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.


Theo C.M.J. van de Klundert

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


In the book the history of capitalism is examined from two different perspectives. First, emphasis is put on technological progress as the main engine of economic growth. It is shown that technological change occurs in an irregular fashion, which has important consequences for the design of the economy and for democracy. Second, attention is paid to the diffusion of capitalism across countries. The main question thereby is whether such a diffusion gives rise to varieties of capitalism, because countries have their own history determined by specific cultures. Capitalism in its present form dates back from the Industrial Revolution in England, which took place after 1750. Technological change as such is not the main factor behind the fundamental revolution. After all, technological knowledge increased step-wise during the long history of mankind as, for instance, documented in Lipsey et al. (2005) by identifying major technological breakthroughs (general purpose technologies) since 9000 BC. What is decisive for the emergence of the capitalist system, is that markets are no longer embedded in social relations. Polanyi (1944) refers to this remarkable feature as ‘The Great Transformation’.

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