Wealth and Democracy (2002)
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5. MARKETS AND DEMOCRACY: A TWENTY‑FIRST‑CENTURY TENSION?
We can begin with a simple premise: Democracy and market economics are not the same thing. Worse, the attempts to confuse and conflate them in pretended equivalence stood out at the millennium as a destructive aspect of U.S. politics. As noted, the rollbacks of democracy sketched in these chapters have accompanied the elevation of markets ‑ the fulfillment of the North American Free Trade Agreement, the European Union (launched as a common market) and the World Trade Organization, and the ascent of the Federal Reserve Board as the protector and liquidity provider of financial and securities markets.
Washington, Jefferson, Lincoln, and the two Roosevelts would probably have been appalled. Politics and government down through the ages, while often brutal or grossly deficient, have been the subject matter of Plato and Aristotle, Aquinas and Machiavelli, Locke, and a few of America's own great names. Markets, by contrast, descend from the fairs of late medieval Europe, church‑permitted safety valves for gambling, money‑lending, and other forms of license. The idea that they have turned into a vehicle for human governance lacks any base beyond the occasional financial publication.
Wealth has been a product of both: markets and politics. To historians Will and Ariel Durant, "Concentration of wealth is a natural result of concentration of ability, and regularly recurs in history. The rate of concentration varies (other factors being equal) with the economic freedom permitted by morals and the law . . .. democracy, allowing the most liberty, accelerates it." But just as inevitably, they added, wealth is partially redistributed, whether violently or peaceably. Thus the innate tensions between wealth laudation, which favors concentration, and democracy, which promotes distribution.
In the United States of the turn of the century, the wealth has concentrated with the help of the corruption of politics on one hand and the suasion of market idolatry and economic Darwinism on the other. The saving grace is that societies seem to have their own related rhythm, their larger pattern of rise and fall, as Toynbee and other historians have suggested.
Politics in the United States has been more cyclical than elsewhere, and Arthur Schlesinger has offered a philosophic interpretation ‑ the necessary alternation of cycles of public purpose with those of private interest. Others have emphasized the inevitable strains between the values of capitalization ‑ property, profits, and markets ‑ and the emphases of democracy on equality, freedom, social responsibility, and the general welfare. Survey research was "unequivocal," said political scientists John Zaller and Herbert McClosky in 1984, that while neither side openly sought to abolish the other, those most supportive of the democratic values were least supportive of capitalist tenets and vice versa.
The merit of the alternating cycles recorded in the United States lies in enabling the nation to have both, wealth and democracy, the ability to move from one wave to the other being a genius of American politics. Thus the flaw in the Progressive era insistence by future Supreme Court justice Louis Brandeis: that "We can have a democratic society or we can have great concentrated wealth in the hands of a few. We cannot have both." At transition points, we have had both.
To be sure, the same cyclicality has mocked market absolutism. The “invisible hand" beloved of market theologians periodically sprains its theoretical wrist in speculative collapses, gluts of oversupply, or private monopolistic distortions.
Thus the prerequisite that capitalism and democracy, while easily overlapping and allied, must be kept separate. They cannot be confused. Candidate Bradley, in the early stages of his presidential campaign, worried that the inability to free U.S. politics from money rose out of this confusion ‑ out of "a failure to understand that democracy and capitalism are separate parts of the American dream, and that keeping that dream alive depends on keeping one from corrupting the other."
Much of the late‑twentieth‑century failure, of course, was deliberate: the continued and heavily funded effort, over two decades of private interest exaltation, to displace the founders' republican arena of civic virtue and political engagement with the marketplace of economic self‑interest. We have seen the speeches and metaphors of conservative politicians, bankers, and journalists hailing markets as economic voting machines and corporations as the democratic selectees of the marketplace. One notable Republican called politics underfunded (by private contributions) because Americans spent more on antacids alone.
Such choruses swelled during the 1990s like an economic version of Handel's Messiah. The market and the people are one and the same. Hallelujah. Buying, selling, and consuming is true democracy. Hallelujah. Popular will is expressed through the law of supply and demand. Hallelujah. Populism is market economics. Hallelujah. Opposition to the verdict of the market is elitism. Hallelujah. The Nations and Peoples shall rejoice. Hallelujah, Hallelujah.
In such a climate, market insistence began to encroach on representative government. The World Trade Organization, for example, in laying down enforceable legal standards that emphasized uninhibited flow of capital and goods, exalted markets over legislative criteria, including local democratic priorities.
Ultimately, the guideposts of a market‑based society never seem to progress beyond tautology: policies that advance markets are good and efficient because they advance markets. The raw logic of a blurring between marketplace and polity, however, boils down to a disturbing simplicity: one dollar, one vote. Inequality is the natural law of the cash‑driven marketplace. The more you have, the more you can buy. Buying is good. The more you can buy, the more validating your acts.
The next jump is the more perverse. Merge politics with the marketplace and buying becomes the game: one dollar, one vote, ten dollars ten votes. Even in America, nineteenth‑century voting often had a property qualification. No holdings, no ballots. Property owners sometimes had a plural franchise ‑ the right to vote in several places. Texas billionaire H. L. Hunt published a book in the 1950s advocating that citizens' voting power be proportionate to the taxes they paid.
Absurd as this sounds, morphing politics into a marketplace is simply a back door to the house Hunt hoped to build. If the essence of democracy is to buy, sell, own, or consume, then political contributions are protected expressions (not far off some of the insistences in 2000‑2001 congressional debate). However, as Charles Lindblom wrote in Politics and Markets (1977), because purchasing is the critical act of the marketplace, business enjoys a privileged position, as does wealth. Democratic politics, by contrast, provides the framework in which ordinary people ‑ voting is their critical act, not purchasing ‑ make up for the disproportionate power represented by organized money.
Which brings us back to where this chapter began: the analogy between today's market Darwinism and the social Darwinism of the Gilded Age. "There is absolutely nothing to be said," Theodore Roosevelt observed, "for government by a plutocracy, for government by men very powerful in certain lines and gifted with 'a money touch,' but with ideals which in their essence are merely those of so many glorified pawnbrokers."
Whether twenty‑first‑century Americans can again revitalize politics, stymie plutocracy, and confine market theory to commerce depends on how successfully the critical distinctions between capitalism and democracy can be brought back into focus. Markets, in short, must be reestablished as adjuncts, not criteria, of democracy and representative government.
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