Originally, the Great Disappointment refers to the false prophesy of William Miller about Christ’s Second Coming in 1844. This, as we know, didn’t happen, leaving his followers bewildered and disillusioned.
One cannot help similar feelings after reading the recent book by two respected academics, Torben Iversen and David Soskice entitled Democracy and Prosperity (Princeton University Press, 2019). The disappointment is at two levels, and this disappointment is even more disappointing, so to say, in light of the ongoing COVID-19 pandemic.
The first one concerns the scope of the study. Despite the grand title that promises a universal answer to the relationship between democracy and prosperity, the reader quickly realizes that the democracy that the authors analyze is limited to what they call ACD – Advanced Capitalist Democracies. They limit their study to the OECD countries although in practice the analysis focuses on 6-7 most advanced economies in the world, such as the US, UK, Germany, France and some Scandinavian countries. Hence, you’ll be looking in vain for the general answer that would clarify the relationship which the title boldly promises to explain. The book entirely leaves out ¾ of the world population who live under various regimes (democratic and not so) and experience various levels of prosperity.
The rapid growth of prosperity in China and Southeast Asia (as well as in some African countries) is completely ignored as is the opportunity to explain the link between prosperity and non-democratic regimes. It takes a stretch of imagination to accept the authors’ argument (which they advance from the first pages) that democracy and prosperity are Siamese twins when there are relatively prosperous societies with a different type of democracy or even no democracy (at least as the authors understand it).
This is a vivid demonstration of a “cupola thinking” in the academic context. This phenomenon was observed by the German philosopher Peter Slotterdijk in the World Interior of Capital. He said that globalism doesn’t mean we are all in one big global society. Globe also means globe in the sense of cupola, grouping us (the privileged elite) under this protective cupola and isolating us from the rest undeserving of our consideration. It is both intellectually arrogant and counterproductive to reserve the concept of democracy to a small number of countries (and two types of democratic regimes in the West) while leaving most of the world out as the authors do.
When the authors discuss the challenge of a “middle income trap” (why it is difficult to break into the rich ACD club), they put the onus on the aspiring countries criticizing their inability to conduct an economic revolution by making major investments in new technology and the supply of highly skilled workers. They seem to be genuinely oblivious of the fact that access to modern technologies is highly regulated and significantly restricted. As I’m writing this, the European Parliament has just voted down an amendment to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to back India and South Africa’s proposal to temporary lift intellectual property rights for the COVID-19 vaccine. This voting has brought together even those who normally disagree: the centre-right European People’s Party (EPP), the socialists (S&D) and the liberals (Renew Europe) all voted against. So much about democracy for us from under the cupola and democracy for them.
The second disappointment is linked to the methodology used by the authors, which is essentially reduced to a circular logic. They reject the notion that democratic capitalism is a clash of interests between labor and capital. To them, democratic capitalism a conflict-free society (at least from the class perspective), an embodiment of social harmony and cooperation: “Democratic governments construct and reconstruct their economies, conditioned by past choices, in response to voter demands for effective economic management and internationally competitive economies and a better life for themselves and their children.” Now, democratic governments have to care about their electorate because otherwise they will be punished by the voters and since “a large number of voters see themselves as benefiting from advanced capitalism, whether directly as employees or as aspirational voters” they vote for the governments that promote advanced capitalism. Delicious circular logic, which looks like this: Advanced capitalism (Western-style) is the only way to make voters happy; democratic process is the surest method to select a party that practices advanced capitalism best; ergo, advanced capitalism and democracy are symbiotically related. QED.
The authors investigate several themes to demonstrate how advanced capitalism is aligned with the popular interests (which is indeed the cornerstone premise of their theoretical construct). First, they argue that advanced capital is weak and cannot produce a decisive impact on political decisions (for example, it is not as footloose in the era of globalization as it is often pictured and therefore dependent on national markets and regulations). Second, the median voter (represented by the skilled workforce, on which, according to the authors, the advanced capitalism is built) has a vested interest in perpetuation of advanced capitalism because “this skilled workforce as gaining rent from advanced capitalism above the competitive market value of their skills”.
If you thought that it was big capitalist monopolies who increased their profits in 2020 (COVID-19 or not) who are gaining rent from capitalism, you were grossly mistaken. (Microsoft’s net income increased by 13%, which pales in comparison to Amazon whose net profit soared to a record 84%, which is still below Goldman Sach’s net fabulous income of 135%. Only the sky is the limit for the rich and mighty.) Apparently, it is the skilled workers (whose incomes show a declining trend in 2020 despite the unprecedented support measures) who are exploiting advanced capitalism.
Look now at the recovery process in the US as (still) the biggest economy in the world. Despite all exhortations for a “better recovery”, what we observe is a growing number of average hours worked per week (it has increased by almost one hour to 34.9 since March 2020) against the backdrop of a $15 increase in weekly earnings. An increase of $15 could be considered an adequate compensation for increased work time but it also implies that there is no wage improvement in real terms. Moreover, this wage increase translates into 1.6%, which compares very unfavorably to the GDP increase of 33.3% in Q3, 4.3% in Q4 in 2020 and 6.4% in Q1 this year (even given the usual lag in wages). To add to this, the US is currently experiencing a labor shortage, with total nonfarm employment at 95% and employment in the leisure and hospitality sector at 83% of its pre-COVID-19 levels.
Economic theory suggests that employers should offer more attractive wage terms to match the supply for labor to their demand but this is simply not happening. The bottom point is that the power of capital is there to stay despite all learned deliberations about the social harmony of advanced capitalist democracies. Businesses aren’t used to raising wages to attract workers, and are simply holding out for a while to see if they can get away with not raising the wage.
(Share of people who have experienced an impact on their personal income due to COVID-19 in 2020, by country and degree: https://www.statista.com/statistics/1117367/covid-19-impact-personal-income-country-degree-worldwide/).
But to the authors the ADC is a perfect match between capital and democracy. There is no collision between the principle of equality (“one person, one vote”) and the principle of market power (“one dollar, one vote”) because the capitalist and the worker want the same – to see advanced capitalism succeed.
The authors are unperturbed by the rising inequality (which they admit) in the ADC countries. But to them the rising inequality has nothing to do with capitalism as such: they see rising income and wealth inequality as a function mainly of technological change and choices made by politicians trying to satisfy the demands from middle- and upper-middle-class constituencies. Those constituencies, the authors add, are unwilling to redistribute to the poor. By this logic, the growing inequality is the outcome of a democratic process. But what they overlook is a continuous process of hollowing out of the middle observed by a number of researchers (Case and Deaton, Stiglitz, among others) indicating that the middle may in fact be moving toward the upper middle or simply rich, thus seriously questioning the locus of the median voter. As Stiglitz said in an interview: “We have to recognize that we have been engaged in a battle in which unfortunately those on top have won and those at the bottom have lost, and lost a great deal. The wages adjusted for inflation at the bottom of the income distribution in the US are at the same level as they were 65 years ago.”
So, the question is who is the “median voter”?
The United States ranks 26th out of the 32 countries that constitute the Organization for Economic Cooperation and Development (OECD) in voter turnout. Roughly about 60 percent of eligible people voted in the United States during recent presidential elections. It’s a well-known fact that wealthier people tend to vote at higher rates. Of course, wealthier people believe that they have more at stake if they don’t vote than those with less resources or income.
The two trends (the decreasing trend in voter turnout, which holds not only for the US but other OECD countries as well) and the raising share of wealthier people among the voters, which is anywhere between 10 and 20% (see Piketty’s Capitalism and Ideology) results in a shift of the median voter towards the richer end of the national income distribution. The so-called median voter is no longer in the middle of the distribution but closer to its right-side tail, effectively becoming a median for 50% of the top earners.
This, in turn, raises the question which democracy is at question. For the authors it is a classless advanced capitalist democracy based on social cooperation and harmony. But Marx argued that as long as capitalism and private property existed there could be no genuine democracy, that democracy under capitalism was bourgeois democracy, which is to say not democracy at all. While it would be in the interest of the working classes to enter a coalition with the bourgeoisie in supporting this form of democracy in order to eliminate feudalism this would be a tactical maneuver. Capitalist democracy could only result in the increase in exploitation of the working classes. Only the elimination of capitalism and private property could result in the emancipation of the working classes and the attainment of true democracy.
Indeed, authors as different as Branko Milanovic, Yascha Mounk, Paul Collier and Joseph Stiglitz point to the increasing power of capital in shaping politics and ultimately influencing the election outcomes. Stiglitz writes in People, Power, and Profits: Progressive Capitalism for an Age of Discontent: “Perhaps the greatest failure of the American political system is the increasing power of money… We all know the components of this awful nexus between money and politics: lobbyists, campaign contributions, revolving doors and the media controlled by the wealthy.” Acemoglu and Robinson indicate in Economic Origins of Dictatorship and Democracy that in reality, one person’s vote may be worth more than others and, in particular, the elites may be able to exercise more or less influence over what happens in a democracy.
Now, the Median Voter Theorem (MTV), which Iversen and Soskice use as their workhorse model, is the simplest and perhaps the most naïve setup in which each person has one vote. In reality, however, is as well-known that political parties have objectives that are to some extent autonomous from those of citizens, and the policies they offer reflect them, not simply the wishes of the median voter (see Acemoglu and Robinson). This is particularly true when there is uncertainty in the outcome of elections or parties cannot commit to arbitrary policy platforms. When either of these is true, political parties’ objectives, not simply the preferences of the voters, are important in influencing political outcomes. In this case, groups that can capture the agendas of political parties can influence democratic policy to a greater extent than their numbers would indicate.
The existence of a symbiotic connection between capitalism and democracy has been questioned by many authors. David Harvey in Seventeen Contradictions and the End of Capitalism writes as follows: ”Bourgeois democracy has not necessarily being a consequence of capital’s rise to dominance as the economic engine of a social formation: its owes its dynamic to broader political forces and to long-standing attempts to find collective forms of governance that effectively bridge the tension between the potential arbitrariness of state autocratic power and the popular desire for individual liberty and freedom.
Peter Burger in his book The Capitalist Revolution (1986) raises an even more interesting point, that capitalism is a necessary but not sufficient conditions of democracy and that democratic governance may become impossible if a capitalist economy is subjected to increasing degrees of state control while opening socialist economies up to increasing degrees of market forces can make democratic governance a possibility under socialism. One big assertion in Democracy and Prosperity is a strong state that works in the interest of the majority. This is a premise that needs a proof and there are too many proofs to the contrary, as the latest developments show. After all, in the words of Marx, a modern bourgeois democracy is just a system where the oppressed have an opportunity once in a while to choose who will oppress them during the next electoral cycle.
The increasing power of money shapes the dominant ideology influencing not only who votes but also how they vote. The ideological capture of the big capital (of which, for example, Fred Block writes in Capitalism: The Future of an Illusion) is a reality. In a not so distant past, we observed for steady approval rates of Donald Trump among Republican voters, no matter how much his policies benefitted ordinary Americans. To achieve this, the big capital deploys via the state what Louis Althusser calls “ideological state apparatuses”. As a class seizes state power and becomes dominant, it has to have the use of not just the repressive state apparatuses (the army, the police, the courts), which function above all on physical violence, but also of another type of apparatus, which functions above all on ideology in other words, on persuasion or inculcation of the dominant class’s ideas on “consensus”. ADC are obviously very successful in creating such apparatuses. The argument used by Iversen and Soskice that the capital in advanced economies cannot produce much political influence because is too weak, driven by diverse interests and cannot overcome the collective action challenge does not stand. The capital does not need to solve the challenge of the collective action when it has a state acting on its behalf.
The last disappointment is how comfortable the authors are with modern capitalism and the lack of the slightest effort to discuss if not alternatives (that would be too much considering their ideological stance) but at least some improvements to the obvious failures of capitalist democracies. Even those who are absolutely convinced about the advantage of modern liberal democracy (i.e. capitalism) over any other regime (such as Yascha Mounk and Paul Collier) do recognize some negative trends and suggest how capitalism functioning can be improved, not to mention the authors on the left of the political spectrum, such as Piketty and Varoufakis, who argue for “participatory socialism” with a broad-based ownership base, stronger redistribution mechanisms, greater role for social property, etc.
Not the authors of Democracy and Prosperity, though. For them, to borrow from Moliere, ”Les malheurs particuliers font le bien général; de sorte que plus il y a de malheurs particuliers et plus tout est bien”. Democracy and Prosperity is a perfect example of the big capital’s ideological capture in academia and how the neoliberal ideology may be disguised as academic impartiality.