Capitalism and Democracy

Capitalism and Democracy

A Fragile Alliance

New Horizons in Institutional and Evolutionary Economics series

Theo C.M.J. van de Klundert

Capitalism is driven by technological revolutions, leading to alternating periods of regulation and deregulation in leading economies. Technologically backward countries face a different situation as they have to catch up with the leaders. Against this backdrop, Theo van de Klundert examines the relationship between capitalism and democracy, combining economic theory and historical description to analyse long-run economic development. Emphasis is placed on the interrelation between economic and political power, and a robust state-of-the-art overview of today’s political economy is presented.

Chapter 8: Democracy at bay

Theo C.M.J. van de Klundert

Subjects: economics and finance, economic psychology, institutional economics, political economy


In Joseph Schumpeter (1942, p. 61), a fundamental question is asked: ‘Can capitalism survive?’ His answer was: ‘No, I do not think it can’. As we know now, this answer did not prove to be true. Yet, maybe the question should have been formulated differently: can democracy survive? This formulation shifts the problem to a different playing field. The relationship between globalization and democracy is at stake, and no longer only the internal dynamics of the capitalist system, as in the works of Schumpeter. Globalization of markets implies that national governments have less say concerning the organization of their own economies. This development does not necessarily mean that the democratic control of market processes is moved to the background, but the danger is not unreal. For, exercising control at a global scale requires tailor-made political institutions. However the chance that such institutions will emerge and satisfy the requirements as well, does not seem great momentarily.

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