With the constant barrage of news, it is easy to focus on
the President’s newest outrage. Less obvious, permanent damage is being done to
our republic’s founding principle of “democratic capitalism.” If we took a
“social MRI” of the United States we would discover that, below the surface,
democracy and capitalism, once compatible, have taken radically different
paths.
Democracy and capitalism are no longer working together to
maintain our republic. In today’s world of politics and economics, democracy is
for Democrats, unregulated capitalism is for Republicans.
This conclusion helps explain why so many traditional
Republicans continue to hold their noses and support Trump’s narcissistic
personality and populist, authoritarian policies. For them, the Trump
administration’s economic policies have added to their wealth and power. This outweighs
significant losses to democratic principles and institutions.
When our country was founded, democracy and capitalism
comfortably coexisted. There was limited representative government designed to
protect property rights. Unlike Europe, most
white male citizens in America held a "stake" in society as property
owners and supported capitalism. Majority rule was restrained. The colonial system was balanced by an economy that,
while fundamentally capitalist, had not yet developed the vast economic
inequalities seen today.
During the American Industrial Revolution,
democracy and capitalism were in a more complex and often tense relationship.
The period was defined by economic laissez-faire policies and rampant
corruption. Ultimately, government intervention and social reforms won out to
address the worst excesses of industrial capitalism.
Following World War II,
democratic capitalism flourished. The middle-class soldiers returning from
battle were rewarded by the government for their sacrifices. The period was
characterized by unprecedented economic growth and expanding consumerism. Government programs helped the middle class
economically improve. While capitalism brought prosperity and stability,
it was also a period marked by strong labor movements and public investment
into important social priorities.
To examine the unexpected breakdown between democracy and
capitalism over the past several decades, I will turn to Martin Wolf, one of journalism’s
most influential commentators on economics. Wolf trained at Oxford and worked
at the World Bank before becoming the chief editorial writer for the prestigious
London Financial Times. His two most recent books come to opposite
conclusions regarding democratic capitalism.
First, in his 2004 treatise, Why Globalization Works,
Wolf explained the then prevalent economic consensus following the West’s 1991
victory in the Cold War. He confidently stated that, “democratic capitalism is
not only a coherent form of social organization but in fact the best one.” In
2004, Wolf was adamant that a market economy in a democracy was the only means
for “giving individual human beings the opportunity to seek what they desire in
life.” Most Republicans then supported democratic capitalism.
Twenty years later, in his latest, 2024 book, The Crisis
of Democratic Capitalism, Wolf’s analysis and conclusions are quite
different. He now believes that the global financial crisis of 2007-09 turned discontent into
seething anger at governing elites and caused a loss of trust in the system. His
present diagnosis is, “Neither politics nor the economy will function without a
substantial degree of honesty, trustworthiness, self-restraint, truthfulness
and loyalty to shared institutions. These values have run into crisis all over
the world.” Wolf’s hard to dispute conclusion follows: “Without ethical elites,
democracy becomes a demagogic spectacle hiding a plutocratic [government by the
wealthy] reality.”
Traditional Republicans
appear to be “all in” with this state of affairs. Even young tech entrepreneurs
can get behind an unethical governmental that represses democracy and gives the
elite power to champion unfettered capitalism. It does not matter that Trump
achieved this result by building a movement under the banner of nativism,
religious nationalism, and resentful populists looking to return to a glorious
past.
What does unjust
capitalism mean for Republicans? The “Big Beautiful Bill” guarantees hardship
for those who depend on wages, disability benefits and public services. It provides
state-sponsored extravagance for those who own assets.
Tax cuts are
given to wealthy individuals and corporations. There are tax breaks, incentives,
and inducements for investors, financial asset holders, and home owners. The
bill assures a continuous wealth transfer to the already well off and to
Americans fortunate enough to own assets.
What does
democracy mean for Democrats? As reported in the Harvard Business Review, in a
2020 article, Democracy Under Attack, “Capitalism is the right way to organize an economy, but it’s
not a good way to organize a society. Markets can allocate resources, but they
cannot solve climate change, too much inequality, or the plight of workers
whose jobs have been destroyed by trade or technology.”
A functioning
democracy is needed to establish guardrails against both political and economic
inequality. The mechanisms
of democracy must be in place to push back against powerful, entrenched
interests. Democratic institutions are needed to ensure that the
electoral process is not compromised. Most importantly, as pointed out by
Martin Wolf, “democracy needs ethical leaders to survive.”
There is no
reason that the free market must remain in the hands of corrupt leaders, large
corporations and the wealthy. There are over 36 million small businesses that
employ most of the nation’s private sector workforce. They can help bring back
a functioning civil society with a market economy and democratic resilience.
It is time to
stop tribal fighting about nonsense on social media and to figure out how to reconcile
democracy and capitalism for the next 250 years.
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