Socialism, Capitalism, and Democracy

Living in the age of the 1 percent and the 99 percent, mired in the swamp of crony capitalism where Citizens United makes a mockery of “one man, one vote,” presided over by a felonious billionaire who has most likely never read the Constitution and is not inclined to obey it, the very notion that capitalism and democracy might cohabit the same political universe seems like a bad joke. Capitalism in its current form has become the graveyard of democracy.

The recent re-emergence of democratic socialism promises to raise the dead. It flourishes, after itself spending a long time interred, largely because it appears not so much as a pathfinder for socialism, but as a restorer of democracy, and especially economic democracy.

Many observers have noted that at ground level the democratic socialism heralded by Bernie Sanders and the movements he’s inspired, seems more or less like an expanded version of the New Deal than it does what is conventionally understood as socialism. Debates rage about whether this is a good thing or bad thing, a betrayal or a savvy strategic demarche, an inevitability given the endemic American allergy to socialism or a choice that avoids the profound transgressions of previously existing socialisms, a way station or a final resting place for a dream deferred. This argument will no doubt continue…but not here.

Instead, it is worthwhile to re-examine what now seems axiomatic: that capitalism is inherently the mortal enemy of democracy. Some may perceive such an endeavor as perverse. At a time like this, when really existing capitalism demonstrates every day in every way that it is the relentless destroyer of all manifestations of democratic society, why resurrect a fantasy? Because at various times in the past and even today, it has been more than a fantasy. Because a case can be made that capitalism both invites and undermines democracy. Because socialism in America has suffered from a surplus of enemies, among which the most tenacious and seductive has been the mythos of democratic capitalism. Most of all, because exploring democratic capitalism compels us to come to grips with just what distinguishes or should or might distinguish democratic socialism as a way of life.

Capitalism and the National Mythos

“‘Liberty produces wealth and that wealth destroys liberty.’ So said Henry Demarest Lloyd, widely read critic of America’s newly risen plutocracy and leader of the anti-trust movement during the country’s first Gilded Age.”¹ The second half of that equation seems to us, as it did to Lloyd, a self-evident truth…

But it is the first element of that social mathematics—that “liberty produces wealth”—which, more often than not, has epitomized the American credo and anesthetized sensitivity to the grievous economic and political costs of capital accumulation. We are, after all, reputed to live in the land of the free where that freedom has nourished a fabled cornucopia that has underwritten democracy.

Stories about what some now call “the homeland,” its origins and unfolding, do not, conventionally, feature capitalism. Other tales about the country’s history usually take priority. Favorites include, perhaps first and foremost, the New World as the incubator of liberty and democracy in the western world. Others emphasize the nation’s embrace of people from a global everywhere, America as the nation of nations. Another is heroic and tracks the conquest of frontiers, both physical and spiritual, a legendary odyssey requiring fortitude and audacity. Organically tied to that one is the apotheosis of America as the land of entrepreneurial genius, daring-do risk-taking, a business civilization resting on a human landscape of indigenous inventiveness. That last tale does indeed spill over into a celebration of capitalism. But it does this less as a form of political economy, more as an epiphany of the self-made man, cleansed of the social abrasions that real capitalism inevitably trails in its wake, and thereby fit to occupy a space in which a society of the self-reliant could practice democracy.

All of these accounts carry their own truths. There is little question but that the country was in the vanguard of certain democratic forms and practices and that it incubated notions of civil liberties. “Huddled masses” did indeed flock here, and, no matter the various reasons they did so, their presence imparted a distinctive cosmopolitanism to the country’s self-conception. Despite the presence of native peoples inhabiting societies ten thousand years old, there is too a truth to the flattering self-fascination with Americans as pathfinders, triumphing over all natural or man-made impediments. And it is a self-evident form of national narcissism that “we the people” have been astonishingly good, almost preternaturally gifted, when it comes to entrepreneurial esprit.

No doubt, all of these accounts tend to leave out of account their more mordant undersides: the selective distribution of liberty and democracy and the frequent instances of their undermining; the chronic stigmatizing, stereotyping, and exclusion of the “huddled masses”; the pathfinder as exploiter, expropriator, and exterminator; the numbingly frequent collapses of entrepreneurial phantasms dragging down along with them lives and livelihoods; and the tithing of human labor and the insults to the human dignity of those legions who labored in the vineyards to make American capitalism the extraordinary world power it became.

Nonetheless, even those versions of these origin myths that allow for these taints and complaints, retain a certain traction. Moreover, they all can be subsumed under the rubric of “American Exceptionalism.” It’s the story that functions as the meta-tale, the one that exempts the New World from the social antagonisms that had for centuries disfigured European civilization—the Old World—from which our freethinkers and freebooters, our instinctive democrats and immigrant refugees, our frontiersmen and adventurers were in flight. This was, and remains, a utopian fantasy, embedded in the heart of the heartland. Here social hierarchies and the fatal confrontations they inevitably fostered, would go to die, liquidated by the boundless prospects of self-advancement that a continental abundance of land and natural resources made possible.

If capitalism figures in at all, it is to forefront opportunity, entrepreneurial vigor, material abundance, economic democracy, and the seven league boots of manifest destiny. Conflict may rear its unseemly face but only episodically, as a kind of alien or aberrant detour off the main road of America’s exceptional career through the world. Instances of serious social discord, when they draw notice, get transcended, a course correction allowing the utopian project to resume.

So, if we tuck inside a grand canyon sized parenthesis all those dreary exceptions to the nation’s “exceptionalism” (granted, not a simple feat of intellectual engineering), there is no denying the left side of Lloyd’s equation. Liberty did produce wealth. Had it not, it is highly unlikely the faith and trust in the American Dream would have gained the traction it did and lasted as long as it has. Moreover, that wealth exists not as an inanimate pile of things or their monetary equivalent, or not only as that. Freedom—to venture forth, to transform organic or inorganic nature into vendible commodities—has also served as a spiritual elixir. Homely acts of commercial enterprise appeal also because the liberty to engage in them free of outside interference by political authorities or economic overlords armored with state powers, are simultaneously acts of self-invention. They can seem to escape not only material privations but also all previously ascribed social positions, especially the humblest ones.

Freedom anchored in acts of self-reliance and the mastery of the market, of nature, of the libido, of other people, can be intoxicating, functioning like an aphrodisiac. Even if its social reach recedes as capital accumulation becomes more and more the exclusive terrain of only the mightiest of the conquistadors, the dream abides.

Lloyd was right of course that “wealth destroys liberty” which helps account for the enormous energy fueling the antitrust movement of his day, and for that matter the wide breadth of anti-capitalist sentiment that darkened the flashy exterior of the Gilded Age. Nonetheless, precisely because of capitalism’s fluidity, its systemic compulsion to sweep away established forms of economic enterprise and antiquated technologies, opportunities to refresh the dream periodically rise to the surface. This was true during and as a consequence of the maelstrom of cyclical booms and busts characteristic of the economy beginning even before the Civil War and continuing with numbing regularity through to the Great Depression. Levelling the ground in this way crushed underfoot many a striving businessman (not to mention millions of working class families) and turned bankrupted enterprises into trophies for hardier and more ruthless predators who could acquire these assets on the cheap. But in the aftermath, new terrain was opened-up for wannabe entrepreneurial heroes, nurturing the dream among many people however unpromising their actual position on the ladder of social preferment.

Ambitions of this sort were alive and well during the original Gilded Age, and again during what is now commonly characterized as our own second Gilded Age. This is the soil in which free market ideologies rooted, where hostility to government generally, and to regulation in particular, bubbled to the surface of public life. The proliferation of small and medium-sized businesses during our era of neo-liberal, decentralized and “flexible capitalism” has been remarkable (over 80 percent of American firms are small, family-owned ones and employ over two-thirds of the labor force). Here is where the dream abides. Shaking off the straight-jacket of any outside authority is part of the dream, at the core of the metaphysics of individualism.

Even while the portals of public life seem increasingly closed off to millions of citizens, a universe of entrepreneurs and wannabe entrepreneurs celebrates the economic democracy they consider a national birthright. Before dismissing it as so much boiler-plate myth-mongering or as a toxic form of “fake news,” it is worth remembering that this is, more or less precisely, the prospect of America enunciated by Abraham Lincoln.

The Two Life-Forms of Democratic Capitalism

Visions of an independent and roughly egalitarian household economy—what one might call family capitalism—originated before the nation did, way back in colonial days when Captain John Smith surveyed the New World and spied there a land where “every man may be master and owner of his owne labour and land.” In a famous speech before the Wisconsin Agricultural Society in 1859 and again in his first annual message to Congress after the outbreak of war Lincoln put it this way: “The world is agreed that labor is the source from which human wants are mainly supplied.” This was a “labor theory of value” that celebrated the middling sorts and their aspirations, whether on the land or household enterprises in towns and cities, for a “competency.” While acknowledging the existence of hired labor, Lincoln denied that anyone need be “fatally fixed in that condition for life; and that thence again that his condition is bad as, or worse than that of a slave.” While it might be true that labor and capital did indeed enter into relations of super and subordination, that was more exceptional than commonplace. Like John Smith, Lincoln conceived of America as a land of families working for themselves, “taking the whole produce to themselves, and asking no favors of capital on the one hand nor of hirelings or slaves on the other.” He concluded that, if “the prudent penniless beginner in the world labors for wages a while, saves a surplus with which to buy tools or land for himself; then labors on his own account for another while, and at length hires another new beginner to help him” then all might eventually enjoy that competency which insured their independence.

Family capitalism in its Lincolnesque version bears therefore not only a distinct “labor theory of value,” but also a theory of proletarian emancipation. And it is a promissory note foretelling an egalitarian society where democracy can flourish precisely because its citizenry lives free of any dependency on overlords of the plantation or factory. Even insurgencies as potent as the Knights of Labor and the Populist Party in the late 19th century, bitter antagonists of the robber barons, nonetheless envisioned a cooperative commonwealth roomy enough for private enterprise.

This is the first life form of capitalist democracy. The Lincoln version is benign, even utopian. But under the right set of conditions it can shed its democratic instincts in favor of a patriarchal authoritarianism for which Donald Trump is the pathological embodiment today. Many have assumed family capitalism was already on the road to oblivion even while Lincoln was relying on it. But it has displayed an extraordinary resilience, both as a politically potent myth and as material form of economic reproduction.

Nonetheless, modern times reduced this prospect of everyman an incipient bourgeois to a soured hope for millions whose actual chances of ascending out of a subordinate status of well or not-so-well-paid proletarian dependency is close to nil. The shattering news that wage slavery was here to stay turned the country into an inferno of class conflict. A hundred-year war of democracy against plutocracy, of “the masses against the classes” beginning around the time Lincoln was killed lasted through the Great Depression and beyond. The proximate outcome of that war was a new life-form of capitalist democracy. Best known as the New Deal, it might be summarized as the Constitution plus the welfare state.

Here’s what it accomplished and didn’t accomplish. It democratized the workplace, legitimating collective bargaining, extending the rule of law inside the black box of private enterprise where once an industrial absolutism as impregnable as any monarch’s had prevailed. However, this new industrial democracy did not level the hierarchies of command and obey. It did not democratize ownership. It left in place the elemental prerogative of private capital to deploy social resources upon which all depended as it saw fit.

The New Deal order pried open the electoral system, and the Democratic Party in particular, to the influence of millions of once voiceless working-class people. But that new political order also shut down fledgling efforts to create independent political vehicles of working-class demand and desire. Instead class interests were brokered by a political class whose first loyalties were to the business system, the interest group ne plus ultra.

The New Deal disciplined the free market, leaving it less free to wreak havoc. Yet this regulatory state presumed the free market as the ultimate arbiter of the country’s economic fate, only establishing more robust protocols under which the essentials of competitive capitalism would continue. In many more instances than is generally recognized, the regulatory impulse originated among peak corporations and financial institutions whose self-interests and systemic interests required stable markets.

Modern capitalist democracy civilized its savage Darwinian precursor; wage minimums, hour maximums, insurance against unemployment and the miseries of being too old to work, and base-level welfare payments for the poorest, together erected an umbrella of protections against the inherent insecurity of old-style capitalism. But the welfare state assumed a dependent proletariat and a reserve army of the unemployed. Its bureaucracy crystallized a tutelary relationship with its “clientele,” functioning as a disciplinary superintendent armed with social engineering credentials and inbred presumptions about its cultural superiority.

Keynesian economic techniques—the leveraging of monetary and fiscal policy—were conceived to moderate the business cycles where insecurity breeds and which are endemic to capitalism; but it never pretended to eliminate them. Its tools were designed to manipulate the volumes and sources of tax revenue, to modestly redistribute income, and fine tune the levers of public and private credit, but not to direct the flow of capital. That Keynesian tool box proved reasonably useful until it didn’t, when the underlying structures of mass consumption capitalism began to break down and found themselves at odds with the most fundamental needs of capital accumulation. De-industrialization, de-unionization, and debt servitude are the work of neo-liberal version of capitalist democracy, not right-wing conservatism.

Critics of the New Deal order have roundly and rightly pointed up its serious limitations including its exclusion of women and minorities from its protections, its tacit tolerance of Jim Crow, the way it tied social insurance and relief to male employment, its cramped efforts to provide low-cost housing, its failure to provide medical insurance, and so on. Whatever the many reasons for these severe instances of unfinished business, they should still be thought of as the unfinished business of this new form of capitalist democracy. Some of these deficiencies were partially remedied in the years that followed, especially during the era of the Great Society. Medicare and Medicaid did this most prominently on the social welfare front; civil rights legislation to extend Constitutional protections and formal equality to the disinherited in the political arena. Had they been achieved back in the New Deal years or were they to be achieved today (presumably after repairing and rectifying all the damage that has been done to civilized capitalism since the return of its more barbaric ancestor), we would be living in the realm of capitalist, not democratic socialism.

Capitalist Democracy vs. Socialist Democracy

Contemporary tendencies to conflate the two echo what first happened when the New Deal order was being born. Much of the radical energy that powered the landmark reforms of the New Deal originated in the protracted era of anti-capitalism that ran through public life from the Gilded Age onwards. Socialism was part of a family of political languages that had indicted capitalism and wage slavery as undemocratic, immiserating, and inherently plutocratic. What became the New Deal was midwifed by all those currents of anti-capitalist rebellion occurring at a time when many believed the system had entered its terminal crisis. But it is also the case that the New Deal order became the gravedigger of socialism and the broader culture of anti-capitalism.

Currents of radical anti-capitalism did surface and then subsided. Militants who powered the uprising of industrial workers through the CIO during its formative years sought and sometimes succeeded in seizing control of the shop floor. Briefly the CIO as an institution lobbied for co-determination of all corporate affairs by councils of workers, management and public officials. The Tennessee Valley Authority and other public undertakings implanted the notion of state planning of the economy, although its roots were shallow. Proposals were mooted about how to solve the problems of unemployment and poverty by mobilizing the unemployed to open shuttered factories and operate them under government auspices, distributing their output to the needy. Independent labor parties formed (although were soon absorbed into the left flank of the New Deal). Norman Thomas and the Socialist Party continued to distinguish what they were after from what the New Deal was about.

All this died away. Death by a thousand cuts, but perhaps the most fatal was the supplanting of an older Lincolnesque dream of democratic capitalism by a new one. Instead of propertied independence, the new reverie took root on the terrain of mass consumption capitalism. The homely competence and modest independence ennobled by Lincoln could still be achieved even while “wage slavery”—no longer known by that distressing name—nonetheless continued to describe the dependent condition of most people. Mass consumption—a consumers’ democracy—and the fantasies absorbed into the psychic bloodstream through the medium of consumer culture made space for internalized triumphs of self-invention, indeed for multiple acts that recreate the self over and over again. These soothe the wounds of real-life insults to self-esteem and to precarious social position made hurtful by the chasms of inequality that have become so conspicuous over the last generation. In an act of historical alchemy classes and class hierarchies were to vanish or rather were dissolved into one class, the great American middle class, the class that is no class. This second life form of capitalist democracy might be reformulated as the Constitution plus the welfare state plus mass consumption.

No matter which expression of capitalist democracy prevails (both are with us today), no matter how preferable we may consider the New Deal species from its free market relative, they share certain essentials. Both are rooted in property rights in capital, however constrained; neither contemplates the overcoming of property rights nor challenging their a priori status. As a civil religion both are grounded on individual rights and have little or no regard for collective rights. Formal equality is the hallmark of both democracies, content with equality of opportunity as it comports so well with its foundational individualism. Substantive equality of condition meanwhile makes capitalist democracy profoundly uncomfortable.

Democratic participation in both versions is largely confined to the electoral arena. Neither type feels at ease with more muscular and substantive expressions of democracy characteristic of socialism in its heyday: the Soviet or council of workers deputies of which there cropped up a few in the United States; the syndicalism represented in the Wobblies One Big Union whose reach was ecumenical crossing boundaries of ethnicity, race, gender, skill, and economic sector, and which described itself as the new socialist society in waiting; the committees of the general strikes which erupted in several American cities, functioning as parallel governing bodies taking responsibility for everything from health care and sanitation to policing and transportation in places like St. Louis, Seattle, Minneapolis and Oakland; the sit-down strikes that occupied industrial plants, retail stores, and other enterprises and that formed democratic bodies to oversee life in these workplaces while the strikes lasted; the anarchist cooperative communes that formed, died away, and reproduced themselves again and again in cities and towns across the country.

These were all more than tactics. Rather they were conceived as embryos of economic democracy preparing to carry on the life functions of society. Nowadays, the preoccupation with the electoral arena makes it seem like that is where democracy is born and where it belongs. But voting is the most passive form of public participation and the most fragmenting and private. It suits capitalism—so long as it retains the basic apparatus of democracy—because it mirrors and reinforces the individualism which is axiomatic for a society premised on private enterprise and private capital accumulation. Democratic socialism, however, imagines a different subject; the social body engaged in actively directing society’s vital functions. Putting hands on the levers of social reproduction is both a manifestation of power, sturdier than what’s on offer in the electoral arena, as well as a rehearsal for a democratic socialist future.

Notwithstanding all the talk about globalization, capitalist democracy operates within the framework of the nation-state. Its internationalism is an empty piety and in the case of the United States a cover for its world dominion. Creating the nation-state was once a great accomplishment overcoming, often at the cost of much bloodshed, the divisions of clan, village, ethnicity, and faith. In that way it widened the arc of fellowship. So too, the nation-state helped create the institutional infrastructure of a widening marketplace within which capitalism thrived. Moreover, business usually seeks—although not always—peace and stability; trade among capitalist nations was supposed to, and sometimes did function as an international sedative. But for some long time now, nationalism has been living way past its due date and making mayhem. When naked nationalism sloughs off even the camouflage of international alliances among the unequal, then the hypothetical connection between democracy and raw national self-interest is severed.

Democratic socialism adopts a “foreign policy” that sheds the false claim to domestic social unity that nationalism rests on, instead grounding its relationship to the rest of the world on the organic fraternity of laboring humanity. Democratic socialism breaks down the artificial distinction between domestic and foreign affairs; after all, what national capital does abroad—trade, invest, exploit, plunder, make war—reverberates in the “homeland,” creating landscapes of industrial ruins, sweated labor, “wounded warriors,” military-industrial complexes and a militarized society which in the end is bound to undermine democracy. Democratic socialism is an antidote to capitalist rivalry among nations and the subordination of the global South, whether those confrontations manifest as tariffs or troops.

No matter how civilized or savage capitalism may be, no matter how democratic or not, it lives entrapped by the antagonism between wealth and commonwealth. Democratic socialism chooses the latter unequivocally. No matter its form, capitalist democracy commodifies its world and, first of all, its human inhabitants. They live as vessels of labor power and as empty receptacles of the goods, services, and delusions of consumer culture. Democratic socialism promises a decent standard of living for all as a birthright not as the outcome of a contract. But it does more. It opens-up the possibility that society will stop treating its members as if they were the containers of tradeable and infinitely fungible exchange values.

Endnotes

1. Steve Fraser, Mongrel Firebugs and Men of Property: Capitalism and Class Conflict in American History (New York: Verso, 2019), 1.