Why Capitalism Is Fundamentally Undemocratic

The antidote is economic democracy.

It is common in Western discourse to claim there is a natural connection between capitalism and democracy. Sometimes the two concepts are virtually fused together. I always find this odd because I value democracy, but there is nothing democratic about capitalism.

Yes, many of us live in democratic political systems, where we get to elect national leaders every few years, even if we acknowledge that this process is often corrupt and inadequate. But when it comes to the economy, the system of production — which affects our everyday lives and determines the shape and direction of our society — generally not even a pretence of democracy is allowed to enter.

Under capitalism, production is controlled overwhelmingly by capital: the big financial firms, the large corporations, and the 1% who own the majority of investible assets. They are the ones who determine what to produce, how to use our collective labour and our planet’s resources, and what to do with the surplus we generate.

As far as capital is concerned, the purpose of production and surplus reinvestment is not to meet human needs, achieve social progress, or to realise democratically ratified objectives. The purpose is to maximise and accumulate profit and power — that is the overriding goal. These decisions are made in the narrow interests of the capitalist class. The workers — the people actually doing the production — rarely get any voice at all.

This arrangement is completely undemocratic. In fact, it is literally plutocracy. And when you govern a system like this, it leads to perverse outcomes. We end up with massive overproduction of damaging and less-necessary things like fossil fuels, SUVs and industrial beef (which are highly profitable to capital) but chronic underproduction of obviously necessary things like renewable energy, public transit and affordable housing (because these are less profitable to capital or not profitable at all).

The result is that despite having extraordinarily productive capacity, with extremely high levels of output to the point of blowing past planetary boundaries, we nonetheless fail to ensure that everyone has access to basic goods and services. In the United States, the richest country in the world, nearly half the population cannot afford healthcare; in the United Kingdom, 4.3 million children live in poverty; and in the European Union, 95 million people cannot afford decent housing and nutritious food. These are totally artificial scarcities.

It also bears noting that those who control production within this system then leverage their profits to manipulate national elections, through campaign finance and advertising, in support of politicians who will serve their interests. Or through ownership and control over media outlets. Democracy cannot function under these conditions. Indeed, a 2014 study found that the impact of this dynamic on political outcomes in the US means the country more closely resembles an oligarchy than a democracy.

A critic may retort that, leaving all of this aside, capitalism is democratic because every person gets to “vote with their dollars”. According to this argument, consumers get to determine the direction of the economy, which therefore ends up serving people’s needs in the most efficient possible way. But this argument does not hold water, for several reasons.

First, if dollars equal votes, then clearly some people have much more voting power than others. A single individual with a billion dollars would have more voting power than 66,000 workers earning the minimum wage. There is clearly nothing democratic about this. And it is all the more repugnant when we understand that those who hold dollars in excess of consumption requirements (in other words, the rich) are the ones who will have the power to invest in manipulating actual elections.

Second, even if we ignored this problem, the dollars of ordinary people do not equal votes, to the extent that you cannot buy things that are not being produced. We may want renewable energy, affordable housing, longer-lasting products, public transit and regenerative agriculture. But if these things are not being produced — because capital does not consider it profitable enough to do so — then no amount of waving our dollars is going to change that. If it did, then we would not suffer chronic deprivation of these things.

The reality is that capital does not allocate investment on the basis of what ordinary people actually need or want. It allocates investment to what is most profitable to capital, which may or may not align with human needs. Of course, for something to be profitable, there has to be some demand for it. Demand is a necessary but insufficient condition. But it is profitability, not demand, that determines investment. Capital determines production, and we only get to “vote” among the things that capital is willing to produce.

Ultimately, it is not a question of who has the power to consume, but who has the power to produce. Wealth represents not only power over consumption but, more importantly, command over the means of production. This includes command over our labour. Capital determines what we build and what we produce, and thus determines the shape and direction of our civilisation. If we do not have democratic control over production, then we can hardly say we live in a democracy.

None of this is inevitable. We can and should extend the concept of democracy into the economy. We know, empirically, that when people have democratic control over production — economic democracy — they are inclined to organise production more around meeting human needs, they manage resources more sustainably, and they distribute yields more fairly. Researchers have shown that if production were organised around these objectives, we could end deprivation and provide good lives for 8.5 billion people with less energy and resources than we presently use.

Decisions about what to produce and how to use our collective surplus should be democratically determined, rather than controlled by and for the interests of capitalists and the 1%. This can be achieved through universal public services and a public job guarantee (to ensure sufficient production of goods and services necessary for human well-being), democratic ownership of firms (such as in the case of Mondragon or Huawei), and a system of industrial policy, public finance and credit guidance (to ensure that investment and production aligns with democratically ratified objectives).

The path out of capitalism is economic democracy.

 

*Jason Hickel is an author and Professor at the Institute for Environmental Science & Technology (ICTA-UAB) at the Autonomous University of Barcelona. He is also a Visiting Professor at the International Inequalities Institute at the London School of Economics, and a Fellow of the Royal Society of Arts. He serves on the Climate and Macroeconomics Roundtable of the US National Academy of Sciences, the advisory board of the Green New Deal for Europe, the Rodney Commission on Reparations and Redistributive Justice, and the Lancet Commission on Sustainable Health. Jason’s research focuses on political economy, inequality, and ecological economics, which are the subjects of his two most recent books: The Divide: A Brief Guide to Global Inequality and its Solutions (Penguin, 2017), and Less is More: How Degrowth Will Save the World (Penguin, 2020), which was listed by the Financial Times and New Scientist as a book of the year.

 

Source: https://jasonhickel.substack.com/p/why-capitalism-is-fundamentally-undemocratic