IS CAPITALISM COMPATIBLE WITH DEMOCRACY?

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Bob Kuttner has written a powerful and poignant article raising the question of whether capitalism is compatible with democracy – or at least a version of democracy that lives up to the American ideals of equal opportunity and government of, by, and for the people. [1]

In the post-Depression and post-World War II era, the New Deal created a fundamental shift in ideology and power in American society and in our economy from laissez-faire capitalism to regulated and managed New Deal capitalism. It was based on a strong social contract that gave substantial power to government to regulate private companies and manage the economy. It gave substantial power to workers through collective bargaining over pay, benefits, and working conditions via their unions.

The results were a thriving working and middle class, where the rising tide of the economy did indeed lift all boats. Income and wealth inequality were stabilized, if not narrowed.

The era of New Deal capitalism lasted for 40 years until 1980. However, in the last 40 years, Kuttner argues, we’ve not just moved back toward the laissez-faire capitalism of pre-Depression days, but gone beyond it to a new form of hyper-capitalism that some call vulture capitalism. It has destroyed the ability of many workers to thrive by driving down wages, employment security, and benefits (including reducing retirement benefits and paid sick time). It has destroyed the ability of many working parents to provide their children with a safe, secure, and healthy childhood due to unaffordable and inaccessible child care, a lack of paid family and medical leave, unstable work hours, and poverty-level wages.

The life, liberty, and pursuit of happiness promised by the Declaration of Independence are a myth to many workers. They are unable to pursue any meaningful happiness for themselves due to their economic insecurity and low incomes, let alone provide happiness for their families. Any true feelings of liberty are constrained by their lack of the economic resources required to have meaningful freedom in making choices in our capitalist system. And life, literally in some cases, is at risk. Workers are getting injured, disabled, and killed in meat packing plants and other dangerous jobs, even without Covid. Sweatshop working conditions of the 1920s have returned in places like the meat packing industry and Amazon warehouses. When people have health problems or suffer injuries, many of them are bankrupted, and some die, because of our capitalistic health care system.

Deregulation at home and in global trade have produced giant corporations that often have monopolistic power nationally or regionally. These companies have the power as huge employers to strip workers of pay, benefits, and even their jobs, typically by moving jobs overseas (or threatening to do so). Similarly, consumers have limited choices and get reduced value in many important areas from health care to Internet service because of the monopolistic power of providers. These giant, monopolistic companies, particularly in technology-driven markets, have also stripped our economy of many small businesses and entrepreneurs through predatory acquisitions or market place practices that stifle competition.

Deregulation of financial practices has also fed these trends through venture capital, private equity, and hedge fund profiteers that aggressively minimize labor costs, strip companies of assets, and often drive companies into bankruptcy while they pocket huge profits. These vulture capitalists, as they have been called, are at the leading edge of the predatory, hyper-capitalism that Kuttner identifies as taking the laissez-faire capitalism of the early 1900s to a whole, new level of greed and economic inequality.

Kuttner states that rather than the theoretical “invisible hand” of capitalism creating efficient markets that work smoothly and produce high quality goods and services at competitive prices for consumers, the current U.S. version of capitalism creates inefficiency and market failure as its norm. It is efficient only from the perspective of profit and wealth maximization for large, wealthy companies and shareholders, including corporate executives.

Nonetheless, the capitalist market mentality is so deeply embedded in our collective psyche that we have allowed capitalistic values and market norms to overrule other norms and values, such as the importance of the public good, providing access to affordable health care, reducing child poverty, and addressing climate change.

Moreover, the incredible wealth of the giant companies and their shareholders has given them substantial power in our political system. Through their campaign spending, extensive lobbying of public officials, and the movement of senior company employees into and back from policy making positions in government (the revolving door), they have gotten public policies and regulation (or lack thereof) that work to their benefit.

We have seen the result of this political power in recent weeks in the opposition of many members of Congress (i.e., almost every Republican and a handful of Democrats) to the Build Back Better legislation that would support workers and their families in ways that are favored by over two-thirds of the country’s voters – for example, through paid family leave, support for families with children and for child care, and enhanced access and affordability for health care and drugs. Members of Congress have been weakening, undermining, and outright opposing these policies that their constituents overwhelmingly support. Congress is also opposing investments in human capital and in slowing climate change that have broad support among the public.

The Build Back Better opponents in Congress are reflecting the wishes of their wealthy campaign donors, not their constituents. This is emblematic of the power and influence of wealthy capitalists and a direct outgrowth of the hyper-capitalism of the last 40 years.

As a result of this hyper-capitalism in the U.S., many workers have had their economic security, their middle-class lifestyle, and their plans for retirement stripped from them. The frustrations of these workers, their feelings of helplessness and hopelessness, are what has led to the appeal of Senator Bernie Sanders and Donald Trump – both of whom promised to upset the current political system and restore economic security for workers.

In my next post, I will review Kuttner’s thoughts on where we need to go from here to restore our democracy and have fairer, more equitable economic and political systems.

[1]      Kuttner, R., 12/1/21, “Capitalism vs. liberty,” The American Prospect (https://prospect.org/politics/capitalism-vs-liberty/)

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