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Do capitalism and democracy go together?

Capitalists' acquiescence to electoral democracy follows from their distinctive political interests, and is strictly conditional.

By Dylan Riley

Despite the common assumption that market societies have a natural affinity with liberal-democratic forms of rule, historically, capitalists’ attitudes toward democracy – defined minimally as a set of procedures for alternating governing teams through formally peaceful methods – vary widely. Capitalists have been the major backers of the most notoriously authoritarian regimes in history, including Hitler’s Reich, Franco’s Estado Nuovo and Mussolini’s Stato Totalitario. Capitalists are neither irreducibly hostile to, nor invariably supportive of, democracy. Rather, their political interests, like that of other classes, flow from their specific location within the class structure of a society.

What are the distinctive political interests of the capitalist class? In order to identify these, it is important to resist describing capitalists using categories that seem accessible but which are imprecise – such as “the rich”, or the “1 per cent”, or “the corporate elite”. Rather, capitalists are a group of agents that occupy a distinctive structural location by virtue of their ownership of a society’s main productive assets – the major means of production – as private property. Much of the character of politics in advanced capitalist societies flows from the distinctive political behaviour of this group.

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All societies in some way or another produce a surplus. The physical manifestations of this surplus are evident in architecture, in culture, in food, in knowledge. But in few historical societies is this surplus equally controlled by all groups. Instead, a division normally emerges between a relatively small group – the dominant class – that appropriates and subsequently controls most of the surplus, and a relatively larger group engaged in producing it – the direct producers or workers. The specific methods by which the surplus is appropriated have been extraordinarily various: membership in the political community of a city state, inclusion in an aristocratic hierarchy, bureaucratic or theocratic position have all been the basis for the formation of dominant classes.

Capitalists differ from all previous ruling classes not because they appropriate the fruits produced by workers, but because of the way they do so. They extract surplus through their legally backed claim to ownership of the major means of production, and after the free exchange of money for a worker’s ability to labour. Capitalists do not typically extract surplus from producers through the direct use of political means (such as the threat or actual use of violence, or by relying on the state authorities to compel the production of surplus). The central class relationship that defines capitalist society is therefore an economic relationship, not a directly political one. The economic interests of the capitalist class do not require them to control the government directly, because political authority is not the basis of their claim to the surplus.

This has two important consequences: first, capitalist exploitation is compatible with the alternation of governing teams in the state; secondly, the individuals who make up those teams need not themselves be capitalists. Indeed, as many theories of the capitalist state have argued, non-capitalists often perform much better as political managers of capitalism than capitalists would themselves – all of which means that capitalism is an economic system that is compatible with electoral or formal democracy.

[See also: Adrienne Buller: “Green capitalism is its own form of denial”]

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Apart from this general compatibility, there is a more specific connection between the interests of the capitalist class and liberal democracy. This connection arises from the particular sort of “intra-class” relations that are characteristic of capitalism. Since capitalists must sell the surplus they extract on the market, they compete with other capitalists over market share. Furthermore, capitalists seek to enter new lines of production within which competition occurs. These two processes – competition within branches of production, and entrance into new lines – mean that the specific economic interests of capitalists are highly differentiated, in contrast with other dominant classes in history, even though they also have a common class interest.

For example, the interests of oil companies, photovoltaic cell producers and windmill manufacturers differ from one another, and in many cases they are competitors. The Hobbesian war that rages among these different capitalists gives them all a shared interest in the maintenance of an impersonal legal order; and preserving such an order requires the rotation of different governmental teams in and out of the state, since if any one group of capitalists came to control the state they would pursue only the narrow interests of that group rather than the broader interests of the class. This means that capitalists are not only potentially tolerant of electoral democracy, they also have a positive interest in maintaining it.

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Capitalists’ toleration of electoral democracy has two well-defined limits, however: one derives from the balance of power between capital and labour, and the other from structural features of capitalist economies. During periods of economic growth, capitalists may accept the emergence of working-class organisations that press for a redistribution of the social surplus toward wages. The three decades after 1945 in Western Europe – “les trente glorieuses” – which saw high growth and rising wages, as well as the emergence of welfare states, is a textbook example.

These concessions are, however, strictly conditional. The only examples of capitalists tolerating organised mass labour movements and left-wing political parties are when those parties have either toned down, or jettisoned altogether, the goal of transcending private property and transforming the distribution of social power. Where mass working-class parties have existed within capitalism, they have always had to abandon or euphemise their socialist aims: this was as true of Scandinavian social democracy as it was of Italian communism. When a working-class movement struggling for anything beyond the most innocuous social-democratic reforms appears to be anywhere near achieving victory, capitalists will rapidly abandon any residual commitment to democracy and resort to emergency measures.

The second limit to capitalists’ toleration of electoral democracy derives from the structural conditions of the capitalist economy. Capitalists, as I have suggested above, can tolerate the mobilisation of workers for material concessions in an environment of economic growth. Under these circumstances, capitalists can share the gains of an expanding pie with a working class that has moderated its political demands. However, when growth slows, the competition over that pie between capital and labour increasingly takes on a zero-sum character. Conflict also becomes harsher among capitalists themselves. Since the 1970s, when the postwar boom faded and growth slowed, governments have been trying to deal with this problem.

Eventually, however, “winner take all” strategies emerge, in which capitalists become more and more reluctant to share the meagre gains from growth. Moreover, in conditions of low growth, capitalists begin to shift from a strategy of investing in production to one of using political means to increase their share of the surplus. This alternative strategy can take on many different forms, from the deployment of police powers to evict residents for not paying their rent, to the use of legislation to enforce the interests of financial capital against debtors, or to secure monopolistic control over intellectual property rights.

[See also: What does ‘elites’ mean, and why do they always rule?]

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Capitalism is of course compatible with political forms other than liberal democracy, as the many examples of political authoritarianism existing alongside a capitalist economy show – from European interwar fascism to Latin American bureaucratic authoritarianism to the East Asian development dictatorships. But the truly distinctive thing about capitalism is that it is compatible with formal electoral democracy. No other surplus-appropriating class in history has permitted a political system which grants suffrage rights to at least a significant portion of the direct producers (under capitalism, the working class).

However, capitalists’ tolerance of electoral democracy – which results from their highly specific political interests – is strictly limited and conditional. There are no historical cases of capitalists tolerating the outcome of elections which might threaten to transform the social relations on which their ability to extract surplus depends. And in an increasingly stagnant world economy, as rates of investment decline across the board, a zero-sum struggle for the distribution of the social surplus is beginning to emerge both between capital and labour and within the capitalist class itself. Both of these developments are profoundly damaging to the liberal-democratic mechanism, which requires “tolerance” and a willingness to accept the aleatory results of elections as legitimate.

Dylan Riley is professor of sociology at the University of California, Berkeley, and author of “The Civic Foundations of Fascism in Europe“.

A version of this article appeared in Jacobin.

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