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Democracy field notes

Big Business and Democracy

‘No bourgeois, no democracy’ is a formula made famous during the 1960s by the American scholar Barrington Moore Jr. It’s still frequently quoted in the academic literature. When explaining the connections between modern parliamentary democracy and market capitalism, some scholars, journalists and politicians even regard it as a ‘law’ founded on solid statistical evidence.

The formula has old roots. A most interesting and still-relevant version is found in Joseph Schumpeter’s classic Capitalism, Socialism, and Democracy, published exactly 60 years ago this month. When re-reading it recently, I was struck by its daring rhetoric. ‘History clearly confirms’, wrote Schumpeter, ‘modern democracy is a product of the capitalist process.’ Generalising from the special case of Britain and the Low Countries, he noted how the early modern property-owning bourgeoisie, unlike previous classes, imagined their interests were ‘best served by being left alone’. The bourgeoisie was a class whose identity depended upon freeing property from controls based on tradition, church and monarchy. Contemptuous of cramps on its own power, the bourgeoisie favoured restraints upon others, especially those classes (the aristocracy) that had taken refuge in state structures. The early bourgeoisie had parliamentary democracy in its veins. Hence its attraction to civil and political freedoms, periodic elections and constitutional government.

The view that ‘modern democracy rose along with capitalism’ (Schumpeter’s words) is often given a twist, to say that capitalist markets and a robust middle class are essential drivers of representative democracy. No bourgeois, no democracy. Hillary Clinton repeated a variant of the formula last week in Mongolia, in a speech delivered to an international forum of democracy advocates.‘You can’t have economic liberalisation without political liberalisation’, she said. The converse rule holds true, she added. Democracy is good for business. No democracy, no bourgeois. ‘Countries that want to be open for business but closed to free expression will find that this approach comes at cost; it kills innovation and discourages entrepreneurship.’

Fine reasoning, but flawed. The historical record of countries such as Russia, Germany and Japan shows that there’s nothing automatic or necessary about bourgeois support for democracy. In each case, for reasons to do with business greed and fear of losing fortunes, owners of private capital clung to state power with an iron fist. Their calculation: better rich and safe than equal.

Something similar is now happening in parts of the contemporary Asia and Pacific region. The dynamism, technical ingenuity and productivity of its markets are impressive; with the Atlantic economy in dire straits, the Asia and Pacific zone has out-invested, out-produced and out-traded the rest of the world. Yet the region also displays deep ambivalence about democracy. In countries otherwise as different as China, India, Vietnam and the Philippines, powerful business interests show no special liking for democracy. Insisting it breeds social disorder and political gridlock, they’ve long ago concluded that the old European principles of freedom of association, fair elections and majority-rule democracy are out of date - less legitimate and effective than strong government committed to ring-fencing markets and keeping citizens in their place.

Schumpeter wouldn’t be shocked. In contrast to later catchy versions of the ‘no bourgeois, no democracy’ formula, he pointed out that even in countries with established parliamentary traditions (Weimar Germany was a prime example), owners of capital and their middle class supporters are often politically fickle. Confident their fortunes are better protected by manipulation, propaganda and strong leaders backed by force, they turn their backs on the spirit and substance of democracy. Bourgeois, no democracy.

So it should come as no surprise that the deepening economic crisis in the Atlantic region is re-activating old bourgeois ambivalence about parliamentary democracy. The trend is uneven and hard to measure, but ponder for a moment an in-depth survey of the political attitudes of American CEOs conducted by the New York-based The Conference Board. It’s an industry body that recently asked seventy prominent corporate executives which institutions are best handling the present economic crisis.

The survey reveals (unsurprisingly) that 90% of these CEOs think that ‘multinational corporations’ are proving ‘moderately’ or ‘very’ or ‘most’ effective. The robust narcissism of these CEOs is understandable; given the big mess within the private banking sector, equally understandable is their conviction that the runner-up favourite institution is ‘central banks’. 80% of the surveyed group ranked them as ‘moderately’ or ‘very’ or ‘most’ competent.

Guess which institution was ranked third most ‘effective’ by these American CEOs? Readers of Schumpeter will knowingly smile: the Chinese government. It won the approval of 64% of the sample (the US presidency scored 33%; the Congress a miserable 5%). Many CEOs complained bitterly about the current absence of ‘leadership’ and the urgent need to halt ‘domestic political stalemates’ and short-termism. ‘The Chinese have some policies we hate’, noted one CEO, ‘but at least we know what those policies are.’

Might these words be signs of our times? Coded warnings that the era of big business compliance with welfare state intervention is well and truly over? Proof that big business is selfishly prepared to take off its political gloves? If so, then perhaps it’s time for a call to democratic arms, in support of a new politics of protecting democracy against what Schumpeter called the ‘predatory’ and ‘cuthroat’ impulses that fuel the ‘capitalist engine’.

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