The left, the right, capitalism and democracy

Democracy is a set of political institutions that combine elections, the rule of law and civic freedoms. Capitalism is a set of economic institutions that combine markets, private ownership and firms where the owners of capital hire workers. These definitions, like all definitions in social sciences, may be disputed. I use the ones in the CORE Project’s e-textbook, The Economy (now in its second edition).

Democracy and capitalism do not always go together. There are, and there have been, capitalist autocracies and capitalist democracies. The main contradiction between capitalism and democracy is that the economic power in capitalism is in the hands of a minority, and this economic power may translate into political power. In a democracy, by definition, the executive and legislative powers are, at least formally, in the hands of a majority (who must respect minorities and the rule of law).

As a result of these tensions, the left is uncomfortable with capitalism and tries to reform it or replace it. In some extreme forms, the left has made the mistake of associating capitalism with democracy, speaking of a “bourgeoise democracy”. And atrocities have been committed in the name of the left over history.

But in general, the left and the center-left today are the most reliable defenders of democracy. The left is not by definition necessarily uneasy with the market as a mechanism of resource allocation, or with the existence of large private sector firms. But it is uneasy with the unfettered power of capitalists.

There is a left wing tradition of defending free international trade as a pacifist cause, and there are connections between progressive thinking and neoclassical economics. Kenneth Arrow, probably the most interesting of neoclassical economists, wrote an article making a “cautious case for socialism.” In pages 857-858 of Bowles and Halliday’s textbook on Microeconomics, they show that frictionless perfect planning and perfect markets can actually be represented by the same model.

But efficiency and equity are only separable under very unrealistic conditions, and in many realistic ones markets can worsen discriminations or segregation. Under appropriate institutions, markets have lifted whole countries out of poverty (China, but not Russia), but have done little to stop inequality, in fact they have increased it. Only when non-market (state or civil society) strong institutions can pre-distribute or re-distribute resources, markets are compatible with both efficiency and equity. That’s a possibility that should always be explored: an economic system with regulated markets (at the realistic scale, which is more and more global), efficient firms and constrained private property (call it reformed capitalism or cautious socialism) should be the perfect complement of democracy.

Today, the biggest threat to democracy comes from the support of some capitalists for political leaders that threaten the rule of law and civic freedoms (and also elections when they don’t deliver the result that they expect). It is not a mistery why many among the very rich (and many “both siders”) endorse Donald Trump or Marine Le Pen more or less openly, as well as in the past they endorsed Hitler. They give support to these likely authocrats because they give priority to their short run economic interests (lower taxes, less regulation), they don’t really care about democracy for any ethical reasons, and they underestimate the economic and social risks that themselves also face.

Lessons from the Burmese dystopia

We receive news every day about Gaza and Ukraine, and there are good reasons to keep our focus on them. But there are other tragedies about which we only hear from time to time that we should pay attention to as well.

Thant Myint-U, a diplomat and grandson of a former secretary general of the UN wrote a few years ago a very interesting book, “The Hidden History of Burma. A Crisis of Race and Capitalism.” The author, born in New York city, knows the country well, and participated in an advisory capacity in the attempts to complete the transition to democracy until a military coup in 2021 stopped the process.

Myanmar (as the country is now officially called) is a country sandwiched between India and China, of incredible ethnic, religious and linguistic diversity, for historical and geographic reasons. The book is the chronicle of a failed transition, the history of the years between colonialism and the current civil war. Inter-ethnic violence is an important ingredient of this history, culminating in the tragedy of the wave of the Rohingya refugees as a result of this violence.

The cascading mechanism of ethnic violence is well known, and reached tragic proportions in this case in the second decade of this century, just some years ago. A supposed crime is perpetrated, and someone publicizes that the perpetrators are members of some ethnic, religious or linguistic group. The entire group is blamed for it, which triggers a reaction by the most radical members of the targeted group, and so on and so forth. One has to be careful with the narrative, and that is why it is important that the precise details are delegated to those that know the case very well, as it happens with the autor of this book.

The episodes of ethnic violence took place in the middle of a failed transition to democracy, after years of military rule, first trying to follow a socialist system and later opening up the doors to markets and private interests without much regulation. The case has similarities to dystopian fiction: “In a world with no shortage of mass atrocities, the civil war in Myanmar is perhaps the most inescapably dystopian”

The book finishes with the Covid-19 pandemic, just before the military rebellion that put an end to the transition. The current situation is one of civil war, with the army fighting against a coalition of the legitimate government and armed ethnic groups: “The resistance aims to overthrow the Military Junta, establish a genuine federal democracy, and remove the military permanently from the country’s politics."

The book is a warning about what happens to capitalism without a strong state: violence, warlords-business men, and drugs are together in a tragic cocktail. Climate change meanwhile devastates a country that is most vulnerable to it.

The mistake of ethnic federalism results from choosing to deal with fixed ethnic groups (a mistake to which the UN apparently contributed) instead of using a fluid interpretation of ethnicities, emphasizing diversity and a common purpose. Ethno-nationalism and unregulated capitalism feed each other, and Facebook contributes to it, as it did with the Rohingya catastrophe. 

The international celebrity business projects a simplified view of complex countries, and in this case it invested too much hope on a leader (Aung San Suu Kyi) that in the most dramatic moments failed to take a principled view on human rights.

I strongly recommend this book, both if you are interested in this specific case, and more generally if you are interested in the co-evolution of ethno-nationalism, capitalism and democracy.

Milei's neoliberal dogs

The recently elected President of Argentina, Javier Milei, who was trained as an economist, has several dogs that are cloned from a previous dog that died not long ago. Some of these new dogs have the names of economists favorable to a minimum role for government in the economy. One of the dogs, for example, is called Milton, after Milton Friedman.

Javier Milei has many of the attributes of right-wing populism. I read in The Guardian: “More than Milei’s ideas, what worries me is his state of mind and emotional stability, said Juan Luis González, the author of an unauthorized biography which takes Milei’s nickname as its title: El Loco (The Madman). The book portrays Milei as an unhinged loner who was bullied and beaten as a child and gets political advice from four cloned mastiff dogs named after libertarian thinkers.”

Milei defines himself as anarcho-capitalist. He was recently in Spain for an international meeting with other far right politicians, including the leaders of VOX, a Spanish nativist movement that denies the importance of climate change, and other parties that believe that the experiment of the European Union has gone too far. Milei not only has close links with the European far right, but also with Trump and Bolsonaro.

Milei illustrates that neoliberal ideas seem to be complementary of populist methods and far right objectives. In logic, it wouldn't need to be like that. The three dimensions could be separated. However, when one explores the similarities between, say Reagan and Trump, or Thatcher and Johnson, although the neoliberal leaders on the 1980's did not qualify as populists, many of their anti-government (except in law and order) policies where very similar, for example promoting a race to the bottom to lower taxes. Perhaps the modern right-wing populists are more protectionist, but that is not always the case. Now they are more populist, but they are equally neoliberal.

Where does the complementarity between neo-liberalism and populism come from? One hypothesis is that the evolution of technology and institutions forces the right to manage themselves today in a hyper-democratic society, where citizens interact in the social media and finally they vote in unavoidable elections (although eroding democratic institutions is feasible in this context). The right has always had a very instrumental view of democracy (capitalism comes with democracy or without it, see Franco or Pinochet): if they cannot destroy it formally, they will use all the technologies available to make it work for its objectives. I interpret national populism as one of these technologies.