Many people are out of work right now and struggling to make ends-meet. They
may be questioning the fairness of an economic system that is presently
increasing the income gap between the rich and the poor. For example, many in
the United States took to the streets last summer in protest during the “Occupy”
movement. I was alarmed at how many people seemed to be simplistically blaming capitalism
for all of the global economic problems. I interpreted their message as being a
democratic uprising to end capitalism and install a more egalitarian societal
system. But I will explain to you why I think this reasoning is flawed.
In this essay I argue that Capitalism and Democracy are entirely
compatible with each other. More precisely they are two very distinct concepts
that complement each other very well. The two concepts shall be broken down
into their constitutive conceptual elements so that we may compare and contrast
them to see how I postulated my conclusion. You, the reader, will notice that
although Capitalism and Democracy deal with different domains of society, they
share many fundamental features. Where Capitalism deals with the creation and
exchange of products and materials, Democracy deals with the creation and
exchange of ideas and opinions. When you are finished reading, hopefully you
will see that both concepts possess central tenets that rest on the idea of
liberty, choice, and decentralization, and that they are indeed absolutely
compatible with each other.
Democracy is a special form of
societal governance because decisions are not made by a single individual or
group. Democratic societies view their citizens as independent and autonomous
entities with their own unique drives and goals. This is known as individualism. Citizens have free will and are knowledgeable enough
to make choices that benefit them. As
such, they view coercion and other such assaults on free will as something
undesirable that should be avoided. Violence and the threat of harm is the most
ancient form of human coercion, so democratic societies have laws set in place
to discourage it among the population. These are generally known as Human Rights. Citizens are free to do
as they so please as long as they are not interfering with other citizens’
Human Rights. Individuals are generally united in their common goal to achieve prosperity, happiness and good health,
despite the fact that they each may have their own unique ideas about achieving
it. As an extension of free will, all citizens must be involved in the matters
of the state/society/group. This occurs through public discussions where every citizen is given the chance to have their
ideas and opinions heard. In modern societies with large populations,
citizens elect leaders to represent their interests during these public
discussions. Through these exchanges
of ideas and opinions, citizens discover new and innovative ways to cooperate with each other to achieve
their goals. Ideally, group decisions must be made with group consensus, meaning that every single individual agrees to the
decision. When consensus cannot be reached, decisions are made by the majority or through compromise. Individuals seek power not through violence or coercion,
but rather, with political influence.
What this means is that a person in a position of authority (i.e. the president,
politicians) is dependent on the support he receives from other citizens. In
this sense, power and influence is decentralized.
If a Politician begins to do things that the citizens do not like, the citizens
simply withdraw their support and the Politician can no longer influence public
policy. This is usually done through the process of voting. A skillful politician finds the common ideas that unite the
citizens and gains their trust by reflecting those ideas back on to the citizens.
Capitalism is a special economic
system for very similar conceptual reasons as Democracy. Capitalism is the production, trading and proliferation
of commodities to achieve profit and growth. Commodities are essentially modified and refined resources
which have value, meaning they
improve the quality of life of its
owner. They are analogous to ideas in democracy. Quality of life is an umbrella term for
prosperity, happiness and good health, which as you may recall is one of the
common goals among citizens of a democratic society. In fact, among the many
Civil/Human Rights stated in democratic constitutions you will find something
called the “Right to Private Property”.
The Right to Private Property allows individuals to own commodities which are protected in ways that are similar to
Human Rights, and can be considered as an extension of the individual. As such,
an individual can accumulate
commodities which serve to increase her quality of life. In this way we see
that Capitalism benefits Democracy and vice versa.
The act of trading is when one party gives away a commodity in exchange for another commodity of equal
value (may also be referred to as buying
and selling). Value is usually
measured in currency, a universal yardstick.
The value of a commodity is determined on the free market through the homeostatic
balance of supply, demand and competition. If the supply of the commodity increases, it is more
accessible and thus becomes less valuable. Similarly if the demand increases,
it is less accessible because more people want it and thus it becomes more
valuable. As such, the scarcer the commodity is on the market, the more
valuable it becomes. Businesses are
entities whose main goal is to achieve profit and growth by selling commodities
on the market. Profit is achieved by selling a commodity for a higher price
than it cost to produce. Businesses cannot sell their commodities for too low a
price otherwise they are not profitable and fail. They cannot sell for too high
a price neither because buyers will simply buy from another business for
cheaper. This is competition. As such, businesses must find a middle ground
that is profitable yet cheap enough for buyers. This drives efficiency and
innovation as businesses find ways to cut
costs and increase profit margins.
If you understand the concept of the free-market you also understand that these
free-market forces are decentralized just like political power in a democracy
is decentralized.
However, some folks may argue that Capitalism goes against democratic
ideals of quality of life since it produces commodities that are harmful, like
guns. Guns are a tool for causing violence and are against the principles of
Human Rights because they are used for coercive purposes. I would respond that,
although democratic ideals are against violence it does not change the fact
that the world is a dangerous place where many people do not accept these
principles. Guns improve the quality of life of their owners by enabling them
to protect themselves, their families and their property from people who mean
them harm.
Other critics may point out that Capitalism often uses exploitation to increase profits and
growth. Exploitative techniques such as cheap
labor are harmful to individuals because it is oppressive and creates profit at the individual’s expense. How can
something which promotes exploitation be compatible with democracy? I respond
that, even though capitalism may be exploitative, reckless and at times blind
to human suffering, it creates choice. Through this choice it creates
opportunity and growth in the long term. For example, a subsistence farmer in
sub-Saharan Africa is given the choice to go work in a sweatshop. The working
conditions in the sweatshop are terrible for her (judging from our comfortable
Western standards). But are they really much worse than her conditions as a
subsistence farmer where she experienced uncertainty, droughts and starvation?
This textile factory, mechanistic and exploitative as it is, offers a choice. A choice that can lead to something more, a
choice that can lead to growth. She may still be starving while working long
hours under terrible conditions, but at least her children are near an urban
center where they may get some sort of education. Although she may never escape
the miserable conditions within her lifetime, at least her children will have
more choices than she had, and thus a better chance of escaping poverty than
she did. And if you recall, choice and free will are the central tenets of
democracy.
With this brief conceptual break-down we can see that Capitalism and
Democracy share many of the same fundamental ideas. Democracy deals with the
exchange of ideas and opinions, whereas Capitalism is concerned with the
exchange of commodities. Both are based on a system of decentralization and
individual liberty. This is strong evidence in support of my statement that:
Yes, Capitalism is compatible with Democracy. I would even venture further to
say that, like two soul mates, Capitalism and Democracy were made for each
other. In fact, if we look back in history we can see that they were both thrust
onto humanity at the same time. I believe that more conceptual, social, and
economic research would confirm my statement. It makes me think that some of my
fellow citizens exercising their democratic right to protest against Capitalism
(of all things!), really do not understand Capitalism at all! In fact, if it
were not for Capitalism, they probably would not be allowed to protest in the
first place! Although I agree that the present economic system could use some substantive
improvements, I whole-heartedly disagree that Capitalism is the problem!
