• Twinkle Joshi

Can Capitalism endanger Democracy?


The world sees capitalism as the synonym of democracy. The unifying bond that brings us true freedom. Free markets, free choices in our nation. Capitalism is considered the only way on the path of modernization and growth. And rightly so, the epitome of democracy and capitalism, The United States of America is the most powerful nation. The world is thought to be moving towards a unifying globalized market with no entry barriers. With the same correlation, democracies around the world have increased over the last few decades. Though the seemingly, symbiotic relationship between capitalism and democracy may be a parasite one, bringing democracy to grave danger.



For diving deeper, I would like to classify freedom in two senses, one the market freedom and the other one the political freedom. It has been witnessed that political freedom brings to market one, as the government moves towards centrally controlled to market run. But the vice versa may not be true, free markets can exist without political freedom. China is standing high at the second number in terms of GDP taunting the laurels.


Pre- Great Depression period classical economists believed in laissez-faire (no government intervention) in markets leads to flourishing but John Keynes showed that government intervention is necessary as the market that exists is inefficient and runs on irrationality. Hence, we can understand the role of capitalism and democracy. The role of capitalism is to increase the growth of the country and that is it. As we can see in various countries, it leads to income inequality, imperfect markets, monopolies, and lack of public good. Hence, it is the job of the government to supplement this growth and manage it in a manner that is sustainable and fair. Democracy gives the power to the public to decide what they seem fair in the distribution of wealth and the limits on capitalist. Giving us a picture of the perfect pair.



Yet, all around us the economies are growing sizes like the US, India, Japan but the sense of power in the public is declining. Capitalism is keeping its end of the bargain but democracy is failing to keep up. The lines of understanding of the roles of each party are getting blurred. The public is relying on the philanthropy of the capitalist to keep the equity forgetting that the profit is the main motive of the business houses. Fair practices, equal distribution, social activities can be the choice for them but it is certainly not their duty. While on the other hand, the government is indulging themselves in business houses which as the data showcase are unable to sustain them. The working of the business houses and government should be of check & balances not of the unison of politicians and business houses.


The question arises why are the two entities together even after being at opposite sides. It might be shocking to realize that part of the reason can be traced back to the shopping habits of us common man. Take a step back and think about how do you manage your purchases. If you want to buy a product online, you would directly go the brands such as Amazon and purchase the highest recommended or ‘Amazon Verified” items. You would use the internet and sites to, directly and indirectly, tell the big business houses your preference. In the offline method, you buy the product which has given the prime spot on the shelves. We the consumers only have the illusion that we are free choices in the market while we are picking the items that “they” want us to buy.



It is claimed that “Data is the new oil” and by extension, consumer preference data is a goldmine. When the big companies have your exclusive insights (through legal channels), it creates asymmetric information in the market driving out any chance of competition, hence, creating an unseen monopoly. The new entrants have no legal or financial barrier to enter the market but without the data of consumers, the products will not be able to compete. How do the entrants end up solving this issue - by buying the data from these big houses. It has two impacts; first, the new entrant is only contributing to the success of the big companies which in turn more powerful, hence the vicious cycle keeps ongoing. Second, the more disastrous one, it gives the power to the capitalist to decide who gets to enter the market making them the decision-maker instead of the government as they own the resources now.


The role of the government comes into question now. Due to both self-interest and inability to govern its territory make them dependable on the giant capitalist. Gaining power and maintaining power by politicians in democracies are costly which makes them dependent on private companies for funding their campaign (look at the United States) for which they owe them in the future. While on the other hand, due to market inefficiencies and cracks of capitalism the government finds themselves in debt as they have the job to bail out companies, support welfare as these firms are so strong that they keep the company floating. Either way, the power of the government declines which makes the vote of the public senseless.


With this high dependency on the firms, the government is unable to keep up their part by having a check on the capitalist and the monopoly that they are creating in the market. The government saves their face by putting the responsibility of social welfare on private companies. How often you have found yourself saying that the giant capitalist like Jeff Bezos in the USA or Mukesh Ambani in India should work for the society. We raise campaigns against companies to have fair practices, treat their employees right, work for sustainable products. While our focus should have been towards the government to make the laws.


Bringing us to the harsh reality that we have given up our both kind of freedom, the market choice, as the big giants get to decide who stays in the market and we merely choose between them also the political freedom as the government is unable to put any control over the societies and often are indebted to the corporations. If this had been an isolated incident of one political party of one democracy then it might be human bias. But, we see that problem is universal to every democracy at different levels, it generates the question is capitalism endangering the democracy.

Now that you've reached the end of this article, if you want to read out my other articles, check them out Tamasha with Twinkle.


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Crafted with love by The Heptade.