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Democracy and Markets

On one hand, industrial capitalism made possible those reforms that are part of democracy. On the other hand, owners of capital from time immemorial have feared too much democracy. In the 1980s, the head of Volvo said: "Sweden needs Volvo but Volvo doesn't need Sweden. In the capitalism of the 21st century, individuals have a complex and rich life.

The sociologist Colin Crouch on the complicated relation of capitalism and citizen power

[This interview published on www.taz.de 6/23/2012 is translated from the German on the Internet, . Colin Crouch, b. 1944, became known suddenly with his study "Post-Democracy" in 2004. In 2008, his book "The Strange Non-Death of Neoliberalism. Post-Democracy II" was published by Suhrkamp.]

Taz: Mr. Crouch, are we now experiencing the end of the era of democratic capitalism?

Colin Crouch: No. Democracy becomes weaker and capitalism becomes stronger in the era of the financial industry. But the combination of democracy and capitalism will remain. The actors of the financial markets do not want democracies to dissolve. In the recent history of capitalism, there were exceptions like the Pinochet regime. But as a rule the powerfu9l appreciate when laws are observed.

Does capitalism need democracy?

Yes, under normal circumstances. Interestingly the so-called technocrat-governments in Italy and Greece that came into office through the financial crisis stopped the self-destruction of democracy. The rule of the political class in Greece that controls the media and doesn't pay any taxes is starting to sway. The development after the last election is uncertain. Even in Italy, democracy did not perish with Berlusconi who massively misused power.

But Rome and Athens also demonstrate something very different. Prime Minister Mario Monti previously worked for the Goldman Sachs investment bank. European central banker Mario Draghi was director of the European division of Goldman Sachs. In the USA, the Treasury secretaries that deregulated the financial sector were on Goldman Sachs' payroll in the recent past. Doesn't this personnel interweaving show that the financial industry has captured the democratic institutions?

Oh, yes. But it also shows that the financial industry appreciates democracy as protection. Globally there are fewer dictatorships than in the past. The attitude of the US toward dictatorships in Latin America and the Middle East has changed. In the past the US brutally suppressed democratic movements. In an accelerated way after the collapse of the Soviet Union, they understood that democracies bring more stability than dictatorships.

Isn't all this good?

No. In present democracies, citizens may vote but what they can influence is limited. The politicians whom they elect can not annoy the financial markets too severely. Otherwise a worse crisis threatens. Up to now, citizens and politicians have basically accepted this rule of the game. Therefore democracy is a comfortable matter for financial market actors. There are no riots and no military coups. That is pleasing.

A shriveled form of democracy exists. Is the undermining of democracy by financial capitalism really new? Or was the attack on democracy a part of capitalism from time immemorial?

There were different periods and from the start a paradoxical relation between democracy and capitalism. On one hand, industrial capitalism made possible those reforms that are part of democracy. On the other hand, owners of capital from time immemorial have feared too much democracy. The form of democracy of which we speak has existed in northwest Europe since 1945 and somewhat longer in the US. We tend to understand ourselves as the norm. But in world history, democracies occurred in a concrete region in a limited time period. The elites understood that democracy is a good cause after the victory over National Socialism. The US model showed that democracy was possible with massive inequality. In this phase, capital groups dominated that understood themselves as national actors whose profit depended on a flourishing mass consumption. The result was a class compromise. Workers had more rights, the system was stable, the welfare state was built and profits bubbled. Everyone was satisfied.

Then what happened?

Then capital internationalized and became nationally dis-embedded. In 1956 the head of General Motors said: what is good for General Motors is good for the U.S. This is a famous sentence. What the boss of Volvo said in the 1980s is less well-known: Sweden needs Volvo but Volvo doesn't need Sweden. This demonstrates the leap from the embedded corporatist capitalism to the globalized system. The deregulated virtual financial capitalism is its intensified form.

Aren't you idealizing the Fordist phase in retrospect? The welfare state was a class compromise, not a true democracy. There are always compromises in a democracy. Democracy consists of balances of power. As a rule, the total victory of one group is the death of democracy. The classic example for this is the religious compromise in the Netherlands in the 19th century when Catholics, secular persons and Protestants made peace. Every group knew all others would unite against them if it tried to win.

What about the idea of non-representative or true democracy?

What does that mean? I don't think there is a majority for the abolition of capitalism. The Marxist concepts for defining the true interests of citizens and ignoring their concrete desires broke down. Capitalism in all its ramifications is part of this society.

The key question is: does politics impair the power of the markets by setting rules? Or does "market-conforming" democracy prevail, as emphasized by Angela Merkel?

We have market-conforming democracies. Whether they can be stable is hard to say. The governments in the US and Great Britain that pushed the deregulation of the financial markets are slowly coming to understand that they cannot exact that on their citizens. That is the optimistic scenario. Politics understands the desires of citizens for more social security must be taken into account. The problem is: capital flight begins when the government renovates the welfare state and raises taxes. The only thing that helps against this is international agreements. Capital has long acted in a transnational way at breath-taking speed. Politics must also do this. This is enormously complicated and complex - as demonstrated by the stubborn resistance against international regulations in Great Britain.

What is the pessimistic scenario?

The protest movements against financial market capitalism are too fleeting. The nation-state egoisms are too strong. The flexible labor market continues; the chance for collective action dwindles.

In what do you believe?

I don't know. There will be much more social disintegration as in Greece. The markets and their agents will try to take away welfare state benefits and social securities. This is already happening and damages the democratic system. There are more non-voters and more protest voters which further weakens the legitimacy of governments. Fading legitimacy can become an ever-faster cycle.

Does a decay of the democratic system threaten?

Yes, the danger is real. But the whole picture of democracy must be seen, not only parties and the state. For years, we witnessed the descent of the big parties and the ascent of citizen initiatives, NGOs and civil society organizations that are not part of the market or the state. Was it really so much better when the big organizations in the 1970s took everything under their wings and thought they could solve all problems? In the capitalism of the 21st century, individuals have a complicated and rich life. The fragmentation and social dismemberment also has positive sides. Individuals become different, more selective, more complicated and more multi-faceted. Therefore it would be a terrible error for social democracy or leftist politics to think everything will be good by returning to the 70s.

But citizens want and need social securities.

Yes, a social state that doesn't make rules on what is good for us, a social state that helps citizens choose themselves. The social state will not be cheaper. Quite the contrary.


Crouch, Colin, "There is an alternative to neoliberalism that still understands the markets," June 27, 2012, The Guardian
 link to www.guardian.co.uk

Deppe, Frank and Hild, Thorsten, "Capitalism and Democracy," 2010

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