I have been arguing for some time on this site that modern capitalism faces a deep legitimation crisis. It has failed to deliver on its promises, and therefore has been calling in to question. As it turns out, Martin Wolf, the chief economics commentator at the Financial Times, has also sounded a warning regarding the continuing legitimacy crisis. However, for him it’s somewhat different. The issue, as he sees it, is the tension between capitalism and democracy.
A natural connection exists between liberal democracy — that the combination of universal suffrage with entrenched civil and personal rights — and capitalism, the best to buy and sell products, services, capital and one’s own labour openly. They share the belief that individuals must make their own choices as people and as citizens. Democracy and capitalism share the premise that people are entitled to exercise agency. Humans have to be viewed as brokers, not just as objects of different people’s energy.
Yet it’s also simple to identify tensions between democracy vs capitalism. Capitalism is inegalitarian, at least in regard to outcomes. If the economy flounders, most might choose authoritarianism, as in the 1930s. If economical outcomes become overly fussy, the rich might turn democracy into plutocracy.
Historically, the growth of capitalism and the strain for an ever-broader suffrage went together. That is why the richest nations are liberal democracies with, less or more, capitalist economies. Widely shared increases in real incomes played a very important role in legitimising capitalism and stabilising democracy. These days, however, capitalism is finding it much more difficult to generate such improvements in prosperity. On the contrary, the evidence is of growing inequality and slowing productivity growth. This poisonous brew makes democracy intolerant and self-evident.
One can discover lots to pick apart in Wolf’s story, starting with the thought that there is a “natural connection” between capitalism and democracy. There’s nothing natural about it, but clearly there is a historic relationship–complex, delicate, and contested–between democratic political arrangements and capitalist economies. However, Wolf does understand that today’s capitalism is global:
Left to themselves, capitalists will not limit their activities to any given jurisdiction. If opportunities are global so, too, will be their activities.
And while Wolf forgets or overlooks the fact that capitalism continues to be global from the very start, he demonstrates his awareness that the disappointing recent performance of global capitalism (“not least the shock of the financial crisis and its devastating effect on trust in the elites in charge of our political and economic arrangements”) has once more created tensions between democracy and capitalism.
Wolf is most worried about the threat to democracy, and consequently has come around to the opinion that the continuing pursuit of international trade agreements (like the Trans-Pacific Partnership along with the Trans-Atlantic Trade and Investment Partnership), that “tightly constrain national regulatory discretion in the interests of corporations,” needs to be curtailed and rethought. The alternative, of course, would be to safeguard and strengthen the future of democracy–in which, in Wolf’s words, economic coverage could be “orientated towards promoting the interests of the many not the few”–by doing away with capitalism itself.