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Capitalism and Democracy

by rdf
Fri Dec 7th, 2007 at 05:52:33 AM EST

There is a trend for people in the west to use the terms capitalism and democracy interchangeably. Lately the confusion has been extended to phrases involving the word "market". The most common of these are "free market" and "market based".

Some clear definitions may help remove confusion and also redirect policy discussion to more useful ends. Like all such discussions those who favor one sort of political or economic system will try to bring their beliefs into the conversation through the door of semantics. This is a diversion.

Diary rescue by Migeru

My definitions (with some help from the dictionary):

Political Organization

Democracy - Government by the people

Socialism - Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.

Communism - A system of government in which the state plans and controls the economy and a single, often authoritarian party holds power...

Authoritarianism - a form of government in which the ruler is an absolute dictator...

Economic Organization

Capitalism - an economic system based on private ownership of capital

Free Market - an economic system in which prices and wages are determined by unrestricted competition between businesses...

Socialism - an economic system based on state ownership of capital

Communism - a form of socialism that abolishes private ownership

We see that several of the terms are used in both a social and economic sense. This leads to confusion. I prefer to sort things differently. There are two dimensions. Let's see how this works in the above cases.

Democracy is a system of government where the people chose their leaders. There is no economic component. The opposite is authoritarianism where there are no such choices. This is also called dictatorship, totalitarianism or similar terms.

When socialism and communism are used as types of government they are meant to imply that they are forms of authoritarianism. This usage arose when there were strong forces pushing for a reform of capitalism. The capitalists found it advantageous to conflate state ownership of the means of production with authoritarianism. The example of the USSR which called it self "socialist" gave weight to this association. Continued use of these terms in this way is meant to sow confusion.

There are only two types of government, those where the people get to chose their leaders and those where they don't. We are speaking of the definitions here, not how well actual societies adhere to the principles. One can have an imperfect democracy.

In terms of economics there are two aspects and the definitions above only cover one of them. The aspect covered is how money to finance the operation is obtained. In capitalism private individuals or other firms put up the money to run the enterprise. This is the capital. In exchange for contributing the money these people are given a share of the business. They become part owners. In return they expect to see their capital grow in value so that they make a profit on their investment.

In socialism and communism the state owns the enterprise and provides the capital. The state may not expect to make a profit, or it may organize the enterprise as a pseudo-capitalist enterprise and expect it to return earnings to the state. This was the standard approach in the USSR and is the case currently in many of the oil states where the oil sector is owned by a state run enterprise.

What these forms of economic organization have in common is the way they raise capital and how they deal with the money that they generate from their enterprise. This has to be contrasted with the issue of governance.

Governance is how an enterprise is managed. In the west public firms are supposed to be run as representative democracies. That is the shareholders vote for the board of directors who then set policy and hire the top executive officers. The board is the representative of the stockholders.

In the socialist or communist type of economic system the government picks those who will run the enterprises. Sometimes this is modified by having worker's councils who are allowed to participate in the governance of the firm, but they seldom have real authority.

Could there be a system where the state owns the means of production, but the governance is handled democratically? There are such cases. A good example are the various quasi-independent, special purpose, entities such as the TVA or the various transportation agencies that run mass transit or roads. The directors of these enterprises are appointed by the government, and if the government is democratically elected, then, in principle, these boards are representatives of the people.

Such quasi-independent entities are set up for a variety of reasons. One of the most popular is to ensure that those who manage them are removed from short-term political considerations. This is done by making their terms of office longer than those of those appointing them. Another reason is so that the public can see where specific funds are going and not have the comingled with other activities. It is also easier to raise money from the public (in the form of loans) when the loan repayment is going to depend upon a well-defined revenue stream, such as from a toll road.

So the two dimensions are: how capital is raised and whether those providing it expect a profit on their investment, and how the enterprise in governed. We see that democratic societies have some socialist enterprises which are run by representatives of the people. China now is an example of an authoritarian, "communist", regime which permits private enterprises to sell shares to the public to raise capital. It is not clear how the governance of these enterprises works. It would appear that the central government still sets limits on what these firms can do, and that shareholders have no real say.

To summarize: public governance vs authoritarian control and public ownership of enterprises vs state ownership. These are the divisions that should be used if confusion is to be kept to a minimum.

Part of the problem with these idealized definitions is that they don't correspond to modern conditions in many cases. I've already mentioned China as a case where there are private firms in an authoritarian regime.

In the west we have been seeing a break down in governance. Most public firms raise capital by selling shares to the public, but because of the rules on how governance works in practice the shareholders have no control over their own companies. The chances of a group of shareholders replacing the board of directors is so slim that when such a challenge is made it is a major news item. Effectively we have public ownership, but authoritarian governance in a capitalist system. Some claim that many democracies are also highly imperfect. They hold elections, but the choice of candidates is restricted by various institutional forces so that only a narrow range of interests are represented. In the US, for example, the wealthy and professional classes make up the vast majority of those holding higher office. Those representing the vast majority of the people have little chance of getting elected - the cost of running for office makes this almost impossible.

Finally we need to address the concept of the "free market". This is neither a form of governance nor a way to raise capital. It is a process. There is a theory that competition leads to optimum results and that such competition takes place in a market. There are many examples where this has proven to be the case. Competition frequently leads to improved products as one firm tries to get a jump on the competition. It says nothing about how these firms raise their capital nor how they are individually managed. The government, for example, puts out requests for proposals for research projects. Those who "compete" for the funding are universities or other non-profit research facilities. These are privately funded, or quasi-state entities and are managed by non-democratic boards or representatives in the case of state owned universities.

The competition takes place in the market, the enterprises are not part of the capitalist system. There have even been cases where rival non-profit organizations compete with each other or with for profit entities. Sometimes it is felt that having several enterprises working on the same task will lead to better results more quickly. Once again this a process not a type of organization.

I cheated before in the definition of free market here's the complete entry:

Free Market - an economic system in which prices and wages are determined by unrestricted competition between businesses, without government regulation or fear of monopolies.

Notice that this definition includes some political ideology along with the process (the part in italics). There can be no such thing as a totally free market without some rules. At a minimum there need to be rules against doing violence against the other party and just taking what you wish. There also need to be rules which govern contracts. These rules must be enforce by the "government". This doesn't have to be a centralized government, in a tribe it could be the elders or some other local system. This is still the "government".

As I said at the beginning one must be wary of ideology masquerading as semantics.

The alternative to "free market" is central planning. Who owns the means of production is irrelevant as I've illustrated. Central planning has a bad reputation in the capitalist countries because of the failures in the USSR. But the USSR was able to put a satellite into orbit before the US and was able to develop the atomic and hydrogen bombs just as did the US. Notice that in both these cases the US, itself, resorted to central planning and quasi-governmental organizations to get the task done. Apparently free enterprise has its limits. The problem with central planning is not that it is centralized, but that the institutional forces limit innovation. This is because it is undemocratic, not because it is centralized. Monopolies are a form of central planning and they limit innovation just as much as do any other institutions which don't have to worry about others eating their lunch.

The "free market" can also suffer from waste. While we wait for the market to decide whether to adopt one format of video media or another vast sums of money are being spent on what will become the loser. Those who pick the wrong choice will see their investment become worthless, as will the firms who ramped up to produce the product. Was the market truly optimal when all these costs (including the impact on the environment) are taken into account? Would having centralized planning (this does not have to be governmental, it could be a private standards group) eliminate the competition actually be better? It worked for the width of railroad tracks and the basic internet protocols.

If democracy is the best form of governance for societies why isn't it also appropriate for the management of non-governmental organizations?

We ended up with three, not two, dimensions: ownership, governance and process. In the real world we find examples of all combinations. We also find successful examples and failures. This implies that the failures are not due to the way things are organized, but to what end they are being run. A system run for the benefit of the few will seldom be as beneficial for the many. A system run using authoritarian governance is likely to be resistant to innovation or change. A system with limited constraints on trading behavior is likely to lead to market distortions. All these failures can be minimized if the general public can see that its interests are being represented.

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Capitalism and Democracy | 36 comments (36 topical, 0 editorial, 0 hidden)

Re: Capitalism and Democracy (4.00 / 2)

Gah. Why do you have to write this on a Friday afternoon, when I cannot respond properly?! ;-)

I agree with your sentiment about Democracy and Capitalism. But I think your argument gets a bit convoluted from that point on ... To my mind, and I have degrees in neither economics or political science, it appears that, contrary to the 20th Century's famous false dichotomies (Democracy or Communism)(Capitalism or Socialism), most systems of governance are 1) some combination of varying degrees of these ideologies 2) in constant flux or evolution and 3) therefore pretty unique to themselves (though some clearly have more in common with each other.) I see no possible absolutes, neither in philosophy nor in practice. Only an endless supply of recipes for something between utopia and disaster.

So I disagree with your choice of alternatives. It doesn't seem to be about alternatives, but rather balance.

And therefore...

It is not the labels which are important, because they practically lack any purpose but their old connotations at this point.

Here's my opus on the matter...

"This is nothing compared to how Putin rigged Eurovision."

by poemless on Fri Nov 30th, 2007 at 04:07:41 PM EST

Re: Capitalism and Democracy (none / 0)

My only quarrel with your essay is your use of wikipedia as the source of your definitions. I see all of them as been ideologically inflected (although perhaps that's your point).

That's why I made my warning about semantics. I think you should repost it here, it makes a nice contrast to mine and perhaps we can get two sorts of comments from the same people.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Nov 30th, 2007 at 04:19:36 PM EST
[ Parent ]

Re: Capitalism and Democracy (none / 0)

I see all of them as been ideologically inflected

That was my point...

"This is nothing compared to how Putin rigged Eurovision."

by poemless on Fri Nov 30th, 2007 at 04:23:39 PM EST
[ Parent ]

Re: Capitalism and Democracy (4.00 / 2)

To summarize: public governance vs authoritarian control and public ownership of enterprises vs state ownership. These are the divisions that should be used if confusion is to be kept to a minimum.

You have quite a few implicit assumptions typically either/or, as above, when I think there is in fact a "both/and" solution now emerging.

The model developed by Peter Barnes in his Capitalism 3.0 posits a "middle way" based upon "trusteeship". It lacks only a workable legal foundation, because conventional judge-made "Equity" Trust law just won't cut it.

Don't forget that Communism is (per wikipedia)

an ideology that promotes the establishment of a classless, stateless social organization based on common ownership of the means of production.

I would argue it's never been tried: what we got was State capitalism.

You assume that Money and Property are objects, not relationships; you assume Corporations, since the very distinction of Private from Public is that "Private" = "owned by a Corporation"; you also assume a State distinct from its subject citizens; "profit"; "labour" and all the rest.

None of these are in fact necessary IMHO. Corporations are obsolescent; the means of production may be held in trust, and the usufruct shared equitably in partnerships between "Capital" and "Labour".

Within such partnerships there is no "profit" and "loss", merely mutual creation of value (aka "money's worth"), in all its forms, none of them a "money" object, but all of them valuable in exchange, by reference to a monetary "Value Unit".

Moreover, it is possible to imagine a State as a framework within which individuals participate, and consensually agree who does what; who is prepared to lead, and who to be led.

The future that I see holds neither States nor "Organisations", but rather networked consensual framework agreements within which individuals "self organise".

by ChrisCook (cojockathotmaildotcom) on Fri Nov 30th, 2007 at 05:33:41 PM EST

Re: Capitalism and Democracy (none / 0)

Don't forget that Communism is (per wikipedia)

an ideology that promotes the establishment of a classless, stateless social organization based on common ownership of the means of production.
I would argue it's never been tried: what we got was State capitalism.

I'd say that the ideology has indeed been tried, and what it created (necessarily, if it was to create anything but talk?) was state capitalism. Here, of course, rdf's distinction between capitalism and markets is a crucial to the way the terms are being used.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Fri Dec 7th, 2007 at 03:20:23 PM EST
[ Parent ]

Re: Capitalism and Democracy (none / 1)

I don't see any logical contradiction for private ownership and enterprise to coexist with public ownership and service. What's really wrong with government participating as a (sort of) peculiar free market player? Government participation in otherwise free market could be an elegant enhancement (from a social perspective) of the free market economy.

For example, government participation would certainly influence the job market - entrepreneurs might not like that, but if the society acknowledges that there is power disbalance in employment negotiations in emphatically "free" markets, with unfair disadvantage for workers, why not have a market player (government) which would not be primarily interested in making labour force cheapest possible? Private companies would have to compete with government for qualified (and even unqualified) labour, and perhaps cumbersome regulations of employment could be greatly simplified.

The modern practice of contracting private companies for every public errand adds a bureaucratic layer, is often wasteful and corrupt, and benefits just a small group of owners and managers of the contracted company - how is that better than letting government manage basic services and jobs itself?

Government companies would set standards of key services. Private companies would always do better?? Great!! Let them have their better ideas and implementations, compete with themselves and the dumb government. But services should be kept not only for those who could spend most, but for everyone.

Would competition in market sectors with government participation be unfair (to enterpreneurs), compared with the competition with no government participation whatsoever? Well, is competition with Wall Mart fairer?! Government companies might deliberatively leave niches for competitors - destructive monopoly is not their aim. Markets change so fast and radically (LPs replaced by tapes replaced by CDs then DVDs, etc), that it is hard to tell what is fair.

Certain inertness of the government might cost a little, probably impede front innovators somewhat, but its relaxing social influence could be valueable. Does a society has to run headlong together with every trendy innovation, regardless social and economic risks?

How to define what services are up to government? Well, there has to be no Bible what the government has to or does not have to do. As times change, social preferences and imperatives may change. Some services might be discarded or privatized, some new engagements could be started. If monopolies must be controlled in ways that bring them very close to state ownership anyway, why not have straight state ownership, or state competition?

As for decision mechanisms, they are not set in stone either, though democratic principles and public influence could be a basis. My suggestion is that decision committees are formed from the public (like with trial juries), and each citizen could be employed in these committees strictly temporarily. Possibilities are ample, I think.

Here's another possible government strategy: To facilitate innovation and reward of real innovators, there would be governmental research institutions, where research (especially of socially desirable innovation, like alternative energy) are supported by government, and researchers with great results would be given a chance to start their own businesses. These researchers could also be educated in marketing and similar things, if desired. In this way, really bright innovators would run less risk of failing to introduce their innovations into the market because of zero inadequate business understanding. The investor class would be somewhat disadvantage, but do they really deserve the monopoly of knowledge how to operate in the markets? Why the society has to reward primarily those who know that one thing of running a business well, when others without that knowledge or emphatic interest have little chance to earn a million?

by das monde on Sat Dec 8th, 2007 at 08:52:06 AM EST
[ Parent ]

Re: Capitalism and Democracy (none / 0)

It's no longer just about either government or private companies.

It is possible to have both working within a common partnership-based framework.

Would competition in market sectors with government participation be unfair (to enterpreneurs), compared with the competition with no government participation whatsoever?

A slight riff on the "unfairness" thing was the situation not long ago when a very successful "not for profit" company in West London tendered for and got a local government contract and the "for profit" big boys were whinging that this represented "unfair competition".

Why? Because the winner doesn't have to pay returns to shareholders....ie the same "unfairness" that exists when governments compete....

by ChrisCook (cojockathotmaildotcom) on Sat Dec 8th, 2007 at 03:58:00 PM EST
[ Parent ]

Re: Capitalism and Democracy (4.00 / 4)

Often when I see FREEDOM on TV news, the freedom seems to be that narrow freedom of the freedom to buy things. I see more a conflation of freedom and capitalism more than democracy. (although it is also impled that without democracy there is no freedom, but not to the same extent)

Life should consist in at least fifty percent pure waste of time, and the rest doing what you please.

by ceebs (bunchofwankers (at) gmail (dot) com) on Fri Nov 30th, 2007 at 06:30:25 PM EST

Re: Capitalism and Democracy (4.00 / 3)

As a schoolboy I learned that Communism is the exploitation of man by man, whereas Capitalism is the other way round.

I don't think we've seen real democracy yet. Those who live in what they think is a democracy are mostly asleep, and those that don't are powerless.

You can't be me, I'm taken

by Sven Triloqvist on Fri Dec 7th, 2007 at 08:27:13 AM EST
[ Parent ]

Re: Capitalism and Democracy (none / 0)

LOL

¤¤¤ It is good to live in a time of great depravity, for one may earn a reputation for virtue at little cost. ~ Montaigne ¤¤¤

by Andhakari (andhakari at yahoo dot com) on Fri Dec 7th, 2007 at 05:06:42 PM EST
[ Parent ]

Re: Capitalism and Democracy (4.00 / 3)

I'm more cynical. Freedom^TM is like Democracy^TM - the word used to describe a system which benefits Wall St.

Real freedom and real democracy are inimical to Freedom^TM and Democracy^TM.

So the way these words are used is really just spin and marketing.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Dec 7th, 2007 at 08:45:19 AM EST
[ Parent ]

Authoritarianism and Totalitarism (4.00 / 4)

There is a difference between authoritarian and totalitarian regimes. A regime can be both or either one. A totalitarian regime can be based on voluntary slavery or interiorized authority as a recent thread pointed out. Orwell's 1984 is an idealized totalitarian regime while such modern "democracies" such as the city-state of Singapore seem more authoritarian.

Usually a purely authoritarian regime is short-lived if it seeks to govern by authoritative methods, a point made by Boetie.

The ideal of an authoritarian personality is to be glorified and loved. Therefore, repressive power is diffused through a pyramid structure to a capillary level thus creating the perception of the lider as benevolent or good. He is not directly associated with repression. That's left to the minions. When governance is personalized in this manner, control becomes near total and for the most part voluntary.

Modern democracies do have totalitarian aspects to them. Take for example canned laughter or televised applause as means of fabricating false consent, above all misappropriating "consensus" from the absent spectator.

As for the "free market" it can easily generate totalitarian situations or impositions such as trusts and cartels. A classic example is the monopoly of television in Italy and its totally deleterious effect on public opinion, not so much in that it persuades people but much worse: it regulates what people are supposed to think about.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Fri Dec 7th, 2007 at 08:55:34 AM EST

Re: Authoritarianism and Totalitarism (none / 1)

I tend to associate "Totalitarian" to state control of every aspect of life and the imposition of a single ideology which (given universal control) then pervades everything.

I think today North Korea may be the only totalitarian state left, unless one wants to argue that Saudi Arabia is a totalitarian Theocracy.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Fri Dec 7th, 2007 at 09:11:02 AM EST
[ Parent ]

Re: Authoritarianism and Totalitarism (4.00 / 4)

I think that's a slippery definition. In practice it's not so much the unique ideology, as the fact that it's enforced by overt violence.

The West is highly totalitarian, but it uses mass media control to enforce its message, so it can pretend to be liberated.

This works well as long as no one starts asking hard questions. ('Why am I doing this job anyway? Why are public systems being starved of cash and breaking down?') But aggressive dissenters are still intimidated, harassed and jailed as soon as they start making a difference. (qv Genoa) Although to be fair activists have been good at marginalising themselves, believing that a bit of shouting, throwing and agit-prop is going to make a difference.

Less aggressive 'debate' is fine because it's easy enough to ignore.

Meanwhile the scale of media saturation is staggering. Not only are most people exposed to constant advertising from radio and TV - how totalitarian is a system which delivers hours of media reinforcement every day? - but dogma is repeated regularly in most of the news outlets.

You can see how locked down the system is when reality (e.g. climate change) creates conditions that require policy change. Instead of responding with flexibility, the dogma responds by repeating the same old messages more loudly, so it maintain exclusiveness and privilege.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Dec 7th, 2007 at 09:38:07 AM EST
[ Parent ]

Re: Authoritarianism and Totalitarism (none / 0)

I agree with Migeru, and by that definition, the West is far from totalitarian, while North Korea is indeed the only high-quality specimen left. "Totalitarian" is on its way to being an historical label and a latent threat, rather than a description of a present reality.

The reality you describe in the West is a dangerous pathology, but it needs a different name. I can't think of a good one at the moment, and that indicates a problem for rational discourse on the subject (or that I have a momentary memory hole -- oops, that term is taken...).

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Fri Dec 7th, 2007 at 03:26:42 PM EST
[ Parent ]

Re: Authoritarianism and Totalitarism (none / 1)

Propaganda regime? Manufactured-consent regime?

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Fri Dec 7th, 2007 at 03:45:05 PM EST
[ Parent ]

Re: Authoritarianism and Totalitarism (4.00 / 2)

Before seeking neologisms it would be better to first define totalitarianism. Hannah Arendt who meditated at length on the matter paraphrased it as the absolutist attempt to realize an Ideal to the point that everything that happens, occurs according to the internalized logic of that Ideal. Ultimately totalitarianism seeks to create a New Humanity, the superman- and consequently reduces whatever doesn't fit into the design into naked, raw life. Humans stripped of identity and rights and confined to spaces without Justice.

Contemporary totalitarianism rejects the Ideal and substitutes it with the Object, the gimmick, the Show, yet its object is identical, complete biological control, preferably through a consensus of the majority. And if events are presently attenuated before the horrors of Stalinism and Nazism, it is wrong to make a simplified caricature of this, our past. The horrors of Nazism and Fascism enjoyed popular consensus, just as torture and Guantanamos do today. Extraordinary rendition will tomorrow be ordinary. Dissent will be dealt with in day-care centers. The show must go on.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Fri Dec 7th, 2007 at 05:18:17 PM EST
[ Parent ]

Re: Authoritarianism and Totalitarism (none / 0)

How 'bout the Vatican?

Kim junior may not use the same tailor (Liberace's?)as the pope but he's into platform shoes and kidnapping South Korean stars.

When he was born all the trees blossomed and birds stopped their migration and sang a triumph- all in the dead of winter. Imagine what the snow looked like with all those dropings.

Talk about consensus building. Throw in Herod and an all star cast.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Fri Dec 7th, 2007 at 04:39:27 PM EST
[ Parent ]

Re: Capitalism and Democracy (4.00 / 4)

One of the biggest human blind spots seems to be a tendency to accept labels for reality, and then spend time debating the labels as if they were real.

So when someone says 'I'm a communist' or 'I'm a socialist' or 'I'm a capitalist' our first instinct is to accept their frame and continue the debate along familiar lines.

It's probably impossible to get any useful insights without ignoring labels and looking at practical social dynamics. So - democracy has nothing to do with being able to vote. And state planning has nothing to do with socialism or capitalism. I think more useful questions are:

Who benefits from social policy - a small caste, or a wider citizenship?
How open is government? Can anyone participate, or is policy-making limited to a select group while external input is ignored or marginalised?
How much influence does open public debate have on policy? Is debate bottom-up or top-down?
How much diversity of opinion is available in government?
How flexible are policy positions? Is policy defined by dogma or by open-minded discussion?
How fluid are caste structures? Can people move between castes easily, or is socially mobility relatively static?
How flexible are local and regional politics, or are they set top-down nationally?
How much force is applied to non-participants and dissenters?

If you start from Cui bono, you can then define a democracy as a political system with a high score for openness and flexibility and a low score for exclusivity and dogma.

Political mechanisms like voting, and economic mechanisms like markets, are pretty much an irrelevance. You can have both, or neither, and still be open and flexible or exclusive and dogmatic.

So I think the two axes that define real democracy are openness vs exclusivity (class peace vs class war) and flexibility vs dogma (reality-based vs fundamentalist.)

Paradoxically a benign dictatorship could be very democratic if it has a leader who listens to popular wishes rather than trying to impose them, and isn't interested in personal aggrandisement.

It could easily be more democratic than any of our so-called Western democracies, where voting is entertaining as public theatre but real influence is reserved for lobbyists and special interest groups.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Dec 7th, 2007 at 09:21:48 AM EST

Re: Capitalism and Democracy (none / 1)

Yes, and yes. The dominance of labels, however, makes it important to find good labels for what ones preferred answers to those questions.

Reading your questions, what came to mind as a relatively short label for the preferred answers is "an open, flexible society", and I see that you highlight these words below. Even shorter would be "an open society". Like any short label, however, these must be given meaning by a context of discussion, and are subject to the threat of being taken and twisted.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Fri Dec 7th, 2007 at 03:33:11 PM EST
[ Parent ]

Re: Capitalism and Democracy (4.00 / 2)

Since I wrote this I've started reading a text book on comparative economics. I didn't even realize there was such a discipline and now I discover that I'm an amateur comparative economist myself!

The problem with essays such as mine is that people get caught up in semantics. It would be nice if we could select a set of neutral labels to describe things, but all of them have connotations attached to them. I'm used to mathematics where one states the axioms and then derives things from that. In this case I tried to use working definitions as the axioms, but many people who reads my essays that use this technique won't accept that framework.

So, a new approach.

There are two forms of social organization: A and B.
In A the people get to select their leaders directly or through representatives. In B they don't.

The thing that gets all the attention these days is when the de jure structure of a society is of type A but the de facto is of type B. Sometimes the society has aspects of both at the same time. We can call this an imperfect type A.

The criteria that separates an imperfect type A from a fake type A have to do with what is needed to get back to a real type A. If it requires a revolution than it was a type B. If it can be accomplished peacefully by means of a change of government than it was an imperfect type A.

I would say that Russia is skirting very close to being a type B masquerading as a fake type A.
I would say that the US is an imperfect type A, but one that is at risk of losing the ability to fix itself as the influence of big business and the military continues to grow.

An interesting topic would be how is a seriously damaged type A to be restructured without resorting to violence and, even more difficult, how does one oppose a type B?

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Dec 7th, 2007 at 09:33:42 AM EST

Re: Capitalism and Democracy (none / 1)

Historically, democracy has emerged in the US in reaction to the development of capitalism. This was demonstrated most powerfully in the 1820s and 1830s, when the Democratic Party emerged, led by Andrew Jackson, with the explicit purpose of enlarging voting rights for adult white men so that they could beat back the institutions and tools of the market revolution - destroy the Bank of the United States, rein in the courts, write off debts, etc.

The pattern has regularly repeated itself ever since, from the 1900s Progressive Era to the depression and New Deal of the 1930s.

And the world will live as one

by Montereyan (robert at calitics dot com) on Fri Dec 7th, 2007 at 03:11:55 PM EST

Re: Capitalism and Democracy (none / 0)

I am not sure that the American example can be simplified into Jacksonians fighting the Bank of the United States. The forces which substituted democracy for Federalist elitism existed before Jackson and continued to develop after him.

My guess is that the original impulse towards egalitarianism and manhood suffrage (for white men) in America, was more to do with the lack of traditional European wealth and status hierarchies in newly settled frontier districts, leading to the breakdown of deference and acceptance of the rule of the "better sort" of people. Attitudes like hostility to "aristocratic" institutions such as banks were thus consequences, rather than causes of the development of American democracy.

by Gary J on Sat Dec 8th, 2007 at 04:15:30 AM EST
[ Parent ]

Re: Capitalism and Democracy (4.00 / 2)

Interestingly, NBBooks has said

Carey was the greatest U.S. economist of the 19th century; I generally find that I can take any recent book on economics and judge its worth by looking in the index to see how many mentions of Henry Carey there are. If there are none, or perhaps just a short note, the book has always, ALWAYS, turned out to be some apologia for monetarism or some other dementia.
British economic thinking, Carey wrote,
is unsound and unnatural, and second, a theory invented for the purpose of accounting for the poverty and wretchedness which are its necessary results. The miseries of Ireland are charged to over-population, although millions of acres of the richest soils of the kingdom are waiting drainage to take their place among the most productive in the world, and although the Irish are compelled to waste more labour than would pay, many times over, for all the cloth and iron they consume. The wretchedness of Scotland is charged to over-population when a large portion of the land is so tied up by entails as to forbid improvement, and almost forbid cultivation. The difficulty of obtaining food in England is ascribed to over-population, when throughout the kingdom a large portion of the land is occupied as pleasure grounds, by men whose fortunes are due to the system which has ruined Ireland and India. Over-population is the ready excuse for all the evils of a vicious system, and so will it continue to be until that system shall see its end... (pp. 64-65)
In conflict with the British system, Carey was a proponent of what was known until about the 1920s, as the American System of political economy. There is an excellent write up of it on Wikipedia.

I don't know whether NBBooks is referring to the American System

The American System was an economic plan based on the "American School" ideas of Alexander Hamilton, expanded upon later by Friedrich List, consisting of a high tariff to support internal improvements such as road-building, and a national bank to encourage productive enterprise and form a national currency. This program was intended to allow the United States to grow and prosper, by providing a defense against the dumping of cheap foreign products, mainly at the time from the British Empire.

associated with the Whigs or the American School

The American School, also known as "National System", represents three different yet related things in politics, policy and philosophy. It was the American policy for many decades, waxing and waning in actual degrees and details of implementation.^[1] Historian Michael Lind describes it as a coherent applied economic philosophy with logical and conceptual relationships with other economic ideas.^[2]
It is the macroeconomic philosophy that dominated United States national policies from the time of the American Civil War until the mid-twentieth century^[1]^[3]^[4]^[5]^[6]^[7]^[8] (after mercantilism and prior to Keynesian economics, it can be seen as a modified type of classical economics).

which apparently was associated with the Republican party.

On the other hand, Montereyan here is extolling the Jacksonians who were opposed to both the Whigs and the Republicans. I really would like to see a debate on this.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sat Dec 8th, 2007 at 06:14:05 AM EST
[ Parent ]

Re: Capitalism and Democracy (4.00 / 2)

Controlling the definition of terms has long been fundamental in making an argument or writing history to one's advantage. The stories of Jacob and David in the Bible are fine examples of early spin doctoring and the slandering of various characters is a powerful tactic: ...and Esau was a hairy man, hated by God before he was even born...
It's just name-calling and the invocation of authority, etc. Nothing new here.
I read an interview with some recent repub escapie (name-calling in use here) wherein he likened (in his words) conservative bloggers who regurgitated US administration talking points as 'influential', and all others as being something else. Redefining 'influential' as being synonymous with 'conservative regurgitation'. That's a new one for me. LOL
We don't need to redefine these terms. We just need to be well enough educated to know when we're being manipulated and lied to. And I hope we can be ethical enough to distance ourselves from the liars and whores even when they're on our side, whatever side that is.

¤¤¤ It is good to live in a time of great depravity, for one may earn a reputation for virtue at little cost. ~ Montaigne ¤¤¤

by Andhakari (andhakari at yahoo dot com) on Fri Dec 7th, 2007 at 04:59:24 PM EST

Re: Capitalism and Democracy (4.00 / 7)

Democracy is the system of political decision making guaranteed to deliver the least amount of satisfaction (and perhaps the most ambivalence) to any (most) of the participants.

Condorcet pointed out that the first problem with voting and elections is determining how to sort out how a group establishes its preferences when several options are on offer. Modern democratic thinking almost invariably boils issues and candidates down to two options one of which must receive >50% of the votes. Given a choice between apples and bananas there are four possible positions voters can take.

A. Pro-Apples
B. Anti-Bananas
C. Anti-Apples
D. Pro-Bananas

Assume preferences are split 25% for each position. If apples are elected only 25% will enthusiastically support the outcome. And so with bananas. Depending on depth of feeling the vast majority will be either marginally ambivalent or hostile to the results of the entire process.

And this is a good thing.

Markets (AFAIK) also have their abstract structures. Some markets by their nature will tend to having only 1 buyer (military uniforms perhaps); some will tend to have only 1 supplier (electricity, water, police protection); some will be open to an almost infinite number of buyers and sellers (cabbages, fish, and toothpicks). The structure of each market depends upon barriers to entry. These can be either natural or political.

Natural barriers arise when a good or service cannot be easily or conveniently duplicated. To put in competing sewage systems is physically impractical. Blanket standards, as in rail gauges, rail lines or computer operating systems, lead to oligopoly and monopoly. Few can afford or find the space next to the garden shed for a nuclear reactor.

Political barriers often arise due to licensing of agents (doctors, lawyers), or by making certain goods and services illegal (marijuana, prostitution) or by limiting ownership (tasers and prescription drugs). I understand that some municipalities limit taxi licenses keeping the supply of cabs low thus guaranteeing cab drivers higher fares without engaging in direct price fixing.

Many pro-free-market policy makers contort themselves like yoga masters to try and set their markets free!

However, since the beginning of recorded history, from encouraging the construction of harbors, bridges and piers, to granting guilds protection, to minting currency, to chartering joint stock companies to settle colonies across the ocean, to providing bread in times of famine, governments have had a role to play in structuring markets.

This brings one back to the core abstraction of modern political-economy:

A. pro-free markets
B. anti-free markets
C. anti-vassal markets
D. pro-vassal markets

Few shall be satisfied.

L'inteligence sans volonté n'aboutit à rien, n'est-ce pas?... Mais, la volonté sans intelligence?... Catastrophe!... Celine

by kagaka (kagaka [zav] yahoo [tecka] com) on Fri Dec 7th, 2007 at 06:46:30 PM EST

Re: Capitalism and Democracy (4.00 / 2)

Brilliant! Post it as a diary.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Fri Dec 7th, 2007 at 07:12:53 PM EST
[ Parent ]

Re: Oligarchy and Democracy (4.00 / 3)

The definitions used in this diary are not the only possible ones. One alternative scheme of classification may be the ancient Greek definitions of positive and negative forms of government.

Rule of the one - good Monarchy - bad Tyranny.

Rule of the few - good Aristocracy - bad Oligarchy.

Rule of the many - good Democracy - bad rule by the mob (Anarchy, Demarchy?), perhaps the tyranny of the majority.

Using this conceptual framework, the pre-democratic British elite considered that their countries constitution blended the three types of good rule in a uniquely successful model of government. Thus to make law the concurrence of the Monarch (the one), the aristocracy in the House of Lords (the few) and the representatives of the people in the House of Commons (the many) was required.

From this viewpoint the development of democracy, by making the House of Commons overwhelmingly dominant over the other two elements, unbalanced and destroyed the traditional constitution.

There were critics of eighteenth century British smugness about the excellence of their government. The representative nature of the House of Commons (where an uninhabited grassy hillside might have two members of Parliament and a great centre of industry and population could be unrepresented) was sometimes doubted by those who could not aspire to own a rotten borough or three. There was also a French comment along the lines that the English think they are free, but this is only so when there is an election.

This leads on to the question whether a category error was being made in regarding representatives of an electorate as being equivalent to the electorate. More broadly is representative democracy (even under circumstances of universal adult suffrage) a democratic or oligarchic form of government?

The Athenian democracy took the view that elected bodies were oligarchic, so that where the whole body of citizens could not take a decision it was better to select a part of the citizenry by lot (a process known as sortition) than to elect representatives. A random sample of the citizens was more democratic than the elected representatives of the citizens.

There has been some use of sortition in Canada recently, to construct representative bodies to consider electoral reform which would not be affected by the partisan vested interests in the way an elected assembly would have been.

Gordon Brown, in the UK, has made some noises about citizen juries helping form policy. However it seems this is just a term for a focus group, with a properly pre-biased unrepresentative sample to ensure the jury agrees with Gordon Brown.

It may be that we are approaching a crisis of democracy, brought about by oligarchies of professional politicians getting in the way of democracy (perhaps this should be the definition of the democratic deficit in the European Union). It would be interesting if a democracy abolished elections and replaced them with sortition. Would such a polity be a better or worse democracy than the ones we have today?

by Gary J on Sat Dec 8th, 2007 at 04:56:51 AM EST

Re: Oligarchy and Democracy (none / 1)

Wikipedia: Sortition

Almost all Greek writers who mention democracy (including Aristotle^[1], Plato and Herodotus) both emphasise the role of selection by lot or state outright that being allotted is more democratic than elections. For example Aristotle says:
"it is thought to be democratic for the offices to be assigned by lot, for them to be elected is oligarchic,"^[6]
We see the same idea in the 18th century after the re-emergence of democracy in the writings of Charles de Secondat, baron de Montesquieu:
"The suffrage by lot is natural to democracy, as that by choice is to aristocracy"^[7]

The citizen juries have been proposed also be Ségolène Royal. It might become the preferred oligarchic non-solution to the democratic deficit/crisis of democracy.

I was once talking with friends about the political compass and we tried to find historical figures to assign to the various corners of the diagram. At some point I argued that we should actually try to come up with positive and negative figures for all of them - for instance, "enlightened despots" or "benevolent dictators". We were quite successful populating the authoritarian edge, but the libertarian edge was hard to populate. We couldn't find prominent figures who had actually been rulers (Gandhi, MLK, came to mind, but they never held office even if they led social movements). It was also hard to place the "libertarian" historical figures on the left-right dimension. I drew two conclusions from this:

if you truly believe in freedom and tolerance you need to allow people to organise themselves as they see fit and then the left-right economic axis fades away because to fix a position you need some degree of coercion - this means the political compass is not a square but a triangle
government is an essentially authoritarian function and so it is more likely that historical figures will fall on the authoritarian than the libertarian end.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sat Dec 8th, 2007 at 05:55:23 AM EST
[ Parent ]

Re: Oligarchy and Democracy (4.00 / 2)

Good to see osmosis still working. :)

Migeru:

if you truly believe in freedom and tolerance you need to allow people to organise themselves as they see fit and then the left-right economic axis fades away because to fix a position you need some degree of coercion - this means the political compass is not a square but a triangle

The catch is that sometimes you need to enforce freedom and tolerance.

Self-organisation only works between socialised, approximately generous adults. If there are sociopaths in the game, they'll use any means they can to monopolise resources.

The left/right axis doesn't fade away because there's an irreconcilable conflict between left and right values. The left believes that sharing makes more for everyone at the cost of preventing resource monopolisation by a tiny minority.

The right wants to be that tiny minority and wants to avoid sharing at any cost.

But this is really a socialisation problem, not a political problem. If there's a strong dominant narrative supporting sharing, the extreme crazies on the right can be marginalised, and not left running things as they're doing now.

Migeru:

government is an essentially authoritarian function and so it is more likely that historical figures will fall on the authoritarian than the libertarian end.

This is only true if politicians are self-selecting.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Dec 8th, 2007 at 07:17:52 AM EST
[ Parent ]

Re: Oligarchy and Democracy (none / 1)

It's funny the amount of effort that is spent on young children encouraging them to share. I suppose they are better at learning from what we do than they are at learning from what we say.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sat Dec 8th, 2007 at 07:21:16 AM EST
[ Parent ]

Re: Oligarchy and Democracy (none / 1)

The catch is that sometimes you need to enforce freedom and tolerance.

You know, often I wonder whether I would ever want the job of police chief, and what the job would so to me. I think that is a question everyone on this blog needs to give an answer to: under what conditions would you take the job of minister of the Interior, or of police chief? How about being an enforcer by taking a job as a police officer? What would you do to the job and what would the job do to you? What if nobody took those jobs?

Maybe I should make it a diary.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sat Dec 8th, 2007 at 07:25:34 AM EST
[ Parent ]

Re: Oligarchy and Democracy (none / 0)

It is a very good idea for a diary. Doesn't need much work maybe - all the content will come from comments?

Here's the mission statement from Finnfuzz:

"The Finnish Police maintain public order and security, prevent and investigate crime and forward investigated cases to a prosecutor for decision (consideration of charges). The police also provide the public with various licence services.
The objective of police operations is to ensure that people can exercise their rights guaranteed by the judicial system and social order."

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 8th, 2007 at 08:05:14 AM EST
[ Parent ]

Re: Oligarchy and Democracy (none / 0)

Yes, it would be a Socratic diary, but not Socratic Economics. More like Socratic Politics, or something.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sat Dec 8th, 2007 at 08:11:05 AM EST
[ Parent ]

Re: Oligarchy and Democracy (none / 0)

Or Socratic Policing ;-)

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 8th, 2007 at 08:51:45 AM EST
[ Parent ]

Re: Oligarchy and Democracy (none / 1)

You can have liberal policemen. They are just rarer than conservative ones.

I point to the example of Brian Paddick, in a former life the head of the Metropolitan Police for the inner city London area of Brixton. He pioneered a system where the police reduced effort to arrest cannabis offenders, so they could rebalance operational resources to take on more serious crimes. (I am not inviting a discussion of the merits of such a policy, but using this situation as an example of liberal policing).

Mr Paddick has now left the police force and is currently the Liberal Democrat candidate for Mayor of London. I suppose I should also remark that he is openly gay, although that had no direct bearing on his style of policing.

by Gary J on Sat Dec 8th, 2007 at 04:47:15 PM EST
[ Parent ]

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