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Is a conflict between capitalism and democracy on stage? Some recent books and articles seems to envisage it. But is it real or just another narrative? Moreover, is it true for all democracies or some that they have already bended under an unmatchable game: a low efficiency, often corrupted political system under the false flag of democracy versus a high efficiency, low grade of ethic economic power? Then we have to make some distinctions between the Anglo American system and the Continental European system. Not to mention other parts of the world where “democracy” is just a word to legitimate new oligarchies. Democracy is a complex machine that needs continuous update and is not a model fit-for-all; it needs to be customized.
But let’s start to assess the problem with shortcuts.
The supporters of this theory assert that after the emergence of mass democracy after World War II, an inherent tension has existed between capitalism and democratic politics. The slogan is that capitalism allocates resources through markets, whereas democracy allocates power through votes. Maybe it works in such a fashion in a mature democracy like the U.S., but it certainly never worked like that in Mediterranean-style “democracies”. Votes and free elections are a sliding door between democratic institutions and civil society. They allow to include what local society produces about human resources and moral attitudes. Without strong ethics as an individual and in public attitude, democracy doesn’t work at best or doesn’t work at all. Ricardo and Smith theories were not borne for fate in North Europe, where strong ethics have deep roots. Moreover, in democracy satellite areas, often local oligarchies hold the elective “process” by basically deciding who can go through the electoral system and who has to stay out. They control the media system as well.
Another common ground about theorists is that economists and economic scholars have been slow to accept that this tension exists. Instead, they have tended to view markets as a realm beyond the political sphere and to see politics as something that gets in the way of an otherwise self-adjusting system. But actually is not true. For example, Milton Friedman and the Chicago school stated the market needed to be independent from any state influence. It proves that the struggle between the state and market was consistent through time, even before WW2.
During the 1929 financial crisis, the American system took more time to recover than Nazi Germany after 1933. Why? Because in Germany the presence of great finance was weak; even today it is. It makes the political government more stable. And an efficient dictatorship makes it easier to recover due to the faster decisions chain that citizens pay for in terms of freedom, of course. Basically in Continental Europe, the state is more invasive and wider than civil society. In the Anglo American system it is just the contrary. And when we talk about democracy, we have to remember it. Democracy grows better in the second system with a larger and healthier civil society. (…) click here to read full article
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