Assertion #4

4. Capitalism can serve to promote both democratic institutions at home and abroad, but does not necessarily protect either.

We should desire the spread of democracy and democratic values, but we must understand the limitations of American power. Can the proliferation of ‘capitalism’ and curing the ‘poverty problem’ be the way to both defend our own liberties and encourage their spread to the rest of the world? The theory goes that the higher levels of employment and skill brought about by a capitalist economy would directly facilitate the organization of middle, or ‘subsidiary’ classes. The middle class would use its newfound political capital to push for reformist political movements, strengthened formal democracy, and social democratic policies that would work effectively increase the sectors or classes of the population that could make effective use of their political, civil, and social rights. These classes would in turn continue the cycle. This story definitely has feel good value, and, in its essence, has essential merit,[1] but even if it were possible to spread capitalistic institutions and freedoms to the ends of the earth (which, for all of our “imperial” power, the Washington Consensus has had difficulty doing) it would still not be the perfect answer.

With regard to the question of whether economic growth causes democracy studies have been surprisingly inconclusive. Minier writes that “income levels and the estimated probability of a democratic movement occurring in an authoritarian country are positively correlated over most ranges of income…However as per capita incomes increase beyond a certain threshold the costs of demonstrating for democracy increase enough that the probability of a democratic movement occurring actually falls with further increases in income.”[2] It seems like “it is [only] as likely that economic growth causes democracy as that democracy causes economic growth.”[3] Huber, Rueschemeyer, and Stephens have found that “it is not the mere rise in per capita income that is of greatest importance, but rather the changes in the class and social structure caused by industrialization and urbanization which are most consequential for democracy.”[4]

Additionally, though it does often result from, and in some circumstances can encourage the development of democratic liberties, capitalism is far from an honest defender of freedom. Emphasizing the dangers of capitalist practices bereft of democratic foundations, Huber and her fellow researchers have been bold enough to assert that: “Market-oriented economic policies supported by international pressures and by local constituencies gaining from them tend not only to undercut social democratic reform policies, but also to threaten the foundations of even formal democracy.”[5] Such studies are obviously limited in scope (Latin America was the focus of the study that led to this particular assertion), but the trends are evident and the reasons obvious. The danger of great fortunes and private concentration of wealth perverting and suborning the political process is obvious and fundamental. Even when capitalism works to enrich a few, not at the expense of the many but merely in relation to them, it is dangerous. Laissez faire implementation of a capitalist program will likely eliminate one danger to democracy. The increased level of employment and higher standard of living reduce the number of those “whose bitter necessities make a few dollars on election day, or some little job with the city government a great temptation,”[6] but it merely raises the stakes. In a well developed economy, democracy or no, buying an individual voter is rarely worth much; buying the individual legislator is worth more, and buying the media can buy you the entire legislature. Witness the emphasis our friend Vladimir has put on returning the Russian media to its ‘proper’ place under government control. Individual, non-governmental, ownership does not mean independent. An oligarch with media power can have a subversive influence either for, or against, the needs of ‘democracy.’

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[1] See work by Boix, 2001, Barro, 1996, Lipset, 1995 and Huber, et al, 1997.
[2] Minier, Jenny A. “Is Democracy a Normal Good? Evidence from Democratic Movements.” Southern Economic Journal, Vol. 67, No. 4. Apr., 2001, pp. 996-1009.
[3] Uk, Heo and Alexander C. Tan. “Democracy and Economic Growth: A Causal Analysis.” Comparative Politics, Vol. 33, No. 4. Jul., 2001, pp. 463-473.
[4] Huber Evelyne; D. Rueschemeyer and J. Stephens. “The Impact of Economic Development on Democracy.” The Journal of Economic Perspectives, Vol. 7, No. 3. (Summer, 1993), pp. 85.
[5] Huber, Evelyne; D. Rueschemeyer and J. Stephens. “The Paradoxes of Contemporary Democracy: Formal, Participatory, and Social Dimensions.” Comparative Politics, Vol. 29, No. 3, Transitions to Democracy: A Special Issue in Memory of Dankwart A. Rustow. (Apr., 1997), pp. 338-9.
[6] Miller, op. cit., pp. 220.