There are, among both scholars and people generally, three views of the relationship between capitalism and electoral, liberal democracy.
One is that they are mutually supporting. This is a staple of thinking among conservatives. Here is Bret Stephens, reflecting on Trump: “if you don’t have an executive that believes in the rule of law, that believes in democratic process and procedure… then everything you’re hoping for in terms of the business climate is going to fall apart…. those of us who have spent time outside of the United States know just how intrinsic it is to have a basis in a rule of law if you’re going to have a thriving, capitalist free-market society in which contracts are ordered, contracts are honored and where there’s a sense of how things work.” Of course, Stephens conflates Weberian formal rule of law with liberal democracy, a mistake even without considering Ernst Frankel’s dualism of normal versus prerogative law. But the broader argument is that individual freedoms, as well as group interests, are best secured in a market economy. Choice is here the key to both the market and the liberal polity. History does not produce overwhelming evidence for this position.
A second view is that capitalism and liberal democracy stand in contradiction to each other because the inequality of market outcomes in capitalism and the putative equality of all persons in capitalist democracies stand in inherent opposition: one must give way to the other. Any equilibrium can only be temporary and unstable.
This position was held already in the mid-19th century by conservatives and radicals alike. The British Tory historian Thomas Macaulay and Karl Marx, both writing after the 1848 revolution in France and the Chartist uprisings in England, agreed that universal suffrage could destroy capitalism and, for Macaulay, liberty as well. If the masses all voted, they would simply take away resources from the haves. For Macaulay, a democracy would devour the “seed corn,” destroying the economy and ultimately civilization. For Marx, universal suffrage would advance democracy and reduce hyper-exploitation, even if voting rights alone would not be enough to dismantle class oppression.
These views arise from the fact that, as Wolfgang Merkel observes, capitalism and democracy follow different logics: “unequally distributed property rights on the one hand, equal civic and political rights on the other; profit-oriented trade within capitalism, the search for the common good within democracy; debate, compromise, and majority decision-making within democratic politics versus hierarchical decision-making by managers and capital owners.” Capitalism, in short, is not democratic; and democracy is not capitalist. The level of inequality that defines specific variants of capitalism and supposedly secures productivity and profits is hardly compatible with the democratic principle of equal rights and opportunities for political participation.
A third view is that the relationship is indeterminate. Whether or not the inequality of market outcomes in capitalism can co-exist with the putative equality of all persons depends on circumstances that cannot be generalized. During the first post-WWII decades, this indeterminacy perspective seemed persuasive. Tensions between the two systems were moderated through the socio-political embedding of capitalism by an interventionist tax and welfare state and a “growing the pie” Keynesianism. Since the 1980s, however, the financialization of capitalism has broken the precarious capitalist-democratic compromise. Socioeconomic inequality has risen continuously and has been transformed directly into political inequality. The lower third of developed societies has retreated silently from political participation; its preferences are less represented in parliament and government. Deregulated and globalized markets have seriously inhibited the ability of democratic governments to govern, and oligarchy results.
As I explain in what follows, in our current moment, it is not a crisis of capitalism that challenges democracy, but its triumph. In this way, the current political-economic situation is quite different from that of Weimar Germany, whatever continuities and similarities may exist.
Social Welfare Capitalism: the Golden Age of Coexistence?
In the middle of the twentieth century, an increasingly organized form of capitalism proved particularly compatible with democratic politics in Western Europe, North America, and Japan. This was the result of the labor-friendly needs of postwar rebuilding, a point Thomas Piketty has stressed, as well as of an increasingly expansive, interventionist welfare state that interfered with the capitalist economy by regulating and stabilizing it. During this heyday of social democracy, economic actors were multiply embedded, regulated and socially obligated. Likewise, elements of democracy were introduced into the economic system in some settings, such as codetermination and workers’ councils.
Capitalism’s concessions to democracy during this period were also facilitated by the ongoing critique of capitalism in the name of democracy, as well as the challenge to the Western model of capitalism by actually existing socialism, most prominently in the Soviet Union. It was no accident that the Cold War period proved to be the zenith of coexistence between social capitalism and social democracy in Northern and Western Europe.
But the rapid economic growth in the years following the war, memory of the Great Depression, and awareness of the political catastrophes of the interwar years did not last forever. Slowly but steadily since the fiscal crises of 1970s and the failure of labor to push beyond the Keynesian-social democratic compromise, capitalism has moved back from indeterminacy to what looks like contradiction. Beginning with Margaret Thatcher and Ronald Reagan in the early 1980s, but under the Clinton-Blair-Schroeder social democrats as well, there have been unremitting efforts among most capitalists for more deregulation under the threat of investment strikes, the export of jobs, and internal races to the bottom with resulting unemployment and a decline in real living standards for the masses. This turn toward deregulation and globalization, along with the rise of financialization, has significantly contributed to a growing divergence between capitalism and democracy.
From Morbid Symptoms to the Edge of Fascism
Electoral democracies do demand at least formal popular ratification of ruling-class agendas. This is not always readily available in the face of popular discontent, as too unambiguous a representation of capitalist interests can fail. Thus, in the US, what the Trump Republicans realized is that blatant upward redistribution as a capitalist strategy no longer worked as an electoral alternative to progressive neo-liberalism. McCain and Romney lost badly, after all.
What Trump realized, or perhaps stumbled into, was that it was possible to take the progressive part of neo-liberalism—DEI, so-called “gender ideology,” the supposed privileging of Black people and of immigrants—and use it to inflame a panic in the lower middle class and certain portions of the suffering working class itself. These folks, along with those who always voted Republican—the Republicans suffer from less “dealignment” than the Democrats—provided a popular base for Trump’s elite capitalist supporters. In a sense, then, the MAGA base has replaced the soft welfarist Democrat Party base as the preferred electoral support for a capitalist elite that has built on its successes and changes in the world economy to turn more aggressive and rapacious. What they have created is what Arno Mayer described as not a restorative but a “revolutionary counterrevolution.”
These now-dominant fractions of capital, in turn, come from several parts of the capitalist structure: a Silicon Valley-Wall Street group that wants to pursue innovation, however socially destructive, without the threat of regulation; hedge fund operators who have hit it super-big and seek to avoid taxation at all costs; classic anti-New Deal conservatives like Mellon-Scaife, particularly from the fossil fuel circles, who wish to destroy what’s left of trade unionism and environmentalism; and portions of venture capitalism, joined to the first group and with increasingly fantastic anarchist utopias of decentralized private tyrannies.
These fractions have displaced the more welfarism-tolerant capitalists of the industrial and public-sector adjacent realms. Prominent capitalists in the newly-dominant fraction—Thiel, Ellison, Musk, Ackman, Zuckerberg, and Andreessen, to name but a few—have come to believe that only they, in their alliance with Trump, can hold back an enemy that is, at once, representative of both decay and revolution. During the interwar years, it was the “Judeo-Bolsheviks” who represented this dual threat, whereas today it is a mélange of leftists, environmentalist, uppity minorities, and anti-AI activists. Indeed, in a recent eerie formulation referencing Carl Schmitt—the ultra-right-wing Catholic and Crown Jurist of the Third Reich—Peter Thiel identifies them collectively as the “Antichrist.”
Whether these dominant capitalists believe in or even care about Trump’s quasi-autarkic economic pronouncements is uncertain. Trump’s vision of a Grossraumwirtschaft, from Greenland through Canada to Panama and Argentina, now also involving a battle against alleged white demographic decline, is hardly a threat to their own global reach, which no tariffs seem to threaten.
Weimar: A New Mass Base for Divided Capital
Recent months have witnessed much talk of Weimar Germany, as the moment fascism first threatens and then arrives. While some aspects of our own situation are similar to Weimar’s, and others rhyme, there are many features that are simply different. Weimar occurred against the backdrop of a defeated workers’ revolution, which nevertheless produced a strong social democratic and trade union movement that sapped capitalist returns; a worldwide depression with unheard of unemployment; millions of radicalized damaged war veterans from a lost war; residual feudal forces; territorial revanchism; extraordinary export dependence itself dependent on foreign loans; a very progressive but weakly anchored new Constitution; and a seriously regressive “deep state.”
In the case of Weimar, once Germany’s economy and the international market and finance on which it was highly dependent turned bitter after 1930, most fractions of capital withdrew from the social and political compromises that had underlain stability and instead began ferocious attacks on the left. Within the capitalist class, dominance moved from the export and more modern industries less hostile toward labor to a more right-wing, protectionist, labor-intensive, mining and steel fraction.
But there was a problem: few people would vote for unabashed and unalloyed capitalist interests, and the so-called “bourgeois parties,” obedient to their funders, withered from one election to the next. Due to pressure from their members and a strong Communist movement, the Social Democrats and trade union leaders could not just surrender worker interests and wait to fight another day. They maintained a stubborn and costly defense of worker interests at both the firm level and in parliament, where Weimar’s welfare state could not be erased.
Trapped in an electoral democracy, German capital found itself in need of a new mass base. Compromise with labor had become too costly and traditional conservative constituencies had fractured and weakened. Or, in the words of one contemporary business consultant, writing in September 1932, what capital needed was “linkage to itself of strata that are not part of it socially but which provide it the indispensable service of anchoring its hegemony in the people.” How German capital found “linkage,” with the Make Germany Great Again party, is a matter I treat elsewhere. What is clear, in any case, is that the indeterminacy in the relationship between capitalism and democracy ceases to be indeterminate when democratic outcomes, in good times or bad, reduce profits and prerogatives below some capital-necessary point. Democracy will be undermined and abandoned—even if that entails an uncertain future.
What we are witnessing today, however, is that even when capital is ascendant, reaping rewards previously unseen in modern times, the potential constraints posed by democracy may be too great a burden to bear. We should be clear-eyed about this. For all their faults and failures, no Weimar politician defending a capitalist democracy could conceivably have delivered themselves of the belief recently endorsed by Kamala Harris as to how capitalism and democracy stand in a positive relationship: “I always believed that if push came to shove, the titans of industry would be the guardians of our democracy.”
