In recent history the number of democratic countries has seen a dramatic rise, from one in 1860 to sixty five in 1990.  Democracy has risen from a theoretical system that was at one point associated with mob rule, to a point now where it is widely considered to be the only legitimate form of government.  The rise of democracy has been closely mirrored by the rise of a capitalist system of economic management, which in it’s turn, is now almost universally accepted as the most efficient method of running an economy.  However, capitalism and democracy often seem to struggle in an ‘antagonistic symbiosis’.  One demanding political equality and the other economic liberty.  This essay will considerer the nature of democracy, it will examine the possible antagonisms between capitalism and democracy postulating whether democracy can possibly exists in a non-convoluted form in a capitalism society, or in fact not at  all. It will then consider why capitalism has seemed to work with and towards democracy throughout history so effectively.  It will consider if a practical form of democracy is even possible in the non-capitalist system.  The essay will finally consider what changes might take places within a capitalist system to make it more compatable to ideal democracy and whether or not these changes are practically viable.  

Primarily let us consider the nature of democracy.  Democracy has many definitions, but is we start with a quite basic one suggesting the democracy is:  ‘a political system in which the whole people, positively or negatively, make, and are entitled to make, the basic determining decisions on important matters of public policy’.  This offers us a broad guideline.  Dahl elaborates on this simple definition to set out five key points for a democratic process: effective participation, equality in voting, gaining enlightened understanding, exercising final control over the agenda, inclusion of adults.   Effective participation allows every person in the society to have equal opportunity to have get their view across to the government, voting equality can simply be expressed as one person one vote, enlightened understand requires that even person have equal resource (money, time, education) to devote to acquiring the knowledge necessary to decide on policy, control of the agenda requires that members have the final say in the political agenda, and adult inclusion demands that all adults of sound mind to be allowed to vote.  This sets out ideal principles of democracy.  It is easy to see that no practical democracy lives up to these standards; first passed the post systems do not offer equality of votes for example. However it offers us a good benchmark to judge whether capitalism is fundamentally set against the principles of democracy.

Let us now consider how capitalism may damage the aforementioned democratic principles.  Capitalism is a system based on property rights, private ownership of capital and the regulation of the economic systems by the market mechanism..  In effect this means that the government is not involved in the production of, distribution of, or pricing of goods.  The separation of a ‘public’ and ‘private’ arena is where we find our first antagonism between capitalism and democracy.  As mentioned Dahl states that ‘effective participation’ is his first requirement for democracy.  However, this separation of the ‘public’ state and ‘private’ companies means that only part of the running of the country is democratic: ‘the norms of democracy are held to apply to the action of choosers in the public realm alone’.  Bowles and Gintis consider this separation artificial, as the ‘private’ actions of firms have ‘public’ consequences to individuals and the environment.   So long as companies are run un-democratically, then wage relations, work and therefore a large portion of the average person’s everyday life are not democratically accountable and thus people can not ‘effectively participate’ within them..  The vast majority of employees in a firm may well want to have increase pay, or pension rights, but if the capital owner does not then they have no democratic recourse within the firm.  With international firms this undemocratic capitalist nature become even more acute, with decisions made by capitalists in other states potentially affecting the lives of employees who don’t  even have democratic control of the firm’s base state, no matter the firm itself.

Perhaps the most striking problem for democracy is that capitalism, by developing economic liberty, property rights and private ownership of the means of production, creates inherent inequality.  This inequality creates unequal political resources which mean that: ‘some citizens gain significantly more influence than others over the government’s polities, decisions and actions’.  These are not just financial resources that may allow a more affluent person to influence a politician by offering campaign funding, but also time, knowledge and social resources.  In a capitalism system, richer people may be able to afford to substitute ‘leisure’ time for work time thus giving them more opportunity for political participation.  The ‘class’ system of capitalism also may offer certain individuals or groups with better social links with the political elite, and thus greater opportunity to effectively participate politically thus potentially creating a  ‘tyranny of the minority’, where a small affluent minority may control the less affluent majority .  

This inequality also creates unequal access to education, both with more affluent people moving to areas of better state schools and the private school system.  This seriously limits the possibility of  the: ‘equal and effective opportunities for learning about alternative policies and their likely consequences’ that Dahl prescribes as necessary for an ideal democracy.  Capitalist ownership of the means of distribution of information also seems to limit the possibility of free information.  With mass media broadly privately owned and controlled, knowledge could be considered to be controlled to some extend by the capitalist system and thus possibly bias in its favor.  This inequality seems to seriously question if voting alone is sufficient as a form of political participation.  With more ‘middle class’ voters and falling turnout, voting alone seems to offer only a tiny, if important,, share in the making of political decisions. 

We have seen how democracy seems to require equality.  Equality of voting, equality of political resources and people acting in groups to secure their interests.  We have also seen how capitalism seems to favor liberty, with individuals given rights, the right to own property, capital and to become unequal.  This may seem to render them incompatible.  However, this essay shall now propose that capitalism and democracy in a practical sense are mutually supportive and congruent.

Let us now then consider how capitalism supports democracy and how democratic governments seem to foster capitalism.  After all, every modern western democracy also has a capitalist system, suggesting at least a nominal link between them.  Capitalism creates a broad distribution of power, with individuals owning property and capital; thus the state is inherently reduced in its relative power. It is this spreading of power to individuals that brings us to our first reason why capitalism might support a democratic system.  States in centrally planned economies will tend to be larger than capitalist countries, which in turn will tend to increase its potential for corruption and control.  By distributing power more evenly capitalism allows for interest groups to check the power of the state more effectively.  Capitalism also supports the liberal ideas of freedom of information.  In a centrally planed government the media may well be controlled by the government thus offer little in the way of alternative view point.  However, capitalism offers numerous different sources of information; perhaps even facilitating Dahl’s ‘enlightened understanding’  

Another key reason why capitalism may be good for democracy is that as an efficient economic system it has generally produced considerable growth.  This growth has brought relative stability, and affluence.  Dahl argues that greater affluence allows for the easier solution to social problems, and thus more stable governments.  Perhaps the most striking way in which capitalism benefits democracy in its tendency to create a mobile affluent middle class sectioned into groups of interest, that has the resources to influence politics, has developed business skills to assist them in political activity, desires education and importantly, driven by the need for ‘freedom’ of enterprise in a capitalist system, wishes to have greater freedom.  This pressure from a growing middle class tents to force states towards democracy.  Only time will tell if countries like China will be able to resist such pressure.

We may also consider that democratic countries create a good environment in which capitalism thrives.  John Mueller points to seven main reasons why practical democracy favors capitalism. Firstly he states that democratic accountability encourages capitalists; that the role of government is less likely to be arbitrary in the seizure of firms or land.  Secondly he argues that democratic countries have tended to maintain liberal values, supporting individualism, property rights and security.  Thirdly he maintains that, almost by its nature democracy is a more open system of government and so fosters a more open business environment which is arguably more beneficial.  Mueller also points out that, although capitalism creates interests group with different amounts of resources that political democracy is effective at managing these interests groups, creating a pluralists ‘balance of power’ considering minority rights, and small groups and avoiding single group domination..  Another trait of democracy that benefits capitalism might be its effectiveness of removing failed leaders and governments.  Although a leader or government can certain fail in a democratic system, they can also be unelected.  This creates a system in which capitalists can be sure that a failing leader will properly not stay in power for long and continue the damage. Mueller also points out that democracies, by giving people the power to vote, gives a degree of autonomy to its people and freedom that is of value to a capitalist system.

Dahl has set out criteria for an ideal democracy.  Perhaps unsurprisingly capitalist democracy seems to fall below the prescribed level.  Capitalism offers economic liberty, the rights to freedom of enterprise, property rights and private ownership of capital.  The resulting system also creates a great deal of growth, affluence, but on the negative side inequality.  The giving of property rights can also be seen as an infringement of liberty, potentially the rights to equal treatment can be restricted if the owner of property sees fit.  Democracy, it would seem sits almost on the other side of the spectrum.  It seems to require equality, with equal voting rights, access to politicians, political representation and resources.  Although it seems difficult to rationalize these differences, capitalism has facilitated a large, affluent, mobile, relatively autonomous middle class, who have been able to exert democratic pressure. Capitalism has also required the distribution of power to from the state to individuals, limiting to some extent centralized power and its control of information flows.  These features have been valuable for democracy, and arguable set the scene for democratic development.  Democracy would also appear to be a good supporter of a capitalist system.  It supports relatively autonomous individuals, in a stable system that allows for the effective management of both the positive and negative effects of capitalism.   

In an attempt to improve the democratic credentials of capitalism Dahl suggests that companies should be made more democratic, perhaps on a similar model to Semco, although it is not easy to see how this could be enforced without limiting the efficiency of the capitalist system itself.  Greater redistribution of wealth by the state, and investment in education may also augment the problems with uneven resources.  However, it seems inevitable that in a capitalist system there will be inequality, therefore in a capitalist political system there will be unequal representation. As there appear to be no tenable alternatives to capitalism, the often mutually supportive, although in many ways contradictory relations between capitalism and democracy look set to stay, and form what might be considered a practical democracy.