Capitalism Today

Markets and Democracy: A Brewing Crisis

Anup Sinha

The capitalist mode of production, in all its variations and specificities, share one thing in common: it makes the future seductively attractive, whatever be the present condition of the viewer. The system promises wealth, a comfortable life and greater opportunities to consume a larger variety of goods and services, and above all, the freedom to think and act according to individual choice. One can delegate the responsibility of governance to one’s representatives chosen through the ballot box. The franchise of the ballot also gives the individual the liberty to change the representatives if their performances are not up to the mark. As far as livelihoods and incomes are concerned there is the right to choose whatever one wishes to pursue, from starting a business to becoming a corporate executive, or working for government. One can choose professions too–law, medicine, academics, artist, and so on. The formal equality of opportunities and rights makes the system appear equitable and fair. People can raise their voices over grievances. The system promises to work for the long-term benefit of individuals and groups. The state sets rules to protect each individual from the whims and follies of others, as well as provide protection for everybody against foreign aggression. Markets and electoral democracy are the institutions that provide sustenance to the system of capitalism. Textbooks extolling the virtues of capitalism claim that while people vote in the market with dollars, the one-person one-vote rule in the arena of politics makes it possible to temper the power of the people with the bigger packet of dollars.

This is the reason why, in the discussion about alternatives to capitalism–the economic as well as the political pillars of the system –it is claimed that there is no better system available. The discussions usually take place in terms of the abstract understanding of the ideal structure of capitalism. Social and economic outcomes can be influenced with state policies, but these are minor nudges that correct deficiencies. They are not supposed to break the structures of private property, free markets and electoral machineries. That is why the proverbial democracy’s man-in-the-street can always rely on the system to look after him, if not today, then certainly in the future. It is like a casino game–win some, lose some, win big, win small, hit the jackpot or be ruined. When one is gambling who wants to think about being ruined? That is why, for over the past 250 years the system has altered in appearance but survived in essence.

Despite the amazing success of capitalism and the remarkable resilience it has shown in terms of withstanding challenges, there are questions being raised once again on the inherent strengths and weaknesses of capitalism. Markets look increasingly unstable and unpredictable, shocking economic inequalities and concentration of powers, a rising trend of political authorita-rianism in governments, the unintended and adverse consequences of technologies, and above all, the threat to nature coming out of the great human enterprise of growth and development; have all contributed to making capitalism look unusually vulnerable.

The Markers of Inequality and Concentration
One trend that capitalist market economies exhibit is the growing concentration of wealth and incomes. Enterprises based on private property and facing competition from other enterprises must necessarily and continuously expand their capacities to produce, capture larger share of markets, gather innovative power and keep making profits in order to survive. There is an inherent compulsion to grow for growth’s sake. In this race some win, some lose, some disappear, and some are gobbled up by larger firms and organisations. Larger firms in concentrated markets typically have greater control over prices and outputs. They have larger control over input prices as they tend to be large bulk buyers of material and labour. The largest multinational companies in the world have spending budgets that are larger than the annual national budgets of many small and developing nations of the world. There are a number of implications of this trend. First of all, the bigger a firm is the more likely is its political influence and power to shape government policies and rules. The second implication is that the bigger is the firm the bigger is its ability to deter competition from new but smaller firms in the industry. The third implication is that the bigger is the firm the larger is its ability to stifle small business by being in a position of power to integrate allied businesses and activities into its own domain. For instance, distribution channels previously owned by small businesses may be acquired by a large firm, or ancillary goods producing units could be bought and integrated. Large firms not only keep growing in scale, but also in terms of diversification of products and lines of business. They typically tend to become conglomerates. Income and wealth have been increasingly concentrated across countries as well as within nations during the past 70 to 80 years. The recent World Inequality Report 2022 shows the massive inequality in the world as far as incomes and wealth holdings are concerned. The top 1 percent of the global population holds 38 percent of global wealth and earns 19 percent of incomes. The next 9 percent holds 38 percent of wealth and earns 33 percent of income. The bottom poorest 50 percent people of the world hold a mere 2 percent of wealth and earn a paltry 8 percent of income.

There are a number of implications of this trend. First, it tends to generate social misery, distrust, crime, anger and violence. This, in turn, tends to invite greater political authoritarianism to suppress any instability. The rich need protection. The poor have to be contained. The second implication is that the inequalities tend to produce a parallel inequality in carbon dioxide emissions so important in controlling climate change dangers. The same data set shows that the top 1 percent emit 17 percent of greenhouse gases, the next 9 percent, 31 percent, while the poorest 50 percent emit a mere 12 percent of global carbon dioxide. The notable issue is that growing inequality is built in to the life line of capitalistic growth and continuity. It can be reduced significantly by suitable policies, but they are not. Why? Are policy makers not as neutral as they are claimed to be.

The Environmental End-game
Before proceeding further, it is worthwhile probing one question that is being increasingly asked: can this indefinite growth of the economic system continue much longer? During the past 200 years or so, the production (both in scale and variety) of goods and services have grown astonishingly fast and continuously. Think of the industrially produced or industrially supported materials and services one uses in everyday life. The days of James Watt and his steam engine has been surpassed to the point of singularity. A James Watt, if brought to earth today, would have great difficulty in recognising any of the everyday goods people use almost out of habit. This period was referred to as the Great Acceleration in economic progress.

Now, the data for the amount of natural resources humanity has used up during the same period of time are being juxtaposed against the data of the Great Acceleration. The second set of data shows the Great Depletion of natural resources. Human beings have a tendency to master and control Nature often forgetting that humans are also part of Nature. The great machinery of capitalism has looked upon Nature as both a bottomless gift hamper and a bottomless garbage dump. People have used resources from Nature starting with intensive use of land, mineral ores, fossil fuels, fresh water, cutting forests, turning forests into agricultural land and turning farmlands into urban spaces. Humans think there is more where the last bit came from. The economic system has facilitated the unplanned mining of non-renewable resources and the planned use of renewable resources often beyond the point of replenishment.

In the process of converting the resources for everyday use wastes are produced both at the stage of production as well as consumption. Wastes are regularly dumped into open spaces, beneath the ground, into open waters and oceans and emitted into the atmosphere.

Two things are happening as a cumulative result of this. First, resources are becoming more and scarce and society does not have alternatives in place yet. Second, the enormous pollution from wastes produced are also spoiling natural resources like fresh water, clean air, or the fertility of land. In short, Nature is being destroyed and diminished. The most talked about aspect of this crisis is perhaps Climate Change which is being brought about by carbon dioxide and other greenhouse gases emitted through human economic activities of production and consumption. Other damaging signs like the sixth mass extinction of species, ocean acidification, freshwater scarcity, disrupted bio-geo-chemical cycles and the large impact of chemicals coming into our bodies through processed food, through cosmetics and polluted air. Capitalism’s business as usual has brought society to this existential crisis, yet business as usual continues without much urgency about the impending disaster. A couple of points need to be noted at this point. The first is that individual awareness and changing one’s lifestyle can be a solution if and only if everyone thinks and acts in the same way. It is a global problem requiring a global solution. If the voluntary solution is deemed to be difficult then the only alternative is collective global governance. Attempts at this, over the last two or three decades have not been very successful at all, as even the latest Paris Accord seems to indicate. There is great faith in the marvels of progress. People believe that technological solutions would come about before any major disaster strikes. It is time now to look at technology.

The Rise and Rise of Technology
One feature of the history of capitalism has been the persistent and sometimes quite dramatic technological changes that constantly affect the ways we work and enjoy leisure. Starting with powered locomotion, electricity, radio, television, cars, air conditioners, and not to mention the breath-taking developments in the world of medicine and surgery, all have contributed to transforming lives of ordinary people. More recently, the advent of the computer and the internet have accelerated these changes. New products, newer versions of older products, new apps, faster connectivity, instant global access to information and markets: these are some of the changes one takes for granted.

Every technological change has some de-humanising aspect: it displaces human labour and effort, and with it a part of the dignity of work and the associated traditional norms and mores of human labour. Recall, for instance, the famous ballad of John Henry. Henry was a railway construction worker and found himself being displaced by a steam drill. He competed with the drill to show that he was as good and efficient as the drill. In the competition he died from trying too hard. Slowly but surely, over decades and centuries a large part of the tedious human efforts in production have been removed, where efficient machines have taken over from humans. The assembly line in factories has been instrumental in reducing human errors, while maintaining uniformity of quality, while also speeding up the process of production. For the homeworker the washing machine has liberated her from the drudgery of washing clothes. Instances are too large to list.

The more recent information and communication revolution of the past three four decades has changed many more things in a hurry–the way we communicate, how we get news about the world, and how we entertain ourselves, gather knowledge and verify facts. In the process many new kinds of jobs have opened up: the computer programmers, the code writers, the analysts, the web designers as well the hardware and software engineers who man the entire computer industry. Computers design products to perfection. Life without a computer (or at least a smart-phone) is unimaginable. There is news and sometimes glimpses of new things on the anvil that will transform our lives in the next two or three decades. The grapevine has it that the most startling developments will come from the fields of bio-technology and nano-technology–things to do with living beings and things that will get smaller and smaller. In this context the terms Artificial Intelligence, machine Learning and Robotics along with Quantum Computing are being heard quite frequently.

In a nutshell, the new technologies will be able to do existing human or even existing-technology based machine-work much faster and with complete accuracy. For instance, these machines could drive cars, wait on dinner tables, or assist in complicated surgical procedures. These machines are referred to as forged labourers who can do work at amazing speed and accuracy and do it 24x7. That is only one aspect of the new technology. The new machines, when fed a large amount of data, can figure out the best way to do a task, and make predictions. These machines cannot only take decisions, but also execute them. These machines are called synthetic intellects. Though not available immediately, these are on the horizon in a couple of decades. In other words, these machines with intelligence can replace workers irrespective of the colour of their collars–blue or white. This will be a new inevitability. The world is seeing the nascent stage of development of inorganic life. What is estimated currently is that the jobs displaced will be far in excess of new jobs created. What the future foretells in this context is that new technology might make a large number of people jobless and quite useless as far as the economy is concerned. How they will be sustained and what kind of social problems will arise out of this is anyone’s guess. If there is trouble some power has to control and contain it.

The Tight Knit of the Political and the Economic
The political structure of representative democracy that goes hand in hand with the development of capitalism suffers from a number of constraints that are far away from the formal elements of equality, inclusion and freedom. As the economic system tends to mature the more economic power gets concentrated in the hands of a few business houses and corporations. These are powerful in the sense that they control a substantial share of the markets in the economy. The politicians who represent the people focus on the next election and how might they win it and return to political power for another period of time. Winning elections means a lot of propaganda, campaigning, influence in the electronic, print and social media, along with pampering of different lobbies who ask for special favours in lieu of electoral support. These, in turn, require massive amounts of money to spend for the support required to win (and often control) elections. Somewhere, the development of capitalism converts the promise of the future benefits for ordinary citizens into illusions of prosperity. Slowly, people begin to realise that the promises will not be kept. Potential frustration and anguish can foment into social and political violence. To suppress this the business bosses, want a political system that is subservient to their wishes and can do whatever they want provided the rich and powerful are protected. Hence there is a win-win situation for the political system and big business. It is a symbiotic relationship that feeds on one another. Faces and names of leaders and firms might change, but the essence of the relationship remains the same. One difficulty with the formal liberty of democracy is that if a social group (say a political party) questions the very foundations of liberal democracy, then the system is unable to handle that kind of difference in opinion.

Given these trends, the political system becomes corrupt, completely subservient to the economic powers, controls as much as possible ideas and news that come into the public domain, and finally, become more experienced with false promises, deceits and lies. If these fail, or in times of social unrest, the system is ready to suppress dissent with force and violence. The formal structure remains free and fair, but the real substance is meaningless to the extent that the system can ever be critically questioned. Not only that, even a critique of existing practices, policies or laws can be stifled ruthlessly if needed by the use of state violence and humiliation like turning the taxman, or other investigative arms of government systematically against the citizenry. The political system serves its purpose by doing a number of things: serving and protecting the interests of the rich and economically powerful, ensuring political control of the voting mechanism, feeding ordinary people with illusive goals and limited opportunities, and finally stabilising markets through taxation and monetary policies to keep the economic ship from rocking too much. It is in these senses that the economic and the political threads of capitalism are tightly interwoven.

Controlling Beliefs and Ensuring Consent
What is being witnessed today is a crisis of capitalism: chronic economic and financial instability and a world-wide rise in authoritarian, illiberal governments. Liberal democracy is on the backfoot against a wave of right-wing governments with fascists ideologies. This political trait is a consequence of the inability of capitalism to deliver long-term benefits to the ordinary citizen: not adequate improvements in living standards, not job and livelihood security, nor protection from global crisis like climate change, or internecine war and nuclear annihilation.

To keep the capitalist system going, the state has to be increasingly illiberal. Control is the key word. First of all, the state has to control public opinion and beliefs. This is done systematically by the business’s control of media and by persistent government propaganda and national aggrandisement. The second line of defence, if this is not enough, is the use of force such as police, security forces, and even the armed forces if needed. During the last 6 to 7 decades when the world has not seen a major global war, each country’s spending on internal security and policing has gone up manifold. New laws have come into force that protect the state against the dissenting citizen, some of them quite draconian in nature. Finally, to keep the control really tight and fool-proof, new technologies are used for surveillance of citizens’ behaviour and actions, from what they buy, who they talk to, which books they read, which website they visit and which places they visit. Indeed, this private data about citizens are needed by both business and government for different purposes and there will be a struggle by both these institutions to gather data fast, and analyse them for patterns and predictions. Dissent is usually generated initially by intellectuals and thinkers, and then by victims of state actions and deprivations. That is why authoritarian governments are highly suspicious of intellectuals. The surveillance technologies help the government keep a tab over thinkers and activists.

To achieve all this as smoothly as possible, the state must be able to create an enemy, an enemy that is fairly near and tangible–a racial or religious minority, immigrants (current or from the past) or a geographical neighbor with whom the state has disturbed relationships. It is claimed that the good times for society can only follow when this enemy (or enemies) are annihilated or at least completely subjugated. The good times will not be something newly constructed (because most people are not credulous of future images) but a reimagining of an indefinite but glorious past. This past (the golden age) is carefully constructed with a set of lies and half-truths. Democracy has a built-in advantage for this transition to authoritarianism: it is the power of the majority rule. The political majority can be created through propaganda or through influencing voting outcomes–could be supporters of a strong demagogic leader, could be a racial or religious majority, or a carefully constructed ideological majority. The economic crisis and the political crisis have become all too visible.

Through the Mists of the Present
Extreme economic inequality is toxic to liberal democracy. Yet this inequality is inevitable given the economic logic of capitalism. Inequality breeds delusions that mask reality undermining the possibility of joint deliberations to solve society’s divisions. Those who benefit from large inequalities are inclined to believe that they have earned their privilege. Those who demonstrably do not benefit from inequalities can be made to believe that they do, like in USA racism is used to ensnare poor white citizens into supporting tax cuts for the extravagantly rich minority, just for sharing the same colour of skin.

Liberal equality implies that those with different levels of power and wealth nevertheless are regarded as having equal worth to society. Political equality, is by definition, positioned to be compatible with economic inequality. And yet when economic inequality becomes extreme, then the myths used to sustain the equivalence of the political and the economic, begin to crumble. Then, to completely destroy the previous (though mythical) reality authoritarian politics replaces the liberal ideal with the opposite of equality: hierarchy.

To some people, the precariousness of the present moment appears frightening. Yet this seed of uncertainty was always there during the last two hundred years or so. Capitalism never promised anything permanent or stable. Indeed, instead, liberal democracy demanded many things from citizens: participation, debate, effort, duties. A degree of tolerance was required for some amount of chaos and cacophony. Capitalism has always altered lives, destroyed livelihoods, break up families, disrupted lifestyles, and, above all, influenced the way people accepted the world around them–the social, natural, political and economic. There is one difference from the perceptive expectations of the past and the current moment is that the contemporary shadows are darker and contain existential threats–the environmental disasters looming shows that humanity might be reaching the end of the rope of using nature mindlessly, a world filled with weapons of mass destruction that finish off the world in an afternoon of blinding light and heat, the arrival of technologies that are likely to take much of the human jobs over, and might overwhelm us as a species.

Yet, nihilism is the worst bad habit of the human spirit. It is not the first time in history people proclaim (despite the threat of consequences) that ‘all politicians are crooks’, ‘all journalists are liars’ ‘all businesses are corrupt’. It has happened in the past where nations have faced deep skepticism, anti-politics, whatever-ism. This was called ‘qualunquismo’ in post-war Italy. Modern history has sensitised people to the fact that alternative visions of our nations try to draw us in. But maybe, picking one’s way through the darkness, it might be possible to resist the gloom. It is not clear where humanity is headed towards. But there must still be a way to construct something better and human.

Applebaum, Anne (2020): Twilight of Democracy: The Seductive Lure of Authoritarianism, Doubleday, New York.
Kaplan, Jerry (2015): Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial Intelligence, Yale University Press, New Haven.
Stanley, Jason (2018): How Fascism Works: The Politics of US and THEM, Random House New York.
Zuboff, Shoshana (2019): The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power, Profile Books, UK.

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Vol 56, No. 17-20, Oct 22 - Nov 18, 2023