Year XLVII, 2005, Number 2, Page 100

 

 

POLITICAL DEMOCRACY AS A CHECK ON ECONOMIC CAPITALISM *
 
RONALD J. GLOSSOP
 
 
1. The Problem: How to Humanize Capitalism.
 
A critical problem for contemporary social philosophy is how to hold in check the deleterious effects of capitalism not only within countries but also in the global community. One of the most disastrous effects of capitalism within nation-states and in the world as a whole is the increasing disparity between the rich and the poor. The challenge is to indicate what needs to be done, both nationally and internationally, to reign in the harmful effects of an unrestrained capitalist economic system.
In response to this phenomenon, some economists such as J.W. Smith are calling for “economic democracy”. Smith argues that “cooperative capitalism” with fair trade would do more to advance social welfare than the existing subtle-monopoly capitalism built on the notion of free trade.[1] But what is “economic democracy”? Doesn’t “democracy” refer to a particular kind of political system? What is “cooperative capitalism”? Doesn’t “capitalism” refer to a particular kind of economic system which emphasizes competition? We also need to consider how these concepts are related to both our national and our global institutions.
 
2. Understanding Leftists and Rightists.
 
In order to deal with this issue of the meaning and significance of concepts such as “capitalism” and “democracy”, I think we need to get clear about some very basic distinctions in the area of social philosophy. The first and most basic is the distinction between a leftist or egalitarian view and a rightist or hierarchical view about how a community should be organized. The second is the distinction between an economic ideology and a political ideology. Having made these distinctions, one is ready to consider the issues of how an economic system and a political system interact with each other.
So let us begin with this distinction between leftists and rightists.[2] What constitutes a just or fair society? Leftists are those who emphasize the principle of equality. For them justice requires that everyone in the society should have about the same amount of goods. Rightists, on the other hand, emphasize the principle of merit. For them justice reflects the fact that some people deserve to have more than others and that those who already have more should be allowed to keep it. Most people would say, I think, that both of these principles have some intuitive appeal and should be balanced in some way. Nevertheless, some put more emphasis on equality while others put more emphasis on merit.
There are some derivative values implicit in the two basic viewpoints. The leftists with their focus on equality also emphasize cooperation and sharing among all the members of the society in order to advance the collective welfare of the whole community. Those who happen to have more of something (whether it is ability or knowledge or good health or physical goods) should unselfishly share with those who have less. On the other hand, the rightists with their focus on merit emphasize competition and making good use of whatever one has to advance one’s own situation. The goal is the good of the individual rather than the whole community (though in the long run such an “individualistic” system may in fact turn out to be better for the group as a whole).
Leftists with their emphasis on equality actually have two kinds of issues to address. First, there is the ethical issue of whether someone who has more than average is obliged to share some of that excess with others who have less, and if so, how much should be given, to whom, and in what way? Second, there is the political question of whether individuals who have more should be forced by the society to share, and if so, how much?
To help my students to get a better appreciation of all that is involved in the difference between the leftist and rightist viewpoints, I ask them to think about the matter of giving grades. A leftist system based on equality and the collective good would be a pass-fail system for individuals with some kind of collective grade for the group as a whole. There might be some kind of minimum requirement for individuals to pass the course, but the focus would be on what the whole group accomplishes.
What would be the likely outcome of this leftist system? Undoubtedly there would be many students, maybe even a majority, who would do as little as necessary to pass the course. Why exert yourself if the grade will be the same? These students might even turn to playing games or listening to music during class time. At the same time there probably would be some conscientious students who try to organize the class project and encourage others to do their share. Those involved would contribute what they could to improve the project. An esprit de corps might develop as the project progresses and the group works together on “our” project. Some who had not previously been interested might even be pulled into the effort, but others likely would remain indifferent. At the same time feelings of resentment might develop in those who were doing most of the work. They would complain that it just isn’t fair that those who are doing nothing will get the same credit as those who have done all the work.
Now for contrast, consider an extreme rightist grading system that rewards individual achievement in a very competitive setting. Instead of the A-B-C-D-F grading system so familiar to U.S. students, the students would be rank-ordered not just when they graduate but on every assignment and test in every course. Furthermore, in order to accentuate the competition, the grades would be posted in the classroom for all to see.
What would be the likely outcome of this rightist system? Intense competition would probably develop among the top few students in each class. The one who had the top score would undoubtedly study hard to maintain that position, while those who ranked second and third would be studying hard to try to take over that number one position. Those who were not doing so well would probably soon drop out of the class if possible or would cease to try hard if they couldn’t drop out. Some might complain that the system isn’t fair. They would complain that they were trying as hard or harder than those who were getting higher scores but lacked the capability or the previous experiences which the winners had. Personal animosities might arise as a result of the intense competition. Some, even those close to the top, might resort to cheating in some way since it is so disgraceful not to succeed, and all that seems to matter is the final score.
It is worth noting how these two systems of grading bring out the very kinds of arguments typically used for or against a leftist system or a rightist system, including complaints about the unfairness of the system. In the leftist system, it is those who are more talented and hard working, the “haves”, who are likely to complain about the unfairness of bestowing unearned equal rewards on those who are not so talented and hardworking. But in the rightist system, it is the less talented and those who are more disadvantaged, the “have-nots”, who complain about the unfairness of a competitive system where background conditions are ignored and only the final score in the competition matters.
Something worth noting is the way in which the rightist’s emphasis on competition and merit is similar to the “struggle for survival” in nature. Some individuals happen to be lucky in their inheritance and environment. They survive and produce offspring while the less fortunate perish. This “survival of the fittest” is nature’s way of operating. In the long run it produces those who “have what it takes” to succeed while the less fit perish. The rightist says, “Let society follow the hard way of nature”. That policy of relying on stiff competition to weed out the less favoured may seem inhumane in the short run but it produces the best results for everyone in the long run.
On the other hand, the leftist focus on equality and cooperation is “humanistic” or “moralistic”. Humans should be compassionate and help the less fortunate. A key point is that people do not choose what qualities they have, what ethnic group they belong to, what gender they are, whether they will have special talents or crippling disabilities, where or when they will be born, and what circumstances they will face, especially when young. All these things are just foist upon us. Once the importance of these crucial things which are outside of our control is acknowledged, one can hardly maintain that those who are fortunate should just ignore the fate of those who are not so lucky.
It should be noted that there are degrees of commitment to these two opposing outlooks.[3] In both cases we can have extremists and moderates. The extremists, whether rightists or leftists, are certain about the correctness of their own particular viewpoint. Their dogmatism leads them to be intolerant of the opposing view. The moderates, on the other hand, are open to the presentation of alternative points of view. They tend to be supporters of open parliamentary democracies where policies are determined by votes after the various views have been heard. Extremists of the left are usually called “radicals” while extremists of the right are usually called “reactionaries”. Moderate leftists are often called “liberals”, but I prefer the term “progressives” since the word “liberal” has other meanings. Moderate rightists are rightly called “conservatives”. People who are doing well, the “haves”, generally believe that the present policies and rules should be continued as they are. Why change what is working so well for them?
 
3. Economic Ideologies and Political Ideologies.
 
Let me now turn to another distinction which is particularly relevant to my views on how to deal with the disturbing effects of unbridled capitalism, that between economic ideologies and political ideologies and how the rightist-leftist distinction applies to them. An economic ideology addresses the issue of how the goods (and bads such as taxes) should be distributed in a society while a political ideology addresses the issue of how the decision-making power in a society should be distributed.
The farthest left economic ideology would be Marxist Communism (“From each according to his ability; to each according to his need”) while the farthest right would be monopolism (let the wealth of the community be concentrated in the hands of one person or a small group of persons). The more moderate leftist view would be socialism (wealth should be based on labour alone; those who work more should have more) while the moderate rightist view would be capitalism (wealth should belong to those who know how to invest wisely and who invent new and useful things as well as those who do useful high-quality work).
Turning to political ideology, the farthest left view would be pure or direct democracy (each person in the society gets one vote in determining what policies should be adopted) while the farthest right view would be absolute monarchy or dictatorship (one person decides what the policies of the whole society will be). The more moderate leftist view would be representative democracy (periodically elected representatives determine what the policies of the society will be) while the more moderate rightist view would be that a small elite group (such as an aristocracy or members of a special Party) should make the laws.
 
4. Democratic Capitalism Within the Nation-State.
 
One way to have a society that is balanced between the leftist and rightist viewpoints would be to have a rightist economic ideology checked by a leftist political ideology. This is in fact exactly the combination we find in one of the more successful countries in history, namely the United States of America. Undoubtedly the United States has benefited from some very good luck, such as being separated from other big powers by two oceans and having an abundance of natural resources. But a big asset has been its combination of a rightist capitalist economic system which has encouraged new inventions and entrepreneurship and economic growth with a leftist political system of representative democracy which has exercised at least some restraint on the power of the “haves”, partly by gradually extending voting rights to more and more of the “have-nots”.
There is an ebb and flow in the relative influence of the two parts of the total system. Sometimes the “haves” seem to be totally in control getting everything they want, but then an election occurs where the restraining power of the “have-nots” is reasserted.[4] A good example of this is the election of Franklin Roosevelt in 1932, when the policies of the “haves” had resulted in the Great Depression. At the present time, the U.S. leftist political system has been taken over by the rightist economic system. The power of money in the U.S. political system has undermined the capacity of that system to restrain the rightist economic system. It remains to be seen whether the election of 2004 can return some power to the leftist political system. This combination of a capitalistic economic system checked by a democratic political system has proved its success not only in the United States but in most of the counties of the developed world.
 
5. Democratic Capitalism at the Global Level?
 
When we look at the global level, we see a different situation. A rightist capitalist economic system exists on the international level (even though not all countries are capitalistic within their national boundaries), but there is no leftist global democratic political system to put restraints on it. All the economic forces of an unregulated capitalist economic system are leading to the greater disparity in wealth between the rich counties and the poor countries, but there is no worldwide democratic political structure to adopt the global laws that would correct the situation. We need a democratic world government which could use political means, that is, laws enforceable against individual violators, to check the disastrous consequences of the activities of global businesses. Various proposals about what should be done at the global level are not likely to lead to action unless there is a democratic world parliament to discuss them and make laws to implement them.
Some Marxists would claim that this proposal ignores the facts of history, that political systems are always the necessary consequences of the economic realities. A central principle of Marx’s dialectical materialism is that any group that controls the prevailing mode of production will also control the political institutions of that society. But it is interesting that when Marx turns to the practical question of how to bring about a revolution to replace the capitalist class with the proletariat, he seems to forget his principle. If political power is always based on economic power, then it would seem that what is required to get political control by the proletariat is to put more money into the hands of the workers. But Marx ignores his economic determinism and urges the working men of the world to unite to take political power through the force of arms. Then they will be able to control the economic system through their political power.
My question is, If the political system can control the economic system in one situation, why not in another? What seems to be required is a democratic political system where economic power cannot be converted to votes. There must be some kind of limit on the amount of funds which can be contributed to the campaigns of candidates. There should be some kind of government financial support to assist all candidates running for government office. There needs to be public debates and forums where all candidates are heard. Undoubtedly there are details to be worked out, such as how much financial support the government should provide and how to determine which candidates will be eligible for that assistance, but such questions are answerable.
For a democratic system to work it is also necessary to educate the citizenry about social philosophy and history and political institutions, something that seems greatly lacking in many educational systems today. Voters must be able not only to hear the candidates but also must have the background to evaluate what is being said. I believe that failure to provide such education is a significant weakness not only in this country but also in many of the world’s democracies.
When we consider establishing a representative democracy at the global level, a big problem would be deciding on what system of voting to use. Would the representatives represent countries or continents or metropolitan / geographical areas having roughly equal populations? If voting were done on a national basis, wouldn’t the quantity of votes for a country need to be weighted to take account of population, economic power, geographical area, degree of protection of human rights, and so on? If the more powerful countries were not given more votes (at least at first) reflecting their greater power, why would they agree to subordinating their power to that of a global government? In fact, if the United States and other more powerful countries such as China or a united Europe were not given a veto power or something very similar, why would they agree to the establishment of a democratic world federation?
 
6. Is Socialism the Solution?
 
I may be expressing a minority viewpoint among those concerned with these issues, but nevertheless I want to say that I think that when it comes to economic systems, socialism does not work very well. Being a leftist system, socialism could be expected do better than capitalism at distributing more equally what is available within the society. Cuba is a good example here. But the difficulty with socialism is the tendency toward stagnation and absence of any progress brought about by new inventions. People generally do not welcome change, so there must be some incentive to bring it about. Stagnation would be especially likely if there were no capitalist systems anywhere to stimulate progress.
The tendency toward stagnation in socialism has many sources. One factor is the focus on rewarding people for time used in working but not doing much to reward people for inventing or implementing procedures and devices that save time and money. Consider two similar hypothetical cases, one in a socialist system and one in a capitalist system. Suppose that a worker notes that an operation being conducted in a factory could be done in a different manner which would require only four people to do it rather than six. He tells his supervisor about this possibility. If this occurs in a socialist system, the supervisor is not likely to be very interested. She is likely to respond, “Even if your proposed new method would work just as well, what would I do then with the two workers who would no longer be needed? I don’t want to fire them just because they are no longer needed in this operation, and furthermore I don’t have anything else for them to do. I think it will be best to just continue doing it as we always have.” Contrast this reaction to what happens in a capitalist The supervisor is likely to say, “Your proposal to do the operation with only four workers instead of six is wonderful. You will be given a bonus because you are saving us money and we want to encourage others to help us make similar savings in the future.” What about the two workers who will lose their jobs? In the capitalist system, that is their problem, not the employer’s.
This kind of incident is likely to occur again and again in the different systems. The result would be virtual stagnation in the socialist while the capitalist system would become more and more efficient. There is little doubt that the socialist system is more humane, especially in the short term, while the capitalist system is indifferent to the plight of individuals. But the remedy for this situation is not the abandonment of capitalism in favour of socialism. Rather one needs to have a democratic political system which creates laws to assist those individuals who lose their jobs as more efficient procedures and machines are used. We need unemployment compensation and job training programs and special public welfare programs to take care of health needs, food needs, education needs, and so on. The businesses which are making more money should be required to help pay for these programs. But what is not a good idea is to eliminate the incentives for progress in a capitalist system. Let’s not forget that outside the military the socialist Soviet Union was doing virtually nothing to develop computers.
Another problem for a socialist system is that policy-making tends to be focused on short-term good while ignoring the long-term situation. Consider the situation with regard to providing medicines to fight AIDS or other diseases. The humane approach is to insist that medicines already available be provided at low cost to poorer people. But the pharmaceutical industry insists that it needs to make money from the medications already available so that it can afford to do the research to develop new medicines and even totally new approaches to dealing with the problem. There is room for dispute on how much the corporations should be making, but there is little doubt that in a socialist system the main effort would be on using what is already available rather then on developing new medicines to deal with the problems in the long run.
We cannot overlook the positive effects of a capitalist system driven by the desire to gain more profit from one’s investment. Society needs this continuing drive toward ever greater efficiency to encourage new inventions and then to make use of them quickly. Another benefit of capitalism is the continuing effort to produce goods that are wanted by consumers, which means that businesses must produce a variety of good quality products to appeal to a variety of buyers.
 
7. The Need for Democratic Constraints.
 
At the same time we need a democratic political system to deal with the difficulties of an unregulated capitalist system. The government must control the effort of capitalists to externalize their costs, that is, to get others to pay for things they want such as controlling the areas where raw materials like oil are available or taking care of damage they have done to the environment. Second, the capitalist system depends on competition, but in unregulated market situations those with more money get a better deal than those with less money. Regulations are needed to try to keep the bargaining somewhat fair. Capitalists bargaining with workers are usually in a better financial situation than the workers looking for jobs since the capitalists can wait for their profits, but the workers need money for food and shelter now. Therefore regulations are needed to protect the bargaining rights of the workers. In the absence of regulation there is a natural tendency for the richer, bigger businesses to get better deals than their poorer, smaller competitors. The result is that without regulation monopolies develop and the competition which is crucial to the capitalist system is lost. A third problem, one which can become very troublesome in the absence of regulation, is the production of very profitable items which are unsafe or harmful (like cigarettes).
From a moral point of view, however, the biggest problem resulting from an unregulated capitalist system is the widening gap which develops between the rich and the poor. Certainly, that happens in part because of the way that the rich tend to gain control of the political system and make rules that increase their advantage, but as already noted the proper response to that difficulty is to design a democratic political system where economic power cannot be converted into political power. But one also needs to recognize that it is a built-in characteristic of the capitalist system that the rich get richer. That is precisely why unrestricted capitalism is inherently immoral. Being rich means that you can afford a good education rather than having to work to take care of current needs, that you have the financial resources to invest so that the money you have makes more money, that you have time to explore new ideas, that as a consumer with money to spend you can influence what gets produced, and so on.
Another way of looking at this rich-get-richer tendency of capitalism is to consider who gets discriminated against in a capitalist system.[5] Some opponents of capitalism have claimed that capitalism is racist and imperialistic. It may well be that some capitalists have been racists, but that is not an inherent characteristic of the capitalist system. In fact, racism is totally foreign to it since the only things which matter in a capitalistic system are competence as a worker or manager or inventor plus the possession of money in order to be able to buy as a consumer or to invest as a saver. The race, religion, gender, and age of the individual employees or consumers are irrelevant. It may also be the case that some capitalists have been imperialistic, but nationalistic imperialism is directly contrary to the theoretical basis of capitalism. Capitalists want to be able to make the biggest profit possible on their investments regardless of where that might be. Thus theoretically (as Adam Smith tried to show) they should favour a worldwide “free-trade” market economy rather than a mercantilist system of national tariffs and regulations. For capitalists national boundaries are obstacles.
But there is one type of discrimination which is an inherent part of the capitalist system, and that is discrimination against the poor. The poor are discriminated against because they do not have enough money to serve as potential buyers or to be able to invest and earn profits. Capitalism works on the basis of market forces of supply and demand, and demand is not the same as need. Demand is want plus the money to buy what is wanted. The poor may be in need but their needs will not constitute part of the demand because they lack money to buy. The other side of this situation (one that little by little is getting more attention both domestically and globally) is that capitalism won’t work well if wealth is too concentrated in the hands of too few persons because then there won’t be enough demand to keep buying the products being produced.
What is the proper remedy for this systematic discrimination against the poor? It seems that at least part of the answer is the establishment of a democratic political system which will establish a system of taxation and redistribution of wealth where some of the wealth accumulating in the hands of those who are already wealthy is systematically syphoned off and put into programs for the poor and made available to poor individuals (as is done by Grameen banks).
 
8. Yunker’s Plan for Equalizing the Wealth Globally.
 
On the international level, just such a systematic program for channelling wealth from the rich countries to the poor countries has been proposed by James Yunker. He described it in his 1993 book World Union on the Horizon: The Case for Supernational Federation.[6] His “World Economic Equalization Program” (WEEP) assumes that there will be savings from large cuts in military spending as the result of his proposed world government while at the same time recognizing that the huge economic gap between the rich and the poor must be addressed to dampen hostility of the poor against the rich, a situation which might undermine the world government if not addressed. The program calls for rich countries to transfer money annually to a transfer fund, a fund from which poor countries draw money (but which could be used only for production goods and education/training, never for any commodities intended for final consumption).[7] The amounts of money going into the fund from the rich countries and the amounts going out to be used for investment by the poor countries are based on a formula spelled out in great detail by Yunker. He admits that “The rules embodied in the WEEP model for determining contributions [paid in by the richer countries] and shares [paid out to the poorer countries] are very much of an ad hoc nature”.[8] Nevertheless they are “commonsensically appealing”. He relies on computer modelling to show how the program he outlines of annual stipulated transfers from the rich countries to the poor countries should result in a situation where “after 35 years of WEEP… per consumption in the poorest region [of the world] would be close to 90 per cent of that in the richest region”.[9] Without WEEP that figure would be 10 per cent.[10]
I don’t intend to defend the specifics of Yunker’s “World Economic Equalization Program” or to go into further detail about it. I only want to point to it as one example of how political decision-making at the global level, isolated from the influence of present economic power, can provide a viable program to deal with the widening economic gap in standards of living for the rich and the poor. It is not necessary to eliminate capitalism or institute socialism. What is required is the institution of a democratic political system which is not undermined by economic power.[11] This is true at both the global level and the national level.


* This heading includes contributions which the editorial board believes readers will find interesting, but which do not necessarily reflects the board’s views.
[1] J.W. Smith, Economic Democracy: The Political Struggle of the Twenty-First Century, The Institute on Economic Democracy, 3rd ed. expanded, 2003, p. 14.
[2] A similar discussion of this point can be found in Ronald Glossop, Confronting War: An Examination of Humanity’s Most Pressing Problem, Jefferson NC: McFarland, 4th ed., 2001, pp. 106-12.
[3] A chart showing the names used here to describe leftist-rightist views in general as well as the various economic and political ideologies described below can be found on page 111 of Glossop, Confronting War, 4th ed.
[4] For an article which succinctly describes this ongoing struggle in the United States between the power of corporations and the effort of government to check it, see Laurent Belsie, “Rise of the Corporate Nation-state”, in The Christian Science Monitor, April 10, 2000, pp. 1, 4-5. I responded to this article with a letter arguing that democratic government at the global level is needed to restrain corporations at the global level. It was published under the heading “Global companies need global regulation” on page 8 of The Christian Science Monitor for April 18, 2000.
[5] This paragraph and the succeeding one are basically excerpted from Glossop, Confronting War, cit., pp. 114-15.
[6] Lanham MD: University Press of America. In his later book (Common Progress: The Case for a World Economic Equalization Program, Westport CT and London: Praeger, 2000) Yunker reached essentially the same conclusions as he applied his proposed program to 140 individual nations to show how his proposal would produce greater economic equality among the countries of the world without greatly harming any of them.
[7] James A. Yunker, World Union on the Horizon, pp. 182 and 193.
[8] Ibid., p. 198.
[9] Ibid., p. 183.
[10] Ibid., p. 186.
[11] For a statement of this view which focuses on the issue of centralization-vs.-decentralization of the global economy see David Ray Griffin, “Global Government: Objections Considered” in Errol E. Hams and James A. Yunker (eds.), Toward Genuine Global Governance: Critical Reactions to “Our Global Neighborhood”, pp. 59-60.

 

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