Wayne O'Leary

Is Democratic Capitalism the Answer?

It’s not just the US; the entire Western world appears out of sorts. Throughout the European Union, as well as in North America and Australasia, the discontent is palpable. And as James Carville would say, “It’s the economy, stupid.”

Look at Australia, long a prosperous, stable democratic country that made it through the dot-com bubble and bust, and the world financial crisis that followed, without a recession or a downturn in the standard of living. That was then, but things have changed down under. A recent New York Times analysis (3/29/24) of the country’s prevailing mindset reveals growing economic unhappiness that, according to an annual poll, has registered the lowest level of “life satisfaction” in almost a quarter-century.

Australians, it seems, are deeply troubled by the high cost of living, an uncertain labor market, and rising inequality. Food insecurity is up, compounded by difficulties paying for housing, healthcare and utilities. A startling indicator is the price of bread, 24% higher than in 2021, but rents have increased 50% in a year, and mortgage rates have lately tripled. Overall inflation, which soared during the pandemic, has moderated somewhat to 3.4%. Still, consumer optimism has not recovered from the 2020 downturn, and wealth inequality, never a major issue in egalitarian Australia, has emerged as a nagging problem there, along with other developed nations.

We’re seeing something similar throughout the Western countries. Take liberal New Zealand, Australia’s Pacific neighbor; it recently elected its most conservative government in a generation amidst rising food, fuel and rent costs, an emerging child-poverty problem, and an inflationary housing market whose prices rose 58% between 2017 and 2021.

Or take our close neighbor, Canada. There, the Liberal government of Justin Trudeau has dropped to a low of 27% in popularity as it approaches national elections. Public concerns include the rising cost of living, lack of affordable housing, and an inflation rate that, after falling from a 2020 peak of 8%, recently shot back up to 4%, double what it was in 2015. Add a suddenly struggling healthcare system, whose level of patient satisfaction has dipped from 67% in 2021 to 48% in 2023, as well as worries over the impact of expanded immigration.

And in famously social-democratic Sweden, plagued by growing inequality brought about by economic globalization and years of gradual privatization (of schools, hospitals, nursing homes, etc.), the 2022 national elections gave a neofascist party, Sweden Democrats, 21% of the vote, making it the second-leading parliamentary party and a threat to eventually take over government. Immigration was the immediate catalyst for the far-right upsurge, but Swedes were more concerned about inflation, healthcare, energy, pension contributions, and welfare privatization.

Lest there be a suspicion that we are witnessing a fundamental negative reaction to predominantly left-of-center governments, the facts say otherwise. France, where the mainstream political left in the form of the Socialist Party collapsed in 2017, Emmanuel Macron’s succeeding center-right party La Republique en Marche (Republic on the March) is experiencing similar disfavor. In the 2022 election, squeezed between what remains of the left and Marine Le Pen’s far-right National Rally, Macron’s centrist/conservative coalition retained a bare governing plurality. The issues agitating the French electorate revolved around inflation (primarily increasing food prices), inequality, insufficient wages, rising rents, declining purchasing power, and, of course, immigration.

Although economic issues dominate politics all across the Western world, the often critical factor, which in a real sense is also economic, is mass migration; it’s impacting France, Germany, Sweden and the Netherlands, in particular. Even in tiny Ireland (population 5.3 million), where a coalition government has brought in record numbers of migrants — 27,000 asylum seekers since 2020 and 100,000 refugees since 2022 — public outrage has nearly overshadowed a cost-of-living crisis contributing to economic deprivation, an existing housing shortage, and already-strained social-service programs.

In country after country, governments have ignored domestic opinion and opened their borders. North America and Western Europe now have total foreign-born populations amounting to 12% to 15% of individual nation-state populations, and the push-back is reaching critical mass. Recent polls show that 60% or more of the French support stricter immigration rules, 61% of Canadians oppose the Trudeau government’s plans to increase immigration, and 71% of Americans regard unauthorized immigration as a serious national problem. Some of this anti-immigration feeling can be superficially chalked up to expressions of racism or nativism, but that obscures justifiable economic concerns and anxieties associated with the costs of integration — housing shortages, reduced wages, increased demand for necessities, higher public-welfare budgets, and the like.

What’s really roiling international politics these days is a negative reaction to the essentially centrist politics being practiced by Western governments of both center-left and center-right in an attempt to conform to the role assigned them by global capitalism. Adhering to that role entails being in the pocket of dominant corporate interests.

The present system, which conservative free-market theorists like to call “democratic capitalism,” was examined in detail recently by Martin Wolf, chief economics commentator for the Financial Times of London, whose latest book “The Crisis of Democratic Capitalism” (2023) sees systemic warning lights flashing. Wolf defines the currently besieged arrangement as “the marriage of democracy with the market economy”; it’s based on the idea that democracy and capitalism are inextricably linked and mutually reinforcing — are, in fact, dependent upon one another.

The weakness of the system is that capitalism invariably seems to be the more important partner. In practice, this means taking care of capitalists and assuming democracy will follow. The danger, which Wolf recognizes, is that because of monopoly and its spin-off, plutocracy, the system won’t deliver for the majority, causing a loss of faith in democracy. Recent developments worldwide suggest exactly that is happening.

In the US, we’ve learned voters unhappy with the exploitive economy are tending toward autocratic (that is, MAGA) solutions. They’re most concerned about inflation, the product of corporate pricing, which refuses to return to pre-pandemic levels; instead, it’s rising, up from 3.1% year-on-year to now 3.5% (and 3.8% for “core” inflation). That’s bad news for Joe Biden, but, more broadly, for the specious claims made on behalf of democratic capitalism.

There is an alternative to the current system; it’s called economic democracy. However, it requires a commitment to strong government action to roll back market supremacy. Unfortunately, we’re not there yet.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, June 1, 2024

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