Capitalism, Fascism, and Democracy

— In this review essay on a book about fascism, Terry Eagleton concludes:
The assumption that the free market and political democracy go naturally together was always pretty dubious, and fascism is one dramatic refutation of it. But we might now be moving deeper into a world where the two go together like a horse and cabbage.
We do not expect much from Eagleton, so this isn't surprising.
Now, the first sentence is a bit hazy on the meaning of “go naturally together.” If Eagleton means “are rather often found together,” there's nothing dubious about this. I don't have the statistics at my fingertips, but I do remember seeing numbers somewhere that showed a strong correlation between liberal democracy and capitalism. The question is blurred by the fact that there's no universal agreement on the right way to use these words, but I take it that the liberal democracy/free-ish markets correlation is fairly conventional wisdom.
It's clear, at least, that the sort of “democracy” where voters are frogmarched to the ballot-box to cast their vote for the resident autocrat tends not to be congenial to free markets. And we should probably expect a fully populist sort of democracy to feature plenty of redistribution from losing coalitions to winning coalitions, especially if the minority happens to dominates the market. (And we should also, I take it, expect violence in these cases. To put it in Scanlonian language, market dominant minorities have a “reason to reject” a system of principles that allows expropriation based simpy on numerical superiority, and they often express their rejection in not entirely peaceful terms.) So, yes, markets and democracy, per se, are not by their essence complements, like punch and pie.
But, according to one sort of bourgeois liberalism, there is a deep logical-normative relationship between free markets and democracy. Suppose we take it for granted that it's better for people to realize their reasonable ends than to not realize them, and that there is such a thing as cooperation to mutual advantage, i.e., interaction by which the interested parties jointly advance their ends. In general, the best piece of evidence that an interaction is mutually advantageous is that the parties to the interaction have each agreed to its terms and have carried them out. If somebody had to be forced to agreement, or to compliance with it, that's evidence that it's not really mutually advantageous. Which means that somebody's ends are being frustrated, which is a bad thing. So unless we can't avoid it, the unanimity rule should prevail as our favored principle for collective decision.
Anything less than unanimity tempts noncompliance by the overruled, which may in turn necessitate coercive means for gaining compliance, which, aside from moral qualms about coercion, is also expensive to those who have to pay for the mechanisms of force. Other things being equal, it's better to get things done voluntarily and cheaply rather than coercively and expensively. Does it require saying that, in general (negative externalities aside), the market is a system of unanimous decision, i.e., cooperation to mutual advantage? Yes, I suppose it does.
Alas, there are collective action problems and public goods, and so we often need some mechanisms of coercion and public finance to best facilitate a general system of mutual advantage. How are we decide how to implement these? If unanimity is required, everyone has a veto. But someone always stands to lose relative to any particular coercive policy. So we need a decision rule short of unanimity. That is, we need some kind of majoritarian, or extra-majoritarian democratic principle. And each of us can see that this will be to our benefit. We might lose in certain cases, but we will win overall, assuming the system's a good one. Now, which system of collective decision principles, and which structure of public roles and institutions will best constrain and control the use of state coercion and facilitate an overall system of cooperation to mutual advantage is a damn hard problem. But it remains that the point of such a system just is to facilitate such cooperation, and to help us achieve our ends in concert with others.
So it seems that the logic that governs the market is also likely to deliver democracy. Moreover, it is likely to deliver a democratic structure that will tend to minimize the ability of the ambitious to dominate the means of coercion in the manner characteristic of a fascist state. The generally negative-sum struggle for fascist state power is diametrically opposed to the positive-sum logic of cooperation that is the very heart of capitalism, and the justification of democracy.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center