Why does capitalism create inequality
Capitalism and democracy : Why do they need each other
The social historian Jürgen Kocka is a professor emeritus at the Free University of Berlin and was President of the Science Center for Social Research Berlin. His “History of Capitalism” was published by C. H. Beck (3rd edition 2017).
Capitalism is currently being criticized for a long time. Once again, he is perceived more as an adversary than a partner of democracy. The criticism is very diverse: it ranges from complaints about the overwhelming power of large digital corporations that monitor their users, avoid taxes and exploit their monopoly position, to complaints about increasing precarious work. The criticism feeds on the feeling that even love is subordinated to the capitalist principle through Tinder, and a fundamental criticism of growth is currently being renewed in the climate protection movement. Even the CEOs of great entrepreneurs join in.
180 of them recently published a text in the "New York Times" in which they renounced the orientation of their companies solely on share value and promised to focus more on meaningfulness again. The French economist Thomas Piketty will shortly publish his second, fundamental critique of capitalism and inequality - this too is likely to become a bestseller.
The resurgence of populism, nationalism and right-wing extremist aggressiveness is also interpreted as a protest of the socially and economically “left behind” and thus as a consequence of inequality caused by capitalism. There is a lot of empirical evidence to support this view. So it is worthwhile to think again fundamentally about the relationship between democracy and capitalism. Does capitalism threaten democracy?
The historical findings and the international comparison show a different picture. Using the German example: in the 19th and early 20th centuries, the implementation of capitalism and the democratization of society and politics went hand in hand. National Socialism established an extreme dictatorship which, however, allowed large parts of the capitalist economy to continue doing business and profit, even though the rulers intervened deeply in the property rights of the market players, up to and including the expropriation of Jewish entrepreneurs without compensation and in violation of the law and the constitution.
The GDR eliminated capitalism and democracy. In the Federal Republic, on the other hand, a symbiosis of welfare-state cushioned capitalism and representative democracy succeeded, a connection that is constantly changing, but survives.
The world shows the diversity of capitalist systems
If you look around the world, you can see the great diversity of capitalist systems - and also that there is no simple connection between democracy and capitalism. You can see that the most democratic countries have a capitalist economic structure, Switzerland and Sweden as examples. Democratic orders have so far only been realized in capitalist economies.
In countries that avoided or abolished capitalism, democracy was and is doing badly. Think of the Soviet Union or North Korea, Cuba and Venezuela today. But capitalism also thrives in authoritarian and dictatorial systems, provided that these leave the markets the necessary leeway and ally with them; this can be observed in Russia and China. In the democratic states of the Anglo-American area there is a relatively radical market capitalism, in EU Europe there is not “neoliberal” but highly organized capitalism.
The overall view shows, firstly, that the coexistence, indeed the symbiosis of capitalism and democracy is widespread; and second, that capitalism does not necessarily lead to democracy or its opposite, but that it can flourish in many different (if not all) socio-political circumstances. Third, there are very different types of capitalism, and it depends on the structure, energy and politics of the respective community what kind of capitalism is realized in it.
This can be formulated as an opportunity and a challenge: Capitalism does not determine on its own which social and political purposes it is made available, although it has its own weight and cannot be easily instrumentalized.
It depends on what the respective community makes of “its” capitalism, even if the scope for action is limited by the functional conditions of capitalism, historical influences and international dependencies. It depends on politics, social creative power and culture. That is where the responsibility lies. If something goes wrong catastrophically, one cannot talk oneself out of “capitalism”. That can be explained systematically.
Capitalism is not democratic, democracy is not capitalist
Capitalism is not democratic, democracy is not capitalist. The logics of both differ and are in tension with one another. Because capitalism and democracy have different bases of legitimation: unequally distributed property rights one, equal citizenship the other. Different procedures prevail in them: profit-oriented exchange in capitalism, on the other hand debate, compromise and majority decision-making in democratic politics.
The thoroughly selfish perception of particular advantages is normal for capitalist action, even if it claims to contribute indirectly to the general benefit. The realization of the common good, on the other hand, is the goal of democratic politics, even if the perception of selfish interests is legitimate and the rule. Economic activity according to capitalist principles, if not counteracted, leads to a degree of economic and social inequality that is difficult to bear according to the principles of democracy, which are based on equal rights, opportunities and duties.
Conversely, the full application of democratic decision-making rules - equal participation rights for everyone, elections, majority decisions, protection of minorities - is incompatible with the rules of capitalism despite employee participation and other reforms. Indeed: capitalism is not democratic and democracy is not capitalist.
At the same time there is a relationship between capitalism and democracy. In both, competition and voting, weighing and negotiation play a role. In both of them freedom is practiced, understanding is sought and acted purposefully. Capitalism and democracy have common enemies: uncontrolled agglomeration of power, unpredictability, corruption, violence and war.
A predictable legal-political order helps capitalism. Conversely, the growth that is most likely guaranteed by capitalism legitimizes democracy, because growth enables innovation, the financing of common goods, welfare state benefits and mass consumption.
More fundamentally still: The tense coexistence of capitalism and democracy has the effect that political power and economic control do not coincide and become overwhelming. This separation of powers succeeds in modern constitutional and constitutional states. Because these allow and secure in a fundamental right that the various areas of life - state, economy, society, religion, art - are organized according to different logics.
This inner differentiation of modern, complex communities into relatively independent sub-areas is a condition of freedom and democracy, but also a prerequisite for the efficiency of states. If that is the case, the West will have the better cards in the long term in the increasingly fierce competition between its and the Chinese modernization model.
The relationship between capitalism and democracy wavers when borders are crossed
The delicate interrelationship between capitalism and democracy wavers when the differences and boundaries are systematically crossed. However, this is currently happening frequently. The usurpation of political power through financial and economic power - for example with big money in the American election campaigns - is one example, while the threatened creeping transformation of science, education, the arts and everyday life according to capitalist principles is another. Both can be countered through legislation, civil society engagement and a culture of solidarity.
On the other hand, the necessary demarcations are blurred by symbiotic relationships between state-political and economic-financial power holders. Observers note such tendencies in many countries today, especially in the politically tightly controlled capitalism of East Asia and Russia. Such symbioses undermine the separation of powers and powers between capitalism and democracy.
On the other hand, it should be emphasized that the demarcation between the sub-areas cannot and must not be hermetic. It cannot be denied that economic interests can influence political decision-making processes and be very strong in the process. This is their constitutional right, but has legal and practical limits. Conversely, state authorities in Western democracies have and use a wide range of instruments to regulate the capitalist economy and to influence it in detail. Its justification in itself is hardly disputed, but its scope and details are very much.
The welfare state, which has been developed in this country since the 19th century, has on the one hand helped to protect capitalism from excesses and crises into which it slides, if left alone; at the same time, the welfare state has helped to improve the acceptance of capitalism and its compatibility with democracy. The welfare state is essential for any productive relationship between capitalism and democracy.
But for three reasons it is becoming more difficult to provide these state regulation and promotion measures. On the one hand, the gap between his worsening inefficiencies and people's expectations is widening. Two examples: The inequality of income and wealth distribution continues to increase within economically advanced societies under the influence of finance capitalism, while at least in some European countries the willingness to accept pronounced inequality decreases with advancing democratization.
Second example: under the influence of the communications revolution, employment has become more volatile. The resulting risks and uncertainties are a burden for many employees and self-employed. The unstoppable digitization makes the future of work seem uncertain. At the same time, the need for predictability and security in life is increasing. Complaints about precariousness are widespread and feed criticism of capitalism. The welfare state is challenged again. His tasks have become more difficult.
Capitalism is a driver of global warming and environmental degradation
On the other hand, the concern about progressive global warming and environmental degradation has entered the public consciousness massively in recent years and months and has moved to the center of politics. Capitalism is a driver of this alarming development, one of several. Without him, however, it will not be possible to turn the corner. But the markets alone will by no means make it. Capitalism is to be made subservient to the new goals by political means. It is possible, but difficult.
After all, we are threatened by a fundamental discrepancy: in the age of globalization, capitalism and its problems have long since become transnational. They can only be regulated and processed across borders. But the means that are suitable for this, especially the welfare state, are essentially limited by the nation state. The ability to communicate internationally is declining. The decisive factor will be whether this trend can be turned around. The withdrawal to a democratic and welfare state taming of capitalism exclusively in one's own country is in any case not a promising strategy.
Reforms are pending, politics and ideas are in demand. Democracy is not capitalist and capitalism is not democratic. But they go together. The civilization of capitalism is most likely to succeed in a democracy. This is most likely to survive in tense coexistence with capitalism.
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