Capitalism, Democracy and Dichotomies.

The general rule of thumb in polite conversation (even in an election year?), is “never bring up race, politics, and religion”.  There is good reason for this since these issues hint at the utility of our past, present, and future circumstance, while apparently offering some measure of keen insight to our understanding of the same. It seems that the layman however remains in an abyss of bewilderment, while in the aggregate political scientists continue unabated to classify hegemonies and flavors of social governance.

In short Capitalism represents the interests of the market economy (think Wall Street, Goldman Sachs).  “There is general agreement that elements of capitalism include private ownership of the means of production, creation of goods or services for profit or income, the accumulation of capital, competitive markets, voluntary exchange and wage labor.”[1]

 Many people use the term “democracy” as shorthand for liberal democracy, which may include elements such as political pluralism; equality before the law; the right to petition elected officials for redress of grievances; due process; civil liberties; human rights; and elements of civil society outside the government.[2]

Several interesting dichotomies were outlined by Francis Fukuyama.[3]

“Middle class people do not necessarily support democracy in principle: like everyone else, they are self-interested actors who want to protect their property and position. In countries such as China and Thailand, many middle-class people feel threatened by the redistributive demands of the poor and lined up in support of authoritarian governments that protect their class interests”.

In the US although “the Tea Party is anti-elitist in its rhetoric, it’s members vote for conservative politicians who serve the interests of precisely those financiers and corporate elites they claim to despise… (reasons being) a deeply embedded belief in equality of opportunity rather than equality of outcome, and the fact that cultural issues, such as abortion and gun rights, crosscut economic ones.”

From a cautionary perspective, “over the last two generations, the mainstream left has followed a social democratic program that centers on the state provision of … pensions, health care, and education… welfare states have become big, bureaucratic, and inflexible… and most important, they are fiscally unsustainable given the aging of populations”.

The real issue lies in the inflexibility inherent in these systems of social governance. A simple example would be to consider the early development of an area rich in natural resources. A capitalist model may offer early gains all around, but with subsequent wealth distribution, and an increase in living standards/education the onus may shift towards increased regulatory control, class segmentation, external market and internal social protections (welfare, progressive tax system). While the ideal model is inflexible the external environment is not. Competition, dwindling resources, and substitutes will place a strain on profits as other areas play catch-up.

“Left to itself, capitalism produced long term aggregate benefits along with great volatility and inequality…”, but what exists today is a hybrid system of capitalism “tempered and limited by the power of the democratic state and often made subservient to the goals of social stability and solidarity, rather than the other way around”.[4]

Yet it is clear that the American system today is no social panacea, since with increased globalization and developments in China (state capitalism), India, and Brazil, the deficiencies of the system are becoming more apparent. These developing nations are reaping the benefits of a global market, being uniquely positioned to take advantage of the increased flow of natural resources, labor, technology, and capital. The American system of the 21st century  is characterized by the numbing balancing act of their leadership.

“Many people currently admire the Chinese system not just for its economic record but also because it can make large, complex decisions quickly, compared with the agonizing policy paralysis that has struck both the US and Europe…”[5]

While Democrats and Republicans fight (think stagnate), over who gets the bone the irony is that by the time the smoke clears the “bone” will be resting comfortably in an upscale Shenzhen suburb, or rocking in downtown Sao Paulo.


[3] The Future of History, Francis Fukuyama ; Foreign Affairs, Jan/Feb 2012, vol 91 #1 p.53

[4] Making Modernity Work: The reconciliation of Capitalism and Democracy, Gideon Rose ; Foreign Affairs, Jan/Feb 2012, vol 91 #1  p.3

[5] The Future of History, Francis Fukuyama ; Foreign Affairs, Jan/Feb 2012, vol 91 #1 p.57

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