Doug Moody once said, “Capitalism is the bastard child of democracy“.

Democracy and Capitalism – The Pros and Cons

Democracy claims to give a voice to every person and equal rights to all. Capitalism claims to build on this foundation of freedom for all and claims to recognize talent and promote innovation. And both these claims hold good in their initial days.

But as time progresses, elections after elections come and go and democracy slowly tends to become a mob rule where theoretically 51% of the people suppress the freedom of 49% of the people, and practically it is actually around 30-35% of the voters who make their candidates win and suppress the remaining 70-75% population who either do not vote or vote for other candidates. Then the promises of democracy becomes an illusion to majority of the population. They will have to remain satisfied only with their freedom to protest against the policies of the state whom they DID NOT elect in the first place.

Protests against elected governments are a common scenario all over the democratic world. And this need not include only those who DID NOT vote in favor of the current administration. It can even include those who voted IN FAVOR OF the current administration but later became disillusioned with its policies.

Same with Capitalism. Initially there will be a spur of growth, industrialization, employment, wealth creation, etc in a capitalist society. But later as private limited companies go public, as giant corporations start getting created, as business magnets evolve in place – capitalism becomes monopoly of giants or becomes host to manipulative tactics of giant corporations. Smaller newer companies and startups will face unethical competition, or will be swallowed by acquisitions. Democratic institutions and policy makers will start living under the perks of large corporations and will create policies favoring a particular group of corporates.

In other words, Corruption sets in.

Democracy + Capitalism = Corruption

Corruption is the illegal nexus between Capitalism and Democracy where in,

– Capitalists share their wealth with those in power outside the boundaries of democratic setup –  like by paying bribe

in return for

– Administrators (politicians and bureaucrats) misusing their democratic power to create policies that favor the capitalists or to issue orders that favor business houses

So Corruption is where capitalism misuses democracy in return for democracy misusing capitalism, which creates a win-win situation for both capitalists and policy makers at the cost of the general public. Now let us start from the beginning again. Wasn’t democracy and capitalism actually created to benefit the same general public, the common man? And here we are in a situation where both democracy and capitalism have ganged up together to loot the same general public.

The fact is that the policy makers come to power with the votes cast in the elections by the general public. The capitalists run their businesses because the general public buy their goods and products. And yet, the illegal network between Capitalists and Administrators makes life more miserable for the same general public by means of corruption. And the reason?

The Missing Link

Lack of adequate checks and balances. Any system, no matter how fool proof or well intentioned its ideological basis is, if it lacks proper checks and balances, then it is due for a massive failure in the long run. It is this same lack of proper checks and balances that caused the current global economic crisis.

There is no accountability in a democracy. If a corrupt politician loots the country for five consecutive years, does not perform upto the mark, and causes an entire population of a billion people’s development to be delayed by five years, the maximum punishment he will get is not getting elected again. Most of the corruption cases end up in prolonged inquiries and lengthy court cases and rarely does a corrupt politician get punished for his misdeeds.

In Capitalism, the stronger your business corporation is, the easier for you to grow even bigger. Solution monopolies do not allow alternate ideas to easily flow in. Take the case of petroleum business which tries its very best to make sure alternate energy sources do not enter mainstream energy solutions. Larger business companies with deep pockets make sure that smaller companies cannot easily get in for a good share of limited resources. Take the case of the current 2G Scam where it is alleged that stronger telecom companies got away with the 2G spectrum at throw away prices by bribing the democratic policy makers.

Now take the reverse case.

In democracy no matter how strong a political party or political leader is, a collective people’s mandate can root them out in a single election. Be it BJP led NDA putting an end to Congress rule in the Center, or be it Nitish making a clean sweep over Lalu in Bihar – when electorate says enough is enough, parties and leaders have to pack their bags. This is the strength of democracy. The need for change – which brought Obama to power.

In capitalism no matter how little money you have, no matter how inexperienced you are in terms of running a business, if you have a great idea then you have ample options to find all means to assist you to give life to your idea. This is the strength of Capitalism. Capitalism recognizes merit and innovation, and this is what has made Google possible today.

Bringing in Accountability into Democracy will build a better representative system. While democracy is not THE BEST form of governance, it definitely IS the best among all the available alternatives to it. It guarantees maximum representation and justice to all if properly implemented, and on the other hand will simply create a mob rule when there are no checks in the system. Plugging in Accountability into democracy gives it a perfect shape. In this regard, the world’s largest democracy India has miles to go compared to the world’s strongest democracy United States. Accountability is to democracy what anti-virus software is to an operating system. Anti-virus software keeps viruses out in a computer, and accountability keeps corruption out in a democracy.

Once accountability is in place, this automatically reduces the cons of Capitalism making it a legitimate child of democracy. When you do not have corruption in the government, obviously policies will be in place to keep a check on the business houses. The only business of a government is to regulate business, and good governance is all about making sure that the benefits of capitalism are equally shared by all the citizens. Failing to do so will remind us of yet another Winston Churchill’s quote

“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”

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