Is the Marriage Between Democracy and Capitalism on the Rocks?

From a New York Times Critic’s Notebook by Jennifer Szalai headlined “Sounding the Alarm Over America’s Values”:

The documentary series “Free to Choose,” which aired on public television in 1980 and was hosted by the libertarian economist Milton Friedman, makes for surreal watching nowadays. Even if Ronald Reagan would go on to win the presidential election later that year, it was still a time when capitalism’s most enthusiastic supporters evidently felt the need to win the public over to a vision of free markets and minimal government. Today’s billionaire donors may be able to funnel money to their favored candidates without even bothering to pay lip service to American democracy, but the corporate funders of “Free to Choose” set out to make their case.

They had an enormous audience: The 15 million viewers who watched the first episode saw an avuncular Friedman (diminutive and smiling), leaning casually against a chair in a Chinatown sweatshop (noisy and crowded), surrounded by women pushing fabric through clattering sewing machines. “They are like my mother,” Friedman said, gesturing at the Asian women in the room. She had worked in a factory too, after immigrating as a 14-year-old from Austria-Hungary in the late 19th century. Friedman explained that these low-wage garment workers weren’t being exploited; they were gaining a foothold in the American land of plenty. The camera then cut to a tray of juicy steaks.

Friedman may have been happy to do his part to try to persuade the masses, but he didn’t put too much stock in democracy. He notoriously offered economic advice to the Chilean military dictator Augusto Pinochet that amounted to a brutal program of austerity. In 1967, at the height of the civil rights movement, Friedman argued that any progress made by Black Americans had to do with “the opportunities offered them by a market system” (instead of “legislative measures” that only encouraged “unrealistic and extravagant expectations”). What Friedman believed in was capitalism, or what he called “economic freedom.” Political freedom might come — but capitalism, he said, could do just fine without it.

Not so, insists Martin Wolf in his new book, “The Crisis of Democratic Capitalism.” “Capitalism cannot survive in the long run without a democratic polity, and democracy cannot survive in the long run without a market economy,” he writes. Capitalism supplies democracy with resources, while democracy supplies capitalism with legitimacy. Wolf, the chief economics commentator for The Financial Times, worries that after an efflorescence of democratic capitalism, “that delicate flower” is beginning to wither. Most of his ire is directed at an unhinged financial system that has encouraged a “rentier capitalism” and a “rigged” economy.”

Wolf is hardly alone in noticing that the relationship between democracy and capitalism has gone haywire. He and other observers are trying to make sense of what might happen next — and, befitting our current bewilderment, they offer a range of perspectives. Some, like Wolf, hope the relationship can be repaired; others argue that the pairing has always been fraught, if not impossible.

In Wolf’s case, his anguished tone reflects the scale of his own disillusionment. Born in 1946 in postwar England, he recalls in his preface how “the world seemed solid as I grew up.” He describes the feelings of “confidence” in democracy and capitalism that flourished with the collapse of the Soviet Union. But he has also read his Marx and Engels, looking askance at their solutions while commending them for how “brilliantly” they described capitalism’s relentlessness and omnivorousness. Left to its own devices, capitalism expands wherever it can, plowing its way through national boundaries and local traditions — making it marvelously dynamic or utterly ruinous, and not infrequently both.

Yet the “democratic capitalism” that Wolf wants to preserve was, even by his own lights, short-lived. Democracy itself — or “liberal democracy” with universal suffrage, which Wolf says is the kind of democracy he means — is a “political mayfly.” Democratic capitalism ended, in his account, with the financial crisis of 2008. The former Secretary of Labor Robert Reich has offered another measure, arguing that democratic capitalism, at least in the United States, began with Franklin D. Roosevelt’s New Deal and ended with Reagan, when “corporate capitalism” took over. (There’s also an argument to be made that true democracy in the United States began only with the Voting Rights Act of 1965.) Reich and Wolf share a deep sense of crisis, along with the adamant conviction that democratic capitalism can and should be revived.

Capitalism expands wherever it can, plowing its way through national boundaries and local traditions — making it marvelously dynamic or utterly ruinous, and not infrequently both.

The left-wing German sociologist Wolfgang Streeck stakes out a decidedly different position, suggesting that the tendency to equate “democratic capitalism” with a few decades of postwar plenty is to misinterpret a “historical compromise between a then uniquely powerful working class and an equally uniquely weakened capitalist class.” In “How Will Capitalism End?” (2016), Streeck argues that it’s not compromise but the cascade of crises following the postwar boom — inflation, unemployment, market crashes — “that represents the normal condition of democratic capitalism.” Where Wolf wistfully invokes a “delicate flower,” Streeck writes contemptuously of a “shotgun marriage.”

Less than a decade ago, Streeck sounded like a fringe Savonarola; in 2014, he published “Buying Time,” declaring he was sure that the end of democratic capitalism was nigh. When an idea that once seemed preposterous starts to look prescient, we know that something fundamental has changed.

It’s a transformation that the historian Gary Gerstle explores in his fascinating and incisive “The Rise and Fall of the Neoliberal Order” (2022). Before the New Deal order started to falter in the late 1960s and ’70s, Gerstle writes, a majority of Americans believed that capitalism should be managed by a strong state; in the neoliberal order that followed, a majority of Americans believed that the state should be constrained by free markets. Each order began to break down when its traditional ways of solving problems didn’t seem to work. Both the New Deal and its neoliberal successor took for granted that democracy and capitalism were compatible; if these books are any indication, that mainstream assumption — and even the notion of a mainstream assumption — is in tatters.

Democracy might be imperiled, but capitalism, according to Naomi Oreskes and Erik M. Conway, has obtained the status of civic religion. In “The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market,” the authors argue that industry groups and wealthy donors have engaged in a concerted campaign to promote “market fundamentalism” — “a vision of growth and innovation by unfettered markets where government just gets out of the way.”

Oreskes and Conway are perhaps best known for “Merchants of Doubt” (2010), which detailed corporate-funded efforts to protect the tobacco industry and promote climate-change denial by depicting settled science as “unsettled.” They describe their new book as a sequel of sorts — an attempt to understand the ideology that animated the figures in “Merchants,” whose terror of government regulation was so extreme that they equated environmental protections with communist tyranny.

But instead of sowing doubt, what the figures in this new book are peddling is certainty: the iffy “science” of laissez-faire economics dressed up as indisputable fact. Oreskes and Conway are historians of science, and they do an impressive job of uncovering the resources that groups like the National Association of Manufacturers and the Foundation for Economic Education put into spreading the (greed is good) word.

The main implication of “The Big Myth” seems to be that “market fundamentalism” is so horrifically egregious — enriching the few and despoiling the planet — that Americans had to be plied with propaganda to believe in it. But as Gerstle’s book shows, neoliberal ideas proved so seductive because they also happened to dovetail with the stories that Americans wanted to tell about themselves, emphasizing individuality and freedom.

Such popular support is crucial in a democracy, of course, but in “Globalists” (2018) the historian Quinn Slobodian argues that neoliberals have found ways not just to liberate markets but to “encase” them in international institutions, thereby shielding capitalist activities from democratic accountability. He observes that neoliberals were especially alarmed after World War II by decolonization, adopting a condescending “racialized language” that pitted “the rational West,” with its trade rules and property laws, against a postcolonial South, “with its ‘emotional’ commitment to sovereignty.”

Slobodian’s excellent if discomfiting new book, “Crack-Up Capitalism” (forthcoming in April), explores other neoliberal evasions of the nation-state: tax havens, special economic zones, gated communities — enclaves that are “freed from ordinary forms of regulation.” A new generation of swashbuckling billionaires entertain the prospect of secession, using their money to realize fantasies of escape, whether through seasteading or spaceships. The book quotes one seasteading enthusiast declaring, “Democracy is not the answer,” but merely “the current industry standard.” That person was Patri Friedman, Milton’s grandson.

Still, as much as a rarefied class might try to live in a realm beyond democracy, Slobodian says that even the most fantastical capitalist projects require a demos to function. Tech billionaires might be trying to create a world where the plebes — with their pesky demands for secure working conditions and a living wage — will be replaced by indefatigable robots that don’t have to eat anything at all (let alone a tray of juicy steaks). But for now essential workers are still humans.

“The waged service class is the easiest for the visionaries to forget and the hardest for them to live without,” Slobodian writes. “The cloud floats because the underclass holds it up. Time will tell if they drop their arms one day and make something new.”

Jennifer Szalai is the nonfiction book critic for The New York Times.

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