Capitalism and Democracy

There is very little doubt that capitalism is a highly potent economic system for generating wealth and prosperity. In the last four decades of its implementation globally, there are numerous examples that support this claim. As Peter Berger writes, capitalism is a “horn of plenty that heaped…immense material wealth and an entrepreneurial class, on the countries in which it originated.” (Foulkes, 2006, p.22) This newly emerged entrepreneurial class shows little tolerance for government bureaucracy and regulation. At the same time it clamors for ever more material prosperity in the form of consumer goods, social progress in the form of quality education, etc. More importantly, it was argued, this entrepreneurial class would enforce democratic structures in the localities in which they operated. In other words, “by producing economic wealth and an entrepreneurial class, capitalism inevitably produces democracy. And since democracies don’t start wars or have expansionist proclivities–forget, for the moment, Theodore Roosevelt and imperialist Britain–capitalist-democratic development contributes to security and to world peace.” (Foulkes, 2006, p.22) There is evidence from recent political history to support this benign linkage of capitalism and democracy. For example,

“Entrepreneurial capitalism became more dominant in the America of Ronald Reagan than it had been before, and job growth and record-breaking prosperity followed. In Britain, Margaret Thatcher reversed almost four decades of socialism and changed her country from the sick man of Europe into one positioned for long-term, non-inflationary growth. Meanwhile, the Soviet economy was shown to be like the Wizard of Oz–an imposing facade, but impotent and powerless at its core. Put these events together and you have an unassailable proof that capitalism produces a level of economic welfare that a planned economy simply cannot emulate.” (Stelzer, 1994, p.32)

And, when we scan the performance of capitalist regimes in other parts of the world, the links between capitalism, prosperity and democracy becomes incontestable. After all, in recent times, capitalism in countries such as Chile, Taiwan and South Korea have resulted in both economic progress as well as democracy establishment. In the newly remodeled Russian political system too, we see the formation of glasnost (democratization) and perestroika (economic restructuring) marching hand in hand. (Friedman, 2007, p.46)

Nothing exemplifies the successes of capitalism than the recent developments in India and China. By participating in financial globalization, countries with abundance of cheap labour such as India and China are primed to assume leadership position in another 10-15 years. While Mao Zedong was the father of the Communist China, his successor Deng Xiaoping must be credited for the nation’s progress toward prosperity. It was under his leadership that the party ratified and implemented the ‘Four Modernizations’ program that would propel China onto the global stage, where it is fast approaching leadership position. This ambitious program of sweeping economic reforms opened China to the outside world in more than strictly economic sense. In the case of India, it’s huge pool of skilled workers, who have the added advantage of proficiency in English language, have been the engine of economic growth. The re-election of Manmohan Singh as the Prime Minister is also a positive development from an economic perspective, for it was he who initiated India as a participant in globalization in 1991. China, on the other hand, started participating in the process of globalization much before India did. As a result, its economy is more than twice that of India and is catching up fast with that of the United States and Japan.

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