Two Concepts Of Democracy And Capitalism example essay topic

From the very dawn of intelligent human interaction to the present day, the concept of capitalism has dominated the way we trade goods and acquire wealth. Except for the necessity of a simple communist society in pre-modern times, or the noble humanistic notion of a socialist society, the free market has always been the most efficient way to run the economy once the most basic needs of life have been satisfied. Only during the last several hundred years has the idea of a modern democracy been developed and applied through the modern state. These two concepts are thought by some to be interrelated, but contemporary critics of the liberal form of democracy seek to separate the two notions of capitalism and democracy. However, when examining the evidence of the relation of the two, let us not use the altered conceptions or versions of these terms, but rather analyse them by their base meanings as we have come to understand them. After this analysis of the terms and a resulting stipulation of what their base meanings are, critics may say that any further analysis of the relationship between the two terms would be tainted by their supposed definitions.

The problem with this is that without a common frame of reference between the two, no comparison would be logically possible without considering an infinite range of possible meanings. With this technical matter aside, the analysis will continue with an investigation into arguments both for and against the separation of the two terms, and then an evaluation of the true nature of capitalism&rsquos relationship with democracy. Specifically the free market economy dictating the actions of any democratic regime. After this task of evaluation is complete, the argument will conclude with illustration how capitalism will actually lead to a more liberal form of democracy. The first step of this investigation is to make some attempt to achieve a common frame of reference between the two terms.

Literally, democracy is the rule of the people. Specifically, it is the organization in place to allow people of a specified area, through organized elections, to give their uncoerced opinion on who they want to represent them in government, or what they want government to do for them. The underlying presupposition is that government will always obey the command of the majority of voters. There are many limitations to democracy, such as the fact that people can only vote YEA or NEA on a specific topic area, thus producing a dichotomy of choices that may not necessarily offer a solution to a problem.

Also, people must leave most decisions to the people they elect, since they don&rsquos have enough time to continually vote. However, the focus of this work is not to delve into this area of controversy, but rather to take this understanding of democracy as the stipulated definition for this work. One critical distinction must be made regarding Berger&rsquos understanding of the term, and that is that the term democracy does not include all the civil and human rights associated with liberal democracy. Similarly, by capitalism, this work will not use any other connotation of the term other than describing the free market economy, where there is private ownership of property, and the economic freedom to buy, sell, or trade with whomsoever you chose. The critical element of the term is that there is limited government in place to enforce contracts and to provide a safe trading environment. Another specific meaning given to capitalism is by Friedman, who describes capitalism as economic cooperation, where both parties are benefiting from the trade, provided that the trade is voluntary and informed on both sides.

The next step in the investigation is to analyse some of the arguments that capitalism is separate from democracy. Dryzek argued that an individual&rsquos consumer preferences were properly expressed in the economy, while the same persons political preferences were expressed in politics 3. This perspective indicates that the capitalist economy is a separate entity form the democratic political system, because these are two different institutions into which an individual can state his or her preferences, depending on whether they are economically or politically motivated. On the other hand, history has given many examples of how a person&rsquos economic preferences have been stated in the political forum, such as voting for a politician that has promised to reduce taxes or to establish free trade between two states.

That same person could only express those preferences in the political forum, because they alone would have no power to change the structure of the economy such that it would seem advantageous to lower taxes or sign a free trade agreement. On the same note, a person could express their political beliefs in the economy, by no longer selling their labour to the firm who employs them, perhaps because they support a particular political party of which the labourer is not fond. If that labourer provided a service that the employer could not find elsewhere, then the employer would fold, thus stating a political belief in the economic sphere of influence. The point illustrated here is that the two concepts of democracy (politics) and capitalism (economy) are not as independent of one another as Dryzek may argue in that example.

As Schumpeter argues, the association of capitalism and democracy is purely coincidental, and that there are no necessary linkages between the two 4. The support for this position comes from his belief that democracy is possible under both capitalism and socialism, but that a social democracy would not be a liberal democracy 5, but logic dictates that this interpretation is incorrect on two counts. The first being the fact that democracy (as we have come to understand it) entails that the majority of the people will get what they want, and if there is a choice to be made between economic hardship through socialism, and economic prosperity for the majority through capitalism, then the majority will chose to have prosperity over hardship, because it is common sense. This simple example presupposes the historical reality of socialism being economically inefficient and having a lower standard of living than capitalism, as well as the voting public being rational in that they will choose what offers them the most material wealth as opposed to an arrangement that offers them little material wealth. On the same note, Berger argues that all democracies are capitalist, no democracies are socialist, but many capitalist societies are not democratic 6. These examples represent only a very small percentage of the arguments that support the claim that the concepts of capitalism and democracy are not related, but their counterarguments do support the notion that capitalism and democracy are intrinsically linked.

To further the analysis of why capitalism and democracy are linked, the following examples will provide the proof of their immediate relationship, as well as the ability of those examples to stand up to an honest defence. To begin this examination into the relationship between capitalism and democracy, Friedman suggests that it is not possible to decouple the two because history indicates that capitalism is a necessary condition for freedom, but not a sufficient condition in itself 7. This begs the question of how freedom can be related to democracy when Friedman himself does not like to equate the two. His reasons for not wanting to equate the two are not the concern of this work, so for the purposes of this argument, I must use logic to connect the two. Common sense itself dictates that a rational individual would choose freedom over an absence of freedom, so if a democracy is made up of a majority that have the same notion of rationality, then the majority would vote for a state of freedom, therefore Friedman&rsquos use of the word freedom in this case might reasonably be construed as democracy. To argue from the other side, the word freedom could be linked to democracy in that those who are free would have democracy as their form of government, because to have total freedom would be anarchy, which would include freedom to limit the freedom of others, and the next logical step down is democracy, which at least provides for a limitation on this level freedom that could possibly restrict the freedom of others, if the majority are rational and insist that the actions of those who would limit freedom be restrained themselves.

The argument is dizzying at best, but the logic is necessary to continue the explanation of how capitalism is necessary for a democracy to work, but it is not the only element that is needed. To prove the first part of this statement is correct, namely the need for capitalism to be in place to have a democratic system of government, one must look at what capitalism provides to make a working democracy possible. One of the things that capitalism provides to make democracy possible is the affluence necessary maximize free time, or more specifically, to allow people to concentrate on other matters of interest after their basic needs for survival have been met. This free time could be used educating one&rsquos self, looking into political problems, as well as becoming a member of a interest group to pressure government. At the next level, it gives the individual the capital necessary to give financial support to the groups to which he or she belonged, so they could collectively raise support through lobbying or the mass media for their cause. On the third level, the behaviour of providing financial support to those groups that represent the individual&rsquos political beliefs, can be transferred to the behaviour of providing money to groups that best represent his or her economic interests, and that is where the connection is made, and where democracy and capitalism intertwine with each other.

The initial counter argument to this is that this arrangement has lead to a mass society, whereby humankind is experiencing a radical dehumanization of life, and that humankind is losing out on the personal human contact that help us treat each other better, not as objects to be bought or sold 8. The first primary counterargument would state that because of this relationship, capitalism and democracy are to be considered separate from each other because the are studied in terms of one another in this instance. However, the prevailing notion is that because you must have capitalism to provide the affluence necessary to devote time to democracy, they are essentially linked. The second primary counterargument would illustrate the fact that even if the economic system was poor, and even with a failed form of capitalism, the people would still vote, and there could still be democracy.

But what kind of democracy would that be, with people living hand to mouth and not having the time to study long term solutions instead of quick-fixes. So to have a working democracy one must have free time, and to have free time one must have some degree of affluence, and history has shown that capitalist societies are more affluent than non-capitalist societies, therefore one must have capitalism to have a democracy that works. The second part of the initial premise that capitalism is not the only detail needed to have a democracy is obvious, because there must be a host of other factors, but it not relevant to this work, because it argues neither for nor against a direct connection between capitalism and democracy. There is another important piece of evidence regarding the direct connection between capitalism and democracy in that capitalism must have a government in place that will carry out the function of enforcing contracts, securing private property rights, and issuing and controlling the value of currency 9, 10.

This is the position that both Dryzek and Friedman take on the issue. Some would argue that any type of state could perform this administrative function, and this is true up to a point. Fascist Italy, Spain, and Germany were not politically democratic by the sense of the term in use by this paper, but they all had private enterprise, which is a form of capitalism 11. What they did not have was a institutionalized limitation on government that only democracy could provide 12.

This limitation on government is precisely what pure capitalism needs to be effective. It relies on the government to perform these administrative functions as illustrated above, but not to involve itself any further. The reason being that if the market is not allowed to run free, then by definition it is not operating efficiently, and therefore not providing maximum wealth to the majority of the population, and if government were to go too far then the majority would restrict its intervention. That relationship described above is another example of how capitalism and democracy are linked.

At this point the interconnectedness of capitalism and democracy has been established and the counterarguments to this refuted. What has yet to be explored is the real nature of the relationship, which will first indicate the pessimistic notion that democracy is controlled by capitalism, and conclude by illustrating the optimistic notion that capitalism will eventually lead to a better democracy. The best way to illustrate how capitalism can control democracy is the simple premise that you must have capital to finance a successful interest group in a democracy. The need for this money and how it is obtained through capitalism has been explored previously in this work. What has not been explained is the next logical conclusion stemming from the need to have capital to run a successful interest group. That next step is that the interest group that has the most capital has the best chance of influencing the democracy, whether it be through the media, or hiring an influential lobbyist, or some other means of convincing others to vote for something that benefits another party.

This coincides with Social Darwinism in that the interest group that is the most able to survive, or has the greatest success, should get its way. This is no way to run a democracy, because it detracts from the belief that democracy is the rule of the people. This in turn leads us away from the stipulated meaning of the term democracy at the start of this work, in that the decision to vote should be uncoerced and free. The crucial part of this concept is that this relationship between capitalism and democracy illustrated here represents a more realistic portrayal of how the two concepts relate to each other.

Supporting this viewpoint is Berger, who believes that all democracy&rsquos true purpose is to obscure the real power relations in society, which are determined and dominated by the members of the capitalist class 13, who can mobilize support for their initiatives through pooling of resources and the corresponding use capital assets. Democracy is also forced to obey the demands of the capitalist market through international investment. Capitalism forces democratic governments to seek out foreign investment by providing inducement for that investment, whether they are corporate tax breaks or improved levels of local infrastructure. If the governments choose not to comply with these market pressures, then this will cause corresponding reduction in tax revenue, which will in turn limit resources for government schemes. In addition, this will limit employment, which will also limit general levels of income, and therefore jeopardize the popularity and legitimacy of a government 14. Similarly, democratic attempts to control trade and capital flows will result in international relocation of production, which will in turn force other nation-states to lower their corporate tax rates 15.

This is an example of how capitalism has a certain level of control over democracy. So now that the task of arguing against the decoupling of capitalism and democracy is complete, the remainder of this work will concentrate on how capitalism relates to the liberal form of democracy that exists today. What exists in tandem with this negative outlook of capitalism&rsquos relationship with democracy, is a different angle of vis on that sees capitalism leading to a better type of democracy where political participation is improved, and the features of the free market economy lead to more human rights. An example of how this is applied in reality is in opposition to Berger&rsquos viewpoint that the best guarantor of human rights is democracy 16. When one looks at the market economy, the cosmopolitan view seems to be one of giant coronations that tyrannize the people of that country in the pursuit of efficiency, with very little attention paid to human rights, but that is not true.

One aspect of what these critics say is true, specifically the fact that the corporations are all trying to maximize returns on their investment. However, this will actually raise the standard of living by eliminating the inefficiency of the welfare state, and will give those who are not working the incentive to work. For those who work hard, the market rewards them with affluence. This managed to free the US and the UK from their economic problems in a movement known as the New Right.

Also, if there is an area of high unemployment, the corporation will see that situation as a cheap labour pool and will set up operations to exploit this. The down side is that these people have no choice but to work for this company, the positive side is that in working at their assigned task, they will have acquired skills and experience they can use toward finding a job elsewhere. Also, with democracy alone bearing the responsibility of providing human rights, one must take into account the tyranny of the majority. Where this line of argument connects with human rights, is in the fact that capitalist societies in history have a higher standard of living than non-capitalist societies. The capitalist economy also serves the interest of human rights by protecting the individual&rsquos interests.

The buyer is protected from the seller, in that he or she has the choice to go to other sellers, and the same protection is offered to the seller because he or she can go to other buyers. The same type of protection works for all economic relationships, such as employee to employer, because of all the other employers for whom the employee can work (ceteris paribus). The market does this task impersonally without the need for an all powerful state 17. The market also reduces the number of issues upon which the government must decide, therefore freeing up energy to pursue human rights, and not spend too much time and money trying to control the economy. The argument thus far has given a fair treatment of the arguments both for and against the decoupling of capitalism from democracy, as well as explored the true nature of the relationship between the two concepts. Primarily the fact that capitalism facilitates the control of the democratic process, and that in the end, capitalism will lead to a more liberal form of democracy.

This argument has had to evaluate evidence from both sides, as well as attempt to build a common frame of reference in which the two concepts could be evaluated, while minimizing the risk that any authors argument would be taken out of context. After all is said and done, what really matters is that these two concepts have dominated the realm of political thought for hundreds of years, and when understood in terms of each other, have served to guide the actions of the most powerful and influencing nation-states the world has ever seen. Perhaps the best way to end this brief treatment of capitalism and democracy is to cite Friedman&rsquos axiom which reads; "economic freedom is an indispensable means toward political freedom, and economic freedom is in itself a component of freedom broadly understood, so it is an end in itself.".