Austerity: Democracy versus Capitalism

From: Peter Radford

That’s where we are. That’s where we’ve been for a while. That’s where we’re likely to stay. Get used to it.

Don’t get me wrong: the history of the past two hundred or so years have shown that capitalism – depending on how you define it – has been a good thing. Yes, it has. My ancestors were much the worse for living in the shadows of an aristocratic England, and it is only in the industrial era that their descendants, me included, have prospered. No, capitalism has not been a disaster, it has been beneficial.

And right there I stop endorsing it.

Because capitalism also unleashes horrible side-effects. These are the kind of consequences that its ardent admirers – like David Stockman whom I lambasted the other day – conveniently overlook. That oversight generally follows right after they’ve managed to make a decent living and so they adopt the posture and comport of a capitalist. They start asking different questions. They start seeking different solutions. They change sides.

It isn’t capitalism that created the American middle class. It was democracy. Which is a countervailing force pressing against capitalism. Democracy is the mechanism through which the likes of you and I prevent the pillage that unfettered capitalism encourages. And it is the method we use to make sure we get our fair share of the collective spoils.

So, you see, capitalism and democracy are locked in a fight against one another. They cannot abide each other.

The one concentrates wealth by encouraging greed, exploitation, monopoly, and conspiracy. The other distributes wealth by enforcing the tyranny of the majority, constraining liberty, establishing rules, and forcing apart those conspiracies.

Ironically true democrats love competition since it sanitizes the economy by opening it up and pushing back against the desire of capitalists to profit at all costs. Likewise, and equally ironic, capitalists despise competition because it prevents them from reaping undue rewards, colluding, and otherwise rigging the game.

It was democratic government that gave the birth to the middle class. It inoculated the masses from the risks of living in a capitalist world: it protected them from the downside so they could enjoy at least a small part of the upside. It did this by creating ex nihilo a welter of programs and tax deductions aimed at creating an affordable middle class life untenable in a ‘winner take all’ deregulated pure capitalist world.

So democracy is the political solution to the problem of exploitation by capitalists.

Which why neither the extreme right nor the extreme left like democracy much. They pay token lip service, but behind the scenes they grumble about its invasive character. Democracy is indeed tyrannical, if, and only if, you mean tyrannical to be the enforcement of fairness.

This is precisely why the Founding Fathers got it so hopelessly wrong. They hated the prospect of majority rule. Or rule by the mob. Why? Because the mob might want something in return for all the hardship the few impose.

In contemporary America this contest is still being played out.

The last election was full of right wing indignation about the 47% – that part of America said to depend on government largesse for its survival. The moral indignation with which right wingers attack such ‘dependency’ betrays their contempt for democracy. It also displays a shockingly naive perspective. The kind of perspective that infects all traditional conservative political economy. The notion that nearly half of all Americans don’t pay income tax was used to demonstrate the abundance of layabouts that decades of government largesse has fostered. Conservatives love this kind of morality play.

But they overlook a more simple explanation. One with a different moral twist. Half of Americans don’t pay income tax because they don’t have enough freaking income. Duh!

Which brings me to austerity and budget cutting.

Apart from defense most government spending goes into programs designed to foster our middle class. It reduces the risk of existing within a rapacious capitalist society where saving for retirement is well nigh impossible because wages have been stagnant for decades, or where health care costs are rising more rapidly than those stagnant wages. And those are very significant risks for anyone existing down the income scale. Without those programs, each a victory for democracy, the middle class would shrivel and America would be revealed to be just an oversized banana republic with a small ultra-wealthy plutocracy and vast poor underclass.

So by reducing the risks of capitalism for those who are not capitalists, democracy averts the danger of the emergence of fully fledged socialism. This is why Marx was wrong when he suggested that democracy opens the door for socialism. It doesn’t. It slams the door. His reading of history was wrong.

It is also why those preaching austerity need to be careful.

Because austerity is class warfare.

Say what?

It follows logically. The people who benefit most from all that government spending are going to be the ones who lose the most when those programs are cut. The poor, the sick, the elderly, and the average middle class family sitting on the edge between being decently prosperous and falling backwards into poverty. The 47%. They are the ones who will bear the brunt of the cuts. And they are the ones who drive democracy. Undermine them and you undermine their commitment to moderate politics. You undermine the quiescence that democracy buys.

This may sound cynical, but I don’t see it that way. Freedom constrained by poverty or sickness or lack of education is not freedom. It is an imposition. It is a form of subservience. So the commitment to the notion of freedom can get strained and extremist solutions begin to appeal whenever the specter of poverty, sickness or lack of education reappear strongly.

Furthermore: the collapse of the economy a few years back, the context for our current fixation on austerity, was not the creation of the majority. It was conceived and acted out by a few. The greed and error of the banks caused the recession. The consequent bail-out, and recession made the public debt soar. Instead of making those responsible for the problem pay for its clean up, we have ‘socialized’ it. We have moved the debt from the banks, the bankers, and their shareholders onto the public books. And now we are told that, because those public books are lopsidedly in debt, we all need to pay the price.

So austerity shifts the cost of private gambling, error, and greed onto the shoulders of the rest of society. Since those playing the game that blew up were, by definition, creditors with capital to play with, asking those without such resources to pay for the clean up is also, by definition, a form of class warfare.

The only way that the game gets played out this way is because the fine balance between capitalism and democracy has been tilted out of kilter. Society has been unbalanced. Democracy lost somewhere along the line. The constraints on capitalism were loosened too much. We valued liberty more than fairness instead of striking a balance.

Now the problem that the capitalists have is that the masses are noticing the inherent unfairness of austerity and are seeking fairness. They will look to protect themselves. This desire will either take the form of the continuance of the government programs that protect democracy. Or it will take the form of a more tyrannical show of force by the majority.

Either way, the attempt to shove the costs of the banking system’s stupidity and greed down the throats of society at large will end up destabilizing societies across the globe.

This I think is the logical end point of the decades of corporatist thinking, right wing dogma, deregulation, and the sustained attack on the underpinnings of the middle class.

Democracy will re-assert itself. We ought to hope. Before something else does