

    anyway. no, it is not. the essence of capitalism is private ownership, and freedom in how do you use your property. everything has one or at most a limited number of owners, and other people don't have a say in how they use it. it is essentially antidemocratic. democracy, on the other hand, assumes that some things are decided publicly, by many people who does not own the commanded resources.

    there need to be a clear line in society what things are controlled by capitalism and what things are decided democratically. everything falls into one of these areas, but not both.

    one more note. that "contradiction" is nonexistent. it is a shortsighted fallacy of keynesian economics. other economic theories, like the suppy-side or austrian economics deny the notion that "aggregate demand" would be a meaningful factor.

    socialism in theory is compatible with democracy. but we need to point out that never ever in human history socialism was established by majority vote. and also that they were quick to eliminate democracy as soon as they had a chance.
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      Feb 9 2012: Quote:
      "one more note. that "contradiction" is nonexistent. it is a shortsighted fallacy of keynesian economics. other economic theories, like the suppy-side or austrian economics deny the notion that "aggregate demand" would be a meaningful factor."

      Never heard Marx being described as a "shortsighted fallacy"... lol. perhaps it is a fallacy if we consider that most of the 'low wage earners' are in the developing countries whose manufacturing process is run/exploited by Western capitalists, and they "drip" some of the benefits down to their own societies, therefore not provoking recognition of the imbalance.

      I have no idea if this topic has come up before, I am a new member here and couldn't find the debate through searching....... apologies if i have repeated any issues already discussed.... although no two debates can ever be the same ;-)
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        Feb 9 2012: it seems that i overestimated the depth of that argument. keynesianism is shortsighted. marxism is downright ridiculous.
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          Feb 10 2012: so why respond to a question/debate that is of no interest to you? In some way lauding an air of authority in the TED forum? your de facto manner of speech implies that you are in some way "schooling" me on the topic and that the question is not open to discussion: "democracy is......" "capitalism is not....." Are you assuming that there is a straight answer to the question? are you failing to recognise the significance of the works of people like Marx and Keynes? I think so. Whether or not you think its "downright ridiculous", perhaps it would be more constructive to appreciate the benefits of both schools of thought and then provide a counter-argument, rather than scoffing at the notion that the theories have relevance today....... read a book man
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        Feb 10 2012: i came here to talk about democracy and capitalism. so i did, but you didn't even attempted to react to that. instead, you are intent on talking about my remark about a minor point. if you want to talk about this, instead of your original topic, i'm okay with that. here we go.

        the labor market works just like any other market. in a free market economy, producers of a product compete with each other. they try to offer better and cheaper products to outsell the competition. buyers also compete with each other. whoever needs the product more offers higher price, and gets it before other buyers do. this race condition sets the prices so the supply and the demand is in balance. when this happens, the market is called "cleared". there are no excess products, and there is no unserved demand.

        the labor market works similarly. employers compete for workers. workers compete for jobs. the price of labor (that is, the wage) rises or falls until the market is cleared. if the price is too low, new demand will appear in the form of new companies wanting cheap labor. but the amount of labor can not increase, since the number of people is limited. there will be a shortage of workforce. the market solution is rising price, which reduces the demand, and clears the market. the opposite is possible too, if the wages are too high, demand will fall, and there will be unemployment.

        marx has been refuted in the beginning of the 1900's by austrian economists. mises, in 1920, wrote his essay "economic calculation in the socialist commonwealth", and it should be considered the final nail in the coffin of marxism.

        keynes were similarly refuted, the most notable example is henry hazlitt's "the failure of the new economics".
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          Feb 10 2012: yet again, what are you hoping to achieve by reciting a definition of terms to me, spouted no doubt from wikipedia? you express no opinion, merely attempt to explain economic principles of which I am already aware. If i wanted to know the definition of a laboUr market, i would ask the question, "what is a laboUr market?" or simply go on wikipedia like you did.

          And if you think the 1920s was the "end" of Marxism..... its worse than i thought
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        Feb 10 2012: i'm getting lost here. first, your problem was that i don't explain why marxism is totally off base. i explained it, and now your problem is that i used arguments you knew already. what is the problem with that? if you already knew why marxism is wrong, why did you ask? also, it is rather ridiculous to get upset for the detailed explanation. how i am supposed to know what your expertise is? the things i have explained are, sadly, not part of the common knowledge. so being harsh for i took the effort to explain something is ... well, let's say, weird.

        also note that i didn't give definitions to the labor market, i explained how it works, as opposed to what marx claimed. that's the refutation you asked for. marx claimed that wages will be as low as possible, just to replenish the worker's physical powers to continue working, in accordance with the interest of the capitalist. but in reality wages are rising as the marginal productivity of a worker is rising (by increasing the demand for labor).

        the ludicrous claim that i copied anything from anywhere does not deserve a reply.

        and also note that i didn't say marxism would be dead. i said it has been refuted. marxism is not at all dead, and it is quite virulent even today despite being refuted. same for keynesian economics. the refutation is out there for half a century, but it is still everywhere, and is the basis of government policies all over the world.