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CRITIQ UE OF OUR SYSTEM

The Invisible Fist: Have and 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 . The exten- attracted distinguished advocates from Je- sion of the and the advance of civil remy Bentham to and has, 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 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, 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. 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 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, , through the working of the . 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 -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 . 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 . 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 , as well as the dual forms of liberal democracy itself, not of the thesis political and economic , are that capitalism and liberal democracy are based on legal equality, voluntary partici- compatible. pation, and full 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 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 was cism as a likely outcome of the capitalist the -owning 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 , 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 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 . 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 . Indeed, the compatibility of , 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 and 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 of man," a "realm quate-for both logical and empirical of , Equality, Property, and -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 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 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 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. " 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 . 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 , and more centrial to the operation of the capitalist broadly over the development of policy al- enterpi-ise. ternatives and over political resources Earlier- . 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 corporation thus constitutes , does not in itself constitute a formal an unaccountable center of economic and departure from liberal democracy. It does, political power- in capitalist society. however, give rise to a contradiction in the The second flaw in the compatibility reproduction of a liberal democratic capi- thesis concerns a contr-adiction between the talist social order. From to necessary ideological conditions for the re- Gabriel Almond and Sidney Verba, production of libercal democracy and the political theorists of diverse outlooks have conditions for the perpetuation of capitalist affirmed that widespread democratic com- control over the production process. This mitments, or mnore generally a democratic flaw, like the first, may be traced to an err-o-r culture, is a necessar-y condition for the in the liberal economic theory. perpetuation of democratic gover-nment. In The capitalist economy, even in its comn- the advanced capitalist societies the dis- petitive form, cannot be adequately con- crepancy between a liberal democr-atic ceptualized as a system of voluntary ex- and a daily life of hierarchical change relations. The "realm of domination manifests itself in populai- Bentham" does not encompass all or even struggle to extend the sphere of democratic the most central economic relations. What decision making to the labor process itself. workers sell to the capitalist is not wotk it- However, widespread democratic contesta- self-labor-but merely the formal jUliS- tion over the structure and control of the diction over their capacity to work-labor- labor process would threaten the conditions power. However the of the capitalist for the reproduction of capitalism. Indeed depends not upon labor power, but labor it- the extension of anything more than token self-the concrete productive activity of democracy to the workplace would most work. While the buying and selling of labor likely in mnotion the progressive de- power is ac market-mediated relationship, terior-ation of not only capitalist control the pr-ocess of getting work out of the over production but of profits as well. Thus worker is not. Exceptional circumstances the democr-atic values essential to the re- aside, the amount of work to be done can- production of liberal democracy constitute not be expressed contractually, but rather an ideological climate which undermines is the outcome of an on-going and never the conditions essential to the reproduction completely resolved conflict between of capitalism. worker and employer. By errioneously The third flaw in the comlpatibility thesis, considering labor itself as a , like the second, is traceable to the liberal liberal economics has overlooked the theorist's abstraction from the political essential role played by the dir-ect exer-cise conditions for the reproduction of the capi-

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 361 talist system. The question of how a liberal attempting to secure the conditions for the democratic political regime might be com- continuation of the accumulation process patible with the reproduction of a class so- has conceded and even promoted a more ciety has been explored, with varying direct intervention of the state in the wage intents, by writers as diverse as James labor- relationship. Further, the Madison and . We may conflicts engendered by the accumulation posit two conditions under which such re- process, and the market failures associated production is facilitated: the existence of a with urbanization, industrial concentration, multiplicity of politically relevant groups, the , and the like have classes, or strata, and the elimination from prompted a partial supercession of markets political contestation of issues which divide as the primary allocational mechanism. The the political public among class lines. In state has thus become a major economic ac- most countries which are now liberal tor directly involved in production, in the democracies, early competitive capitalism coordination of economic activity, in the approximated these conditions. The co- mediation of class relations, and in the dis- existence of distinct forms of production- tribution of economic rewards. Class re- small farming, artisan production, capitalist lated issues have thus been rendered unam- production-and the imperfect regional in- biguously political: class struggles have tegration of the economy gave rise to a been partially displaced into the state large number of nonclass-related political sphere. groupings and minimized political polariza- The implications for the long-term re- tion along the capital versus labor dimen- production of liberal sion. Further, the state, even where its eco- are hardly auspicious. Popular movements nomic stance was interventionist, was not around such issues as civil rights and directly involved in any substantial way in ecology have imposed restrictions on the the wage labor-capital relationship. Class concept of private ownership of the means relations in production were for the most of production. The legal recognition of part mediated outside of the state sphere. labor unions and the development of Thus conflicts stemming from the direct ex- substantial systems of income support have ploitation of one class by another were dramatically altered the labor market and defined as beyond the limits of political dis- transformed the exchange of labor power course and contestation. Indeed, the major for a wage into a quasi-political relation- economic intervention of the liberal state, ship. A significant portion of the customary tariffs, served to foster political unity of the - among the producers of particular com- between a fifth and a third of the total wage modities (and consequently along regional bundle in all advanced capitalist countries or urban rural lines) rather than along class except Japan-is now allocated through lines. political mechanisms in the form of medical The very success of the capitalist accu- care, income support, public schooling and mulation process has radically undermined the like. Most significant, perhaps, demo- both conditions. The integration of national cratically won gains in social expendi- and the elimination of noncapi- tures -what Fortune charmingly terms talist forms of production has reduced the " 'social drag' '-appear to constitute a importance of regional, peasant, and petty significant obstacle to the capitalist growth bourgeois political groupings. The capi- process. In the United States the net dis- talist class itself has been sharply reduced tributional impact of federal, state, and as a percentage of the population. Cor- local taxes, transfers and expenditures ap- respondingly the accumulation process has pears to have been significantly and by any reasonable count created working increasingly egalitarian over the years class majorities in all of the advanced capi- 1950-70. In the advanced capitalist coun- talist countries. tries as a whole, investment ratios and the At the same time, the capitalist class in ratio of social service expenditures to gross

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 362 AMERICAN ECONOMIC ASSOCIATION MAY 1978 domestic product have exhibited over the laissez-faire and property rights. Indeed, past two decades an increasingly strong responding to the social conflicts and irra- negative relationship. Similarly, growth tionalities of , eco- rates of total output and the ratio of social nomic theory has on balance rationalized service expenditures to gross domestic rather than chastized the interventionist product exhibit a strong negative relation- state. ship. The dynamic instability of liberal demo- While these data are, of course, con- cratic capitalism is a contribution to the sistent with a variety of explanations, they dissolution of the still dominant but mor- are hardly supportive of the thesis of com- ibund corpus of liberal social theory. It patibility of liberal democracy and capi- also represents a challenge: the construc- talism. Indeed they suggest that the growth tion of a more adequate conceptualization process of capitalism, a necessary part of of the relationship between liberal its reproduction, has generated a constella- democracy and capitalism. Two elements tion of political forces which, while hardly of such a new theory would appear to be , appears to promote eco- essential. nomic stagnation. First, the relationship between capitalism Much of the evolution of liberal social and liberal democracy is not a logical rela- theory over the past century may be viewed tionship in which liberal democracy may be as a response to these contradictions. Two inferred from the structure of the economic strands are particularly striking. One is a system. Rather, liberal democracy must be natural extension of liberal democratic understood as a historically contingent out- theory, known to economists primarily come of a particular alignment of class and through the work of . other forces generated in important degree Drawing on the earlier arguments of by the capitalist accumulation process it- Mosca, Pareto, and others, Schumpeter self. With the possible exception of the invokes the putative decision-making inca- United States, the achievement of liberal pacity of the electorate to reduce democracy, as distinct from , democracy to a competition among elites. dates from the late nineteenth and the Expertise replaces participation as the twentieth centuries, that is, from the period guiding principle in this new theory of of the rise of the , not from the democratic elitism. The task of the elec- ascendancy of the bourgeoisie. Indeed, torate is ratification, or the selection of a was never a project of new group of experts. the bourgeoisie, but rather a hard fought The other strand is the enduring effort to concession won by farmers and workers. It arrive at a satisfactory definition of a seems reasonable to conjecture, private sphere of economic and social rela- analogously, that a socialist democracy tions, a sphere exempt from democratic cannot be conjured up from the blueprints claims and beyond the legitimate interven- of workers councils and transformed tion of the state. The accumulation process property relations, but will arise, if at all, itself has not been entirely supportive of from the configuration of class forces which this effort, as the recent history of the bring into existence and impart family reveals. General to it its own dynamic. developments have been equally unac- Second, the extension of the suffrage and comodating. Unlike the Lockean theory of the securing of during the property rights, the utilitarian theory now capitalist era may best be understood as a dominant in the social sciences, ethics, and political analogue to wage increases in the jurisprudence has proved a porous bulwark economic sphere. The exchange of labor against the state. The theory of the second power for the wage represents both a gain best, the social function, and lump for the worker and a relinquishment. The sum transfers are evidence that modern receipt of the wage exhausts the worker's has all but jettisoned claim on the product and on participating in

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 363 the control over the production process. under duress, then the defenders of liberal Historically the advent of the wage labor democracy must strive continually to system represents the progressive elimina- renew the terms of the accord. If our argu- tion of a complex and varied system of ment is correct they could hardly have claims on both the product and control of chosen a less auspicious terrain upon which the process of production. In like manner, to take their stand than the advanced capi- participation in the electoral sphere is a talist economy. gain for the worker and a relinquishment. Indeed, there may be no viable defense The worker gains a vote and the op- strategy for liberal democracy. The suc- portunity to contest in the electoral sphere. cessful mobilization of mass support for At the same time the worker gives up legiti- liberal democratic institutions may well en- mate resort to other once very legitimate tail a redefinition of democracy itself, one and effective forms of political expression: which emphasizes substantive popular out- political strikes, bread riots, machine comes as well as formal liberal democratic wrecking, the tarring and feathering of procedures. cus- Thus the defense of liberal toms officers, and even dumping tea into democracy may well entail more than the Boston Harbor. The extension of the vote transformation of the capitalist economy. It and the increased real wage are at once may also set in motion forces for the forms of integration of the working class supercession of liberal democracy itself, in and substantial working class gains. favor of a socialist democracy which in- If liberal democracy is not the logical tegrates political equality and majority rule political expression of the capitalist with popular sovereignty. economy, if instead it is a bargain struck

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