Capitalism and Democracy
"Don't Mix Very Well"
Reflections on globalization
by Paul Street
Z magazine, Feb. 2000
Economic globalization enthusiasts like Bill Clinton, Madeline
Albright, Tony Blair, New York Times foreign policy columnist
Thomas Friedman, and the unelected officials of the World Trade
Organization repeat a classic Cold War mistake by claiming that
globalization is advancing two sides of the same historical coin:
capitalism and democracy. One does not have to be a Marxist or
other variety of radical to acknowledge basic differences and
fundamental conflicts between these falsely conflated phenomena.
Listen, for example, to liberal economist Lester Thurow who writes
that "democracy and capitalism have very different beliefs
about the proper distribution of power. One believes in a completely
equal distribution of political power, 'one man [sic] one vote,'
while the other believes that it is the duty of the economically
fit to drive the unfit out of business and into extinction. 'Survival
of the fittest' and inequalities in purchasing power are what
capitalist efficiency is all about. Individual profit comes first
and firms become efficient to be rich. To put it in its starkest
form, capitalism is perfectly compatible with} slavery. Democracy
In a similar vein, Chicago Tribune economics correspondent
R.C. Longworth, also no radical, writes that the "struggle
of democracy and capitalism" is "at the heart"
of current "debate over the global economy. In theory,"
Longworth claims, "they are meant to go together, indeed
to be inseparable. But democracy's priorities are equality before
the law, the right of each citizen to govern the decisions that
govern his or her life, the creation of a civilization based on
fairness and equity. Capitalism's priorities are inequality of
return, profit for the suppliers of capital, efficiency of production
and distribution, the bottom line."
There is plenty to criticize from a radical perspective in
Thurow's and Longworth's more extensive formulations on the question.
But Thurow and Longworth are reasonably candid and essentially
correct in ways that the Clinton administration is not when it
proclaims that every country in Latin America "with the single
exception" of Cuba has successfully negotiated a "return
to democracy." Even the venerable right-wing think-tank Freedom
House refuses to designate numerous Latin American states (including
Mexico, Brazil, El Salvador, Guatemala, Haiti, Paraguay, Columbia,
Peru, Ecuador, and El Salvador) as "free" and democratic
countries (it does give that label to Chile, where many workers
and intellectuals are still too terrified to openly express their
political sentiments) just because they are capitalist.
Regimes Based on Minority Rule
The great western conflation of democracy with capitalism
originated with the crisis of European feudalism and the great
European and North American bourgeois revolutions of the 17th
to l9th centuries. It reached its officially disseminated pinnacle
with the Cold War, when U.S. propaganda proclaimed an all-or-nothing
global division and struggle between "free world" capitalism
headquartered in Washington, DC and expansionist "communist"
totalitarianism headquartered in Moscow. This Cold War doctrine
provided ideological cover for U. S. sponsorship of numerous pro-capitalist
/ pro-globalization dictatorships throughout the world. It also
disguised the real nature of leading First World states. Beneath
outwardly democratic political processes and generally strong
civil liberties, those states were fundamentally subject to the
command of centralized, hierarchical corporate power and great
monied wealth-a condition that persists well into the "post-Cold
This persistence is particularly clear within the supposed
national homeland (now as during the Cold War era) of "democratic
values." In telling the Chicago Economic Club why "the
international community" (the world's leading industrial
states, that is) should not shy away from "intervening"
in the internal affairs of (as in bombing) "rogue" states
like Iraq and Serbia last April, British Prime Minister Tony Blair
argued that "when regimes are based on minority rule, they
lose their legitimacy." Yet, while Blair would never dream
of describing his senior partner the United States as a "minority"-ruled
"regime," American reformers express widespread popular
sentiment when they describe U.S. elections as de facto "wealth
primaries." American candidates without vast financial resources
or access to such resources can generally forget about being taken
seriously in money- and media-driven campaigns. As most Americans
see it, the democratic ideal of "one person, one vote,"
is negated by the harsh realities of "dollar democracy"
and the "golden rule" ("those who have the gold
rule"). The candidate-selection and policymaking processes
belong primarily to the top 10 percent of Americans that own 73.2
percent of American wealth.
This makes retreat from politics into a seemingly rational
life choice for ordinary citizens, as was acknowledged with exceptional
candor last July by mainstream media pundit William Pfaff. "As
the United States approaches the 2000 presidential race, in which
more money will be spent than ever," Pfaff wrote in the Chicago
Tribune, "the fact must be faced that America has become
a plutocracy, rather than a democracy. Money rules government.
Moreover, the transformation probably is irreversible." Activists
and intellectuals trying to spark resistance to these facts of
American political life struggle to get their message through
a system in which less than 10 giant corporations control more
than 50 percent of the country's electronic and print media. No
wonder, then, that U.S. reformers are thinking about appealing
to the United Nations for international inspection and verification
of an "open political process" in the 2000 U.S. elections.
A National Daily Referendum
As if all this were not sufficiently bad, there is something
particularly evil about U.S. "elites" use of the term
"democratic" in connection with an increasingly universalized
and worldwide capitalism. Few if any aspects of contemporary capitalism
are less democratic than precisely its tendency towards globalization.
As Edward S. Herman notes, "the globalization of recent decades
was never a democratic choice by the peoples of the world-the
process has been business driven, by business strategies and tactics,
for business ends." Tops on the list of the relevant "business
ends" is the weakening of popular sovereignty. Capital seeks
through globalization to evade, subvert, and preclude popular
and governmental regulation and to roll back labor power.
This phenomenon is also explicitly acknowledged in the mainstream
media of the post-Cold War era, when the seeming absence of anticapitalist
ideological enemies seems to create new frankness on the part
of the U.S. intelligentsia. In early 1997 Chicago Tribune reporter
William Neikirk, for example, calmly reported the following comment
from the chief economist at a leading global securities firm:
"there is a global pool of capital that floats around from
country to country every day. It amounts to a national daily referendum
on government policies. It will discipline even the biggest countries
and force them in a conservative direction."
Neikirk's Tribune colleague R.C. Longworth was equally candid
the following year: "An employer doesn't have to move jobs
to Asia to persuade those left behind to take pay cuts. The mere
possibility that, in the global age, he can do it is enough. 'The
possibility creates the reality,' Norbert Walter [the chief economist
for the Deutsche Bank in Frankfurt, Germany] said. In Stuttgart,
Jurgen Muller, a manager at Daimler Benz, told me how his workers
swiftly accepted previously taboo changes after Daimler opened
more plants abroad, including one in Tuscaloosa, Alabama. 'You
wouldn't believe how useful the example of Tuscaloosa was in discussion
with our workers here,' he said."
According to British political scientist David Marquand, "the
rhetoric of globalization already resounds from every rooftop....Why
deregulation? To survive the pressures of global competition.
Why low taxes and impoverished public services? Because the globalization
of financial markets rules out tax increases. Why falling real
wages and dwindling social protections? Because our unskilled
workers now have to compete with millions of hungry Asians, happy
to work for even less."
There is an interesting debate among radical intellectuals
on the extent to which globalization poses an actual structural
or particularly novel threat to workers and democracy in the core
states of the world capitalist system. But no serious left analyst
would question the notion that globalization discourse is a potent
weapon in the hands of the more elite segments of the business
class. Beyond the question of how accurately it reflects structural-economic
reality, the widespread, alternately celebratory and fatalistic
chant of globalization plays some of the same domestic ideological
role that the Cold War once performed. It provides an international
rationale for the persistence and furtherance of inequality and
repression at home.
Why American CEOs Prefer Dictators
All of which provides excellent context for understanding
some fascinating new research on trade, investment, wage-determination,
and U.S. preferences in the world capitalist system of the "post-Cold
War era." According to a recent study by the New Economy
Information Service (NEIS)-a labor-connected think tank that gauges
the impact of globalization-American corporate capital particularly
likes to float into global territory controlled by dictatorships.
By cross-checking U.S. government and World Bank statistics on
world trade and investment with Freedom House's comparative ranking
of world nation states as "free," "partly free,"
and "not free," the NEIS recently discovered that 72
percent of U.S. manufacturing investment in "developing"
(Third World) countries goes to "unfree" nations. At
the same time, U.S. imports from "unfree" states have
risen from less than half to nearly two-thirds of U.S. imports
from the "developing" world since the end of the Cold
War, even while the number of Third World nations meeting Freedom
House's criteria for "free" status has also grown. It
should be remembered, of course, that much of what passes for
import trade with the "developing" world is in fact
the shifting of product assets from Third World to U.S. branches
of American-based multinational corporations.
In explaining the above apparent anomalies for U.S. and WTO
doctrine on supposedly "democratic" global capitalism,
Longworth notes quite frankly that "wages tend to be lower
in dictatorships than in democracies, giving businesses in dictatorships
an advantage on selling exports abroad. The investment question
is more complex," writes Longworth, "but the [NEIS]
report suggest[s] a combination of factors-lower wages, easier
environmental laws, bans on labor unions-that give dictatorships
This analysis, which will hardly seem controversial to radicals,
is strongly supported by a recent study reported in matter-of-fact
fashion by Business Week. According to Harvard trade economist
Dani Rudrik, who also uses Freedom House criteria for describing
political regimes, democratic nations pay workers considerably
higher wages than do autocracies. For a given level of manufacturing
productivity, Rudrik's research on 93 nations determined, factory
workers in "free" countries make 30 percent more than
those in "partly free" countries and 60 percent more
than workers in "unfree" nations. It is a capitalist
myth, his work suggests, that wages are set simply and purely
by the global "free market": governmental authoritarianism
pays out a significant profit dividend to local and international
capital and relative democracy pays out an equally significant
wage dividend to workers fortunate enough to live in states with
comparatively minimal repression.
Especially telling is Rudrik's comparison between China and
India, two massive developing states with significantly contrasting
political systems. Relatively democratic India, he found, produced
an annual average output of $3,118 per manufacturing worker between
1990 and 1994. Indian factory workers received an annual average
wage of $1,192. With a similar annual output of $2,885 per worker,
by contrast, authoritarian China paid its factory workers just
$498 a year during the same period-a difference that helps explain
why China rather than India is a particularly cherished U.S. zone
for future and ongoing investment and "trade."
More surprising than these findings is the candor with which
Longworth deepens his explanation by acknowledging synergy between
the bottom line considerations and authoritarian values of American
multinational CEOs and Third World fascism. Dictators, he writes,
"tend to be strong leaders who can provide quick decisions,
deliver results and stamp out opposition. These qualities can
appeal to many business leaders, who themselves operate in a non-democratic
To buttress this exceptionally forthright analysis, Longworth
provides an excellent quote from Ron Leven, a currency expert
at the international investment firm J.P. Morgan, who made a revealing
comment as Indonesia was ridding itself of its U.S.-sponsored
dictator Suharto last year. "Democracy is a desirable form
of government," Leven proclaimed, "but it's not necessarily
the most efficient form of government." Or, as AFL-CIO policy
functionary Thomas Palley puts it: "profits and morality
don't mix very well." Exactly-and no small part of why tens
of thousands of workers, environmentalists, leftists, and other
concerned world citizens recently staged remarkable mass protests
at the Seattle meetings of the World Trade Organization, an autocratic
agency that has a strong record of favoring global capital's unimpeded
freedom to exploit the profit premium of Third World fascism.
Efficiency is an interesting keyword loaded with conservative
ideological overtones in its common usage by U.S. business and
intellectual "elites." The formal dictionary definition
of the word is the attainment of more output from the same or
less input. But the actual doctrinal usage of this term by the
masters of American economy and propaganda is rather different.
For the particular type of efficiency that has always mattered
most to capitalists and their intelligentsia is quite specific:
more profit from less or the same investment input (what Marx
famously represented as the endless pursuit of Money-Commodity-Money
Prime). This perspective is opposed by radical democrats, who
see democracy as a desirable and exalted "output" or
policy outcome in and of itself and not as simply one of different
possible means to the end of profit. In taking such a view, the
latter embrace a moral universe beyond the cold, authoritarian,
and egotistical calculations of capital. It was precisely that
universe that was perhaps more than just envisaged in the streets
of Seattle in late November and early December 1999.
Paul Street's articles and editorials have appeared in Monthly
Review, Dissent, the Journal of Social History, Mid-America, Z
Magazine, The Chicago Tribune, and the Capital City Times.