What is the relationship between capitalism and democracy? Research Paper

October 14, 2020 by Essay Writer

Introduction

Typically, democracy is a system of governance in which people choose the kind of leadership they prefer (Mansbridge 2). Concurrently, capitalism refers to an economic system signified by private or commercial ownership of principal commodities (goods and services). Capitalism is determined by investments through private decisions, prices, production, as well as distribution of commodities in a free market (Crick 34).

There is a considerable relationship between capitalism and democracy. Additionally, it is not possible to attain democracy in the absence of capitalism or capitalist economy. Considerably, democracy is a major contributor to capitalism as well as other fundamental human values, thus, it should be encouraged all over the world.

It promotes values, such as the rights of workers, freedom of speech/movement, as well as the right to establish and run a business under the sole proprietorship methodology. It also establishes a secure and stable environment for citizens of a country. This shows its relationship with capitalism (Barkawi 54).

In addition to this, democracy ensures that the interests of all citizens and the country are secured. Governments that promote democracy are the ones that enhance peace, avoid violence and wars, encourage development, promote capitalism, and advocate for the rights of all humans.

Democracy should be promoted in the modern world to assist in the achievement of stability and growth for humanity. Its development should also be promoted to enable countries that are newly formed to adopt democratic principles (Mansbridge 98).

Countries that have not implemented the principles of democracy and capitalism should be denounced and encouraged to adopt them (D’Anieri 33). This section of the paper discerns the relationship between democracy and capitalism and whether any of the two can do without the other one being a considerable provision.

The relationship between capitalism and democracy

Through capitalism, many countries in the world have established, ratified, and embraced democracy. There are others still in the process of implementing strategies that will ensure democracy (Art 245). The growth of democracy has taken a long time, and there are various methods that have been used to spread it.

There have also been various barriers to the spread of the value. Capitalism and commercial provisions have spearheaded the aspects of democracy in diverse aspects. Some of the methods that have been used to spread democracy incorporate religion and education. However, there is the question of the effectiveness of coercion in spreading democracy through capitalism. There are people who believe that capitalism and free market economy can promote democracy (Traub 56).

The need to interconnect capitalism and democracy can be answered using theories of international relations. In this context, realism theory focuses on the motives leading to proper security, control, and capitalism (Gilbert 58). On the other hand, liberalism proposes that the relationship that exists between countries regarding principles of democracy and capitalism are evident.

The theory also believes that the international structure and systems have an important role in international relations (Fishkin 23). The proponents of this theory further believe that the absence of authority from a central point leads to dilemma on matters of security, capitalism, and its free market provisions.

This, therefore, means that attempts by one country to seek security assurance are likely to make its adversaries feel insecure. These adversaries can then use other forms of interactions that are hostile by nature. The relative provisions of capitalism thus play an important role in international relations and democracy (Dryzek 77).

Groups based in various parts of the world are also important in international relations (according to the realists). Additionally, the behavior of the states (n the context of democracy) is considered to be rational according to this theory. The reason for this belief among realists is that the States use democratic provisions when making decisions and act in the interest of the nation.

This then promotes the aspects of capitalism (Mansbridge 62). The motives of the nation usually make analysts to manipulate how policy makers think, and this has the effect on policy makers making laws that are to the interest of the nation.

Through capitalism, external factors of democracy are evident. These can be used to explain how democracy can be spread within a country through the ratification and embracement of capitalism. For example, Iraq was a country led by a dictator. This interfered with the provisions of capitalism in the country.

There were also extremists in Iraq and the rights of the citizens were not guaranteed (Bulliet 45). The United States, on the other hand, is a country that values democracy and protection of the rights of individuals through capitalism. However, according to realists, there are other interests that the United States had apart from the promotion of democracy through capitalistic economy.

There are various approaches to capitalism that depends on the level of the business institution. According to research being carried out over the last three years, the government has seized control over business market, as such, most of the business institutions are privately owned because it cannot go beyond the set boundaries due property rights that protect single private merchants in the context of capitalism and democracy (Porritt, 2005).

Although the government involvement in private business corporation is limited, other approaches are set that grant partial and democratic involvement. Some of these approaches are based on taxes and business permit purchase. Stock market scales is another way through which the government controls and benefits from private corporations in the context of capitalism (Fortmann 116).

Other elements of capitalism are capital accumulation, wages, labor force, and stiff competition. Citizens have democratic rights to decide on the business prospects of the country, and how capitalism can be established and nurtured to realize such goals. This indicates the relationship between the two phenomena, namely, capitalism and democracy.

The importance of the roles played by the stock market in the capitalistic economy is related considerably to the aspects of democracy and free market. Most governments measure their economic stability in relation to world stock exchange and free market provisions (Fishkin 34).

Capitalism is also measured the same way. To enable investors to trade securities, they must be able to access the assets. The primary and secondary securities markets do exist to enable investors to have the access, and enable the sale and purchase of securities. It is vital to agree that most capitalists mostly like to do business in democratic countries.

In this context, primary markets are new markets while secondary markets, on the other hand, are the resale markets. Having a clear understanding of the two markets, work is very important to investors as it enables them to be aware of various capitalistic securities (Gilbert 223).

According to realism theory of international relations, democracy has guided decision making in various countries. In this context, for instance, the United States checked the benefits that could result from invading Iraq and the costs of the invasion. It then made decision based on the findings in respect to democracy (Botscher 56). Capitalism does not embrace forceful invasion of other economic territories. This is quite disadvantageous to the concerned countries. It is vital to consider these prospects considerably. The foreign policies of some countries do not reflect the aspects of democracy as well as their economic prowess (Hamm 67). According to the capitalistic principles, the economic strength of a country is important in the context of free market and open economy. It determines how the country establishes, ratifies, and protects its foreign policies and democratic provisions. A democratic country is able to understand and respect the capitalistic demands of its citizens. This indicates the relationship that exists between capitalism and democracy in the international realms. In other words, the capitalistic policies of most countries are democratic in nature (Rousseau 143).

On the other hand, according to liberalism, decisions to ratify force (to initiate democracy) are made based on differences that exist between countries that are democratic and countries that are non-democratic (Modugno 165). Thus, it is the capitalistic ideologies that exist in a country that promotes the economy of a given country in the context of democracy.

This is different from the realists who see financial, political and bureaucratic motives of the elites as the reasons for embracing democracy and capitalistic economy. Liberalism theory believes that the spread of democratic principles can lead to peace in the whole world and promotion of capitalism.

Arguably, countries that uphold democratic principles are usually peaceful and democratic compared to countries that are ruled by authoritarian regimes.

Economic interdependence among countries can also promote peace, business, and enactment of free market in the context of capitalism (Carter 92) because countries that are cooperating or depending on each other economically cannot go against each other because this would destroy both economically. According to liberals, the States are the main actors in international arena but not international corporations.

Is democracy possible in the absence of a capitalist economy?

It is arguable that democracy is hardly possible in the absence of the capitalist economy. Capitalist economy enhances the aspects of free market, which is a considerable provision in the context of democracy. Free market system is one in which there is no control by the government in the supply and demand.

This means that individuals are allowed to buy and sell or transact freely. The business decisions of a country should be made democratically so as to open the market for various investors. This provision is only possible in a capitalist economy (Fishkin 87).

The state usually gets involved in the process of transaction through regulation of activities, taxes and through subsidies. One of the main proponents of the free market system is Milton Friedman. However, Karl Polanyi has criticized the free market system on various grounds (Polanyi 43).

According to Friedman, a capitalist economy leads to economic freedom for the people. This, on the other hand, leads to political freedom and democracy in diverse contexts. The reason for this is that free market separates economic power and political power. This brings about a balance that gives freedom to individuals. However, Polanyi criticizes this view and argues that capitalism autoregulates itself; market prices are the only determining factors.

The mechanism controlling the economy does not relate to the will of any person but democracy. Thus, markets are directed by the laws controlling supply and demand. This means that Friedman’s view tended to denote that free market ensures economic power, and is not concentrated in the hands of the political players.

Capitalism helps in spearheading democracy. Free market should be practiced since the society is subordinate to the economy (Mansbridge 41). Polanyi believes that capitalists should adapt to the market but should not interfere in it. On the other hand, Friedman proposed that the government should promote democracy so as to enhance a capitalist economy. The other basis of Polanyi’s critique of the capitalist economy is based on history (Polanyi 32).

Friedman’s views of the free market are supported by historical evidence showing the relationship that exists between free market and development of political freedom and democracy. This indicates that the democracy is hardly possible in the absence of the capitalist economy as indicated earlier.

The evidence is that there is no society that has gained democracy, and maintained it without first gaining economic freedom. This means that capitalism is important in the quest for freedom politically. However, it is not a satisfactory condition. He further argues that it is free markets’ characteristics that have led to shift in direction of reforms from political to economic reforms.

On the other hand, capitalists argue that societies’ economy cannot be controlled by fringed markets. Thus, capitalism is not a result of free market, however, it dictates the aspects of democracy and free market. There are other factors that determine development of capitalism or market, for example, human passions.

The other point to base one’s criticism on is the distribution of products. Free market economists argue that there is cooperation and voluntary exchange in market economy. Thus, individuals usually cooperate so as to satisfy their democratic needs. In order to operate efficiently so as to achieve economic goals, the distribution of products should be free and capitalistic.

This means that the distribution, the cooperation and the coordination of activities should be democratic and free of external hindrances. This indicates how democracy is hardly possible in the absence of a capitalist economy as indicated earlier.

In any country, democracy tends to promote credible financial systems. A country’s financial system and markets matter considerably in the realms of economic growth. The stock market plays a very big role in ensuring that the economy grows steadily. Some economists do not consider whether the stock market favors the economic development.

The economic development that is seen in any place always creates demands for certain types of financial arrangements, and financial systems always tend to automatically respond to such demands. This is mostly promoted by democracy within an economy and political quarters. Evidently, this provision tends to exhibit that democracy is hardly possible in the dearth of a capitalist economy indicated before. Additionally, the other basis for criticism is in the role of the States in the economy (Long 65).

According to Friedman, the role of the government is to promote democracy and provide credible ways of modifying transaction rules, mediate whenever disputes arise between traders, and enforce agreed democratic rules. There have been debates whether free trade imperialism is justified and whether it benefits the countries that practice it through democratic provisions.

There are views that the struggle for democratic survival is a natural occurrence, and thus justifies free trade imperialism. Other people have views that free trade imperialism is justified since it can be employed to ensure the security of the country in the context of capitalism.

This can be in terms of supply of raw materials or in ensuring that the country is free from attacks. Finally, another justification (between democracy and capitalism) has to do with the political liberation of people. Free trade imperialism can be implemented in countries that have authoritative rulers and regimes that are democratic (Fishkin 12). In these cases, the free market policies will aim at ensuring that the rights of people are guaranteed and their lives are improved democratically.

Free trade capitalism refers to credible market policies of state, actions, and practices that seek to extend power and democratic domination over other states. The state can do this through various means including acquiring territory, controlling the economy of another state or by directing political activities in another state.

Free trade imperialism in most cases is achieved through the use of power (especially use of military forces), democracy, and has many submissions (Hobson 129). This indicates how democracy depends on capitalism in order to gain economic rights. Many countries have practiced free trade imperialism, and some still practice it up to date.

For instance, countries such as England, France, Germany and Italy practiced free trade capitalism by colonizing countries in Asia and India between the 15th and 18th century. Between 19th century and the period of the First World War, countries such as Japan, the United States, Russia, Germany and England practiced, established and embraced capitalism through democratic provisions. The methods used by Germany, Japan and Italy to employ free trade imperialism policies caused the outbreak of the First World War.

After the First World War, Russia implemented capitalism policies and gained control of a large part of Eastern Europe. Russia did this by gaining much military and political control of the states in the region. The United States has constantly intervened in the activities of the third world countries in the twentieth century (Aron 76).

The interventions are mainly to protect the interests of the United States especially to protect interests of international organizations that are owned by the United States in the context of democracy. These examples indicate how democracy is hardly possible in the absence of a capitalist economy as indicated earlier.

Most countries have employed free trade policies, and they always appear undisruptive. Mostly, capitalist agreements are mutually beneficial. Mostly, the agreements are made by rulers in the countries signing the agreement through democratic provisions. Most capitalist economies are characterized by democratic provisions in diverse contexts (Crick 56). Conversely, most free trade policies end up making the rulers rich while the masses do not benefit much.

The policies at times are made for economic reasons, for example, to enable companies of a country to sell its products at a cheaper price than competitors. However, in the communist manifestos, Karl Marx recognizes that capitalists have the ability to use advanced technology to produce commodities cheaply and then use these commodities to exploit the democratic rights of other countries.

Conclusion

It is vital to conclude that democracy is a system of governance in which people enjoy the right to choose the kind of leadership they prefer. In the same context, capitalism refers to an economic system signified by private or commercial ownership of principal goods and services, and determined by investments through decisions, prices, production, as well as distribution of commodities in a free market (Crick 34).

As indicated before, there is a considerable relationship amid capitalism and democracy. Through capitalism, external factors of democracy are evident. These can be used to explain how democracy can be spread within a country through the ratification and embracement of capitalism.

The need to interconnect capitalism and democracy can be answered using theories of international relations. Democracy should be promoted in the modern world to assist in the achievement of stability and growth for humanity. Its development should also be promoted to enable countries that are newly formed to adopt democratic principles.

This shows the relationship that exists between capitalism and democracy in vast quarters. It is evident that there is no society that has gained democracy and maintained it without first gaining economic freedom. This means that capitalism is important in the quest for freedom politically.

It is crucial to argue that democracy is not possible in the absence of a capitalist economy. Noticeably, democracy is a major contributor to capitalism and other fundamental human values; thus it should be encouraged globally.

Works Cited

Aron, Raymond. Peace and War: A Theory of International Relations. New Brunswick: Transactions Publishers, 2003. Print.

Art, Robert. The Use of Force: Military Power and International Politics. Lanham: Rowman & Littlefield, 2003. Print.

Barkawi, Tarak. Democracy, Liberalism, and War: Rethinking the Democratic Peace Debate. Boulder: Lynne Rienner Publ, 2001. Print.

Botscher, Johana. Neorealist Assessment of India’s Look East Policy. London: Grin Verlag, 2011. Print.

Bulliet, Richard. The Earth and Its People: A Global History. Boston, MA: Cengage Wadsworth, 2011. Print.

Carter, April. Direct Action and Democracy Today. Cambridge: Polity Press, 2004. Print.

Crick, Bernard. Democracy: A very Short Introduction. Oxford: Oxford University Press , 2002. Print.

D’Anieri, Paul. International Politics: Power and Purpose in Global Affairs. Boston, MA: Wadsworth Cengage Learning, 2012. Print.

Dryzek, John S. Democracy in Capitalist Times: Ideals, Limits, and Struggles. New York , NY: Oxford Univ. Press, 1996. Print.

Fishkin, James S. When people Speak: Deliberative Democracy and Public Consultation. Oxford: University press , 2011. Print.

Fortmann, JamesBalance of Power: Theory and Practice in the 21st Century. Stanford: Stanford University Press, 2004. Print.

Gilbert, Alan. Must Global Politics Constrain Democracy?: Great-power Realism, Democratic Peace, and Democratic Internationalism. Princeton: Princeton Univ. Press, 1999. Print.

Hamm, Bernard. Cultural Imperialism: Essays on the Political Economy of Cultural Domination. Peterborough: Broadview Press, 2005. Print.

Hobson, Joan. Imperialism: A Study. New York, NY: Cosimo, 2005. Print.

Long, David. Towards a New Liberal Internationalism: The International Theory of J. A. Hobson. Cambridge: Cambridge Univ. Press, 1996. Print.

Mansbridge, Jane. Beyond Adversary Democracy. Chicago, IL: U of Chicago press, 1983. Print.

Modugno, Roberta. Murray N. Rothbard Vs. the Philosophers: Unpublished Writings on Hayek, Mises, Strauss, and Polanyi. Auburn: Ludwig von Mises Institute, 2009. Print.

Polanyi, K ari. Karl Polanyi in Vienna: The Contemporary Significance of the Great Transformation. Montreal: Black Rose, 2006. Print.

Rousseau, Dancan. Identifying Threats and Threatening Identities: The Social Construction of Realism and Liberalism. Stanford: Stanford University Press, 2006. Print.

Traub, John. The Freedom Agenda: Why America Must Spread Democracy (just Not the Way George Bush Did). New York, NY: Straus and Giroux, 2009. Print.

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