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.
Some of the South American countries such as Venezuela and Russia (rich in oil resources) and Brazil (rich in natural resources) also pose a threat to American domination of global economy. In fact, American media believes that the threat will come from BRIC countries (Brazil, Russia, India and China). The South East Asian countries’ GDP has also grown since their involvement in the neoliberal project. The emergence of counterbalancing economic power centers is healthy for geo-politics; and capitalism has contributed toward this trend.
Hence, it is quite convenient to conclude that capitalism and democracy are inseparable, and that they feed and bolster one another in creating a safe, secure and prosperous future for all those who embrace it. But the reality is not as rosy and simplistic as this assessment suggests. To illustrate this point further:
“The experiential evidence concerning this relationship is ambiguous–totalitarian China is in the midst of a boom, undemocratic Singapore prospers, while newly somewhat-democratic Russia is on the brink of economic collapse. So democracy is no guarantor of prosperity, nor its absence a guarantor of poverty. On the other hand, there are pathetically poor dictatorships, and immensely prosperous democracies. No linkage is evident.” (Stelzer, 1994, p.31)
In modern political rhetoric, the terms ‘democracy’ and ‘capitalism’ (especially the laissez-faire variety) are often touted as beneficial, benign and progressive. This is certainly true to an extent. But in order to understand how democracy and capitalism actually manifest in national and global real-politick, one has to study the subject with nuance. In the context, slogans like ‘promotion of democracy’, ‘making the world safer for democracy’, etc. will have to be read with a healthy dose of skepticism. For example, the way in which neoliberalism operates can actually undermine the functioning of democracy. Under the neoliberal system, there has been an increase in speculative capital flows, making developing countries vulnerable to currency devaluation, capital out-flight, etc. In this sense, neoliberalism can be said to have created a “virtual senate of investors and lenders, who conduct moment-by-moment referendums on government policies.” (Chomsky, 2010, p.29) If this ‘virtual senate’ senses that the policies of local government are not favorable, meaning that the policies reflect democratic mandates and aspirations as opposed to corporate interests, then they have the power to exercise ‘veto power’ by threat of capital flight, currency devaluation, etc. What illustrates this mechanism clearly is the case of Venezuela, where, upon Hugo Chavez’ election as president of the country, capital flight rose to a point where assets owned abroad by elite Venezuelans amounted to a fifth of the national GDP. In other words, when capital flows are liberalized, local governments face a dual constituency – the voters on the one hand and the virtual senate on the other. And it is not difficult to guess which constituency eventually wins the battle.
We can also observe paradoxes existing within established democracies, wherein, the more formalized the system the more corrupt and vacuous in substance it turns out to be. Argentinean political scientist, Atilio Boron, who has done extensive research on the subject notes that “the extension of formal democracy was accompanied by an increasing disillusionment about democracy and a lack of faith in democratic institutions”. (Boron, as quoted by Chomsky, 2010, p.28) In Latin America, for example, the latest wave of democratization has coincided with neoliberal economic reforms, which are both inherently in conflict. This pattern is seen in many other parts of the world, where seemingly opposing concepts of democracy and neoliberal capitalism have rise in unison. The resolution for this paradox becomes clear once we realize that the democracy so propped up by neoliberal capitalism is largely devoid of substance and function.
The most obvious example of the triumph of capitalist values over democratic ones is seen in opinion polls taken in Venezuela. The Chilean polling agency Latinobarometro, which is reputed for its neutrality and integrity, regularly releases results of its opinion polls. These results are proving to be a serious annoyance to American propagandists, politicians and business owners alike. For example, “Venezuela ranked second behind Uruguay in satisfaction with democracy and third in satisfaction with leaders. It ranked first in the assessment of the current and future economic situation, equality and justice, and education standards. True, it ranked only 11th in favoring a market economy but, even with this flaw, overall it ranked highest in Latin America on matters of democracy, justice and optimism, far above the US favorites Colombia, Peru, Mexico and Chile.” (Chomsky, 2010, p.29) But the complete lack of coverage of this poll results in the Western media is an indication of contempt and hatred of functioning democracies. The United States, unfortunately, takes the leadership position in blatantly disregarding instances of democratic success. It is in this context that African-American academic and activist Cornel West, hands a harsh indictment of American political values and priorities:
“Ironically, we are losing sight of the very meaning of democracy even as we hold elections and occupy countries in order to make the world safe for democracy. In our market-driven empire, clever elite salesmanship that appeals to the fears of a frightened and often ill-informed voting populace constitute our impoverished electoral politics. And seductive rhetoric championing of democracy and freedom hide an imperial foreign policy of geo-political concerns and corporate interests. The long-term result may be the vulgar reduction of the precious and great word democracy to a mere cliché-uttered by all but devoid of content and substance. The irony of American history is that we can lose our democracy owing to our allegiance to an emaciated conception of democracy.” (West, 2005, p.129)
Under the pretence of spreading democracy and capitalism across the world, the United States has been covertly promoting its strategic interests. This includes signing unfair trade agreements, detainment of illegal immigrants, toppling democratic governments by supporting military coups (in fact, the Central Intelligence Agency has gained a tarnished reputation for designing and executing many such coups), etc. All of these factors have established corrupt political institutions in many countries across the world. In several others, American involvement has sapped local economies to the brink of collapse. Erosion of national sovereignty, concentration of power in the hands of a few large Multi-National Corporations (MNCs), declining political stability in many regions, hurdles for democracy promotion are all symptoms of the flaws in the capitalist system. As the threat of global warming and nuclear warfare loom large on the horizon, the continuation of America-led neoliberal project, with its attendant militarism and forceful diplomacy, will have to be questioned, protested and eventually dismantled. It is clearly in reaction to the excesses of capitalistic hegemony that grassroots mass movements are starting to emerge in different parts of the developing world, especially the Global South. (Friedman, 2007, p.46)
Works Cited
Chomsky, Noam. “Another World Is Possible: While Neoliberalism Undermines Democracy in the West, the Promise of Change in Latin America Grows-And When It Happens, the Effects Will Be Felt around the Globe.” New Statesman 28 June 2010: 28+.
Chomsky, Noam. “In a League of Its Own.” Harvard International Review 22.2 (2000): 68.
Chomsky, Noam. “Judge the US by Deeds, Not Words.” New Statesman 9 Apr. 1999: 11+.
Foulkes, Arthur E. “Capitalism and Democracy.” Freeman Nov. 2006: 22+.
Friedman, Benjamin M. “Capitalism, Economic Growth & Democracy.” Daedalus 136.3 (2007): 46+.
Stelzer, Irwin. “A Question of Linkage: Capitalism, Prosperity, Democracy.” The National Interest Spring 1994: 29+.
West, Cornel. “Democracy Matters.” National Urban League. The State of Black America 1 Jan. 2005: 129+.
West, Cornel. “Finding Hope in Dark Times.” Tikkun July-Aug. 2004: 18+.