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Is capitalism compatible with democracy?

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  • Merkel, Wolfgang

Abstract

Capitalism and democracy follow different logics: unequally distributed property rights on the one hand, equal civic and political rights on the other; profit-oriented trade within capitalism in contrast to the search for the common good within democracy; debate, compromise and majority decision-making within democratic politics versus hierarchical decision-making by managers and capital owners. Capitalism is not democratic, democracy not capitalist. During the first postwar decades, tensions between the two were moderated through the socio-political embedding of capitalism by an interventionist tax and welfare state. Yet, the financialization of capitalism since the 1980s has broken the precarious capitalist-democratic compromise. Socioeconomic inequality has risen continuously and has transformed directly into political inequality. The lower third of developed societies has retreated silently from political participation; thus its preferences are less represented in parliament and government. Deregulated and globalized markets have seriously inhibited the ability of democratic governments to govern. If these challenges are not met with democratic and economic reforms, democracy may slowly transform into an oligarchy, formally legitimized by general elections. It is not the crisis of capitalism that challenges democracy, but its neoliberal triumph. During the first postwar decades, tensions between the two were moderated through the socio-political embedding of capitalism by an interventionist tax and welfare state. Yet, the financialization of capitalism since the 1980s has broken the precarious capitalist-democratic compromise. Socioeconomic inequality has risen continuously and has transformed directly into political inequality. The lower third of developed societies has retreated silently from political participation; thus its preferences are less represented in parliament and government. Deregulated and globalized markets have seriously inhibited the ability of democratic governments to govern. If these challenges are not met with democratic and economic reforms, democracy may slowly transform into an oligarchy, formally legitimized by general elections. It is not the crisis of capitalism that challenges democracy, but its neoliberal triumph.

Suggested Citation

  • Merkel, Wolfgang, 2014. "Is capitalism compatible with democracy?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 8(2), pages 109-128.
    • Handle: RePEc:zbw:espost:270951
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    References listed on IDEAS

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    1. Scharpf, Fritz W., 2011. "Monetary union, fiscal crisis and the preemption of democracy," MPIfG Discussion Paper 11/11, Max Planck Institute for the Study of Societies.
    2. Przeworski,Adam, 2010. "Democracy and the Limits of Self-Government," Cambridge Books, Cambridge University Press, number 9780521140119, October.
    3. Harvey, David, 2007. "A Brief History of Neoliberalism," OUP Catalogue, Oxford University Press, number 9780199283279.
    4. Fritz W. Scharpf, 2011. "Monetary Union, Fiscal Crisis and the Preemption of Democracy," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 6, London School of Economics / European Institute.
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    Cited by:

    1. Christian Reiner & Christian Bellak, 2023. "Hat die ökonomische Macht von Unternehmen in Österreich zugenommen? Teil 1," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 49(1), pages 21-59.
    2. Schäfer, Andreas & Merkel, Wolfgang, 2020. "Emanzipation oder Reaktion: Wie konservativ ist die deliberative Demokratie? [Emancipation or Reaction: How Conservative is Deliberative Democracy?]," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 61(3), pages 449-472.
    3. Merkel, Wolfgang & Zürn, Michael, 2019. "Kosmopolitismus, Kommunitarismus und die Demokratie," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 67-101.

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