Posts Tagged ‘democracy’


I have been arguing for some time on this blog that contemporary capitalism faces a profound legitimation crisis. It has failed to deliver on its promises, and therefore is being calling into question.

As it turns out, Martin Wolf, the chief economics commentator at the Financial Times, has also sounded a warning about the ongoing legitimacy crisis. But for him it’s a bit different. The problem, as he sees it, is the tension between democracy and capitalism.

A natural connection exists between liberal democracy — the combination of universal suffrage with entrenched civil and personal rights — and capitalism, the right to buy and sell goods, services, capital and one’s own labour freely. They share the belief that people should make their own choices as individuals and as citizens. Democracy and capitalism share the assumption that people are entitled to exercise agency. Humans must be viewed as agents, not just as objects of other people’s power.

Yet it is also easy to identify tensions between democracy and capitalism. Democracy is egalitarian. Capitalism is inegalitarian, at least in terms of outcomes. If the economy flounders, the majority might choose authoritarianism, as in the 1930s. If economic outcomes become too unequal, the rich might turn democracy into plutocracy.

Historically, the rise of capitalism and the pressure for an ever-broader suffrage went together. This is why the richest countries are liberal democracies with, more or less, capitalist economies. Widely shared increases in real incomes played a vital part in legitimising capitalism and stabilising democracy. Today, however, capitalism is finding it far more difficult to generate such improvements in prosperity. On the contrary, the evidence is of growing inequality and slowing productivity growth. This poisonous brew makes democracy intolerant and capitalism illegitimate.

One can find plenty to pick apart in Wolf’s story, starting with the idea that there’s a “natural connection” between democracy and capitalism. There’s nothing natural about it, although clearly there is a historical relationship—complex, fragile, and contested—between democratic political structures and capitalist economies.

But Wolf does understand that today’s capitalism is global:

Left to themselves, capitalists will not limit their activities to any given jurisdiction. If opportunities are global so, too, will be their activities.

And while Wolf forgets or overlooks the fact that capitalism has been global from the very beginning, he demonstrates his awareness that the disappointing recent performance of global capitalism (“not least the shock of the financial crisis and its devastating effect on trust in the elites in charge of our political and economic arrangements”) has once again created tensions between capitalism and democracy. One source of tension is the rise of a global plutocracy (“and so in effect the end of national democracies”), the other is the rise or illiberal democracies or outright dictatorships (“in which the elected ruler exercises control over both the state and capitalists”).

Wolf is most worried about the danger to democracy, and therefore has come around to the view that the continued pursuit of international trade agreements (like the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership), which “tightly constrain national regulatory discretion in the interests of corporations,” needs to be curtailed and rethought.

The alternative, of course, is to safeguard and strengthen the future of democracy—in which, in Wolf’s words, economic policy can be “orientated towards promoting the interests of the many not the few”—by doing away with capitalism itself.

Jamie Galbraith’s ties to Greece go back some seven decades, most recently as an adviser in the Ministry of Finance (working with Yanis Varoufakis) for the Syriza government.

In a recent comment (itself a summary of his new book, Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe), Galbraith [ht: cb] has presented a clear, trenchant critique of Europe through its treatment of Greece.

Last year’s third bailout of Greece, imposed by Europe and the International Monetrary Fund, does to Greece what Versailles did to Germany: It strips assets to satisfy debts. Germany lost its merchant marine, its rolling stock, its colonies, and its coal; Greece has lost its seaports, its airports — the profitable ones — and is set to sell off its beaches, the public asset that is a uniquely Greek glory. Private businesses are being forced into bankruptcy to make way for European chains; private citizens are being forced into foreclosure on their homes. It’s a land grab.

And for what? To satisfy old public debts, incurred for tanks, submarines, the Olympics, big construction projects outsourced to German firms, and to hide deficits in health care, with creditor connivance — a quagmire of graft to support an illusion, that Greece could “compete” as part of the euro. Already in 2010 the IMF knew it was breaking its own rules by pretending that Greece could recover quickly, sustain a huge primary surplus, and repay its debts. Why? To help save French and German banks, which the IMF’s sainted managing director, Dominique Strauss-Kahn, wanted to do, because he wanted to be president of France.

Europe crushed the Greek resistance in 2015. Not because Wolfgang Schäuble, the German finance minister, thought his economic plan would work; he candidly told the Greek finance minister, Yanis Varoufakis, that “as a patriot” he would not sign it himself. But Germany wants to impose its order on Italy and on France, where civil society continues to fight back. And Chancellor Angela Merkel could not admit to her voters, or to fellow Europeans from Slovakia to Portugal, that back in 2010 she’d saved Germany’s banks by saddling them with Greek debts that could never be paid.

Greece was given collective punishment as a lesson. It was done to show that “there is no alternative.” It was done to stop any other attempt to develop, articulate, and defend a more rational policy. It was done to protect the power of the European Central Bank, the German government in Europe, and the policy-making authority, in face of a long record of failure, of the IMF.

If there is an alternative for Europe, where would it come from? According to Galbraith, the process begins with the Democracy in Europe Movement (or DiEM25), launched in 2015 by Varoufakis. But it doesn’t stop there.

Ultimately there would have to be big changes, as revolutionary as the 2015 Athens Spring. The old oligarchies, the Brussels cabals, the self-serving technocrats, and the economic ideologues who now dominate European economic policy would have to yield.

British Labor leader Jeremy Corbyn considers socialism—which he defines as “You care for each other, you care for everybody, and everybody cares for everybody else”—to be obvious.

As it turns out, socialism is increasingly obvious for folks on this side of the pond, too. Like Bernie Sanders. And Mark Workin and Melissa Young, who made the film Shift Change. And Richard Wolff, through Democracy at Work.

Now they’re joined by Shannon Rieger, a recipient of the Janice Nittoli “Forward Thinking” Award from The Century Fund.


Rieger’s argument is that, in the face of growing inequality (such that “the top 1 percent wage has increased by 138 percent since 1979, [while] the wages of the entire bottom 90 percent of earners have grown by the comparatively meager margin of just 15 percent—and an even more unequal distribution of wealth”), it’s imperative that the United States “develop policies that not only mitigate existing economic inequality and poverty, but that actually reverse these trends for the long term.”

And her proposed solution? Enterprises that are owned and managed by their employees.

By creating a policy environment to support and promote democratic employee-owned businesses, the United States could promote a more equitable employment system and a more just distribution of wealth. Doing so would not only help the country recover from the recent economic devastation of the Great Recession, but also begin to reverse the deep wealth and income disparities that have plagued American workers and families for decades.

Worker-owned cooperatives (which, across the world, employ more than 250 million people, and in 2013, generated $2.95 trillion in turnover) are a particular form of democratic employee-owned business that Rieger considers to have particularly rich potential in the United States.

But they need support, to “help grow the sector to scale.” So, as Rieger explains,

it is crucial that the United States establish a national-level regulatory framework for worker-cooperatives. Foundational components of such a framework could include a clear, universal definition for worker-cooperatives and a national worker-cooperative incorporation code; financial support mechanisms, such as a dedicated worker-ownership fund; and cross-sector partnerships with the existing decentralized network of employee ownership service providers.

Using examples from around the world (including the Marcora Law in Italy) Rieger makes the obvious case for the growth of democratic worker-owned enterprises in the United States.*

Worker-owned enterprises, as a key feature of a socialist transition from capitalism, are certainly obvious to me.


*The Marcora Law, which was passed in 1985, offers Italian workers an array of financial support options and a “right of first refusal” opportunity to purchase and re-launch troubled businesses as worker-cooperatives. As Rieger explains,

a U.S. worker-buyout policy modeled after the Marcora Law should become a component of federal-level policy framework for worker-cooperatives. By creating federal legislation that recognizes the worker-owned cooperative business as a distinct form of democratic employee-ownership, and that aligns existing state-level incorporation codes and the worker-ownership service provider network under universal regulatory guidelines, the United States could make a meaningful, effective commitment to expanding the democratic worker-ownership sector.


Presidential polling and forecasts (such as those from FiveThirtyEight) in the United States have quite definitively moved in favor of Hillary Clinton. And, by the time this gets posted, the gap between Clinton and Donald Trump will probably have grown even more.

We should remember all such polling presumes voters are “sincere,” that is, they will vote for the candidate they think is the “better” choice.

But what if voters are strategic, that is, they make tactical decisions in their voting? Then polling, and the forecasts that stem from them, are going to be deceptive. And the loser in the polls might be the winner in the election.

The obvious strategic choice, for those who don’t want Trump elected but also dislike (for a whole host of valid reasons) Clinton, is to vote for the Green Party’s Jill Stein. The idea is that, at least in states where Clinton appears to be a “lock,” it’s important to run up the numbers to Clinton’s left, in order to put pressure on her electoral campaign and post-election policies. This is presumably the option that at least some, and perhaps a large number, of Bernie Sanders’s supporters will choose in November.

But there’s another strategic choice, which will also lower Clinton’s final numbers: those who are indifferent between Clinton and Trump (because both have moved “too left,” or at least more populist, on economic policy) but certainly don’t want Clinton to win in a landslide. It’s the argument Holman W. Jenkins, Jr. has recently made in the Wall Street Journal:

let’s also remember that even if Trump defeats himself, it would not be the same as reaccrediting the Depublican and Remocrat leadership class of which Mrs. Clinton is so spectacular an example. Our system of institutions is not designed to find us the “right” person to be our national hero/role model. Its job is to harness and constrain the forces and personalities that democratic populism throws up.

Voters are perfectly entitled to ask themselves if one of our major parties has thrown up a candidate unsuitable purely on grounds of personality and temperament, but we also should have some humility about the historical moment we’re living through. A narrow Hillary victory or Trump victory might not be outcomes all that distinguishable from each other in the end—whereas a Clinton landslide that produces, like the first two Obama years, one-party government fundamentally out of sync with the American electorate and out of sync with the national moment could be the larger misfortune.

This is an argument for continued “gridlock,” which may be precisely what American businesses want at the national level. Presuming Clinton is going to win the presidential election, they want to make sure at least the House, if not the Senate—in other words, the result of the down-ticket races—remains in the opposition’s hands. And that’s the reason they may vote strategically for Trump.

I can well imagine both these strategic voting decisions affecting the presidential vote, especially if the polling and forecast gaps between Clinton and Trump continue to grow.

To be clear, I am not trying to make an argument for or against voting (or, for that matter, for or against strategic voting). Precisely because it raises the possibility that the winner might lose (or, alternatively, the loser might win), the case I’m trying to make is that voting in elections is merely the semblance of democracy and that democracy falls far short of the horizon of the politics we actually need today.


Charles Wilbert White, “The Contribution of the Negro to Democracy in America” (1943)

Almost two centuries ago, European (especially French) elites were fearful of the democratic experiment taking place in North America. So, they dispatched Alexis de Toqueville (and Gustave de Beaumont) for a report, under the pretext of examining the U.S. penal system. The result was de Toqueville’s two-volume paean to the principle of equality and the “great democratic revolution [that] is going on among us.”

This year, the United States hosted another visitor, Maina Kiai, the United Nation’s Special Rapporteur on the rights to freedom of peaceful assembly and of association. As Max Bearak [ht: ja] explains, Kiai’s trip “was spurred by growing concerns that despite a Constitution that guarantees broad inalienable rights, the world’s supposed beacon of freedom is often not living up to international standards of equality under law.”

At the end of his trip, Kiai also published his findings, which readers will see is a much more critical analysis of the current state of democracy in America.

Like de Toqueville, Kiai begins with some history:

The United States is an impressive, complex and imposing nation in which to undertake a mission such as this. It is an economic powerhouse, a military superpower, a global engine of technological development, and one of the oldest democracies in the world.

It is also an extremely diverse nation, a nation of indigenous peoples, slaves and immigrants. It is a nation of diverse opinions and views, sometimes so strongly held that it once slid into Civil War. And it is a nation of struggle and resilience, home of one of the 20th Century’s most inspiring moments encapsulated by the Civil Rights Movement.

The experiences with various forms of diversity and complexity have not always been smooth. The country was founded on land stolen from its indigenous Native Americans; its early economic strength was built on race-based slavery against people of African descent; and successive waves of immigrants have faced discrimination, harassment or worse.

Kiai then observes, “America seems to be at a moment where it is struggling to live up to its ideals on a number of important issues, the most critical being racial, social and economic inequality, which are often intertwined.” He is particularly concerned with an issue that de Toqueville himself thought was vital to the practice of American democracy: the freedom of association. “But it is impossible to discuss these rights,” Kiani notes, “without issues of racism pervading the discussions. Racism and the exclusion, persecution and marginalization that come with it, affect the enabling environment for the exercise of association and assembly rights.”

This issue is particularly grave in the African-American community, and understanding its context means looking back at 400 years of slavery. It also means looking at the emergence of the Jim Crow laws that destroyed the achievements of the Reconstruction Era, which emerged at the end of slavery in 1865, and enforced segregation and marginalized the African-American community to a life of misery, poverty and persecution.

It means looking at what happened after Jim Crow laws were dismantled, when old philosophies of exclusion and discrimination were reborn, cloaked in new and euphemistic terms. These may have not been race-based on their face, but they have, intentionally or not, disproportionately targeted African-Americans and other minorities.

The so-called “War on Drugs” is a perfect example. From it, one out of every 15 black men is in currently jail. One out of every 13 African-Americans, meanwhile, has lost their right to vote due to a felony conviction. An aggressive emphasis on street-level “law and order” (or “broken windows” approach) policing combined with wide police discretion means that African-Americans are subjected to systematic police harassment – and sometimes much worse – often for doing nothing more than walking down the street or gathering in a group. Convictions and incarcerations dramatically increased once the “War on Drugs” was set in motion, without a corresponding increase in drug use.

Similarly the crime laws passed under the Bill Clinton administration (1993-2001), including the federal “three strikes” law, implemented aggressively against people of color have contributed to the huge rises in incarceration and exclusion of the black community further fueling discontent and anger.

The effects can often snowball: A minor criminal offense – or even an arrest without substantiated charges – can show up on a background check, making it difficult to find a job, secure a student loan or find a place to live. This marginalization in turn makes it more likely that a person will turn to crime, for lack of any other option, and the vicious cycle continues.

These discriminatory laws and practices need to be seen in the larger context. Wall Street bankers looted billions of dollars through crooked schemes, devastating the finances of millions of Americans and saddling taxpayers with a massive bailout bill. Yet during my mission I did not hear any suggestions of a “War on Wall Street theft.” Instead, criminal justice resources go towards enforcing a different type of law and order, targeting primarily African-Americans and other minorities.

There is justifiable and palpable anger in the black community over these injustices. It needs to be expressed. This is the context that gave birth to the non-violent Black Lives Matter protest movement and the context in which it must be understood.

In discussions with activists, it is clear that “Black Lives Matter” does not mean that other lives—green, purple, blue, white or other color—do not matter. The Black Lives Matter movement is simply a reaffirmation that black lives do in fact matter, in the face of a structure that systematically devalues and destroys them, stretching back hundreds of years. It is not about granting African-Americans special status or privilege. It is about a historically and continuously targeted community seeking to elevate itself to the same level that everyone else enjoys.

But, he explains, “racial inequality is not the only inequality inhibiting the enabling environment for association and assembly rights.”

 Although the United States engineered an admirable recovery following the financial crisis of 2007-08, this rising tide did not lift all boats. Productivity and economic output has grown, but the benefits of these have gone primarily to the wealthiest, as the wages of average people have stagnated. This has exacerbated the problem of inequality across all demographic groups, created more resentment, and more tension; providing more reasons for people to become politically engaged – including by exercising their assembly and association rights.

This inequality has been accelerated by declining union membership in a context of laws and practices which make it difficult for workers to organize, increasing corporate power, and a free market fundamentalist culture that actively discourages unionization. A dysfunctional, polarized Congress that has seemingly lost its tradition of compromise has made things worse.

In short, people have good reason to be angry and frustrated at the moment. And it is at times like these when robust promotion of assembly and association rights are needed most. These rights give people a peaceful avenue to speak out, engage in dialogue with their fellow citizens and authorities, air their grievances and hopefully settle them. They are also a key vehicle for public participation for marginalized groups whose ability to participate in democracy may be otherwise limited by dint of being felons or migrants.

Consider, then, the difference in perspective 185 years have created: The French aristocrat thought American democracy, whose only threat was a tyranny of the majority, promoted general equality among its citizens. Today, however, the U.N. official finds that growing inequality—racial, social, and economic—in America is undermining the practice of democracy, precisely when it is most required for the majority of its “angry and frustrated” citizens.

Free trade - 5

Every once in a while, a reader sends me the link to an article and asks me what I think of it.

The most recent one is Geoff Gilbert’s [ht: db] piece, “Who Plans the Economy? Imagining Fair and Free Trade.”

Clearly, at least in terms of U.S. presidential politics (but also, I think, in the United Kingdom and across Europe), the issue of international trade is “hot.” Donald Trump has certainly focused on the downside of U.S. trade details (such as NAFTA, which he has promised to “immediately renegotiate. . .to get a better deal for our workers”), as has Bernie Sanders (who eventually succeeded in pulling Hillary Clinton in that direction).

Gilbert, for his part, argues that

The way we talk about trade is all wrong. We’re told we have two options: the “free” trade status quo or protectionism. But many other possibilities exist, if we are willing to entertain different rules for owning and controlling capital both within and between countries.

I think he’s right. The free trade versus protectionism argument is exactly the way the debate has been framed across the history of capitalism and within mainstream economics. Capitalists and mainstream economists have been mostly in favor of free trade, which they then counterpose to protectionism, that is, one or another regulation of or barrier to free trade (such as national content legislation, tariffs, and so forth).

That’s it? Those are the limits within which we can discuss international economics? It’s just like the debate between markets and planning or export-led and import-substitution development—a false, narrowly circumscribed debate, and often a pitfall, especially for critics of free trade. Many times (as with Trump, Sanders, and now Clinton), they end up criticizing free-trade agreements because of their negative impact on workers but then moving in the direction of one or another kind of protectionism, as if that’s the only alternative.

And while Gilbert is correct in arguing that free trade is “corporate-managed trade for corporate interests,” he fails to recognize that protectionism is, too. Both Alexander Hamilton and Friedrich List sought to protect “infant industries” from foreign competition just as the U.S. steel and sugar industries did a couple of centuries later—and there many examples in between. They were all defending”corporate-managed trade for corporate interests,” but in the form of protectionism.

In fact, as I argued back in 2011 (in criticizing Harvard economist Greg Mankiw), the whole idea of international trade as trade between individuals (from which we all benefit, at least on aggregate) is profoundly misleading.

What Mankiw and other neoclassical economists refuse to understand is that, when international trade takes place, it has nothing to do with an individual in one country (say, the United States) buying a scarf from an individual in another country (say, China) as if they were just equal neighbors engaging in a mutually beneficial transaction. There are other economic processes involved. The consumers in the United States sell their ability to work to a corporation, and then use their wage or salary to purchase goods, some of which are produced in other countries. Some of those corporations have decided to produce goods in other countries, and thus to export jobs, while other corporations have decided to purchase the goods they sell either from their own subsidiaries in other countries or from corporations located in other countries. And in those other countries, the workers are not deciding to sell their goods to consumers in the United States; the corporations they work for are making those decisions.

Simply put, international trade doesn’t take place either between individual consumers and producers or between countries. International trade takes place between and, increasingly, within corporations located within different nations. They make the decisions about where and how goods will be produced, and where and how people will be employed.

What people who actually work for a living understand all too well is that both the much-vaunted freedom in free trade and the supposed unfreedom of protectionism are merely different ways corporations and their representatives have, at different times and places, chosen to structure international trade to advance their own interests.*

That’s certainly what Karl Marx and Friedrich Engels understood in the mid-nineteenth century, when free trade was also being hotly contested.

The question of Free Trade or Protection moves entirely within the bounds of the present system of capitalist production, and has, therefore, no direct interest for us socialists who want to do away with that system.

But if we refuse the narrow and misleading terms of free-trade-versus-protectionism debate (as both Gilbert and I believe we need to), does that mean we have nothing else to say or propose?**

Fair trade is one such alternative. Starting in the mid-1990s, George DeMartino has suggested one possibility: a fair-trade policy based on a Social Index Tariff Structure.*** The basic idea is as follows:

SITS is a multilateral trade regime that would promote benevolent means by which countries seek to improve their trade performance and growth while at the same time punishing countries that pursue export-promoting strategies that undermine human development, equality or sustainability. It does this through a multilateral system of social tariffs.

It can be thought of as a leveling-up, rather than a race-to-the-bottom, approach to international trade—a way of taking areas of economic and social life out of competition, rather than subjecting them to the competitive pressures entailed in both free-trade and the usual protectionist approaches.

Gilbert, in invoking the Mondragón Cooperative and targeted tariffs, makes a similar argument (although, to correct one point, that’s not what Raúl Prebisch and UNCTAD were attempting to do in the 1940s and 1950s) :

The idea is to use tariffs to favor goods produced by democratically owned and controlled capital at home and throughout the world.

Any systemic solution to inequality and mass economic deprivation will need to expand the amount and types of people who get to make the investment decisions that determine where industry and jobs will exist and at what pay.

One can make exactly the same argument about free trade—to expand trade (either within or across national boundaries) by democratically owned and controlled enterprises.

What are we left with then? To my mind, we can refuse the terms of the existing debate between free trade and protectionism and, at the same time, speak out in favor of either free-trade or protectionist policies as long as the goal is to build and expand institutions and spaces “capable of actually placing investment decision-making in the hands of the people.”


*Perhaps less understood is the fact that, as I argued three years ago, “much of the international trade that takes place these days does not occur through market transactions.” Instead, a great deal of trade occurs within corporations; it is intra-firm trade, transactions among and between different parts of giant multinational corporations, that is planned by the corporate directors.

**Marx’s own famous option was to speak in favor of free trade because, as Engels explains,

To him, Free Trade is the normal condition of modern capitalist production. Only under Free Trade can the immense productive powers of steam, of electricity, of machinery, be full developed; and the quicker the pace of this development, the sooner and the more fully will be realized its inevitable results; society splits up into two classes, capitalists here, wage-laborers there; hereditary wealth on one side, hereditary poverty on the other; supply outstripping demand, the markets being unable to absorb the ever growing mass of the production of industry; an ever recurring cycle of prosperity, glut, crisis, panic, chronic depression, and gradual revival of trade, the harbinger not of permanent improvement but of renewed overproduction and crisis; in short, productive forces expanding to such a degree that they rebel, as against unbearable fetters, against the social institutions under which they are put in motion; the only possible solution: a social revolution, freeing the social productive forces from the fetters of an antiquated social order, and the actual producers, the great mass of the people, from wage slavery. And because Free Trade is the natural, the normal atmosphere for this historical evolution, the economic medium in which the conditions for the inevitable social revolution will be the soonest created — for this reason, and for this alone, did Marx declare in favor of Free Trade.

***DeMartino has outlined that policy in a series of articles, including “The Social Index Tariff Structure: An Internationalist Response to Economic Integration (with Stephen Cullenberg), in the Review of Radical Political Economics (1994, vol. 26, no. 3, pp. 76-85) and “Achieving Fair Trade Through a Social Tariff Regime: A Policy Thought Experiment” (with Jonathan D. Moyer and Kate M. Watkins), in the Cambridge Journal of Economics (2016, vol. 40, pp. 69-92) (unfortunately, behind paywalls).


Special mention

173210_600 182437_600