Conceptualizing Politics

5.   Democracy and capitalism
If we want to address this thorny topic in a rational way, it is wise first to clarify our 
language, steering away from the understanding of capitalism the reader may have 
drawn from political struggle and propaganda, in which words are bent to the par-
ticular interest of any actor in order to influence the debate in her/his/its direction.
By capitalism let us understand an economic system producing commodities, 
which is driven by profit expectations and based on private ownership of the means 

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Government and democracy  99
of production as well as wage labour being itself a commodity exchanged on the job 
market.
This is the core definition of capitalism, of which many versions have existed 
in modern history and the contemporary world. Some of them bring, in extreme 
cases, to development the pathological elements that are – given its core structure – 
possible, but not necessarily always active. The sometimes recurrent cry ‘abolish 
capitalism’ seems to be aimed at these pathologies rather than at capitalism as such.
Against historical determinism, and in the sense of a multi-factor conception of 
history, we can hold that, while the rise of the modern state was almost contempo-
rary to the rise of capitalism, the former was not caused by the latter, and even their 
interrelationship cannot be enshrined into a formula. As to democracy, its relation-
ship with capitalism has been ambivalent.
On the one hand, so far capitalism has been the economic system that has best 
accommodated democracy; the same can be said neither of pre-capitalist econo-
mies nor of the state socialism of Soviet or Chinese brand nor of the economies 
almost exclusively based on the selling of their natural resources and incapable 
of normal capitalist development (countries affected by the ‘oil-curse’). As the 
revolutionary force that was recognised as such by Marx himself, capitalism has 
set traditional societies upside down and created the terrain for modern political 
dynamics. The private powers created by early capitalism were able to counter-
balance those of the absolutist state and to loosen its grip on a country’s wealth, 
especially in France; the creation of economic growth also generated the urban 
middle class and the civil society based on it, which were the fitting environment 
in which liberal, democratic and later socialist ideas and movements were able to 
thrive. After the Second World War, the capitalist reconstruction of Western and 
Southern Europe under democratic governments created the premises for the 
implementation of the workers’ social rights – obviously not without conflicts 
with entrepreneurs.
On the other hand capitalism, if left unbridled, can become a threat to democ-
racy for at least three major reasons:
1.  It creates global and national non-political powers that can overwhelm the 
policy-making ability of democratic governments and severely limit their 
range of options, especially after the primacy achieved by insufficiently regu-
lated financial capitalism.
2.  Those extra-democratic powers can heavily influence policy by poorly regu-
lated money donations to parties and politicians as well as by corruption of 
representatives and civil servants, which sometimes occurs across borders. The 
funding of anti-democratic parties and rebel groups is another example; one 
of the many examples was the funding by wealthy donors of rightist militias 
in the process that led to the upsetting of Latin-American democracies in the 
1970s–1980s.
3.  Capitalist powerhouses or oligopolies, seeking to expand their profits without 
economic wisdom and due consideration to the human and environmental 

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100  How politics works
externalities
22
 of their activity, can constrain legislation in the direction of 
voiding or limiting social security, thus eroding one pillar of the democratic 
state and creating social unrest, or even letting conflicts degenerate into a threat 
to domestic peace. The market, to put it in the words of Robert Dahl, needs to 
be civilised by democracy.
This view is based on a balanced appreciation of the market along with the rejec-
tion of the attitude called market fundamentalism. Looking back at the debate 
‘market economy vs. planned (or command) economy’ of the early 1920s in Ger-
many and Austria (cf. Cubeddu 1993), there is little doubt that the liberal or free 
trade party was right in seeing the market as better equipped to provide an effi-
cient (thanks to the price mechanism) provision of goods for the society, even if 
they were wrong in rejecting any state intervention in the economy – as the New 
Deal in America and the social market economy of the European reconstruction 
proved. By the way, planned economy also was relatively successful, but only in 
the initial phase of industrialization and modernisation of underdeveloped coun-
tries such as the Soviet Union in the 1920s and China in the 1950s and 1960s; it 
proved later an incorrigible obstacle to development, so that Deng’s China shifted 
later to capitalism in order to kick off poverty-staving growth and reinforce the 
Communist regime.
To be clear, one thing is the superiority of market over plan, another one alto-
gether the alleged autonomy of the market from all politics, which has resurfaced 
as neoliberal myth since the 1970s and contributed – along with the new global 
dimension – to taking away economic processes from regulations passed by demo-
cratic decision making. The Asian crisis of 1997 and more decisively the first finan-
cial, then economic crisis that started in New York in 2008 and led to the nearly 
worldwide, year-long Great Recession, has proven the fundamentalist faith in the 
market wrong not only in theory, but in economic practise as well, as remedy-
ing it required a lot of intervention by governments and international institutions. 
Nonetheless neoliberal ideologues are rarely ready to give up their exaltation of the 
market and their treatment of the state as their bête-noire.
23
We will come back to the ‘democracy and capitalism’ topic in the chapter 
on the two moments of globalisation, which will have something to say also on 
how democracy comes to terms (or fails to) with scientific and technological 
advancements, be it nuclear physics or the unveiling of climate change. But we 
need to first enter the two fields of international and global politics and make 
ourselves familiar with the state of affairs and its language. Then we will be able 
to complete our image of democracy with the issues challenging it today and 
tomorrow.
Notes
 1  The same word is the title of Plato’s main work on politics and is in his case translated 
as Republic. As to democracy, till the 18th century this word meant either government by 
the populace led by demagogues, as in ancient Greece, or direct democracy.

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Government and democracy  101
 2  This is clearly not even a recapitulation of the long and variegated evolution of the 
typologies of government, for which the reader is invited to turn to both a history of 
political thought and a history of political institutions.
  3  Philosophical reflections on totalitarianism – a word introduced by Italian fascism, which 
unlike Nazism did however not fully succeed in realising a corresponding regime – were 
first formulated by Max Horkheimer (1942, 15), though under the label of the authori-
tarian state, and later Hannah Arendt (1951).
  4  Thucydides BCE 404. That the author ended his writing in the year BCE 404 (the year 
of his death? or 396?) is only a conjecture. We also ignore the original title given by him 
to his work that was traded down to us as 
ιστορίαι/histories or. Περὶ τοῦ Πελοποννησίου 
πoλέμου/The Pelopponesian War.
 5  Voting rights for African-Americans, established by the Fifteenth Amendment passed 
in 1870, only became effective nation-wide with the Civil Rights Act of 1964 and the 
Voting Rights Act of 1965, a combined if conflictual achievement of President Lyndon 
B. Johnson and Dr. Martin Luther King Jr.
 6  This was the prevailing direction in which the doctrine of the nation state expanded, 
though not the only one, as the cases of Mazzini and later Otto Bauer (1881–1938), the 
leader of the so-called Austromarxismus, prove.
 7  Here I am reminded of Norberto Bobbio’s suggestion, in a talk given as early as in the 
1980s, to replace ‘the people’ by ‘the citizens’ in constitutional texts.
 8  In the case of the USA, the quasi-aristocratic role is now said to have passed from the 
Senate, which until 1917 was not elected by popular vote, to the Supreme Court. Bun-