does capitalism promote or prevent...

Does Capitalism Promote or Prevent Democracy?

Donal Khosrowi Durham University

[email protected]

January 31, 2017

1. Marx’s Scientific Communism Historical Background Alienated Labor and Exploitation The self-destructive Dynamics of Capitalism

2. Criticisms of Marx’s Analysis Historical Determinism Labor Theory of Value Predictive Failures

1. Capitalism, Communism & Democracy Capitalism & Democracy Communism & Democracy A Third Way?

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Overview

1 Marx’s Scientific Communism

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• Marx’s work situated in observations of conditions of working class in early 19th century NE-Europe

• Before 1848 revolutions, pre-democratic societies at dawn of industrialization, liberalizing economies from mercantilist vestiges

• Marx finds earliest large-scale realization of capitalist production economy • Capitalists own large factories where generic commodities are mass-

produced by workers (vs. feudal-aristocratic production economies) • Increasing specialization of wage-labor • Workers do not own means of production or outputs • Pressures of free market incentivize capitalists to produce more

efficiently, invest in machinery to substitute manual labor • All in the ultimate pursuit of generating profit

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1.1 Background

• While this helps bourgeois civil society overcome particularist tendencies prevalent in aristocratic-feudal societies by creating an economic sphere where individuals are free to engage in any economic interaction whatsoever…

• …It also creates two issues of concern to Marx

1. Alienated labor 2. Immiseration of the working class

Marx argues that these two tendencies constitute inherent contradictions that will lead to the eventual decline of capitalism and its supersession by communism

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1.1 Background

• Marx argues that industrial wage-labor is alienating • Alienated labor: a form of labor bereft of the elements that help individuals

to fully realize themselves • Contrast with non-alienated labor:

• Main premise: Human beings are fundamentally multifaceted • Each individual has various capabilities, interest, tastes, desires,

hopes • Traditional forms of labor, e.g. artisanal labor, are a means for

individuals to realize themselves in various ways • Simultaneous pursuit of interests, enjoyment of fruits of labor as

accomplishments of their own making and confirmation of their capabilities

• E.g. hunt in the morning, craft a chair in the afternoon, write poetry in the evening

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1.2 Alienated Labor and Exploitation

• Alienated labor is the exogenous division of labor • Worker not asked to realize his potentials, but to perform narrowly defined

activity in pre-determined ways, subject to tempo of machinery • In many instances, this is physically exhausting and unnatural • “[…] the machine does not free the labourer from work, but deprives the

work of all interest” (Marx, Capital, Vol. 1, Ch.15, §4)

• Alienation manifests itself in different ways: 1. Product of labor is taken away from the producer as soon as it is created 2. Work is experienced as torment 3. Labor alienates workers from realizing their capabilities 4. Labor alienates workers from other individuals; market relation of

exchange displaces substantive relations of attending to each others’ needs

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The second of Marx’s concerns is with the immiseration of workers • Marx argues that capitalism incentivizes capitalists to exploit workers • Competition puts pressure in capitalists to get more surplus value out of

their workers • Make workers work as long as possible • Put pressure on workers, increase labor productivity • Replace / augment workers by machinery • Hire women and children

• Even as economic conditions of workers are steadily deteriorating, lacking viable alternatives, workers are incentivized to accept employment

• And by accepting these conditions, they perpetuate the very system that is exploiting and oppressing them

• Contradiction: individually rational, collectively deleterious

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In short: Capitalism yields alienation, lack of fulfillment and positive freedom, as well as poverty on the part of the working class

Questions for Marx: • Why and how does capitalism bring about these undesirable affairs? • What are the long-run political and social consequences of these

circumstances?

• Marx’s aim: offer an analysis of capitalism that.. 1. Explains how these phenomena come about 2. Allows to offer an argument for why these tendencies will eventually lead

to the decline of capitalism

• How?...

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Ingredients 1. Principle of accumulation: competitive markets have a tendency toward

centralization of ownership and concentration of wealth 2. Labor Theory of Value

• LTV: only living labor can create value • The value of commodities, as well as their relative values, are

determined by the labor that goes into producing them • Machinery does not create value by itself, only in virtue of the

human labor that went into producing the machines

How does this yield problems?..

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1.3 The Self-Destructive Dynamics of Capitalism

Let’s take a step back: how do capitalists make profits? • By extracting surplus value how?...

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Main line of argument: • Capitalism exhibits tendency of decreasing rates of profit • Rate of profit = S / (C +V) • Competition incentivizes capitalists to substitute and augment labor by

machinery • V is substituted by investments in C • Yet, as only living labor V can create value (LTV), this means that value,

and hence surplus value S gradually decreases • Capitalists can counteract this by putting more pressure on workers • But the general tendency is for V and hence S to decrease • In a competitive environment, firms that are not sufficiently efficient to

operate profitably will be driven out of the market

What follows from this tendency?...

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Results: • Monopolies, accumulation of wealth and capital in the hands of few • Capitalists who fail to be competitive join the ranks of the unemployed • Continued immiseration of the working class, unemployment, decrease in

purchasing power, consumption, crisis • This shapes the basis for revolution • Workers will come to realize that they have nothing to gain from capitalism • Proletariat will become a class that is the dissolution of all classes, a sphere

of society that has a universal character in virtue of its universal suffering • Having nothing to lose and everything to gain by the supersession of

capitalism by communism, together with the intellectuals that recognize the moral inadequacy of capitalism, this will inevitably lead to the communist revolution

• Not necessarily in the short run, but…

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• Long-run: When inner contradictions of capitalism manifest, the bourgeois class will shrink and crisis will ensue

• Next, transitory stage: dictatorship of the proletariat by majority rule of the worker’s party

• Final stage: elimination of the state into post-national, communist society of fundamentally equal human beings

• Classless society makes the state redundant as it is the ultimate realization of true democracy; a society of equals, politically, socially, economically

• Acc. Marx, such society permits human flourishing to the highest degree as it endows individuals with the greatest extent of individual positive liberties (recall e.g. division of labor)

This completes the sketch of Marx’s argument for the decline of capitalism..

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2 Criticisms of Marx’s Analysis

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Three major lines of criticism

1. Historical determinism 2. Labor Theory of Value 3. Predictive Failures

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2 Criticisms of Marx’s Analysis

Marx pursues ambitious project • “Scientific” rather than “utopian” communism • Aim: offer economic analysis of capitalism, uncover its inner contradictions

(partly) on theoretical grounds and derive its ultimate tendency to failure as a prediction

• But: this presupposes a substantive understanding of social and political change as determined by few economic mechanisms that invariably give rise to certain kinds of outcomes

• “[…] the final causes of all social changes and political revolutions are to be sought, not in men's brains, not in men's better insights into eternal truth and justice, but in changes in the modes of production and exchange. They are to be sought, not in the philosophy, but in the economics of each particular epoch.” [Engels 1880[1892] Socialism - Utopian and Scientific, 54]

• Supervenience of the social and political on the economic (surface phen.) • Critics reject this presupposition as untenably determinist • Given pred. failures, nothing seems invariably determined by capitalism

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2.1 Historical Determinism

Marx’s conclusions about the invariable decline of capitalism rest on the adequacy of the labor theory of value • Recall LTV: only human labor can create value • Liable to various counterexamples, e.g. price of gold, works of art, high

profits in capital intensive industries, low profits in labor intensive industries etc.

• Labor is exchangeable for other, arbitrary sources of value, e.g. steel qt. (Sraffa)

• LTV under attack by various economists, e.g. Marshall, Menger, Keynes • Subsequently replaced by subjective theories of value

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2.2 Labor Theory of Value

Marx’s main prediction is the invariable tendency of capitalism to fail and be superseded by communism • This prediction failed • Although stagnant in mid 19th century, worker’s wages gradually began to

increase at the end of 19th century • Purchasing power increased, crisis was avoided • Emergence of a propertied middle class that was enabled by productivity

increases • Class struggle attenuated by collective bargaining • Emergence of relatively autonomous states with the capacity to tax and

spend (!) • This gave birth to modern social democracies, a (purported) third way

between full-fledged capitalism and utopian communism

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2.3 Predictive failures

We might conclude that Marx’s analysis is fundamentally flawed, uninteresting e.g. Keynes on Das Kapital “[…] an obsolete textbook which I know to be not only scientifically erroneous but without interest or application for the modern world […]” (Keynes 1931, Essays in Persuasion)

But is that so? • Possible to reconsider Marx’s central criticisms as a basis for a modern

criticism of (modern) capitalism and its relation to democracy • We can do that without subscribing to Marx’s assumptions (e.g. LTV), or

conclusions about the inevitable supersession of capitalism by communism • We may still grant that there are certain endemic tendencies in capitalism

that are contradictory, undesirable and in conflict with democracy

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2.4 What now?

3 Capitalism, Communism and Democracy

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Some questions of interest:

• Is capitalism/communism necessary for true democracy? • Does capitalism/communism promote democracy? • Does capitalism/communism have tendencies that undermine true

democracy? • Are certain arrangements of capitalism + democracy / communism +

democracy inherently unstable and/or unattainable? • Do capitalism and communism disagree on the means to achieve given

ends, or do they disagree on the very ends that societal arrangements are intended to promote?

• Is the capitalism / communism distinction an all-or-nothing dichotomy?

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3 Capitalism, Communism and Democracy

Wealth inequality vs. effective equality of opportunity • Inequality in incomes and wealth aggravates and perpetuates effective

inequalities in opportunity • Perhaps formal equality of opportunity, e.g. no barriers to enter prestigious

university like Durham • But: my financial background might not allow me to do a Ph.D. at Durham • Effective inequality in opportunity as a function of initial wealth position • Such inequalities perpetuated if e.g. there is an effect of education on

earnings, and I incentivize and finance my children’s university education

This plays out on other levels, too..

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3.1 Capitalism and Democracy

Principled vs. effective freedom of political participation • U.S. heterogeneity in political participation • Most citizens enjoy equal rights to political participation (except convicts etc.) • But: low-income individuals far less likely to vote than high-income individuals

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Why? Low-income (and minority) individuals…

• Less likely to have requisite ID • Less likely to receive absentee ballots • More likely to experience difficulties with finding/commuting to polling

station • More likely to report experiences of hostility/intimidation at polling station • More likely to experience considerable waiting times • More likely to be effectively precluded from voting due to working hours,

higher rate of illness… Upshot: Individuals’ propensity to cast their vote is skewed towards high probability mass on high-income individuals • This means that high-income individuals have a higher probability to have

their political preferences pursued by government • This may be considered as conflicting with democratic principles/values

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Extra-electoral means of political participation Voting is not the only form of participation practiced in modern democracies, e.g. volunteering for campaigns, contributing money to parties/candidates, lobbying the government.. … all effective means to shape legislation and make sure one’s interests are promoted Evidence suggests that low-income individuals lack money to effectively advocate for their needs; their interests are under-represented as a result:

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3.1 Capitalism, Communism and Democracy

Analysis of 2008 Pew Internet and American Life Survey, reproduced from Schlozman et al., The Unheavenly Chorus, Princeton University Press, 2012, p. 124. Socioeconomic status determined by ranking U.S. population by income and education levels and dividing into five equal groups.

Selecting candidates and funding their campaigns • 2% of Americans donate money in presidential elections • < 0.5% donate majority (largest single donor 2012 > bottom 98%) • Of more than 12,000 interest groups lobbying U.S. Gov, less than 1%

advocate explicitly on behalf of low-income individuals and are outspent by 3000:1

“Year after year, decade after decade, and from one generation to the next, the affluent and well educated have participatory megaphones that amplify their voices in American politics ... [and] shape what politicians hear about political needs, concerns, and preferences.” (Schlozman, Verba, Brady 2012, 232)

Poor and near-poor citizens exert ”[…] no discernible impact on the behavior of their elected representatives.” (Bartels 2016, 6)

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Lobbying government • While, contra Marx, tendency toward the centralization of ownership and

the concentration of wealth may not invariably yield the decline of capitalism, it yields other problems

• E.g. accumulation of wealth and capital leads to concentration of power • This can have destabilizing economic and political effects • Larger corporations can exert more political influence as rent-seekers • E.g. corporations that generate substantial tax revenue and can significantly

affect employment levels are in a good bargaining position to change legislation in extra-electoral ways, e.g. threaten to move plants if favorable policy is not implemented

• It would be naïve to think that concentration of wealth and capital does not affect equality of opportunity and distribution of effective powers of political participation

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Q: Does this give license to think that communism is superior in its capacity to promote democracy? • Recall: Marx argues that in the long run, capitalism will be superseded, first by

dictatorship of the proletariat, then stateless, classless, communist society as the realization of true democracy

• But: Have we ever seen any society like this? Why not? • Kim 1992: It seems that there are few if any incentives for a one-party dictatorship

of the proletariat to voluntarily dissolve itself and fully transform into a true, classless, stateless, communist society; a true democracy

• Moreover, historical instances of such governments exhibit various straightforwardly anti-democratic features, e.g. Leninist one-party authoritarian rule: little opportunity for political participation / opposition

A: not really

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3.2 Communism and Democracy

Kim 1992: Recent crisis of communism shows that it is incompatible with democracy East Asia: Three forms of government 1. Leninist one-party authoritarian regime, e.g. 1992 China, North Korea, Vietnam 2. Authoritarian-pluralist, e.g. Taiwan, South Korea 3. Liberal democracy, e.g. Japan, Malaysia, Singapore, India

• 1) Either failed (USSR, Eastern Bloc), or dissolved into 2)… • 2) is unstable: endorsing economic pluralism and liberalization leads to

increasing prosperity, emerging middle class that will eventually make political claims to yield power, accept more democratic constitution

Kim: Nature of capitalism is that is secretly nurtures and eventually unleashes democratic forces

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3.3 A Third Way?

Communism as effectively instantiated doesn’t do the job either Kim (1992) suggests a third way: • Social democracy (weak socialism/communism) as found in modern

European welfare states • Poses no threat to democracy, as socialist take part in bourgeois

parliamentary politics, seeking to limit, yet not abolish, capitalism • In doing so, they may help save democracy by saving capitalism from its

endemic self-destructive tendencies

Social Democracy as striking a balance between 1) Exercising a high degree of state control over the economy that may

adversely affect the “economic vitality” of a democracy 2) Leaving markets unattended, which creates social and economic

dislocations that seriously threaten the stability of democracy

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3.3 A Third Way?

Wrap up

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• There are reasons to believe that both capitalism and communism (at least as instantiated in the real world) can exhibit tendencies that are in conflict with democracy

• Yet, both also exhibit features that seem to promote democracy • Unclear whether there are principled, necessary relations between

capitalism/communism and democracy • Marx analysis still elucidating, not as final word on inevitable decline of

capitalism but as basis for modern critique of capitalism that helps highlight some of its inner contradictions and tensions between capitalism and democracy

• Social democracy has been suggested and implemented as a third way that may be able to reap the benefits of both systems of economic organization

• More on this in W13 on Joseph Schumpeter’s Capitalism, Socialism, and Democracy

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Wrap-up

Thanks & Questions?

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