Can Democracy and Capitalism Coexist?



By Jim Sullivan

Given the recent very large increase in income inequality in the United States, some are asking if democracy and capitalism can coexist peacefully and productively in America.

To begin to answer this question, we must note that not just any old democracy is compatible with capitalism. As examples I cite Athenian (direct) Democracy. The U.S. is far too large and complex to function as a direct democracy. Also, for capitalism to be compatible with democracy, the latter must be functional. Two modern democracies that are today widely considered to be dysfunctional are the United States and India.

Digging deeper, a society must be productive enough to at least feed and clothe its citizens. When the economic elements of land, labor, capital and entrepeneurship are in sensible balance, prosperity for the majority results. But there is a political element to this balance as well. American democracy can be quite compatible with capitalism, depending in large part on who holds the reigns of political power, for example, liberals like FDR or Bill Clinton; conservatives like former Presidents George W. Bush or Ronald Reagan; or possibly libertarians like governor Sam Brownback of Kansas or U.S. Senator Mike Lee of Utah.

Social stability is also of key importance in any country, democratic or otherwise. As Aristotle pointed out not so long ago, an important key to a stable society is a large middle class. Up until recent years we had a very large and increasing middle class in America, especially compared to some developing or totalitarian countries. But as is well documented, there is growing income inequality in America which could, if it gets much worse, lead to social instability. Think of the primary cause of the Russian Revolution.

As part of social stability, capitalism must be properly regulated because corporations can be very powerful in comparison to the rest of society and, as we well know, business has it’s fair share of crooks who cheat consumers, labor and the government. Examples are too numerous to cite here, but when we get someone like Donald Trump in office, combined with a conservative-controlled Senate, House and Supreme Court, all four wed to the idea of the free market with minimum government regulation, and all four of which try to reduce sensible business regulation, then workers, consumers, investors, the government and the environment suffer.

I am retired, but when I was working I made a good living for which I am grateful to our great country and its people. That said, I can barely live with the system of democracy and capitalism we currently dwell in–our system needs both minor and major improvements. Two that come to mind are a parliamentary system (as opposed to our dysfunctional Congress), along with a “Vote of No Confidence” by which a prime minister and his or her cabinet can be removed from office when a majority of Parliament disapproves of his or her actions.

So can capitalism and democracy coexist peacefully and productively in America? The answer is that our current combination of capitalism and democracy is very much a work-in-progress with great improvements needed in both the economic and political spheres.

Jim Sullivan is a Citizen Journalist and retired  businessman with graduate degrees in political science and business.  He lives in Ventura with his wife Juliette and two family cats.

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