Capitalism and Democracy: Ideological and Structural Paradoxes

Muhammad Shujee
POL 244, Politics of Class and Markets
April 17, 2021
 Capital and commercial trade have existed for most of history, but there have been fewer

modes of organization as dynamic and productive as the capitalist machine. Arising in the

agrarian and mercantilist structures during the early Renaissance, capitalism slowly but surely

took over as the primary system of organizing the economy. The Technological Revolution it

ushered in led to unprecedented levels of economic development, facilitating access to newer and

previously untapped markets, and the impersonal nature of market transactions making buying

and selling far more efficient. As mercantilist policies were challenged and critiqued by the first

classical economists, industrialists came to replace mercantilists as the organizers of production.

Soon, and the more familiarly industrial, contemporary form of capitalism emerged. With their

sufficiently strengthened industrial base, European states were successfully able to compete in

the international market. In more contemporary times, capitalism’s growth has been synonymous

with globalization. Democracy, as a philosophic-political concept, is far older than capitalism.

Originating in Athens in the historical period of classical antiquity and built upon by the Roman

Empire, it continued to develop in the Middle Ages, it slowly came to manifest in European

states, in the form of parliamentary systems and increased voting rights. “As of the end of 2017,

96 out of 167 countries with populations of at least 500,000 (57%) were democracies of some

kind, and only 21 (13%) were autocracies. Nearly four dozen other countries – 46, or 28% –

exhibited elements of both democracy and autocracy. Broadly speaking, the share of

democracies among the world’s governments has been on an upward trend since the mid-1970s”

(Desilver 2019). These governments may assume different forms; laissez faire, welfare or

developmental, but what is common to all of them and thus significant is their upholding of

democratic principles. The relationship between capitalism and democracy, has historically and

academically been a contentious one. For one, the growth of capitalism was temporally
accompanied increasing suffrage rights, leading many capitalists to gratuitously argue the

existence of a mutually positive relationship. On the contrary, many fascist and racist regimes

also functioned along capitalist lines. Even in the modern world, there are multiple examples of

authoritarian regimes, such as China and Vietnam which have successfully incorporated

capitalist principles into their respective economies. In light of this historico-political backdrop,

the question that arises is as follows. Does competitive capitalism promote and uphold

democratic principles? The answer to this is shrouded in a myriad of political and social factors.

Grounding our research in the academic discourses of Lindblom and Marcuse, we posit that

capitalism and democracy are not conducive to each other. The reasons, detailed below, are

grounded in class analysis and a deeper understanding of what really underpins the two. Our

approach thus constitutes applying capitalism to democracy, and discerning how the changes

brought about by a capitalist economy result in less democratic states. Citing the Pakistan sugar

scandal, we explain its existence as a manifestation of this capitalist domination that impedes the

democratic process.

Our first critique assumes a more philosophical lens, pertaining to capitalism and the

shaping of public opinion. Given the all-encompassing hegemony of capitalism, one must

question notions regarding the freedom of thought, which is a core tenet of democratic idealism.

It is capitalist individuals, entrenched in wealth and resources, that have the greater ability to

disseminate information and thus place knowledge in the broader domain of collective

perception. As Karl Marx put it, “In every epoch the ideas of the ruling class are the ruling ideas,

that is, the class that is the ruling material power of society is at the same time its ruling

intellectual power” (Marx and Engels 1994, 129). Gramsci’s works also explain in detail how

cultural hegemonization helps provide an intellectual foundation for the dominance of the
capitalist elite. Capitalist society however, attempts to close the gap between existing and

alternate realities, lulling society’s inhabitants into a sense of conformity. This conformity is

reinforced by the diffusion of public opinions into private life, through forms such as the media.

Human needs for instance, are artificially manufactured and manipulated, so they can later be

satisfied through systemically organized ways. The creation of new products necessitates the

need to work more, so these products can be consumed, and people end up working more than

they need to fulfil their basic wants. The more there is of this social integration, the greater the

justification of the status quo. Marx’s catalyst for social change and upheaval was the discontent

arising from internal conflict, but the appeals of a richer society prevent that from happening. It

must also be considered how

“A crucial feature of this very curved influence is socioeconomic class. Class is both a

cause of and is further cemented by the biased persuasion. Class greatly affects 24 the

political and economic system in place. There is an inequality in the competition of ideas

fueled by class that contributes to political inequality. “Many of the unifying beliefs of

the society are those beliefs communicated by a favored class to all other classes, with

enormous advantage in a grossly unequal competition of ideas”.

In purely Marcusian terms, consumerism and mass media are ideological apparatuses used in the

making of a one-dimensional man. Such is this form of oppression, that denies the possibility of

social change. This pervasion of ideas according to Greuss, entails the manifestation of a false

consciousness. Democracy is thus impaired in two key ways; the ability of individuals to think

independently is largely taken away and the dual imposition of status quo ideas serves to inhibit

the political mobility that is inherent to social change and the collective welfare of the public

majority.
 It is important to concede that capitalism allows for certain levels of liberty deemed

essential to democracy. Indeed, the seemingly opportune nature of the market holds certain

parallels to the ideology of equal voting opportunity propounded by democracy. What we also

need to realize is how the system comes to privilege the interests of the elite. Capitalists assume

important positions, both within the government and externally. Any attempt to reform the

market proves disadvantageous to the government. “It imprisons policy making, and imprisons

our attempts to improve our institutions. It greatly cripples our attempts to improve the social

world because it afflicts us with sluggish economic performance and unemployment simply

because we begin to debate or undertake reform” (Lindblom 1982, 329). Lindblom’s description

of the market as a prison is the perfect metaphor for distancing it from liberal and individualist

democratic values. He talks about the tyranny of the capitalist, citing it as a restrictive force, both

in terms of state policy and the problems it poses for the general populace. In such a context, it is

imperative to view society under the dictatorship of the capitalist. It is the economic bourgeoisie

which has unprecedented access to modes of production and thus controls the state of economic

productivity. Modern indicators of development are highly contingent upon these very capitalist

elements. National GDP for instance, is based on the total value of goods and services produced

by the national economy. If the government decides to curtail the power of the entrepreneur,

changes in production will result such that they dually increase unemployment levels and elicit

lower levels of productivity. Lindblom also refers to what is known as reform punishment. Under

this, any attempt to reform the market triggers a sluggishness in economic activity. Let us

consider the case of a polluting factory. There is the reference to a chemical plant discharge that

carries “both a bad odor and is irritant to the eye. Town and state governments are both reluctant

to put an end to the problem for fear that the plant will find it advantageous to move to a new
location in another state” (Lindblom 1982, 325). This is how private interest comes to be

privileged over public interest. The strengthening of private property is not favourable to

democracy, as many theorists claim, for it creates a class of individuals so influential that the

interests of the common are relegated to the margins of political society. From this emerges a

form of institution highly obstructive to the social change democracy attempts to bring about.

Policy and policymakers come to be imprisoned in the mechanisms of capitalism and the whims

of the capitalist elite. This is not to say however, that such a response is based on the malevolent

intentions of the businessman. “They need do no more than tend to their own businesses, which

means that, without thought of effecting a punishment on us, they restrict investment and jobs

simply in the course of being prudent managers of their enterprises” (Lindblom 1982, 329). As

part of this automated mechanism system,

“society may recognize, for instance, that there are some who are worse off, and we

collectively want to help them. To do this, policy-makers decide to raise minimum wage.

However, firms see the costs that this will impose on them in lowering their profit.

Instead of taking this hit in profit, they push the costs off to the one’s with less power in

the firm: the workers. They do this through firing workers, increasing unemployment”.

Upon close observation, it becomes clear that the underlying fundamentals of capitalism and

democracy are inherently different. The modern firm is the key mode of organizing business in

the twenty-first century and its primary aim is the maximization of profit. Democracy, with its

idea of discourse for the collective good, is in stark contrast. Profit maximization might be

conducive to economic growth, but its impact on society is not as encouraging. It is recognized,

even among economists, that all economic actions have a social cost. The cost of pursuing

private benefit for the firm inevitably entails costs imposed on larger society.
 While democracy has weakened, capitalism continues to thrive in the globalized world.

The public sector is increasingly characterized by corporations investing money in legislation

and illicit measures that privilege them over their competitors. It is this rush for political

authority that continues to gloss over the concerns of the ordinary citizen. Let us take the United

States, for instance, where most present debates in Congress are corporational contests and divert

resources for debates of public welfare. The stature and immense influence of the capitalist

corporation also means that they come to develop a sense of morality and social responsibility.

CSR (Corporate Social Responsibility) is a business model that helps hold a corporation

accountable; to its managers, stakeholders and so on. Corporate embedment in the political

process means that they are constantly in the news, taking up political space and diverting

attention from more commoner issues. It must also be noted that corporate “executives are not

authorized by anyone — least of all by their investors — to balance profits against the public

good. Nor do they have any expertise in making such moral calculations” (Reich 2020). In

focusing on CSR excessively, what we often overlook is how attention is diverted from the “task

of establishing such laws and rules in the first place” (Reich 2020). The case for corporate

charity is unfortunately similar. The charity of large multinationals is limited by the intensely

competitive market they operate in. In addition, corporations are run predominantly by

shareholders whose purpose of investing is higher return and higher profit. Therefore,

“companies donate money to good causes only to the extent the donation has public-relations

value” (Reich 2020). The underlying intention thus is not the fulfilment of a social responsibility

or a moral obligation, but a show of benevolence to beguile the public into believing that

corporations are charitable entities. The absence of state regulation and the culminating lack of

accountability is just one of the many features of the capitalist dynamic that embed economic
inequalities within the social fabric. The underlying purpose of democracy and a democratic

form of government is the accomplishment of greater good for all of society. A capitalist

democracy however, is a handicapped one. When most of political debate is spent in arguments

on and around capitalist elites, the democratic process is greatly impaired. In such a context,

policymakers and legislators are rendered ineffectual to addressing trade-offs between economic

development and social problems, with the result that urgent concerns like socio-economic

inequality, unemployment and job insecurity end up largely disregarded. Here we must examine

the correlation between democracy and inequality.

Democracy in the fullest sense, is about much more than free elections and orderly

transitions of power. Above all, it constitutes a system that uses popular opinion to strive for the

collectivized good. One of its founding principles “is equal opportunity for influence in politics.

Given that the prevailing norm is to view individual persons as equals, there should exist equal

opportunity for influence. Historically however, money has played an integral role in funding

and running political campaigns. It is quite often that we hear of political candidates dropping

out of elections for a lack of funds to continue. In Christiano’s words, this is what underpins

money’s role as a political gatekeeper. “Candidates must turn to the wealthy class when looking

for campaign finance. Those who pay for the campaigns choose which candidates to support, and

so in effect, select which candidate wins. They will choose candidates who represent their ideals

best. Therefore, the system is somewhat biased towards the wealthy’s views and interests”

(Petkovic 2017). This smaller pool of citizens is unrepresentative, both of democratic idealism

and the interests of the majority. The sheer volume of business spending in political campaigns

means that they take precedence over the interests of other groups. Looking solely at

contributions to candidates, business gave nine times as much money as organized labor, and
fifteen times as much as ideological donors (Center for Responsive Politics). There is evidence

to suggest that those who privately finance the US elections are from the top ten percent of the

social income bracket. In essence, it is this 10% of the population that heralds inequality. This

leads to the creation of gaps between the interests of the voter and the aspirations of the donor.

Money’s role as a gatekeeper thus violates the basic principle of political equality within

democracy. This is rooted in two aspects: Wealthier individuals have a greater probability of

winning elections due to the availability of greater funds. In addition, it is the wealthy that are

likely to choose candidates, and there is a greater likelihood that these candidates will represent

the interests of the rich after acquiring power. In conclusion, “we are left with a society that is

more responsive to the10 needs and wants of the affluent, but not as responsive to the

nonaffluent” (Christiano 2012, 245). Wealth in the contemporary period is predicated in capital,

and thus it is bourgeoisie elites that are left in indirect charge of state affairs. Under classical

Marxist analysis, capitalist and liberal democracies are inherently paradoxical. The capitalist

system perpetuates economic inequality, and given the monetized nature of the economy and the

role of money in political organization, the proletariat rarely ever has the wealth and resources to

ensure the representation of common interests in the legislature. Here neo-liberal capitalism, with

its lack of regulation and the freeness of the market, falls short of rectifying socio-economic

inequality. Given these observations, we can also reasonably posit that for a truly democratic

society, some form of wealth redistribution is necessary. In this aspect, Picketty argues for more

tax intensive measures against individuals and entities at the top of the capitalist hierarchy.

Nowhere is the pervasion and perversion of capitalist elements more evident than Pakistan,

where businessmen occupy influential positions as ministers and legislators. The pervading

influence of corporate elements was all too evident in the recent sugar scandal in Pakistan that
sent shockwaves throughout the nation. According to the findings of the report released by the

government, it became evident that a cartel, comprising of eighty-eight sugar mills “had exported

sugar during a low yield year, underpaid growers, faked records and manipulated prices, which

contributed to an ongoing crisis in sugar prices that began in late 2018” (Sleet 2020). Prime

Minister Imran Khan himself conceded how, unknowingly, he was the one who had approved

export subsidies that ended up abnormally inflating sugar prices. With sixty percent of the

population facing food insecurity and the integral role of sugar in Pakistani diets, the general

populace was disproportionately impacted. On the contrary, mill owners received more than half

of the net incremental profit, which was as high as 76 billion Pakistani rupees. In turn, the

government’s process of accountability has been impeded by the fact that a number of sugar mill

owners involved in the scandal are eminent politicians. Some of Khan’s coalitionists are directly

involved in the crisis, but given the fragility of the party nexus that keeps Khan in power, there is

little he can do to hold them accountable, without threatening the political stability of the regime.

In conclusion, the argument helps us illustrate how capital comes to permeate through different

levels of the political infrastructure and hierarchy, creating inequality through illicit means and

impeding answerability for the rich and powerful. In a sense, capitalists also embed themselves

in the political structure, such that harm to them is simultaneous with damage to the political

system.

Our arguments help indicate how, despite their parallel development, capitalism and

democracy are incompatible in many ways. China’s politico-economic trajectory, and that too as

an authoritarian regime, furthers our argument. “The authoritarian Chinese state is

metamorphosing into a new kind of imperium that is inimical to democracy. China is growing

richer, but neither more democratic nor responsible” (Jagannathan 2020). Grounding our analysis
in classical Marxist analysis, we rely on the work of several thinkers to debunk misconceptions

regarding capitalism and democracy. The element of capitalism permeates through the political

structure, creating imbalances and illicit concentrations of wealth that aggravate inequality.

Inequality, as a precursor to democratic values, constitutes a pivotal part of our argument and the

culminating lack of it in a capitalism-oriented society means that the two are ideologically

incompatible, even though they have coexisted for much of history.

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