Home > Uncategorized > Exacerbation of the contradiction between democracy and capitalism

Exacerbation of the contradiction between democracy and capitalism

from Alicia Puyana

While the 2008 crisis called into question the fundamentals of economic theory over which the model of global growth had been sustained for the last three and a half decades, today we witness the crisis of liberal democracy and neo-liberal economics (Bauman, 2016), of the Social Democracy doctrine, the New Labor and waning The Third Way, as well as the fading out of the unrestricted support of globalization (Rodrik, 2017). Some foresee it as the end of the Pax Americana, or US hegemony established since the end of the Second World War and the world order that emerged thereafter (Roubini, 2017). For Trump, the costs of maintaining US imperialism are unacceptable; qualifying NATO as obsolete and its members as free riders and suggesting nuclear proliferation of Japan and Korea while keeping the USA “at the top of the pack” (Trump 2017) would be a sensible strategy, as it would reduce for the US the cost of defending these countries. In reality he is not an isolationist. He aims at controlling word order in his own terms: reinforcing the military power elements of the international security policy and weakening the elements of world peace, that inspired the II WW peace agreements and described in  F.D. Roosevelt 1944  State of  the Union Speech (Roosevelt, 1944), for whom security was not only preventing foreign aggressions but also avoiding any threats to  economic, social and moral security, because a basic element of world peace is  “a decent standard of living for all individual men and women and children in all Nations” (Roosevelt, 1944). Furthermore, for Roosevelt, peace depended on “…freedom from fear which is eternally linked with freedom from want” (Roosevelt, op cit.).  

Exacerbated globalization has made clear the contradiction between democracy, which proclaims equality among all human beings and a capitalism that sanctions inequality, that inequality in wealth which supposedly guarantees investment and an economic growth and would end poverty. If property is the basis of freedom, the concentration of wealth impedes equality in freedom and in its exercise. One characteristic of neoclassical economics’ models and the policies it backs is its lack of support and even disapproval of democracy (Radford, 2016). The same author adds that the principle of efficient allocation under conditions of scarcity leads to rejecting every attempt of redistribution of income and wealth downwards.  This rejection is consistent with Lucas (2004) for whom: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion, the most poisonous, is to focus on questions of distribution”. All this led to the metamorphosis of economics, from a social science to a completely sanitized discipline that subordinates the state and society to the dictates of the market. In this way it came

“to reject all heresies, in any organized form, that is to say, anything that seems to threaten the sanctity of property, profits, appropriate tariff policy, or the balanced budget, or implied sympathy for unions, public property, or the poor” (Galbraith, 1974, p. 239).

Thus, adds the author,

“… converting economic theory into a non-political discipline – neoclassical theory destroyed, by the same process, its relation to the real world” (Galbraith, 1974, p. 240).

This distancing from the real world deprived economists and politicians from an understanding of the world and the will of the electorate.

Mexico, the weak link in Trump’s campaign promises

  1. robert locke
    April 24, 2017 at 12:29 pm

    Trump, if he thinks at all, is clearly not looking at economics in terms of market economics but in terms of Clausewitzian strategic thinking in which the strength of states in geopolitical confrontations are at stake, and the welfare of the community, since it adds to the strength of the state is very much an economic consideration. Clausewitz’s classic On War is just as important to economic thinking as Adam Smith’s Wealth of Nations. People who study strategic thinking in Management Schools and War Colleges are very much aware of this kind of thinking. Only neoclassical economists are dumb to it.

    • April 24, 2017 at 6:38 pm

      Trump spends all of his physical and mental energy beating himself on the chest and tweeting how smart he is. Nothing left after that : )

  2. April 24, 2017 at 12:54 pm

    I see only the beginning of the article.

    As to Locke, he is right, but only partially. Strategy thinking must go beyond Clausewitz,
    for really long-term. The climate decisions of Trump are not sufficiently risk-averse.

    • April 24, 2017 at 9:49 pm

      click on the blue link at the bottom — “Mexico, the weak link in Trump’s campaign promises” — to see the whole article in pdf

      i appeal again to posters/editors to employ a clearer link that would pre-empt such questions, such as “read more” or something

      having read puyana’s whole article, i find nothing about jk galbraith (1974) listed in the references
      as far as i know he didn’t publish a book in that year, is this reference to an article?

  3. April 24, 2017 at 2:07 pm

    If property is the basis of freedom, the concentration of wealth impedes equality in freedom and in its exercise. One characteristic of neoclassical economics’ models and the policies it backs is its lack of support and even disapproval of democracy (Radford, 2016)

    Put differently, the freedom to choose depends upon the power to choose, making money and wealth permission slips to be free to choose.

    Actual freedom has nothing to do with earned or unearned permission slips endowing their majority holders the power to choose free from most constraints while denying the minority holders the very opportunity to choose. Ever increasing concentrations of wealth permit the purchase of the the economic freedom of the few by the denial of the essential freedom of the many.

  4. April 24, 2017 at 2:23 pm

    I want to see the 2017 references.

  5. April 24, 2017 at 5:21 pm

    WHERE WE WENT WRONG….” All this led to the metamorphosis of economics, from a social science to a completely sanitized discipline that subordinates the state and society to the dictates of the market.”
    HOW TO FIX IT……”“Give The Power Back To The People.” “It’s time to rewrite the rules―to curb the runaway flow of wealth to the top one percent, to restore security and opportunity for the middle class, and to foster stronger growth rooted in broadly shared prosperity.”( Economic Nobel Laureate Joseph Stiglitz)

  6. April 24, 2017 at 7:11 pm

    “One characteristic of neoclassical economics’ models and the policies it backs is its lack of support and even disapproval of democracy (Radford, 2016).”

    Use of democracy to focus distributed intelligence of humans is related in economic theory to all-knowing economic units.

    An economic knowledge structure involved with cosmic powered biology as old as the first quarks falling in love and producing new combinations can base itself in actual science. Transmission of information via real prices is a form of democracy that information-age economists should be able to use to describe models that are verified by existing data in a similar way that climate and weather models are tested to see if they can reproduce history.

    Dictatorial military empires like the United States cannot tolerated real prices that guide choices toward rationality anymore than they can tolerate educated populations fully participating in real democracy.

    • Risk Analyst
      April 24, 2017 at 7:46 pm

      I’m not so sure about your last statement. Seems the best and the brightest, being the “educated,” at UC Berkeley and Claremont McKenna colleges don’t want participation in democracy if it disagrees with them. In both cases and others, free speech was shut down, in contrast to participating in “real democracy.” What is democratic about physical assault of those who disagree. I would not assume education automatically leads to good judgment and interest in democracy. Education is not the variable of interest so much as what they are learning. Mostly they seem to have learned intolerance.

  7. April 25, 2017 at 10:24 am

    This topic is complex but not complicated. By that I mean the processes of choice and planning are impossible to model or predict with certainty or accuracy. But the questions these choices and planning address are straight forward and have existed since Homo Sapiens first appeared on the planet. The last and final human species, Homo Sapiens live, work, and plan via relationships, via groups. There are no individuals in our species, except those created for and by the communities (groups) which define humanity. But the specifics of all this can be confusing. Federalist Papers #9 (Alexander Hamilton) and #10 (James Madison) deal with the issues of partisanship and factionalism. The conclusions are: 1) these cannot be avoided; 2) the effects of these need to be controlled for a democratic society to function; 3) this control is best instituted via representative rather than direct democracy where; 4) the representatives are an enlightened and wise elite who lead the nation and guide voters. The reverse is the case on the ground today. The effects of factionalism are not controlled; 1-2 specific factions now control the US government; the wise and enlightened elites who ought to be representing Americans have been demonized and subjugated by factions so that democratic government is no longer possible. In simple terms, we are living today and have been for 40-50 years in an oligarchy. There is no stretch of anyone’s imagination through which the current government of the US is by enlightened and wise elites. Probably the closest we’ve come to that since John Adams is the era of FDR, about 80 years back. Impeach Trump, Pence, all the Congress, end gerrymandering, and teach the SCOTUS Constitutional basics. Then, we might be able to begin cleaning up this mess. Assuming all the economists are fired.

    • April 26, 2017 at 9:02 pm

      I think JFK, had he not been assassinated, would have come close to bringing in a wise elite.

      I also think that expecting the foolish to choose to elect the wise goes to the heart of American exceptionalism.

      • robert locke
        April 27, 2017 at 7:19 am

        That “wise elite,”– Mcnamara and his Ford motor company numbers crunchers, brought us the killing fields of Vietnam. Of this wise elitie I wrote in 1989,” No groups of men so fundamentally missread reality as those who implemented and used management science in the Pentagon during the Vietnam warl. Their management sciences did not fail just because the Americans who implemented them were discredited by the Vietnam defeat; they lost the war because they did not understand the limitations of managerial methods.”

      • April 27, 2017 at 9:52 am

        JFK had the right background and temperament to lead the American people into making wise and beneficial choices. But he had two very distinct limitations in this effort. Neither of his choosing. First, he had to work within an intelligence and foreign affairs bureaucracy that still followed the paths laid out by the Dulles brothers. This made doing things like lowering tensions with the USSR and China, or negotiating with Castro impossible. It also made withdrawal from Vietnam Kennedy could only consider in private. Second, Kennedy was Roman Catholic. In fact, he was the first and thus far only Roman Catholic President. So, Kennedy was forced to contend with not just the enemies of his father but also all the bigots who hate Roman Catholics. But even with these limitations Kennedy still managed to inspire Americans at every level and walk of life. Another thing to consider is this. If Kennedy had served out two terms, Lyndon Johnson would never have been President. Which means no Nixon, no Watergate scandal, and very likely no Reagan Presidency. And with that no Reaganomics, no turn to the right politically and center-left governments and society from Kennedy to the present. Small changes sometimes have big consequences. In addition to all this Kennedy had to contend with the Rand Corporation (as dark a force as ever seen on this planet) and the ongoing Cold War. Just think of how Kennedy could have effected these if he had lived. Hell, Kennedy might even have found a new Secretary for Defense in his 2nd term.

      • robert locke
        April 27, 2017 at 5:09 pm

        Counterr factual history is fun, Ken, but can it be taken seriously? One problem I have had with German historians of the Wehler school is that they blame Hitler on Bismarck’s defeat of liberalism in Prussia in 1862. What brought him to power was the uniqueness of political constellation 1929 1934, Seven league boots permit us to jump around in time, but I find it is best to find explanations for events within the time frames and the situations when they occur. I don’t believe much in anachronisms.

        What makes you think Kennedy would have avoided Vietnam? It was his whizz kids who dragged poor Johnson, our last real new deal president, iinto the quagmire of Vietnam. I will concede one theme in postWWII history that has had a persistently bad effect on American democracy, managerialism, it raises its ugly head every time we think that the skills and methods of a managerial elite can prevail over “backward” peoples. We have lost every war, since the leadership ideal was replaced by managerialism, since WWII.We have let a managerial elite ruin firm governance at the same time.

      • Risk Analyst
        April 27, 2017 at 5:30 pm

        A long time ago, I picked up Ralph Nader at an airport and drove him to a speech. What if I was a bad driver and rear ended a flat bed truck. Gore would have won the 2000 election, 9/11 might not have happened, but definitely the Iraq War and all the deaths and everything would not have happened. But as with all other such histories, it cherry picks the good things and other dark things might also have happened we would be lamenting.

        On the wise elite, I could not think of a more disastrous example than Kissinger who is blamed by many for destabilizing Cambodia, leading to the Khmer rouge and the killing fields. Wise does not necessarily lead to good decisions. And you can weakly link him to Kennedy also, because Kissinger was initially brought to Vietnam by Henry Cabot Lodge who worked for Kennedy.

      • April 28, 2017 at 12:16 pm

        Robert, counterfactual history makes historians uncomfortable. I understand. But if you change the name to scenarios, which is the counter- or semi-factuals that planners and forecasters create on a routine basis the situation sounds more realistic and useful. Since events are uncertain, planners can never know that the plans they make will be of use in the future. Likewise, history is re-interpreted regularly. Look at American history. There have been at least five distinct “schools” of American history each with its own view of everything from the founding of the nation to the Indian wars to the Civil War (War Between the States). So, in this sense scenarios or counterfactuals can be useful and enlightening. But mechanical or deterministic interpretations of history ought to be avoided in all instances.

        I’ll have to disagree with you on Kennedy and the Vietnam war. Kennedy didn’t like or want it. Johnson did. Both to fulfill his intention to complete Kennedy’s agenda and because as he often said the US will never lose a war, and certainly not while he’s President. To see managerialism in full flower during and after WWII check out Alex Abella’s “Soldiers of Reason: The RAND Corporation and the Rise of the American Empire.” RAND was and is a sinister and dark force in American history.

        Risk, yes using counterfactuals is difficult. We don’t want to cherry pick to get a result we desire. But that’s not a reason to stop using this tool. The time after WWII included many obstacles to wise leadership, including the beginnings of neoliberalism, the “real politik” of such as the Dulles brothers and the RAND Corporation, and the duel of super powers called the Cold War. Even the wisest leader is sometimes helpless in streams that cannot be controlled.

      • robert locke
        April 28, 2017 at 4:00 pm

        I first wrote about the new scientific paradigm and its shortcomings in management in 1989, Management and Higher Education Since 1940, Cambridge UP, Ch 1 The New Paradigm and 2 The New Paradigm Revisited. pp 1-56. Lots has been written since but I think I was right on my assessment at the time. Remember in 1989 Alfred D Chandler Jr.’ Pultizer Prize winning Visible Hand (1977) ruled the roost as did the Harvard Business School at the time (See Duff McDonalds, The Golden Passport) And Chandler’s Scale and Scope came out in 1990. I was the outsider, but I think history has proven my judgment right. Will it ever replace the Chandlerian schools in business history. You can’t easily buck the boys at city hall.

        I can see that you much admired Kennedy. I considered him and Jackie privileged people. I could relate to Johnson much more. In 1963 I was teaching in Oregon. I was as shocked by Kennedy’s assassination as anyone. I worked hard in the election of 1964, because I thought Johnson kept us out of war. Remember it was Goldwater who was the hawk.

        I think you came of age in the Vietnam War, I came of age in the Korean War and that makes for considerable differences in outlooks.

      • April 30, 2017 at 10:07 am

        Yes, Kennedy was a member of the American elite. But he also attempted to improve both social welfare and democracy in the US. Remember when he cam to office most African-Americans and Hispanics, as well as many women could not (were not allow to) participate in the political processes. Goldwater was a hawk, no doubt. A frightening hawk. But LBJ was not a New Deal democratic. Johnson’s biographer Robert Caro summed up his political philosophy thus, “Johnson’s ambition was uncommon—in the degree to which it was unencumbered by even the slightest excess weight of ideology, of philosophy, of principles, of beliefs.” But Johnson knew the stakes in pressing Kennedy’s agenda. He pressed it. He also pressed the Vietnam War. Between the two he became one of the most unpopular persons in the US.

        You’re correct that Korea and Vietnam were different wars. The first although poorly planned and lead was based on a UN consensus for a democratic Korea. The latter was a commercial enterprise lead by an “overly intelligent” manager and an old style strong arm politician. But the cold war with all its misunderstandings and paranoia shaped them both, and you and I.

  8. April 26, 2017 at 6:57 am

    Restricting my comments to the American experience, the contradiction between democracy (as practiced in America) and capitalism is one of the main things that creates a dynamic system, in other words change. We are not a status quo society.

    Our federal system difuses power, not just at the national scene but also at the state and local level; and, our economic system (capitalism) concentrates power. So we go through different eras where power swings one way or the other. The successful eras are the ones where ruling coalitions have broad impacts — post Civil War, New Deal, etc.

    Trump is more likely to awaken Liberals/Progressives from their long slumber, all for the better.

    • April 26, 2017 at 12:57 pm

      Vic, it’s a bit more complex but basically, I agree. But not only do capitalism and democracy bounce off one another, fighting a war that’s gone on for 200 years, but also capitalism and democracy change with each seceding round of struggle. In 1790, there was no capitalism. Only small business, farms, and small towns. By 1840 brutal forms of capitalism began to emerge. With 15-hour work six and one-half days per week. This stressed America, sending many American west. When new immigrants came during and after the Civil War large industry grew, as did cities, poverty, hunger, and radical opposition to capitalism. Eventually ending with the excesses of the Gilded Age. The push back came with the Progressives and religious attacks. Capitalism reasserted itself only after WW II. But FDR and the New Deal so angered business interests and particularly fascist businesses that they swore to not just reverse it but to never allow such changes to occur again. With the help of the Republican Party and right-wing think tanks and propaganda media they have made good on that promise. Here we see one of the problems of a society based on war between democracy and capitalism. Sometimes in war defeats are so complete that no recovery is possible. We may be nearing that now with democracy in the US.

      • April 27, 2017 at 6:07 pm

        ‘What If’ history. https://www.amazon.com/1912-Roosevelt-Debs-Election-Changed/dp/0743273559

        What if TR won the election of 1912 — a progressive Republican Party, no Great Depression (or at least better handled than Hoover), no New Deal, no WWII, and then… and then…

      • April 27, 2017 at 8:15 pm

        KZ, “…capitalism and democracy bounce off one another, fighting a war that’s gone on for 200 years,”
        This premise is not correct… Capitalism is an economic system; Democracy is a political system.
        When a Capitalistic economy is controlled by a democracy; the goal is what needs to be examined. It would be at its greatest, if …for the betterment of all. Today however; it is controlled by the Private For Profit Banks (PFPB) for the purpose of ‘maximizing profits’. Read my previous comments…

      • May 1, 2017 at 2:57 pm

        I have a problem with your categories of Capitalism being an economic system and Democracy being a political one, as if the the old term Political Economy does not describe anything worthy of talking about. The nature and form of what is called the economy is not independent of how communities govern themselves. The development of what we call Western economies is entrenched in the notion of private property and possession :: the former Latin: pro prius as “own and exclusive use/uses by the owner” and posse sedere as ‘the sitting on the possibility of another’s use/uses’.

        Capitalism is the permanent expropriation of the commons of mankind for exclusive own use. That differs very significantly from temporary personal use of the commons within other forms of the economy following different rules of government within communities. [This is not to say that personal use does not have other origins or is restricted to the commons. It is to say that ‘own use’ displaced ‘personal use’ because of political developments.]

        In other words, economies are not separable from the politics of communities.

        I agree very strongly with much of what Ken Zimmerman is saying to you.

      • April 28, 2017 at 12:30 pm

        Vic, try this book instead. It includes several case studies of counterfactuals. https://www.amazon.com/Virtual-History-Counterfactuals-Niall-Ferguson-ebook/dp/B00B77AIUC/ref=mt_kindle?_encoding=UTF8&me=

    • May 1, 2017 at 7:05 am

      Justaluckyfool, democracy and capitalism now and always play both economic and political roles. Capitalists want certain laws and they use both money and political leverage to get them. Democrats (believers in democratic society) want certain laws and they use both money and political leverage to get them. The issue is what laws do each pursue? As you suggest capitalists pursue laws that help them and capitalism. This can be a narrow focus, as is the case today. The rich protect and benefit only themselves. Democrats seek laws that protect and benefit the notion of democracy and life in the democratic society. Really not hard to see the difference in actual legislation. Why economists don’t observe these differences is a question we need to take up with economists. Or, as many suggest on this blog economists oppose democracy and thus always support proposed laws that favor capitalists and economic inequality. If so, this shows as a lie the notion that capitalism and the economic/political inequality it creates is natural or usual for humans. Humans are not inherently capitalists. But then, historians and anthropologists have known this for decades.

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