Democracy and capitalism

This is a link free post where I’m working through some thoughts. The ideas are not original and will probably change.

It seems that whenever someone talks about any kind of expansion of the federal government a lot of people shout about ‘socialism’. To me, this shows a lack of understanding of the conflicts between democracy and capitalism.

One of the main features of democracy is that it assumes all citizens are worthy of deciding on our government, so, in a very real sense, the people are the government in a democracy. This is in marked contrast with most other forms of government. In all forms of dictatorships, theocracies, and oligarchies, it is felt that only some people are able or deserve to govern (either because of birth or power) while the vast majority have no say in the government. It’s a huge change to believe that everyone deserves an equal say in how government is run.

Capitalism is not democratic. The natural progression of capitalism is towards larger and more consolidated industry (think of the US in the late 1800s) and the natural structure of the individual business is either dictatorial or oligarchic. The idea is that people who are more successful are better at knowing how to run the business and so deserve to decide how it’s run.

If you think of extending either of these ideas into the other’s realm, you see that they’re in conflict. The natural extension of capitalism into government would be either dictatorship or oligarchy, while the natural extension of democracy into business would be a form of co-op structure (this could be socialist, but doesn’t have to be). Since these two are in opposition, there is continuous conflict as each form tries to extend into the other realm. You see this all the time–our democratic government tries to impose restrictions on the capitalist system in the forms of rules and regulations, while businesses try to get some form of de facto oligarchy by putting lots of money behind certain candidates or ideas in the form of advertising or lobbying.

Thus there is a push between capitalists that argue people are worth what the market says (anywhere from nothing to a very large amount) and democrats that say all people have intrinsic worth that can’t be taken away from them and that in some ways we’re all equal. This plays out all the time. Look at a minimum wage–a capitalist argues that different workers are worth different amounts and the market should decide what that worth is, so a minimum wage law is harmful; a democrat argues that we’re all worth something and so there should be some lower bound (notice even this is a divergence from the extension of democracy which would say they should all be paid the same). Since this type of argument is often decided in our imperfect democracy, which side wins will depend on the economy–a minimum wage law  was declared unconstitutional in the US until the great Depression came along and brought a large push from the public.

Thus when we argue over a national healthcare bill, it’s not really an argument between capitalism and socialism it’s an argument between the capitalist and democratic spirits. That’s why there are so many forms of national healthcare around the world (Japan, Switzerland, France, Canada, and Great Britain all have very different systems)–they all follow the democratic spirit arguing that everyone has intrinsic worth and so everyone deserves healthcare and yet almost all of them are built around a capitalist system of some sort (for example: in the Canadian system the government pays for everything but doctors and hospitals compete to get patients; in the Japanese system the government decides on prices with support, but there is competition otherwise).

4 Comments (+add yours?)

  1. Justin Oliver
    Sep 22, 2012 @ 02:00:26

    I thought I’d share a comment since I share the sentiment that democracy can serve a positive purpose.

    The natural progression of capitalism is towards larger and more consolidated industry (think of the US in the late 1800s) and the natural structure of the individual business is either dictatorial or oligarchic.

    Could you be more specific? Standard Oil is common example, but it only survived by slashing prices, right?

    According to New Left historian Gabriel Kolko, cartels consistently buckled and resulted in lower prices and more competition during and after they collapsed. It was only after they turned to federal relief during the Progressive Era that businesses were able to secure the cartels they couldn’t voluntarily. Kolko wrote, ““The dominant fact of American political life at the beginning of century was that big business led the struggle for the federal regulation of the economy.”

    Reply

  2. fredtopeka
    Sep 22, 2012 @ 21:07:16

    Once Standard Oil got big, one of their methods of eliminating competition was to undercut the prices of competitors. Since their competitors were much smaller they would go under since they couldn’t match Standard Oil’s prices for long, while Standard easily could lose money in some markets.

    Standard Oil also used its power to go after companies that worked with the competitor, trying to convince the refineries, suppliers, transportation companies and so on to not work with them or to charge them much lower prices—since Standard Oil was usually their biggest customer by far, they usually got their way.

    Standard Oil also used its size and money to get politicians to help them with laws that would help them (one of the big reason’s for anti-trust laws was to keep companies from getting too large, because that would give them too much political power and distort democracy–the anti-trust laws were put in by progressives. Was Kolko agruing that Standard Oil got progressives to pass anti-trust laws to break up Standard Oil?).

    Reply

  3. Justin Oliver
    Sep 23, 2012 @ 12:37:00

    while Standard easily could lose money in some markets

    Could you be more specific where Standard Oil was able to drive out competition? The history is that the price of refined oil precipitously dropped and output increased, despite Rockeller’s attempt to control the market, because the number of refiners had more than doubled from 1899 to 1909.

    Was Kolko agruing that Standard Oil got progressives to pass anti-trust laws to break up Standard Oil?

    Well, the Sherman Act was passed prior to the Progressive Era though. The break up of the Standard Oil was more of a continuation of the battle between Rockefeller and Morgan interests. Senator Sherman proposed the act as political retribution against the Diamond Match Company, whose owner supported William Harrison for president.

    In any case, Seeing Standard Oil’s market share fall and the many other attempts to create voluntary trusts fail, Kolko argued, industrialists turned to the federal government to control competition. “Ironically, contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, but the lack of it.”

    Reply

  4. fredtopeka
    Sep 24, 2012 @ 17:15:11

    Could you be more specific about what you’re looking for? It almost seems that you’re trying to get me to write a paper for you. I haven’t read Kolko, so I don’t know what his argument is and don’t see the point of arguing against one of his sentences.
    It also seems like you’re arguing against yourself. You initially say “It was only after they turned to federal relief during the Progressive Era that businesses were able to secure the cartels they couldn’t voluntarily.” but now you say “The history is that the price of refined oil precipitously dropped and output increased, despite Rockeller’s attempt to control the market, because the number of refiners had more than doubled from 1899 to 1909.” The Progressive Era started around 1890 so you’re saying both that the Trusts turned to govenment to secure their cartel during this period AND that the percent of the market they controlled declined during this time.

    Reply

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