The Invisible Fist: Have Capitalism and Democracy Reached a Parting of the Ways?
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CRITIQ UE OF OUR SYSTEM The Invisible Fist: Have Capitalism and Democracy Reached a Parting of the Ways? By SAMUEL BOWLES AND HERBERT GINTISI The twentieth century may be seen in compatible systems of allocation and deci- retrospect as the era of the fruition and the sion making. This compatibility thesis has collapse of liberal democracy. The exten- attracted distinguished advocates from Je- sion of the suffrage and the advance of civil remy Bentham to Milton Friedman and has, liberties is without a doubt one of the over the past century and a half, enjoyed an brilliant achievements of the late capitalist impressive degree of popular endorsement. epoch, but it is a profoundly unstable The association of capitalism and liberal achievement as well. The dynamics of democracy in the popular mind may be liberal democr-atic capitalism have pro- traced to the historically coincident pelled us towards a fateful crossroads: one development of the two systems, and to the way-the extension of capitalism; the fact that no economic system other than other-the extension of democracy. The capitalism has coexisted with liberal choice itself heralds the twilight of the democracy. This is compelling testimony liberal tradition, which since the early indeed. However the near universal assent nineteenth century has maintained the com- to the compatibility thesis among liberal in- patibility of capitalism and liberal tellectuals is buttressed, understandably democracy. enough, by more theoretical arguments. Late in his life, Jeremy Bentham joined The celebrated parallelism of liberal with the philosophic radicals and drafted a democratic theory and laissez-faire eco- Parliamentary motion advocating universal nomics would seem to assure compatibility. adult male suffrage. That this position Both the economic and the political theory, marked a sharp break with early nineteenth the reader will recall, posit a society in century liberal opinion is suggested by the which, with two significant exceptions, all fact that Bentham felt compelled two years important social relations are mediated later, in 1820, to publish a tract reassuringly through markets. Economic interde- entitled Radicalism Not Danieroms, in pendence based on the division of labor is which he disassociated the cause of suf- reconciled with individual autonomy frage from that of revolution, anarchism, through the working of the invisible hand. and leveling. The movement for liberal Thus all economic relations can be depicted democracy-that is, for an inclusive elec- as transactions for which contracts may at torate and a roughly equal access to the least in principle be written. Relations public contestation of political issues, or among family members of course constitute what might alternatively be termed political an exception, one which in the liberal eco- equality and majority rule-dates from this nomic and political tradition is neatly period. So too does the thesis that liberal elided by rendering the concept "Indi- democracy and capitalism are uniquely vidual" indistinguishable in use from "family."' The second exception is the rela- University of Massachusetts. An earlier version of tionship of citizen to the state. This rela- this paper was read at the American Political Science tionship is mediated by competitive elec- Association annual meetings in Chicago in August 1976. Thanks to Ken Dolbeare, Chris DiStefano. toral mechanisms precisely parallel to those Richard Edwards. and David Gordon for helpful of the competitive market. The twin con- criticism. cents of consumer sovereigntv and citizen 358 This content downloaded from 128.119.168.112 on Thu, 19 Jul 2018 11:17:11 UTC All use subject to http://about.jstor.org/terms VOL. 68 NO. 2 CRITIQUE OF OUR SYSTEM 359 sovereignty, as well as the dual forms of liberal democracy itself, not of the thesis political and economic competition, are that capitalism and liberal democracy are based on legal equality, voluntary partici- compatible. pation, and full information and appear to Diverse though it is, support for the com- insure both the efficient and consumer- patibility thesis is hardly universal. From responsive allocation of economic re- de Tocqueville to Dahl, liberal observers of sources and the popular accountability of American democracy have pointed to the the only major center of power, the state. possibility of contradictions between the In early nineteenth century liberal capitalist growth process and the perpetua- thought, the economic basis for the tion of liberal democratic institutions. presumed compatibility of capitalist eco- Some Marxists, in turn, have posited fas- nomics and liberal democratic politics was cism as a likely outcome of the capitalist the property-owning economy of yeoman growth process. Prodded by recent events farmers and other independent producers. in Chile and by the rise of large left elec- Yet the introduction of wage labor, the sine toral parties in Europe, socialist scholars qiua non of capitalist production, does not have begun to reconsider the relationship by itself upset the theory. The competitive between liberal democracy and capitalism. firm, as Paul Samuelson has taught us, is A second look at the historical record it- not a significant decision-making body; the self invites such a reassessment. Only a capitalist is reduced by competition to the small minority of the capitalist societies choice of obeying the market-enforced may be termed even approximations of dictates of technical efficiency or going out liberal democracy, less than a quarter by of business. Dahl's count. Outside of Europe, North This striking parallelism in liberal eco- America, and the Commonwealth, there nomic and political theory did not escape are less than half a dozen liberal Karl Marx. Indeed, the compatibility of democracies, down from about a dozen at liberal political and economic institutions the beginning of the previous decade. was strongly affirmed in Marx's work: the Further, the ills of the capitalist economy in exploitation of labor and hence the genera- the United States and Western Europe tion of capitalist profits is perfectly alike are increasingly attributed to what a consistent with formal legal equality, liberal report of the Trilateral Commission has democracy, and a system of markets termed "the excess of democracy." which, he wrote, "represents a very Eden These observations are clearly inade- of the innate rights of man," a "realm quate-for both logical and empirical of Freedom, Equality, Property, and reasons-to refute the compatibility thesis. Bentham." In the hands of Marx and However, they do cast doubt on any asser- Engels, Lenin, Luxemburg, and later tion of a necessarily positive relationship theorists in this tradition, the compatibility between capitalism and liberal democracy. thesis has, to be sure, constituted part of An evaluation of the compatibility thesis it- the critique of liberal political theory: the self requires more careful attention to the liberal democratic state, accotding to the underlying theory. Cotnfmmunist Manifesto, ''is but a committee We will argue that the compatibility for managing the common affairs of the thesis is false. Like the theory of perfect bourgeoisie as a whole." The Marxian cri- competition, it can be shown to be dy- tique has made clear the hiatus between namically unstable. More technically we political equality and majority rule as char- will suggest that the necessary conditions acteristic of a decision-making process, and for the long-term reproduction of a liberal popular sovereignty as an historical out- democratic capitalist society are contradic- come. However, the rather compelling tory. The internal dynamics of such a social proposition that liberal democracy in the order tend to undermine the necessary con- context of a capitalist economy does not ditions for both capitalism and liberal insure popular sovereignty is a critique of democracy. This content downloaded from 128.119.168.112 on Thu, 19 Jul 2018 11:17:11 UTC All use subject to http://about.jstor.org/terms 360 AMERICAN ECONOMIC ASSOCIATION MAY 1978 Three serious flaws in the compatibility of power by the capitalist over- the worker. thesis account for this dynamic instability. "Economics has earned the title of queen The first may be attr-ibuted to the instability of the social sciences,' aptly remarked of perfect competition itself. The competi- Abba Lerner-, "by choosing as its domain tive process has produced its own anti- solved political problems." Contemporary thesis, the giant corporation. The liberal political scientists have shared the associated concentration of control over neoclassical economists' disinclination to the investment process, over the formation explore the noncontractur-al r elations and articulation of public opinion, and more centrial to the operation of the capitalist broadly over the development of policy al- enterpi-ise. ternatives and over political resources Earlier- liberals. Adam Smith and Alexis generally clearly violates the principle of de Tocqueville, for example, did entertain roughly equal access to public contestation the notion that the division of labor within of political issues. Relations between the the capitalist enterpr-ise might be anti- modern corporation and the rest of societv thetical to democracy. Yet the hierarchical are mediated neither by competitive mar- control over the labor process, that is, over kets nor by the liberal democratic electoral a substantial portion of the lives of most process. The