From the very dawn of intelligent human interaction to the present day, the concept of capitalism has dominated the way we trade goods and acquire wealth. Except for the necessity of a simple communist society in pre-modern times or the noble humanistic notion of a socialist society, the free market has always been the most efficient way to run the economy once the most basic needs of life have been satisfied. Only during the last several hundred years has the idea of a modern democracy been developed and applied through the modern state. These two concepts are thought by some to be interrelated, but contemporary critics of the liberal form of democracy seek to separate the two notions of capitalism and democracy.
However, when examining the evidence of the relation between the two, let us not use altered conceptions or versions of these terms. Instead, let us analyze them by their base meanings as we have come to understand them. After this analysis of the terms and resulting stipulation of their base meanings, critics may argue that any further analysis of the relationship between the two terms would be tainted by their supposed definitions. The problem with this is that without a common frame of reference between the two, no comparison would be logically possible without considering an infinite range of possible meanings. With this technical matter aside, the analysis will continue with an investigation into arguments both for and against the separation of the two terms, and then an evaluation of the true nature of capitalism’s relationship with democracy. Specifically, the free market economy dictates the actions of any democratic regime. After this evaluation is complete, the argument will conclude by illustrating how capitalism will lead to a more liberal form of democracy.
The first step of this investigation is to make an attempt to achieve a common frame of reference between the two terms. Literally, democracy is the rule of the people. Specifically, it is the organization in place to allow people of a specified area, through organized elections, to give their uncoerced opinion on who they want to represent them in government or what they want the government to do for them. The underlying presupposition is that the government will always obey the command of the majority of voters.
There are many limitations to democracy, such as the fact that people can only vote YEA” or “NEA” on a specific topic area, thus producing a dichotomy of choices that may not necessarily offer a solution to a problem. Also, people must leave most decisions to the people they elect since they don’t have enough time to continually vote. However, the focus of this work is not to delve into this area of controversy but rather to take this understanding of democracy as the stipulated definition for this work. One critical distinction must be made regarding Berger’s understanding of the term, and that is the term “democracy” does not include all the civil and human rights associated with liberal democracy.
Similarly, this work will use the term capitalism solely to describe the free market economy, characterized by private ownership of property and economic freedom to buy, sell, or trade with anyone. The critical element of capitalism is limited government intervention to enforce contracts and provide a safe trading environment. Friedman defines capitalism as economic cooperation where both parties benefit from voluntary and informed trade. The next step is to analyze arguments that capitalism is separate from democracy.
Dryzek argued that an individual’s consumer preferences were properly expressed in the economy, while the same person’s political preferences were expressed in politics. This perspective indicates that the capitalist economy is a separate entity from the democratic political system because these are two different institutions into which an individual can state their preferences, depending on whether they are economically or politically motivated. On the other hand, history has given many examples of how a person’s economic preferences have been stated in the political forum, such as voting for a politician who has promised to reduce taxes or to establish free trade between two states. That same person could only express those preferences in the political forum because they alone would have no power to change the structure of the economy such that it would seem advantageous to lower taxes.