Capitalism and Democracy

Don Boland

Some like to think of democracy as people power; and so fundamentally it is. For, the word comes from two Greek words meaning rule by the people. Another Greek word for rule was arche. Aristotle classified political government into three kinds, in that a community may be ruled by one, monarchy, a few, oligarchy, or many. This, however, was only a preliminary classification; for he recognized that civil society was made up of human beings good and bad.

Accordingly, one had to take into account the moral character of the rulers, and hence of their rule. Hence, he wisely perceived that we should also subdivide each classification into good and bad, the criterion being whether rulers exercised their rule for the common good of society or not (i.e. for their own good).

So he divided monarchy, or rule by one, into good and bad, monarchy and tyranny; rule by a few, into aristocracy and oligarchy; and rule by many, into timocracy and democracy. Originally, the Greek word for tyrant did not have the connotation of a bad ruler that it came to have. Monarch, as is clear was originally generic but has come to signify a good ruler. All these names indeed can be used quite loosely so we have to be careful with them.

The opposite process has occurred with oligarchy, where the generic term has come to stand for the bad sort of rule of the few. Aristocracy in fact means the rule of the excellent (in civic virtue). So too for Aristotle in the third category democracy was taken for the bad sort and timocracy, which means something like the rule of the worthy, was used to signify a rule of the many for the common good.

Now, Aristotle, a shrewd observer of human nature, noted that when rulers used their power not for the good of the community, or the common good, but to further their own interests, certain things particularly attracted them according to the different kinds of rule they exercised. In the case of the tyrant, it was clearly the enjoyment of power itself or his ability to have others do his will absolutely.

With oligarchic rule, however, the particular end sought seems to be enjoyment of riches or unlimited power over wealth or money. For rich people imagine that money will give them absolute freedom to do what they like. In democratic rule, too, the desire is for freedom to do what one wants to do without restraint. This kind of rule is closest in theory to everyone ruling oneself. So freedom itself is the cherished value.

When he came to classifying these six kinds of rule according to good and bad Aristotle said that simply as kinds of rule monarchy was the best and tyranny the worst, aristocracy was better than timocracy and democracy was better than oligarchy. However, taking into account the condition of human nature where, as Lord Acton says, power corrupts and absolute power tends to corrupt absolutely, the best kind in the concrete would seem to be a mixture of the three good kinds, so that the tendency for one person or a few to dominate others is checked.

But even on general principle it seems that there ought to be some participation of all in the government of a society. For true civic rule is a rule of the free. Everyone in a free society should have some say in its government, so that the whole can be said to be self-governing. Freedom of action is what distinguishes human beings from everything else. No rule, therefore, can take away this fundamental freedom.

Nonetheless, this notion of freedom is not the freedom to do what one likes, but only what one ought to do, morally and legally. It is to be carefully distinguished, therefore, particularly when talking about democracy, from the freedom that wants to be above morality. This latter freedom is what characterizes the bad kinds of rule. So Aristotle spoke of the rule of law as being the best kind of rule; and if the laws are good laws the freedom of all is preserved. For in the systems of monarchy and aristocracy the rulers are ruling for the common good part of which is to allow full freedom to all citizens provided they operate within the law. If the laws are good, i.e. in accordance with the nature of human beings, the good citizens obey them freely.

Now when we come to apply these distinctions to modern systems of government, and in particular to modern democracy, we find the potential for all sorts of confusion. Firstly, the use of the word "democracy" is quite opposite to the classical Aristotelian use. For by democracy we intend a good kind of rule, if not the best. Even if we look at it simply as the form of government that is by majority rule and do not advert to the moral distinction we sort of assume that it will automatically achieve the common good.

Moral connotations or value judgments can thus be imported into the formal differences. Democratic rule is claimed to be necessarily good; aristocratic and monarchic kinds of rule are therefore necessarily bad. Why, because they are undemocratic. Part of the reason for this judgment, it seems to me, is that democracy and freedom are taken as convertible notions. That is to say democratic rule is identified with the kind of rule that guarantees the full freedom of citizens, provided they obey laws duly passed according to democratic procedures.

As seen above, however, freedom, properly understood, can be guaranteed under any form of good rule, whether by one, few or many. But this is not thought to be possible in the modern political understanding of things. The reason for this will be seen, on closer examination, to flow from the moral distinction dropping out of the picture in the modern notions of freedom and democracy. For if freedom and democracy are taken "absolutely" without conscious reference to ends or final goods, to which they are in the final analysis means, then only majority rule satisfies, or best satisfies, the condition that we are fully free to act as we choose.

Perhaps without realizing it, however, we have opted for a form of government that corresponds to democracy in the bad sense, where, as Aristotle noted so long ago, we desire a social life-style that makes freedom an end in itself and obedience to laws restraining such freedom purely formal and pragmatic. Lip service only is paid to the notion of law, and there is a constant push to "reform" laws to bring them into line with (rapidly deteriorating) community standards. Any moral content in such laws is regarded an irritant to be removed by whatever means that are not considered currently illegal.

However, it is our modern notions of democracy and freedom that need to be reformed. The classic definition of freedom is: power elective of means, the due order of the end being maintained. The modern definition leaves out the second half and hence half of what is essential to a true notion of freedom, or a notion of true freedom. It is rather a definition of licence, and operating according to such a notion is a recipe for personal misery and social disaster.

This ambiguity in the word "democratic" is unfortunately used, consciously or unconsciously, to promote life-styles of the most licentious kind. Anyone resisting the push for unbridled freedom is called "undemocratic" and given all sorts of labels, taken in a derogatory sense, such as "authoritarian", "autocratic", "intolerant", and worse.

Yet, if we do take "democratic" to stand for a rule that respects the fundamental freedom of people to choose what is conscientiously thought to be good according to their own lights, subject to the public good, then it is a good and necessary element of every political rule or government. It is not an easy distinction to make, and even less easy to use in arguments about democracy, since it depends on our having a sound sense of morality. Without this our notion of freedom, as we have seen, is essentially flawed.

But let us take democracy in this good fundamental sense, and even ally it with democracy taken as majority rule, as being the most appropriate form of government for our times. We have still the task of determining whether or not the system of government that we actually have can be rightly classified as democratic. I believe that a good argument can be made out for saying that the form of government that we do live under in the modern West is not in reality democratic, whether taken in the good or bad sense, but in fact is oligarchic. To make this clearer, we need the distinction between what is real and what is apparent, or between the thing and its name. For what is called gold is not necessarily true gold.

My thesis is that, though there is a strong desire for democratic rule and many features of government that operate according to its forms, it is in the end not the majority will that has the last say but that of a powerful minority, which is the generic definition of oligarchy. I leave it to my readers to judge to what extent if any such minority is motivated by the common good and not its own general interests, for I do not wish to get into that part of the argument.

It is here that the economic theory of Distributism comes into the picture. For my argument depends upon the fact that, in the modern world, political power is very much tied to economic power. This again is founded upon property in economic goods, or to use more modern terminology, ownership of the means of production and exchange. These means can all be gathered together under the term Capital, which includes a wide range of all sorts of "instruments" from natural resources to money. The only other economic "factor" involved are the persons who use these instruments in ways appropriate to the diversity of their occupations, from farmer to financier.

The term Labour naturally extends to all these human activities. But, for reasons familiar to the student of economic history, this term has been narrowed to signify rather hired labour. For the modern economic system, called Capitalism, from its beginning was characterized by the fact that Capital happened to be in the hands of a relatively few and the labour required to be done with the use of such capital was for the most part done by those who have little or none of their own.

This division of the economic system into these two extremes, as it were, has been complicated not only by the increased sophistication of the instruments of production and exchange and their relationship with human use and enterprise, but also by the entry of government into the functioning of the economy. It is therefore a much more complex economic world we live in today. However, it is still useful for us to consider the system as basically capitalist according to the definition given to it by Chesterton in its heyday.

"When I say "Capitalism," I commonly mean something that may be stated thus: "That economic condition in which there is a class of capitalists, roughly recognizable and relatively small, in whose possession so much of the capital is concentrated as to necessitate a very large majority of the citizens serving those capitalists for a wage.""

Labour still signifies hired labour. But with globalization the association with manual or agricultural and manufacturing labour is not so evident in developed countries. The trend there is to "service industries", as those connected with the more sophisticated information technology and the commercial and financial aspects of capital. These kinds of capital now tend to rule the economic world and its (highly paid) "servants" see their interests as more aligned with such Capital than opposed to it. So in the developed or first world the sentiment of opposition between Capital and Labour seems for the time being at least to have waned.

The opposition and division still apply within nations and indeed within the so-called developed nations. But the focus of the opposition between Capital and Labour, as a modern expression of the relation between the rich and the poor, has shifted to the global scene. Within the so-called developed nations this opposition between Capital and Labour has, therefore, been softened somewhat precisely by the shift of "Capital" to exploit the use of labour internationally.

This can only be however a temporary phenomenon. It remains in the nature of the system for Capital to further concentrate and to seek to maximize its share of income at the expense of Labour. Australia, unfortunately, seems to be one of the countries most blind in this regard. The nation as a whole, including the labourers, has "enjoyed" to some extent the "benefits" of globalization (one-sided though they are from a global viewpoint).

Taking this as proof of the truth of its liberalist ideology the government, urged on by the Capitalists, has begun to dismantle the hard-earned rights of the labourers and allow for them to be bargained away. The pressure to do this may not be present for many under existing conditions. But the "good times" are being bought at a cost to others and the time will come (sooner rather than later) when that cheap labour resource will either become exhausted or rebel. Then we may find again at the national level that "the present age has handed over the workers, each alone and defenseless, to the inhumanity of employers and the unbridled greed of competitors." (Rerum Novarum, 6.)

The sophistry of the argument that the workers are free to negotiate in regard to their wages and working conditions was shown up long ago by Pope Leo XIII: "Let it be granted then that worker and employer may enter freely into agreements and, in particular, concerning the amount of the wage; yet there is always underlying such agreements an element of natural justice, and one greater and more ancient than the free consent of contracting parties, namely, that the wage shall not be less than enough to support a worker who is thrifty and upright. If, compelled by necessity or moved by fear of a worse evil, a worker accepts a harder condition, which although against his will he must accept because an employer or contractor imposes it, he certainly submits to force, against which justice cries out in protest." (RN, 63.)

It is to protect the labourer in respect of this "element of natural justice" (what are better known as workers' rights) that the intervention of governments was called for. For the liberalist ideology puts freedom above all and the capitalists, not needing to call on it themselves, hardly know what is meant by "natural justice".

In stripping away most of the Labour Law of the last century we risk a return to the previous situation that applied in the heyday of Capitalism where "the whole process of production as well as trade in every kind of goods has been brought almost entirely under the power of a few, so that a very few rich and exceedingly rich men have laid a yoke almost of slavery on the unnumbered masses of non-owning workers." (RN, 6.)

Leaving aside, however, the effects that globalization has had on the relation between Capital and Labour within the rich or developed nations, it is clear who remains in control in these nations. The processes of production and trade of goods remain very much under the power of a very few rich and indeed exceedingly rich people (if mediated more and more by anonymous commercial and financial corporations). If anything this economic dominance is greater than in Pope Leo's time.

It has become harder, however, to argue that the control of the economy by a relatively few "and exceedingly rich" group of people is something bad for the country. For many who live within the countries that can in global terms be called the rich nations, and who we could classify as "workers", insofar as they principally depend for their livelihood on their labour, see their interests as coinciding with those of their employers. For they benefit from their employer/corporation's involvement in the global market and "command' very high incomes.

Indeed, they cannot see what all the fuss is about regarding labour relations. This has meant that even the Labor Party has had to accommodate itself to the liberal/capitalist ideology. Correspondingly, it has meant a lessening of the influence of Unions. Moreover, the cheapness of labour where goods are made in the poorer nations and exported to the richer means that all in the latter are able to have a better "standard of living" than previously.

All this, however, does not alter the political picture. The character of a regime is determined by who has the real control or power within the society concerned. This we may gather from seeing whose interests are being protected most. Where property is concentrated in the hands of a few the promotion of freedom of enterprise and trade is decidedly to the advantage of those few. It can only be to the advantage of the many where property is widely distributed and not allowed to accumulate disproportionately, or to become concentrated in the hands of a relatively few.

So it is that, without a social order of generally distributed property, it is not possible to speak truly of a political system as a democracy. It may be called a democracy; it may even have the appearance of such in having the procedural formalities that belong to democracies such as elections, majority decisions etc. But in reality it will be those who have the control of property, i.e. wealth and money, who will be determining the decisions made "in the name of the people". That is to say it is the economic realities that mark such a political regime as an oligarchy rather than a democracy.

The very term "Capitalism" is more to be allied with oligarchy than anything else. It promotes freedom in the name of basic humanity but in effect this freedom primarily benefits those who have property; it enables them to produce and trade without restriction; and to hire labour on their own terms. Freedom is not denied to the labourers; it is just that the only property they have is in their own bodies and the only thing they have to sell is their own labour.

The possession of property is in fact the mark of the free citizen, for it gives each person a degree of independence as regards others, even those who rule. It is a form of insurance against sickness and incapacity to work. It is a natural adjunct of the family. The right of property ought not to be the privilege of a few; it is the birthright of all.

RN 65. We have seen, in fact, that the whole question under consideration cannot be settled effectually unless it is assumed and established as a principle, that the right of private property must be regarded as sacred. Wherefore, the law ought to favor this right and, so far as it can, see that the largest possible number among the masses of the population prefer to own property.

66. If this is done, excellent benefits will follow, foremost among which will surely be a more equitable division of goods. For the violence of public disorder has divided cities into two classes of citizens, with an immense gulf lying between them. On the one side is a faction exceedingly powerful because exceedingly rich. Since it alone has under its control every kind of work and business, it diverts to its own advantage and interest all production sources of wealth and exerts no little power in the administration itself [sic] of the State. On the other side are the needy and helpless masses, with minds inflamed and always ready for disorder.