Are Democracy and Capitalism Compatible?

A friend writes, from a Marxist viewpoint:

Capitalism is a society or an economy in which a class of people, a very small minority, owns almost all the natural resources (land, minerals, …) and also all the created wealth (infrastructure, factories, …), and the rest of the population basically have to live off the wages they receive for their labor (manual or mental).

In summary, Capitalism divides the people into a capitalist class (or bourgeoisie) and the working class. (In between there is the petit-bourgeoisie, who are aspiring to join the capitalist class and who waver in their commitment whenever they support the rights of the working class to any degree).

The main determining power as to how the economic resources are used is the Market. The market system is based on growth of capital and maximizing profits, and as such, it leads to concentration of wealth and to monopolies, which results in oligarchy politically.

The problem with “democracy” is that it is a vague concept, or according to Marxists, it is a class-based concept.

In the capitalist definition of democracy, it means a society where people vote to elect their representatives who run the government, and that the economy is based on free market. In these situations, as we have seen in the US, as wealth concentrates, so does the power.

From a Marxist point of view Democracy is class based. As such, capitalism and democracy are incompatible because “democracy” in capitalism does not provide freedom to the majority of people, who make up the working and middle classes.

In Marxism, democracy means people’s democracy, where the resources are distributed among all fairly and as equally as possible. This is supposed to happen during socialism, which is a transition processes that one hopes leads to communism, where it is “from everybody according to their ability to everybody according to their need”.

In capitalism, it is “to everybody according to their ability”. But we know that even that is skewed because ability is greatly determined by the very unequal wealth.

So, according to Marxism, where peoples’ democracy means all resources owned in common and used in the service of all, democracy does not exist in capitalism.

However, bourgeois democracy exists in capitalism.

That is why “democracy” is an ideological word.


Discussed at

This entry was posted in Uncategorized. Bookmark the permalink.

1 Response to Are Democracy and Capitalism Compatible?

  1. I cited this posting on Facebook to my friend Curt Welch, who argues for Basic Income, a system designed to harness market forces for good. I said, “In regard to reform of uneven distribution of wealth, you argue for the continued use of the market. I can sort of see your side, in that the market coordinates peoples’ economic decisions differently from how an hierarchic control structure would (as in Soviet-style centrally controlled economy). But on the other hand, there’s the argument that the market naturally leads to concentration of ownership of raw resources and built wealth” and then I cited the above post.

    In Curt’s response, he called out my “But on the other hand, there’s the argument that the market naturally leads to concentration of ownership of raw resources” and he responded to that as follows, quote:

    That’s why we must add the Basic Income component to society — it mathematically changes the dynamics and prevents the concentration of wealth and power.

    Free trade turns society into one big parallel distributed optimization process. What end-state it optimizes towards is totally controlled by the parameters of the “game” we set up for it to optimize against. We can set the parameters to anything we want and in so doing, control the steady state of society in terms of wealth and power and resource sharing.

    The board game of monopoly is a simple example of this in action. By the standard rules of the game, we can gurantee the process always ends with one person owning all the resources and all the others in the game being bankrupt. But we can change the rules, by adding forced sharing of assets, and in so doing, create a game that never ends. That would make it a really bad board game, but a really good society.

    We can for example, add a simple rule, that says, anytime anyone gets cash income in the game (such as by passing GO, or by collecting rent, or by receiving some reward), that they are allowed to keep half the cash for themselves, but the other half, must be divided evenly across all the other players.

    If we add this rule, it becomes impossible for anyone to lose. Even if one player ends up owning all the property, all the other players are constantly getting rent income due to the forced “Basic Income” profit sharing rule. In the game, if you have 4 players, and one player ends up owning all the property on the board, and is collecting large rend payments every time any player makes a move, then that one player is getting 50% of all income in the game. But the other 3 players are getting 1/6 th of all the income as well (16.666%). So this means that the wealthiest player in the game can never be more than 3 times as wealthy as the poorest with these rules. Wealth can’t accumulate beyond that point with only 4 players and a 50% Basic Income sharing rule.

    If you want to limit the difference between the most wealth, and the poorest to something less, we only need to increase the tax rate to something greater than 50%.

    In the board game, once a resource is owned, there’s no reason to ever sell it if you aren’t forced to due to a lack of captial. So once all the property is owned and developed the game will just reach a steady state and never change.

    In real life, there will be no steady state because assets will develop and evolve over time and their value won’t remain constant. So people will be able to use their Basic Income to buy other properties which if well managed, will grow in value. So the actual wealth and control of resources will keep shifting over time.

    But the point of the Basic Income Tax is that no matter who owns control over the resources, a fixed percent of the wealth the resources produce must be shared with all of society through the Basic Income tax and payments.

    As a society, we want the resources to be owned and managed, by whoever has proven themselves to be the best managers of the resources. But as a society, no matter who we assign management rights to, we want to make sure the entire population is able to benefit — which is what the Basic Income does.

    The Basic Income tax and payments allows us to cap inequality at any value we choose as a society. If we tax all production at 50%, and share that as a Basic Income, then we guarantee that no individual in society, will have to exist on an income that is less than 50% of the nations per capita GDP. In the US that’s currently around $50K per person (children included). A 50% Basic Income tax and payment would mean that every person and child, would receive around $25K of income for year, just because they were a human citizen, with no requirement to contribute anything to society, other than to follow the laws of the land.

    The rest of the nations GDP, the 50% that people get to keep after the tax, is what is used to motivate people to be productive (aka to work or to invest their money wisely).

    That level of tax would create a society that was 50% socialist — 50% of all our productive output was shared evenly, and 50% capitalistic — where people competed to be productive. The 50% of the economy that operated as a capitalistic competition would create natural inequality across society. But the inequality would be limited to that 50% share.

    As long as lots of people were needed to do the work and the investing, that 50% of the GDP would still be shared across a wide range of people, so that no single person would be too super rich. But as the machines do more and more of the work, and humans aren’t needed at all, then inequality would grow to the point that on person, or small family, would likely end up owning the entire world. But as we approach that point, we just keep raising the tax rates higher and higher to limit how much wealth one person can control. When the machines do everything for us (run all the economy, do all the investing for us), then we can raise the tax to 100%, in which case we become a 100% socialistic society where everyone gets the exact same wealth and income to work with.

    The point of a Basic Income is to create any balance we want to between social sharing of assets, and capitalistic competition we want in society.

    :unquote Curt Welch

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.