Abstract
Capitalism and democracy follow different logics. During the first postwar decades, tensions between the two were moderated through the sociopolitical embedding of capitalism by an interventionist tax and welfare state. Yet, the financialization of capitalism since the 1980s has broken the precarious capitalist-democratic compromise. Socioeconomic inequality has risen continuously and has transformed directly into political inequality. The lower third of developed societies has retreated silently from political participation; thus its preferences are less represented in parliament and government. Deregulated and globalized markets have seriously inhibited the ability of democratic governments to govern. If these challenges are not met with democratic and economic reforms, democracy may slowly transform into an oligarchy, formally legitimized by general elections. It is not the crisis of capitalism that challenges democracy but its neoliberal triumph.
A first German version was co-authored by Jürgen Kocka in: Wolfgang Merkel (Ed.) Demokratie und Krise (Democracy and Crisis). Wiesbaden, Springer, 2015
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Notes
- 1.
Hall and Soskice, however, only describe two varieties of capitalism that they see represented in the context of the OECD: liberal market economies and coordinated market economies. New hybrid types of Manchester-like state capitalism in China, gangster capitalism in Russia and Ukraine during the 1990s, and crony capitalism in Southeast Asia are not taken into consideration here, since they have emerged outside the context of the OECD.
- 2.
The labels for this type of capitalism vary: “organized capitalism,” “coordinated capitalism,” “Keynesian welfare state” (KWS), or “Fordism.” We use the first two terms interchangeably and take KWS as a variety of “coordinated capitalism” that is particularly compatible with democracy.
- 3.
Cf. more extensively, Merkel (2004).
- 4.
Such cuts were only moderate in Scandinavia, Germany, Austria, and France but drastic within the context of Anglo-Saxon economies (USA, UK, NZ).
- 5.
- 6.
It is thus even more surprising that neoclassical economics and neoliberal political forces question this relationship. They see political equality fulfilled by the equal availability of political rights (see von Hayek 1978; the Free Democratic Party of Germany (FDP) and the liberal political parties in the Netherlands and Scandinavia, respectively).
- 7.
When asked whether their vote or political participation influence political decision-making, more than two-thirds of lower class citizens in Germany answered in the negative. When confronted with the same question, a resounding two-thirds and more of middle class citizens responded in the affirmative, stating that their voice had an impact (Merkel and Petring 2012).
- 8.
The exclusive character of US democracy becomes even more apparent if the 10–15% of the lower class without citizenship are taken into account. A considerably smaller section of the population (5%) at the upper end of the income scale does not have citizenship (Bonica et al. 2013, p. 110).
- 9.
The financial crisis and the bottom-up redistributive effects that have become apparent within the context of the crisis seem nonetheless to have reached social democratic parties. The minimum wage and the effects of deregulation on the financial and labor markets have, after two decades, slowly made their way back to the top of party agendas.
- 10.
In non-Anglo-Saxon countries, this shift did not happen by cutting back the welfare state but was pushed through by a tax and income policy in favor of business and the better-off.
- 11.
The US government followed the capitalist rules of a free market more closely when it allowed many more banks to go bankrupt then did European governments.
- 12.
US democracy is, of course, older than that. But even there universal suffrage for women was introduced only in 1920 (in the UK in 1928, in France in 1945). Until the mid-1960s, six southern US states banned African Americans from voting for racist reasons. Only since that period can the “mother country” of democracy be seen as having fully implemented democratic values.
- 13.
If one takes full suffrage of men and women as the crucial indicator for a complete democracy, then New Zealand (1900) was the first and Australia one of the first democracies, not the USA or UK.
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Merkel, W. (2018). Is Capitalism Compatible with Democracy?. In: Merkel, W., Kneip, S. (eds) Democracy and Crisis. Springer, Cham. https://doi.org/10.1007/978-3-319-72559-8_11
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