The Tension Between Capitalism and Democracy Is Growing

Milton Friedman was the cold warrior who wrote that democracy was based upon a capitalist system in which everyone was given the right to choose. Democracy and consumer choice were woven together into a compelling story in the ideological war against communism. Democracy was dependent upon a capitalist system that maximized choice. This article describes the growing tension between capitalism and democracy. Nowhere is this more apparent than in Europe. Democratically elected governments have learned that credit rating agencies and technocrats have the power to dictate the conditions that they must accept in order to survive financially. They must accept these conditions even if the imposed austerity worsens the odds for economic growth. The risk that less democratically oriented governments assume power may even be enhanced.

The relationship between capitalism and democracy worked well for thirty years following the end of WW II. It seems strange to even talk about the conditions that are leading to a more estranged relationship between those powerful forces. Perhaps the demise of communism has produced an unhealthy situation in which the lack of competition in the world of economic ideas has encouraged excesses in capitalism. Its also possible that a shifting economic paradigm has forced elected governments into a difficult situation. The choices that they have to consider may not be politically popular choices.