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Democracy and Capitalism: Why Do They Seem to be Diverging?

posted by Robert Reich at 15h07 GMT on Sep 26

Let me first introduce myself. I'm Robert Reich. I currently teach public policy at the University of California at Berkeley. I've served in several administrations in Washington, most recently as Bill Clinton's secretary of labor.

Also written a number of books about democracy and politics -- the most recent of which came out last week, entitled "Supercapitalism." I'd be very interested in others' reactions to its main thesis, which can be stated quite simply: The United States and many other advanced economies once assumed that democracy and capitalism went hand in hand. Yet since the 1970s, they seem to have diverged. Capitalism has soared, in the sense that consumers have been treated to a vast array of new products -- personal computers, iPods, antidepressants, hybrid cars, to name just a few -- while the prices of standard goods and service have declined, adjusted for inflation. Companies have also become far more efficient and stock markets have surged. And yet, these gains have been accompanied by widening inequalities of income and wealth, heightened job insecurity, and
environmental hazards such as global warming.

Strictly speaking, though, these are not failings of capitalism.
Capitalism's role is to enlarge the economic pie. How the slices are
divided and whether they are applied to private goods like personal
computers or public goods like clean air is up to society to decide.
This is the role we assign to democracy. To me, democracy means more
than a process of free and fair elections. It is, in my view, a system
for accomplishing what can only be achieved by citizens joining
together with other citizens -- to determine the rules of the game
whose outcomes express the common good. The rules of course can affect
how fast an economy grows: At the extreme, a rule that divided the pie
into equal slices would squelch personal incentives to save, invest,
and innovate. Another rule might do more to spur economic growth.
Democracy is supposed to enable us to make such tradeoffs, or help us
achieve both growth and equity or any other goals we share in common.

Yet
democracy is struggling to perform these basic functions. As inquality
has widened here in the States and in many other nations around the
world, the means we once used to temper it -- progressive income taxes,
good public schools, trade unions that bargain for higher wages -- have
eroded. As the risks of sudden job or income loss have grown, the
social safety net has become less reliable. More Americans lack health
insurance. As a nation, we seem incapable of doing what is required of
us to reduce climate change.

In short, capitalism has become
more responsive to what we want as individual purchasers of goods, but
democracy has grown less responsive to what we want together as
citizens. (Surveys suggest this growing sense of powerlessness -- not
only in the US but elsewhere.) Why has capitalism become so triumphant
and democracy so enfeebled? Are these two trends connected? And what,
if anything, can be done to strengthen democracy? These are the
questions I try to get at in "Supercapitalism." But before I share with
you my ideas, I'd very much like to hear from others about theirs.

Tags:

Comments:

I think an answer to your

Submitted by Jonas (not verified) on Wed, 09/26/2007 - 15:40.

I think an answer to your bigger question can be found in the answer to one of your smaller ones - the trends of capitalism's triumphance and democracy's enfeebling are indeed connected. More and more, corporations AND government are so closely tied that the corporations' interests are the government's priority.

Between a rock and a hard place

Submitted by yudhvir on Wed, 09/26/2007 - 15:57.

If "supercapitalism" outlines the rhetoric, then Africa provides the case study. For Third World countries, the inherent competitive nature of capitalism is often a decsion between life and death. Coupled with a free market and liberal democractic measures, many countries in the Third World are splitting at the seam trying to balance both democracy and capitalism.

Profit before equality

Submitted by Anna Miller (not verified) on Wed, 09/26/2007 - 18:28.

Agreed, Yudhvir. The development policies of organizations like the IMF and WTO seem built to increase corporate profits and the wealth of the elite without doing much to actually improve the status of the citizens of developing countries.
Prof. Reich, I wonder what your views are on these organizations and ways in which they could be altered to create a more egalitarian system. Friends of mine work for them and they have commendable ideals... and yet.
Beyond that, how do you propose any such changes be regulated or legislated? In terms of democracies, how does civic engagement help when power is held by transnational institutions not accountable to the public?

Some responses

Submitted by robert on Wed, 09/26/2007 - 19:31.

Let's take the example of subsidies going to farmers in the United States, Europe, and Japan. In the US, these farmers aren't small individual family farmers, for the most part. They're big agri-businesses, and the reason they get these subsidies -- amounting to hundreds of billions of dollars a year -- is because they have huge political power in Washington. But the consequence of all these subsidies is to make it very difficult for people in developing nations to sell their agricultural produce on world markets, because the huge subsidies going to agri-businesses in the US and other advanced post-industrial nations end up under-pricing agricultural exporters from developing nations. If American democracy were working well, we would be able to end these subsidies. But democracy is not working well.

If global organizations such as the IMF, World Bank, and WTO were doing their jobs, they'd be able to pressure the US and other advanced nations to abandon farm subsidies. But they can't, because of entrenched political interests.

Another example of how supercapitalism has spilled over into democracy, to make democracy less effective. The goal, again, must be to save democracy from capitalism, and thereby save capitalism from its own excesses.

international responsibility?

Submitted by Fatima (not verified) on Wed, 09/26/2007 - 21:56.

Can this thesis really be applied on a global scale? I'm not ready to call it US- or Western-centric without reading the book, but I find that there's still a colonialist presumption here that the well-being of developing countries rests in the hands of the West. Care to expand on this?