Capitalism and democracy are strange bedfellows. Capitalism’s mantra is “survival of the fittest.” Capitalism has created a hierarchical society with corporate executives and owners of capital at the top and workers at the bottom

Over the past two centuries, capitalism and democracy have proven to be the most successful systems of economic and political order. Following the collapse of Soviet-style socialism and the transformation of China’s economy, capitalism has become the almost universal economic system around the world. Democracy has been the most cherished political order but is far from universal–only about 60 countries out of about 200 can be classified as true rule-of-law democracies.


            Capitalism and democracy are strange bedfellows. Capitalism’s mantra is “survival of the fittest.” Capitalism has created a hierarchical society with corporate executives and owners of capital at the top and workers at the bottom. With profit as the primary motive, capitalism has created great inequalities in wealth, income, and power. In contrast, democracy strives for an egalitarian society and lives by the mantra “all men are created equal.” All citizens should have equal rights and opportunities; all citizens should have the right to participate in choosing those who govern them; and all citizens should be provided with a social safety net to supply their basic needs. Given the divergent nature of the two, there has been widespread debate whether democracy and capitalism are compatible with one another.


            Capitalism and democracy appeared to be synergistic partners after World War II. There was an unprecedented period of economic growth and prosperity. The new wealth was shared by workers and owners alike, as income achieved unparalleled growth, and unemployment reached new low levels. Labor unions were strong and guaranteed many worker benefits, including a 40-hour work week, higher pay, retirement pensions and workplace safety. Workers in auto assembly plants and other industries could afford a house in the suburbs and were able to send their kids to college. Income inequalities fell across the developed world.


            But things began to change in the 1970s and 1980s. British Prime Minister Margaret Thatcher and President Ronald Reagan supported deregulation of capital and labor markets, and this triggered a strong global movement advocating the importance of self-regulating markets. Globalization and global trade facilitated deregulation, because capitalism and free markets could no longer be regulated by individual nations. The era of organized and regulated capitalism came to an end. A new era of laissez-faire capitalism had begun.


            Globalization and unfettered capitalism brought great economic growth, but the rewards were not shared equally. Income and wealth soared for those at the top but stagnated for the middle class and the poor. In 1993 President Bill Clinton signed the North American Free Trade Agreement (NAFTA) and in 2000 normalized trade with China. Jobs began to flee overseas. Manufacturing plants in the United States closed, and suppliers and supporting businesses to the factories shut down. Many small communities declined and fell into poverty. The social status and self-esteem of working-class men, who struggled to provide for their families and who were loyal members of their church and patriotic supporters of their country, were being destroyed by corporate elites who sent their jobs overseas. The message to the worker–that his skills were no longer competitive and that he would require more education and training to qualify for modern jobs–was clear: it is your fault.


            The great inequalities in income, wealth and social status created by free market unfettered capitalism and the resentment and anger they bring to the working-class have led to a right-wing populist movement in our country that challenges our democracy. Workers feel politicians no longer represent them and feel alienated from their government. Donald Trump capitalized on this resentment and promised jobs and a return to a time when there was respect and a sense of purpose for the White working-class. He rode this movement to the presidency and moved our country toward autocratic rule. Despite his loss in the 2020 presidential election, he still has the loyalty of his working-class base and remains an imminent threat to our democracy. He may run again for the presidency in 2024.


            What can be done? As economist Robert Reich argues in his thought-provoking book Saving Capitalism, we need to change the rules of capitalism. The current rules of capitalism favor large corporations, the wealthy and the connected. Government regulations favor corporations over labor unions. Corporations have hindered union membership by threatening to send jobs overseas, and as a result, union membership and influence have declined dramatically.  Congress has not allowed Medicare to negotiate drug prices with pharmaceutical companies, leading to huge profits for the companies and high prices for the consumer. Bankruptcy laws discriminate against the poor. In the financial crisis of 2008, homeowners whose mortgages outstripped the falling value of their homes were not allowed to declare bankruptcy, while Wall Street titans responsible for the crash were left unpunished. Tax laws favor corporations and the wealthy, who are able to take tax deductions, find loopholes, and often pay at lower rates than working-class Americans.  The primary mission of most corporations today is to maximize profits for their shareholders. This results in greater wealth for shareholders and lower income for workers. The mission of corporations should change to taking responsibility for all stakeholders–employees, customers, the community, and the environment, as well as shareholders.


            The challenge to rewrite the rules of capitalism is a political one. Inequality cannot be rectified through redistributive taxes alone. The challenge is how to change the rules to provide a fair opportunity for all and a fair distribution of income and wealth. We are in a vicious cycle. Economic dominance creates wealth and political power, and political power shapes market rules that further economic dominance for the elite. Politicians are influenced by campaign contributions and by expert and legal opinions provided by corporations, Wall Street, and wealthy individuals. Inequality is currently baked into the rules of the “free market,” which direct most of the income and profits to corporations, executives and owners of capital and a much smaller proportion to workers. Change will require workers and like-minded citizens to understand what is needed and come together politically to make a change. Change will require mitigating the influence of money in politics, so we can break the vicious cycle of economic dominance creating wealth and wealth bringing political power. Changes will be incremental and will take time, but change is possible.


            Capitalism and democracy have different values. Unregulated capitalism is a competitive world in which the winners attain great wealth and power, and the losers end up with very little. Unregulated capitalism can bring out some of the darker side of our human nature–selfishness, greed, hierarchical and authoritarian traits, and tribal instincts. Conversely, democracy believes in the equal worth of all individuals and advocates for the common good. Democracy brings out some of the better side of our human nature–cooperation, empathy, altruism, and egalitarian traits. Unregulated capitalism has created great income and wealth inequalities that have divided and polarized our nation. Growing and unrestrained socioeconomic inequality beget political inequality, and political inequality is not compatible with egalitarian democracy. Growing socioeconomic inequality has also caused great resentment and anger among the working class and has led to a right-wing populist movement that has moved our country closer to autocracy.


            It has become clear that unfettered capitalism is an existential threat to our egalitarian society and to our democracy. If we are to save and preserve our democracy, we must achieve the political will to rewrite the rules of capitalism. We must give all our citizens opportunities to compete on a level playing field so we can mitigate our country’s growing inequalities in income and wealth. Let’s hope we are up to the challenge. Our nation’s democracy depends upon it.



            To learn more about the potential conflict between democracy and capitalism, check out Bruce Brodie’s new book  Where Are We Going? Human Nature and the Struggle for Our Democracy.