Capitalism and Democracy
Hilton L. Root
The American Interest, Jan/Feb 2008
Edited by Andy Ross
Democracy's Good Name
The Rise and Risks of the World's Most Popular
Form of Government
by Michael Mandelbaum
The Transformation of Business, Democracy, and
by Robert B. Reich
Michael Mandlebaum claims that democracy's good name comes from the
successful fusion of two separate political traditions, one elevating
individual freedom and the other popular sovereignty. He expounds two major
causes for this transformation, one direct and one indirect. The indirect
cause was the global success of the Anglo-American countries. The direct
causes are economic liberty and the working of the free market. Mandelbaum
is an optimist.
Robert Reich explains that democracy's glittering
good name is today being tarnished by the same forces that Mandelbaum sees
behind its remarkable rise. Global markets have created supercapitalism, and
it is killing democracy. Even the places where democracy originated are not
immune from its corroding effects of supercapitalism. The global free market
is eroding individual liberty and effective popular sovereignty in the
Anglo-American world itself. Huge business organizations are so powerful
that they overwhelm the capacity of democratic institutions to constrain
Both China and Russia are exhibiting strong economic growth,
largely through participation in the global economy, without building
democratic institutions. In China, the Communist Party is welcoming wealthy
business leaders into its ranks. And a compliant middle class is a
cornerstone of a repressive, re-centralizing regime in Russia. The fact of
growing middle classes in both China and Russia is not translating into
sentiment for democratic reforms because citizens will forgo venues for
expression and coordination in exchange for opportunities to consume.
In India, the developing world's other emerging powerhouse economy,
measures of economic freedom fall well below middle-income country averages.
Despite being a democracy, India is also less open to the world economy than
China, which suggests that developing-world democratic institutions can be a
barrier to full engagement in global economic opportunities.
Democracy throughout South Asia has been derailed by dynastic politics,
where trust depends on personalities rather than institutions. Winning
elections is based on patronage and upon the selective dissemination of
resources as private goods to party loyalists. Political parties typically
lack respect for parliamentary duties.
Where democracy has enabled a
culture of impunity for those who can afford it, citizen cynicism often
nurtures extremism. Mandelbaum acknowledges the danger of extremism in
democracies, because radicals enjoy the protections of due process. But in
South Asia extremism thrives because democracy has failed to provide the
mass of citizens with basic endowments of health, sanitation, literacy and
When Anglo-American type firms expand their
operations overseas, Mandelbaum's theory would assume the values and habits
of the governance standards required in their home markets are promoted in
new markets overseas. However, the American investor seeking overseas
partners in under-institutionalized markets is often best satisfied by
well-connected partners, often firms owned by entrenched elites with insider
connections to political officeholders.
Western corporate collusion
in the entrenchment of small cliques of wealthy families creates enemies for
global capitalism. This enmity helps to explain why many outside America
view U.S. democracy activism as a form of guiltless imperialism. As they see
it, such activism opens the door for the supercapitalist, come to despoil
the hapless masses.
The expectation that market capitalism will
create social foundations for the spread of democracy fails to anticipate
the capture of weak democratic institutions in emerging states by wealthy
minorities. Supercapitalism is carpet-bagging on a global scale.