CAPITALISM AND DEMOCRACY
Part One: How Did Capitalism Get Started?
“The golf links lie so near the mill
that almost every day
the laboring children can look out
and see the men at play.”
That is what Sarah Cleghorn, a turn-of-the-19th century Quaker pacifist and socialist thought of capitalism
A 21th century scholar, Francis Fukuyama, on the other hand, claims that we may be approaching the “end of history” now that the combination of free-market capitalism and liberal democracy is spreading so rapidly around the entire world.
Who is right? Is capitalism good or bad? Is it necessary for democracy or opposed to democracy?
Scholars and citizens disagree. Most scholars today, however, say that capitalism is necessary for democracy--but not sufficient. How so?
Well, first. What is Capitalism?
In the broadest sense capitalism is an economic system based on three simple ideas:
(1) An individual human being’s self-interest is a good thing..
(2) Private property is a good thing.
(3) Specialization of labor and free trade is a good thing.
It gets more complicated in the modern world, especially when it comes to artificial individuals called corporations, but these three basics still hold true today.
How did capitalism get started?
In the broadest sense, the ideas behind capitalism are as old as the human race. Our prehistoric ancestors lived in caves and crude shelters and had to survive by hunting animals and gathering wild foods.
They knew their survival depended on looking out for oneself as well as one’s fellow tribe members. In other words, they had Self-interest:
The tools to do that (spears, bows and arrows, knives, as well as cave paintings, shelter materials and fire) had to be produced and kept safe from other animals, and especially from other human beings. In other words, they had Private property. (Private in their case was not necessarily individual private property however. Land, for instance, was “owned” and fiercely defended by a tribe rather than an individual.)
They learned that one human (or one tribe) could trade with another human or tribe, so that all profited. The warrior got a better spear, the spear-maker got a better cut of the mammoth. One tribe got beads, the other got baskets. In other words, they had specialization of labor and they had Free trade:
From these primitive beginnings capitalism, in fact all systems of economics, evolved over the past 100,000 or more years.
In hunter/gathering societies this primitive kind of capitalism worked but it had severe limitations. It provided an often precarious economic base that enabled our ancestors to survive. But the environment of early people was full of danger and short of food, shelter and pleasure. People needed more than economics to survive.
Scholars who have studied early people have found that people then often had more leisure than people today. They used some of this leisure to create new meanings to see them through dark and dangerous nights—in other words, they created religion and art.
And some of them used some of their leisure to invent better spears, bows and arrows, fire—in other worlds they invented science and technology..
Besides having more leisure than modern men and women they also had more disease, more starvation, and more violence. The average man or woman in those perilous early times lived less than 30 years.
About 10,000 years ago some people in some parts of the world learned how to grow food and domesticate animals. Eventually this agricultural revolution spread to all the continents of earth.
Economically the agricultural revolution was a mixed blessing. With a more reliable food supply populations increased dramatically. There was now enough surplus wealth to allow a few people to escape the day-to-day struggle for existence and to specialize. To become kings and queens, priests, warriors, engineers, architects, bureaucrats, artists, story-tellers. And to found the world’s first cities and civilizations.
It also led to new kinds of economic systems that featured strong class differences, tyrannical governments, bloody wars and severe restrictions on freedom for almost everyone.
Because agriculture (and animal husbandry) demand much more heavy labor than hunting and gathering, it not only cut back on leisure, it led to peasantry, serfdom or slavery for most people. The strongest exploited the weakest both within the tribal, ethnic, religious and political group and between tribal, ethnic, religious and political groups. Most people lived a subsistence existence where bartering was common, but free trade and private property were severely limited.
In ancient Rome for example, texts on agriculture recommended that a master would need at least 12 slaves to operate a small farm. Roman emperors, senators, philosophers, artists, writers, warriors and assorted nobles, like the Greek and Egyptian nobility before them, got their wealth from rent on farmland worked by millions of slaves. With such widespread slave labor, they had little incentive to improve technology or economic organization.
In China, India, Southeast Asia, Africa, North and South America the picture was similar. The ruling elite laid heavy taxes on the peasants or simply enslaved them and used this agriculturally based wealth not to make more wealth but to construct forts, castles and palaces for the rulers and his or her followers. These forts, castles and palaces were needed to defend the societies’ wealth as well as to wage aggressive war on nearby kingdoms in the effort to get more wealth (land, animals, slaves).
Since wealth in all of these agricultural kingdoms was a more or less fixed quantity of land, animals and peasants, serfs or slaves, one person (or one group) could only become wealthier by taking from another person (or group). If I win, you lose. If you win, I lose. Net result, zero increase in total human wealth. Today we call that a zero-sum economy.
One of the most enlightened of the 18th century kings, Joseph 11 of Austria-Hungary, laid down a first principle for a zero-sum economy: “The land and the soil which nature has given to man to support him is the sole source from which everything comes and to which everything returns, and whose existence remains constant through all the vagaries of time. For this reason it is incontestably true that land alone should provide for the needs of the state.”
One of the most prominent economists of the 17th century, the Frenchman, Jean-Baptiste Colbert, put his zero-sum philosophy this way: “There is only a fixed quantity of money circulating in all of Europe .... we cannot succeed in increasing this amount ... without taking the equivalent quantity away from neighboring states.”
Although there were many differences between them, some historians describe the economic foundation of these agricultural civilizations as “feudalism.” In feudal societies there is always a strong class distinction between the elite rulers (typically less than two percent of the total population) and the working peasants, serfs or slaves (typically over 98 percent of the population.).
As could be expected in these zero-sum economies, wars were extremely common. In the 17th century, for instance, there were over 50 major wars in northern Europe alone.
All of these feudal societies also nurtured and shaped religious beliefs and practices to help unify and justify their economic and political structures. Buddhism, Hinduism, Taoism, Confucianism—many varieties of polytheism--and then later the two great monotheistic religions, Christianity and Islam, grew from, supported, modified and sometimes made these feudal civilizations more humane .
For many thousands of years this kind of mutual interdependence with class-defined obligations, religious zeal, zero-sum economies, frequent wars and subsistence living was the norm in agriculturally-based human societies.
And this zero-sum mentality (along with its wars, poverty, class and religious differences) was and is so powerful that it has lasted right up to the 21st century in many parts of the world. Fortunately, not in all.
Think about it for a minute. Consider the average person. For more than 100,000 years past the average human beings lived less then 30 years in almost daily fear of disease, starvation or violent death. For more than 10,000 years past the average human beings still lived only slightly more than 30 years as peasants, serfs or slaves, could not read or write, saw most of their children die before the age of two, rarely traveled more than a few miles from their place of birth and were still always and everywhere in fear of disease, starvation or war.
And then suddenly (“suddenly” in historical terms) in the last 200 years there has been a change. An enormous change. For people living in an industrial society today that is. The average person today lives two to three times as long –over 70 years. He or she can read and write, travels thousands of miles a year, rarely see their children die, are healthier, wealthier, freer than ever before in human history--and only rarely find themselves in daily fear of violence, starvation and death.
How did it happen? Ah, that is a good question. Here scholars debate. History is not like science. There are no ways to conduct experiments that yield definite answers. Nevertheless most modern scholars think that the weight of evidence from the past supports the following story.
What makes much of the modern world different is the combined power of science, technology, capitalism and democracy. Instead of zero-sum economies we now have (in many parts of the world, not all) win-win economics, based and driven not by serf or slave labor, but by the creativity and innovation of free labor, free markets, and free trade. By what we call modern capitalism.
Here we must back up and qualify what was said before. Past agricultural societies were not totally zero-sum. In all agricultural societies there was some progress, even if slow and halting. All human societies, for instance, including hunting/gathering ones, have engaged in trade. In agricultural societies in Asia, Africa, Europe, South and North America and in the classic Egyptian, Greek, and Roman empires around the Mediterranean this trade increased. Aided by energy-rich innovations like sailing ships, a slowly-growing merchant class managed to buy goods in one place and sell them in another, profiting from the exchange.
This merchant class was small in agricultural societies and empires. It was usually looked down upon, and sometimes suppressed by the elite rulers. These rulers, however, often used the merchant’s services to get luxury goods from far-off places and to borrow money (usually to finance wars.)
Markets like these today in Morocco, Mali, Mexico and China were common for centuries in all agricultural civilizations. Markets where local farmers could bring their fruits, vegetables and livestock and exchange them for locally produced cloth, leather belts, pottery and metal pans. As well as musical instruments and religious relics and treasures.
Merchants like the famous Marco Polo traveled what is called the Silk Road from Europe to the Middle East and China in medieval and Renaissance times, taking wool and gold and silver from Italian city-states like Venice or Genoa and bringing back silk, beautiful ceramics, jewels, carpets and rare spices in exchange.
This was a kind of early merchant capitalism as each partner in the trade tried to get the best deal so that both would emerge winners. Mohammed himself, founder of the Islamic religion, was a merchant, as well as a warrior. This early merchant capitalism, however, was never the basic life supporting structure that kept the vast majority of people alive nor it did not greatly increase the net wealth of any society.
This feudal world, of course, was not exactly the same everywhere. It was shaped and modified by the religion, by the technology, by the culture, and by the geography of the given society.
Most historians today argue that the most important of the differences that led to modern capitalism and democracy came out of the often chaotic Christian world of western Europe.
In medieval times in Europe, for instance, (unlike the more geographically far-reaching empires in China, Japan, Southeast Asia, Africa and South America, as well as the Middle Eastern World of Islam) there were literally thousands of feudal estates, along with hundreds of small city-states—all of them relatively independent of one another--often at war with one another.
While serfdom was still the rule in the Middle Ages, slavery (universal in the Islamic and most other societies at that time) was for the most part abolished in Europe by the late Middle Ages. That along with a disaster known as the Black Plague that killed a third of the population in Europe, left feudal estates and city-states with a severe shortage of workers. This shortage in turn was a stimulus to innovation. People had to find ways to get necessary work done with fewer workers. And they did. The first steps were taken to move away from a static zero-sum society.
New kinds of plows, for instance, as well as new methods of field crop rotation were developed that greatly increased agricultural output. New horse collars were invented that enabled horses to do twice the work of Greek and Roman horses without choking themselves. Sailing ships were improved. The compass, clocks, eyeglasses, water wheels were invented (some think many of these innovations were first invented in China and slowly passed on to Europe over the Silk Road). In 1080 there were over 5624 waterwheels in Great Britain alone used for grinding flour and sawing wood.
Some of the few institutions that managed to sometimes escape the chaos of division, ignorance and war were the monasteries that Christian orders established throughout Europe, the British Isles and Scandinavia. Some of these monasteries became seedbeds for scientific and technological invention as well as an early kind of religious capitalism.
Merchants and trade in agricultural kingdoms was limited mainly to luxury goods and it did not envision or produce any great accumulations of capital for future profit. Few people even thought of the idea we call progress. Things just happened. Civilizations rose and fell. Good happened. Bad happened. History, as well as economics, was zero-sum.
Monasteries in the European middle ages, on the other hand, began to experiment with new forms of economic organization that did emphasize investment for future profit. Motivated in part by their Christian faith, dreams of progress were in the air. Trade began to flourish as one monastery specialized in making wine, another in woolen goods and still another in cheese-making. And that was just the beginning.
Monasteries developed some of the first banks, lending money to other monasteries as well as to princes, kings and the Pope. In England alone there were over 500 banks in 1200, most of them branches of Italian banks. These banks also lent money at interest even though such usury had traditionally been prohibited by Christian morality and law. As it still is in Islamic morality and law.
And then after the invention of the printing press in 1450 and the Protestant Reformation a few years later, literacy became more common in Europe than anywhere in the world.
These trends that eventually led to modern capitalism and democracy were accelerated in the late Middle Ages and the Renaissance (13th to the 15th centuries) in northern Italy by merchant capitalists and bankers in new fast growing prosperous city-states like Venice, Genoa, Pisa and Milan. They were aided by new innovations in science and technology like compasses, better sailing ships, better mathematics and better maps and atlases.
For a variety of reasons not well understood, the center of this new kind of merchant capitalism moved a few decades later to northern Europe and to the British Isles. Amsterdam and London became the vibrant centers of a rapidly expanding world-wide trade as sailing ships began to explore and expand trade and markets to all corners of the world. The profits from this merchant capitalism as well as imperialist ventures in Africa, Asia and North and South America soon made England and the Netherlands the richest countries in the world.
The real explosion of capitalism, industry and science that is dominant in our 21st century world happened later, just a little over 200 years ago. That story is the subject of Part 2 of this program, CAPITALISM AND DEMOCRACY.
Part 2: Free-Market Capitalism and Liberal Democracy
In 1776, the year the United States declared its independence from England, England was not only the richest country in the world, it was also the freest and most democratic. Unlike its arch rivals, Spain and France, England had a parliament that shared power with the king. It also had a tradition of freedom from arbitrary state and clerical power. It nurtured and protected a rapidly growing entrepreneurial and merchant class; and England was a leader in the radical intellectual revolution called the Enlightenment.
Christian theologians of the Middle Ages like St. Thomas Aquinas had led the way in promoting faith in reason as one of the foundation stones for religion. This was in sharp contrast to most eastern religions like Hinduism and Buddhism, as well as Christianity’s new competitor in monotheism, Islam. All of these religions looked to revelation and tradition as the only solid foundations for religion and for society.
The Christian faith in rational inquiry (itself in debt to ancient Greek philosophers like Aristotle and Plato, as well as to lawmakers in the Roman Empire) took a new and radical turn in the European Renaissance and the Reformation, and this led in turn to a unique event in world history known as the European Enlightenment.
The Enlightenment happened in the 17th and 18th centuries. It was centered in England, France, northern Europe and the Low Countries of Holland and Belgium, and then a little later in the new world of what would later become the United States of America. It was led by a new breed of intellectuals. Philosophers like Voltaire and Rousseau in France, Thomas Hobbes, David Hume and John Locke in England, Immanuel Kant in Germany (he was the one who coined the term “enlightenment”), and Benjamin Franklin, Thomas Jefferson, Thomas Paine and Alexander Hamilton in the new world of America.
These radical new thinkers disagreed about many things but were united in their rejection of feudal politics and of other worldly-religions as guides to human governance. Instead they put their confidence in human experience and in natural reason as the keys to happiness and to a just society.
Central to that confidence was the progress and the example of science and technology that had taken such giant steps forward in the Renaissance and now vastly increased its stride in the days of the English Enlightenment. This faith in science and technology was now reinforced by a new turn toward economic and political freedom as the only sure path to progress and wealth.
At the time of the American Revolution, Spain, Portugal and France, for instance, (despite the Enlightenment) had absolutist monarchies with no hint of freedom for any but the elite. Even more important for our subject, like all other kingdoms and empires in Asia, Europe, Africa and South America, they had feudal zero-sum economies through and through.
Spanish and Portuguese explorers, for instance, were the first to reach, explore and then colonize Central and South America. They did not send large numbers of settlers to their new colonies and then carry on mutually beneficial trade, as the British did in North America. Instead Spain and Portugal, in accordance with feudal zero-sum economics, simply robbed the colonies of their mineral wealth, most especially their silver and gold.
Like present day oil-rich or mineral-rich countries, they thought they were wealthy with this huge influx of silver and gold and they took little or no thought to developing industry or trade. Spain and Portugal, as well as Central and South America have paid the price of this neglect many times over since 1776.
England on the other hand became the center of the Industrial Revolution.
In England there is a small city called Coalbrookdale and, nearby, is the first Iron Bridge in the world over the River Severn. It was built in 1776, the same year our Declaration of Independence was signed..
Engineers, scientists, artists and businessmen from around the world came to Coalbrookdale in the late 18th century to see how they did it. One key to their success was inventing a new and far more powerful way to get energy from fossil fuels, nature’s gift from millions of eons past..
Coal, for instance, had been known from ancient times but was used only sparingly for heating and smelting metals. At Coalbrookdale they invented a new way to increase its power, converting it into coke. Coke was an enhanced form of coal made in much the same way that charcoal was made from wood.
By using this new more highly concentrated source of energy, whole new possibilities opened up and were soon exploited. Instead of only using high-priced charcoal-smelted iron for special purposes like swords, armor, locks, knives, iron - bolts, chains and pots and pans, Coalbrookdale quickly became a leader in using the now much more plentiful coke-produced iron to forge wagon wheels, to make the first iron rails and iron wheels for the newly invented railroads and most important of all, to make cylinders for the newly invented steam engines.
One thing led to another, and again no one can be sure what caused what. (The steam engine, for instance, was invented to pump water from deep coal mines!) Soon the steam engine was improved and became a power source for railroad locomotives, steamships, factories, mills and mines. And by the end of the nineteenth century, steam engines were being used to produce the most versatile kind of energy of all, the newly invented electricity.
In midland cities like Birmingham and Manchester new innovations in weaving looms led to factory-produced cloth whose quality and price soon made England the world leader in fabric production. Other advances in pottery production, machine design, energy production, canals, factory construction and organization, firearms, sanitation and medical services made England the world leader in industrial production and wealth.
Supporting and accelerating these developments in science and technology, another Enlightenment philosopher, the Scotsman Adam Smith, provided the intellectual base for this industrial revolution and the accompanying leap forward from zero-sum feudal economics to modern free-market capitalism. Smith wrote and published a book in 1776, “The Wealth of Nations,” a book that is still used today in defining and defending capitalism.
Smith returned to simple principles. Capitalism, he wrote, was based on three simple ideas.
Self Interest, Specialization of Labor, and Free Trade.
If societies adhered to these principles, he said, an “invisible hand” would lead to a win-win economy rather than a zero-sum one. In other words, so long as there was freedom-- free labor, free markets and free trade-- wealth for all was bound to increase.
To make sure there was free labor, free trade and free markets Smith realized that order was necessary. This meant that government indeed had a part, an essential part. It, the government, must have and enforce effective laws to protect private property, enforce contracts, prevent crime, and protect against foreign threats. Other than that, however, for the most part the government should stay out of private affairs and let the “invisible hand” do its work. Some call it “laissez-faire” capitalism.
As capitalism and industry exploded on the world stage in the 19th century some of Smith’s optimism seemed to come true. Never in the long history of the human species had the world seen such an enormous growth in wealth and human power and prosperity. And not for just the elite, but for the 98-plus percent poor as well..
Coal and iron, capitalism and the invisible hand, made the nineteenth century a century of rapid population growth, impressive new cities and ostentatious new wealth.
The 19th century, however, also had urban poverty, worker exploitation in dangerous factories and mines, industrial pollution and bloody wars.
Poverty, exploitation, pollution and wars were nothing new of course. For thousands of years, ninety-eight-plus percent of the people who lived in low-energy agricultural societies had lived always and everywhere with poverty, disease, slavery, pollution and wars. As Thomas Hobbes, a seventeenth century philosopher in England, put it, "the life of man everywhere is nasty, brutish and short."
Even the elite few who escaped poverty-the kings and queens, the bishops and nobles-could not escape pollution, disease and death in wars. For even the wealthiest human beings the average life span was still only a little more than thirty years.
In the nineteenth century Industrial Revolution, however, all this changed. The sudden new increases in energy and wealth meant that many more people could now live richer lives. They could travel more, eat better, read and write, and had many more choices about what they could do with their lives. The average life span increased to over forty years.
In the United States capitalists like John D. Rockefeller, Andrew Carnegie, Cornelius Vanderbilt and J.P. Morgan founded whole new industries in oil, steel, railroads and finance. They were often bitterly resented and called the “robber barons” by labor leaders and intellectuals then and now. And true, they often did use aggressively harsh methods and true, they did become “obscenely” wealthy.
But it is also true that the workers in their refineries, steel mills, railroads and offices were paid two and three times as well as workers in similar European industries or even worse, on European peasant farms. They were paid these higher wages not out of charity or management good-will, but because the workers were two and three times as efficient as the workers in Europe in creating new wealth. And they were more efficient because of capitalist encouragement of technological change and innovation.
Despite the exploitation, these industrial workers of the 19th century were much better off than the peasants, serfs or slaves in previous feudal society. They were, in fact, so much better off than European farmers and workers in the same century that people from Germany, Poland, Russia, Italy, Ireland, Scandinavia and eastern Europe emigrated to America in record numbers. Those immigrants are the great-grandparents of most people in the United States and Canada today.
In the middle of the 19th century a German intellectual named Karl Marx wrote a powerful critique of this new industrial capitalist world called Das Capital. Instead of the invisible hand promoting the welfare of all, Marx claimed that it promoted only the welfare and wealth of the capitalists, the owners of industry, the bourgeoisie. It left the workers, he called them the proletariat, as wage slaves. They would, he claimed, inevitably sink deeper and deeper into poverty until they revolted and took power for themselves. They would then establish true socialist utopias where the means of production were owned by the workers themselves and production was not for profit, but for the welfare of all.
Along with his English colleague, Frederick Engels, Marx wrote in the most important pamphlet ever printed, the Communist Manifesto in 1848. “The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a communist revolution. The proletarians have nothing to lose but their chains. They have a world to win. Proletarians of all countries, unite!”
It sounded like a good idea to many people in western and non-western countries. But it never worked out as Marx and Engels predicted. For one thing their prediction that workers would sink deeper and deeper into poverty turned out to be mistaken. Due to the dynamics of capitalism itself, along with struggles of many free-trade union activists in western countries, instead of sinking deeper and deeper into poverty, workers became richer and richer. Became middle class, bourgeoisie.
At the same time workers were getting richer, industrialized countries were also slowly and haltingly becoming more democratic. Free trade, free labor and free markets seemed to be a good fit with freedom of speech, freedom of religion and free elections, as they began to develop in the democratic states of western Europe and North America. In the 19th century, not without extreme violence especially in the American Civil War, this partnership of capitalism and democracy did lead to the final extermination of serfdom and slavery in the western world.
In the 20th century, however, in the wake of World War I, a revolution in Russia led to a new kind of slavery, the first totalitarian state, the Soviet Union. And then after World War II communist parties in China, in Korea, in Vietnam and Cuba took power and established totalitarian states. All these intellectually-led parties took power in the name of the workers and the peasants. And all ended up the most unproductive, oppressive and totalitarian regimes in the long history of the human race. Instead of welfare for all, all of these 20th century experiments with communism led to stagnation, boredom, drastic declines in living standards, and savage gulags where fifty to one hundred million people were enslaved or murdered.
By the end of the 20th century only a very few communist states still survive to carry on the communist cause. Cuba and North Korea are probably the only true believers. The Soviet Union is no more. All the former communist states of eastern Europe are now free, democratic and capitalist. China, like Vietnam, is still not free or democratic, but it is strongly capitalist in its economy and is rapidly recovering from decades of economic decay under communism. Whether it will gradually become more democratic, more free and more respectful of human rights remains to be seen.
Despite the seeming triumph of capitalism (and democracy as well) on the world stage, there is strong opposition to capitalism in many parts of the world, including the western world where it originated.
One of the major problems of capitalism is that it does not automatically bring to mind romantically utopian hopes and dreams. To many sensitive and intelligent people it smacks of crudity, selfishness, greed, and a ruthless competition that rewards the bully and punishes the weak. And it fosters, some claim, an environmentally and morally destructive hedonism and consumer driven excess.
Socialism (in theory) gets a better press. In practice, however, full-blown socialist societies like the Soviet Union, China, Cambodia, Cuba and North Korea have not only been the most brutal and ruthless tyrants, they have also been the world’s worst polluters.
Many capitalist countries in Europe and especially in Scandinavia have experimented with a modified version of capitalism that emphasizes strong government interference in distributing the accumulating wealth of a capitalist economy via an expanded welfare state. In fact, most western democracies, including the United States and Canada, do not rely totally on an “invisible hand” to equably distribute wealth. Social security systems, national health systems, unemployment insurance, etc. are common throughout Europe, North America and Japan. All of these liberal democratic states today however do rely on the private ownership of productive industries to produce the wealth that democratic governments help distribute, modifying and softening some of the inequities and harshness of the “invisible hand.”
Some countries of South America, notably Venezuela, Bolivia and Ecuador, are now flirting with more radical socialist ideas like government ownership of key industries in the hopes that they can make faster progress in overcoming poverty.
The “invisible hand” of Adam Smith seems to work well in increasing a society’s wealth but it also seems to make serious mistakes that have in the past led to booms and crashes that have caused great suffering for many hard-working people. It also means that individual companies and sometimes entire industries are destroyed in the competition for efficiency and innovation. Some analysts call this “creative destruction” but that does not make it any more pleasant for those whose jobs or companies are destroyed.
There is also deepening concern in the 21st century about non-economic goods like the environment and human rights. How does capitalism with its unprecedented power of wealth creation and creative destruction deal with non-economic goods like clean air, clear water and productive soil? How does it deal with racial, sexual, religious and gender discrimination? In all of these issues, religion and the arts come into play as well as capitalism and science. Private organizations, both secular and religious, and a free press have acted as powerful and effective restraints to correct problems brought on by capitalistic excess.
Finally, what about globalization? As modern liberal and capitalist democracy becomes ever more powerful and ever more common around the world, some activists in both the western world and the underdeveloped world claim that its aggressive and rapid spread around the world –globalization-- harms both worlds by letting giant multi-national corporations profit generously while doing little or nothing about poverty in the underdeveloped world. Instead, they claim, globalization results in frivolous and environmentally harmful wealth in the western world.
This charge, say most economists and scientists who have studied poverty and wealth, is simply false. Globalization does lead to change as capitalism always has. These scientists point to statistics that show enormous overall gains, however, in countries like India, China, Korea, Taiwan, Malaysia, and South Africa. Many of these countries were written off as hopeless just a few decades ago. And despite claims to the contrary there have also been solid gains in income, agriculture, health, life expectancy, pollution control and almost every other measure of progress in countries that were formerly communist in eastern Europe, as well as in countries in South America, Central America, Africa and Southeast Asia.
Some countries, it is true, seem to have been left out of this progress. So far. Many of these are Muslim oil-rich but industrially and ideologically poor countries in the Middle East (misleadingly “rich” like feudal Spain and Portugal were with their gold and silver) but handicapped by religious and ethnic differences inherited from a thousand years ago.
Some of the countries in sub-Saharan Africa are also slow to progress, handicapped by corrupt governments, and endemic health and environmental problems. And finally the few still communist countries like Cuba and North Korea handicapped by a perverse and tyrannical economic and political system.
If capitalism is rapidly expanding its reach around the world, what about freedom and democracy? Is there a natural partnership between free-market capitalism and liberal democracy?
Here is a map of the world in 1800, at the beginning of the industrial revolution and the beginnings of modern capitalism. Countries in red were (relatively) free, democratic and capitalist. Countries in blue were un-free, (authoritarian, totalitarian or feudal.)
Here is the same map in 1900.
And here is the same map in 2008. Notice the striped red. These are countries that are capitalist but neither free or democratic.
Note that there are no countries that are free and democratic but not capitalist!
Scandinavian countries like Sweden, Norway, Finland and Denmark are sometimes listed as exceptions because of their strong commitment to social welfare policies. However their basic economy is firmly capitalist as most of the productive sphere that creates and underlies their wealth is privately owned.
Some today would claim that Venezuela is an exception as well. While still relatively free and democratic, under the leadership of Hugo Chavez it seems to be moving rapidly in the direction of communism and in the process restricting important freedoms, like freedom of the press, abrogation of private contracts, and severe restrictions on private property. Chavez has openly boasted of his admiration and desire to follow in the footsteps of Fidel Castro’s Cuba. Considering Cuba’s lack of freedom and abundance of poverty, if Chavez carries through on his plans it may well be a dark day for his country.
In conclusion, we can answer the question posed at the beginning of this program with some confidence. Yes, capitalism is necessary for democracy--but not sufficient. A healthy regard for self-interest, for private property and for free trade, in other words, combined with a commitment to science and technology, and leavened by a commitment to humanistic religious values seems to be the story of past economic success as well as human prosperity and freedom.
It may or may not be the end of history, but it does seem to be the wave of the future.