Labor or Capital Primacy

...even with the existence of periodic elections, open and competitive markets nevertheless severely limit peoples’ rights and capabilities to democratically alter their social arrangements. Wolfgang Streeck lucidly describes this problem in his book Buying Time (2013). Here, he explains that democratic citizens (what he calls a Staatsvolk) are bound to a national territory and have specific rights and obligations, including the equal right to vote and the ability to express one’s opinion freely. In contrast, the people of the market (Marktvolk) are generally understood as internationally mobile investors and creditors, who possess the right to demand profits. Importantly, while the first group is more or less geographically bound, the second can move easily and more or less freely from one country to the next. Because the wellbeing of economies, societies and states are largely dependent on private investors, the Marktvolk becomes a second and, in some cases, even more important constituency. Here, elections are complemented with continuous auctions, public opinion with the rate of return on investment, and political loyalty with the “trust” of investors in market stability (Streeck 2013, 117-132). When the Staatsvolk attempts to raise taxes in order to decrease socio-economic inequalities or to implement environmental regulations in order to limit pollution, the Marktvolk often withdraws its investments due to its dissatisfaction with the potential decrease in profits. In turn, these “investment strikes” (ibid., 50, 118-119) lead to unemployment and economic crises, thereby punishing the people for attempting to alter their polit-economic institutions and, ultimately, constraining democratic choices. In Streeck’s words,

“The limitation of national sovereignty by ‘market forces’ amounts to a limitation of the freedom of the Staatsvolk to make democratic decisions and a corresponding empowerment of the Marktvolk, which becomes increasingly essential for financing government decisions. Democracy at national level presupposes nation-state sovereignty, but this is less and less available to [...] states because of their dependence on financial markets“ (Streeck 2013, 126; transl. P. Camiller).

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This is what Joshua Cohen succinctly calls the “structural constraints argument”. As Cohen explains,

“According to the structural constraints argument, the private control of investment importantly limits the democratic character of the state by subordinating the decisions and actions of the democratic state to the investment decisions of capitalists. Political decisions are structurally constrained because the fate of parties and governments depends on the health of the economy, the health of the economy on investment decisions by capitalists, and investment decisions by capitalists on their expectations of profits. While groups other than capitalists also control strategic resources, and can use that control to constrain decision-making, the structural constraints argument holds that the power of capitalists and the fact that everyone's welfare depends on their decisions singles them out for special attention” (Cohen 1989, 28).

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For this reason, I would agree with the political scientist Charles E. Lindblom who provocatively argues in his article The Market as Prison from 1982 that the open and competitive market can be interpreted as a type of political prison that does not entirely stop, but substantially represses institutional change (Lindblom 1982, 326). As he explicates,

“Many kinds of market reform automatically trigger punishments in the form of unemployment or a sluggish market economy. [...] Punishment is not [however; LP] dependent on conspiracy or intention to punish. If, anticipating new regulations, a businessman decides not to go through with a planned output expansion, he has in effect punished us without the intention of doing so. Simply minding one’s own business is the formula for an extraordinary system for repressing change. [...] That result, then, is why the market might be characterized as a prison. For a broad category of political/economic affairs, it imprisons policy making, and imprisons our attempts to improve our institutions. It greatly cripples our attempts to improve the social world [...]” (ibid., 325-329).

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This being said, this rather negative portrayal of the market as a political prison should not deny the positive aspects of capitalist markets. It cannot be denied that open and competitive markets have expanded the realm of individual freedom and increased the number of goods that a large portion of the world’s population can enjoy today. In this sense, we must agree with Fukuyama that democratic capitalism is a good thing. Nonetheless, as I have shown, the institutions of the open and competitive market inherently limit the democratic freedom that people can realize. ...

Democracy, Markets and the Commons. By Peters