Democracy and Capitalism

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Democracy and Capitalism
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Todays Lecture and Course Readings

• Course Readings
• The Market System Ascendant from The Market
  System What It Is, How It Works, and What to
  Make of It by Charles Lindbloom
• Democracy vs. the Market from The Future of
  Democracy by Lester Thurow
• Corporations as Machines from In the Absence of
  the Sacred by Jerry Mander
• Optional Readings on Ereserve
• Views of Inequality from The Economics of
  Poverty and Discrimination by Bradley Schiller
• Suggested Readings
• The Worldly Philosophers The Lives, Times, and
  Ideas of the Great Economic Thinkers by Robert
  Heilbroner

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Market vs. Market System

• Market whenever people pay other people (or
  make exchanges) for goods or services
• Market System interactions of buyers and
  sellers coordinates society

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Control in Democracy Defined

• Popular or mass control over elites
• Vs.
• Market control over elites
• Elites defined by Lindbloom as - two groups
  government and market elites

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Charles Lindbloom

• In market systems, buyers control only the most
  conspicuous features of what the markets offer.
• Both market and democratic governmental elites
  often claim to be servants of the people. But
  they are too big and powerful to be servantsthey
  respond to an aggregate of preferences, that is,
  to election returns or sales reports, but they do
  not respond to any of us as individuals.

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Lindbloom

• Market system advocates claim- makes society
  wealthy- protects personal freedom
• His books thesis- There are great unsettled
  issues about a place for the market system in
  the future of any society.

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Questions Lindbloom Raises

• How does the market system affect society?
• What does it do for it?
• What ills does it bring?
• What future does it offer?

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Charles Lindbloom on Corporations

• Exercise political power beyond the capacity of
  ordinary citizens
• Political power broadly distorts democracy
• Corporate Welfare

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Corporations as Citizens

• Confers special powers to a machine or system
• Makes as much sense as granting citizenship to a
  fire hydrant
• Undermines democracy

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Manders Obligatory Corporate Rules

• Must sustain growth
• Fiercely competitive
• Amoral
• Hierarchical pecking order
• Excludes from decision-making process any values
  that cannot be quantified- example trees do
  not have value until cut down and made into a
  product

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Obligatory Corporate Rules Continued

• Employees are objectified and dehumanized
• Worker is exploited
• Exist beyond time and space on paper
• - no commitment to locale or people
• In direct opposition to nature commodification
• Impose homogenization and destroy diversity

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Thurows Claim Conflating Capitalism with
Democracy

• Different ideological foundations
• Democracy - equal distribution of power
• one man, one vote
• Capitalism - unequal distribution of power
• survival of the fittest

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Possible Answers

• Friedrich A. Hayek not unjust because no
  personal intent, just a byproduct of capitalism,
  implies no need to fix
• Thomas Nagel not unjust but probably a good idea
  to fix
• John Rawls unjust, undeserved inequalities need
  to be fixed society is obligated

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Thurow on Capitalist Democracies

• Interfere with Market to
• promote opportunity
• stop rising inequality
• reduce inefficiencies or spillovers

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Example of A Spillover

• Factory pollutes the environment consequences
  spillover into community results are
  inefficient for society
• What society does about spillovers turns on what
  it values- NIMBY problem- cost/benefit problem

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Examples of Interference

• Public education
• Homestead Act
• Progressive income tax
• Social Security
• Medicare and Welfare
• Environmental Regulation

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Thurows Question

• How far can inequality widen before threatening
  democracy?
• Sees parallels between America, Roman Empire, and
  Dark Ages

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Thurow Asks

• What is the problem role of government in solving
  these questions?
• Capitalism counters it can provide for everything
  we need except for PURE public goods

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Pure Public Good Defined

• Any one persons consumption of a public good
  does not reduce it
• Impossible to stop others from enjoying it
• Everyone has an incentive to hide their demand
  (to make others pay for it)

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Thurows Conclusions about Capitalism

• Much of what we need in our lives would not fall
  under prior definition
• No social vision other than maximizing profit and
  efficiency
• No means of determining values beyond individual
  preferences

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Thurows Recommendations

• America needs a vision to maintain it
• Vision must address social aspects of human life
• Quote To ignore the social aspects of humankind
  is to design a world for a human species that
  does not exist.

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Manders Conclusions

• We surely need to abandon all values that place
  emphasis on commodity accumulation as something
  desirable in life.

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Lindblooms Conclusions

• Think society, not economy. The market system
  can be understood only as a great and
  all-pervasive part of the structure and life of
  society.
• What kind of society do you want?