Democracy and Capitalism

By Volodymyr Kish

When the Soviet Union fell apart almost two decades ago, many people viewed it as an ideological victory of capitalism and democracy over communism.  The assumption at that time was that somehow capitalism and democracy were inextricably intertwined and naturally went together. 

Now, several decades later, many people are more than a little confused.  As an economic paradigm, capitalism, or at least some form of it, is now not only well entrenched in most of the former Soviet republics but, even in that last bastion of superpower Communism, China.  In fact, one could argue that China is probably one of the most successful “capitalist” countries currently on the world economic stage.  Yet, in most of these countries, democracy is still very problematic, if not absent altogether.  The uncomfortable conclusion to be drawn from this is that capitalism does not necessarily lead to democracy.

The confusion comes from the mistaken premise that capitalism is the opposite of communism.  One should realize that in simple terms we are comparing apples to oranges.  Capitalism is an economic system that is strictly concerned with managing the creation and distribution of wealth.  Of course, this has some impact in the political and social arenas, but those are not its essential focus. Communism, on the other hand, is a more inclusive political ideology that aims to not only govern, but to control the social, cultural, moral and economic behaviours of a given society.  Like capitalism, it too seeks to manage the creation and distribution of wealth, but that is but one component of a broader framework that seeks to create a utopian society.  As history has proven many times, we will only have a utopian society when we have utopian individuals.

We need to understand that capitalism is essentially a Darwinistic mechanism that if left unchecked, inevitably leads to a concentration of wealth and power in the hands of an ever fewer and more powerful elite.  It does not have an underlying moral, ideological base – it is a machine, albeit a very efficient one, of creating goods and wealth, driven by the pragmatic rules of supply and demand.  It can exist under a wide variety of political systems.  In fact, as history has shown, capitalism has evolved and thrived over the centuries, and indeed millennia, under tyrannies, dictators, feudal systems, monarchies, empires, and yes, even democracies.  It was unbridled capitalism that fuelled the huge empires of the Fifteenth through the Twentieth Centuries.  Capitalism did very well under the feudal city states of Italy, the globe conquering British Empire, and more recently the rapacious Nazi state.  None of these were paragons of democracy.

The oligarchs of Ukraine love capitalism – it has made them incredibly wealthy and in the process, has enabled them to essentially control the political structures running the country.  Russia too, has embraced capitalism, though their version is managed by a sophisticated police state.  As for China, it has created an interesting variation of capitalism that seems to co-exist quite comfortably within a totalitarian political system.

The challenge with capitalism is that like all economic and political systems we have created, it requires effective controls and balances.  There is no doubt that capitalism is the most efficient economic system Mankind has developed, but if left unchecked, it can lead to serious unwanted consequences.  The recession of the past twelve months is a good example of what happens when you give two of capitalism’s primary driving forces, namely greed and deregulation, free reign. 

No political and economic system should be given a licence to operate without taking into account the overall health and well-being of the societies within which they operate.  There has to be a moral and ethical dimension to all political and economic systems.  That dimension is provided through the agency of democracy which ensures the effective distribution of political power and prevents the concentration of the same in the hands of either an ideological or mercenary elite.

One can only have a strong and successful society when there is an effective balance of power amongst capital, the government and the individual, and this can only come about when there is true democracy at work that produces the appropriate compromises that provide for the optimum degree of stability, freedom to realize economic opportunity, and justice that protects the individual from being abused by either political or economic forces.  We should all realize that despite the propaganda that emanates from the far right political fringe, pure capitalism is no more desirable or feasible than pure communism.

The goal of politics should not be to create a “pure” anything, but rather to find  “golden mean” - a balance of forces and interests that provides the greatest good for the greatest number.