Must Democracy Be Capitalist?

Marxists have always stressed the great political power, the dominating role, of businessmen in capitalist states. But they have generally been too little interested in the actual structures of those states, too little appreciative of their complexity and diversity to analyze that power in detail or to provide a convincing account of how it works. Analysts of “elites,” like C. Wright Mills, have described the overlapping membership of the powerful cadres of government and economy, without suggesting the structural connections between the two. But capital works its way even when the two cadres do not overlap: how is that to be explained?

Liberal political scientists have tended to deny that there is anything to explain. They treat capitalist business as one power among many, assimilating corporations, unions, churches, ethnic organizations, and so on, into the general category of interest groups, as if all of them were equal or potentially equal or (at least) intermittently equal in their influence upon policy. But they are not equal, as Lindblom’s excellent book makes clear. The study of interest groups was once the cutting edge of American political science, and it produced much genuinely important work. Taken as a whole, however, the enterprise can now be seen as an elaborate way of missing the point.

Neither the bare assertion of capitalist hegemony, nor the study of elites, nor the study of interest groups captures the reality of our political and economic arrangements. And none of these sets up the right comparisons with other contemporary societies. What is necessary, Lindblom suggests, is a close examination of the exercise of power in the marketplace and in the state. Commonly, of course, we are invited only to distinguish these two institutions: markets disperse power, politics concentrate it; markets emphasize voluntary exchange, politics justify coercion; markets coordinate without central direction, politics make planning possible. Lindblom shows that each of these distinctions is plausible, partly true, but seriously exaggerated. Instead of sharp and easy contrasts, we find a variety of patterned relationships, governed by two general (empirical) rules: there are no markets except under the protection and patronage of political authority and no form of authority that does not make use of market activity. Politics and markets are two continually connected and interacting forms of social control. So we must study complex wholes—and that study offers some unexpected insights.

Lindblom is committed to a mode of analysis that I should like to call Montesquian. He aims to describe a variety of actual and possible political/economic regimes, to get at the “spirit” of each one, and then to show how that spirit is expressed in all its institutional arrangements. It is a task at which he is only partially, though still remarkably, successful. He does not reach as far as Montesquieu. He has little or nothing to say about the further ramifications of the “spirit” of the regime in education, family life, religion, and morality. He is concerned largely with constitutions, hierarchies, economic life, and ideology. But within his range, he has written an important book, a genuinely enlightening book, which is (like The Spirit of Laws) very hard to summarize.

He loves classifications. That old and elegant trinity, monarchy, aristocracy, and democracy, seems to have lost its usefulness or its persuasiveness; it does not appear in Lindblom’s pages. The need to combine politics and economics makes for a more complicated series. He has to mark off societies simultaneously along a democratic/authoritarian scale and along a free market/central planning scale. There are many possible arrangements, and I don’t think that Lindblom ever settles on a single set. I should note that there is one regime which seems to fall off both his scales. He calls it the “preceptoral” regime and describes it as one that, in principle, uses neither political coercion nor market controls to get its subjects to behave as wanted, but relies instead on persuasion and education. Cuba and China under Mao are his two examples, and though he writes about both with considerable skepticism, his general treatment of the preceptoral regime displays a naïveté that is uncharacteristic of the book as a whole. For he is otherwise fully prepared to recognize that control over the means of persuasion is a form of power in both markets (advertising) and states (education and propaganda): hence the exercise of that control cannot be an alternative to the exercise of power.

But Lindblom is chiefly interested, as we are likely to be, in two regimes whose classification presents relatively few problems. The two are polyarchal market regimes (“polyarchy” is Lindblom’s, and Robert Dahl’s, word for liberal democracy) and authoritarian planning, or communist, regimes. There is planning in the first of these, of course, and a variety of other kinds of political intervention in the economy; and there are markets in the second, in jobs and consumer commodities, though not in investment and capital goods. But the two are nevertheless distinct, and they reflect, Lindblom argues, two radically different understandings of political and economic life.

Communism is marked by a great optimism about the possibilities of intellectual analysis and control. Its rulers claim to have arrived at the “correct ideological position” and to rule on the basis of their knowledge. Possessed of a theory, they can ignore the preferences and volitions of their subjects. Hence they are tyrants, though not, at least theoretically, in Aristotle’s sense of ruling in their own interests, against those of the people they rule. For underlying their optimism is a belief in the ultimate harmony of interests, once classes have been abolished. And they are, so their theory tells them, ruling for the sake of that ultimate harmony.

Liberal market regimes, by contrast, are marked by a deep pessimism about the capacities of the human intellect. No “correct” position has been or is likely to be discovered, and so there is nothing to do but attend to the preferences and volitions of ordinary men and women. But ordinary men and women have conflicting preferences and volitions, which reflect conflicting and ultimately irreconcilable interests. Hence government cannot be anything more than a process of interaction, bargaining, and mutual adjustment. Though Americans are commonly said to be sustained by a buoyant conviction that every problem can be solved, Lindblom insists that our political and economic life is so organized as to give problem-solvers very little room for maneuver and very little authority. In foreign countries, perhaps, we set them loose, but not at home. More cautious at home, we have established all sorts of barriers—checks and balances, countervailing powers, procedural restraints—to protect ourselves against the costs imposed by powerful but fallible (and fallen) men and women.

We are, no doubt, far better protected than are the subjects of communist regimes, and Lindblom, though he strives for objectivity, is in fact a defender of polyarchy for this very reason. At the same time, he is well aware of all the ways in which unplanned market activity imposes costs upon (as well as bringing benefits to) masses of people. Under capitalism, costs are the by-products or side effects of self-interested entrepreneurial activity. They fall, for example, on workers whose skill is now obsolete because of this or that innovation, or on a whole town where a newly outmoded factory is forced to close. In a planned economy, such costs are calculated in advance and centrally assigned. We are distrustful of central assignment (who would guard the assigners?) and so we prefer the uncontrolled market.

But these two alternatives do not exhaust the possibilities, and it is not clear that “we” have in fact ever been asked to state our preferences. Just as there are authoritarian market societies (Yugoslavia), so one can imagine polyarchally planned economies. But this last is a possibility never realized in the real world. Why not? This is the central question posed in Lindblom’s book—as it is a central issue in contemporary political and intellectual debate. Every liberal democracy is also a free market society. Is this an indissoluble marriage, governed by structural laws or by deep compatibilities, or might one, if one wished, work for a divorce? Lindblom’s answer is complex and nuanced, but I think finally that he can be read as the advocate, at least, of a trial separation.

Historically, the marriage is best explained as the outcome of a generalized defense of personal liberty against state power. The great advantage of the market is that it organizes and coordinates the activities of millions of men and women without exposing them to authoritative commands from a single center. But, again, it is possible to imagine planning regimes that stop far short of the total exposure aimed at under communism and that limit or even immobilize the planners in various of the specific ways required by liberal pessimism. The reason such planning is not attempted by constitutional governments has to do with the structural links of politics and markets when one simple condition prevails: the concentration of capital under private ownership. Given that condition, liberal capitalism is dominated by capitalists, and “polyarchy is tied to the market system not because it is democratic but because it is not.”

The point isn’t novel; it is, I suppose, what Marxists mean when they talk about a hegemonic class. But Lindblom makes his analysis, as it were, from within the liberal camp. He does not view the power of capital in the polyarchal regime as one of its defects, but as the product of its virtues; it derives from the legitimate fear of authoritarian rule. Nor is the exercise of that power properly called domination. It too is subject to democratic controls (though it is rarely effectively controlled) and, what is more important, it is exercised piecemeal and cannot by its very nature pose a totalitarian threat. Still, “the privileged position of business” is real enough, and Lindblom provides a brilliant analysis of its nature.

In polyarchal market societies, businessmen exercise power in three ways, none of which is constitutionally recognized or sanctioned, none of which has been adequately studied. First of all, they exercise great discretionary powers within the market itself. Consumers may have ultimate sovereignty, but in making many key decisions affecting economic life businessmen are free, and these decisions are particularly crucial with regard to the government of industry. Decisions about the organization of the work force, plant location, executive authority and income, technological innovation, and investment either are not controlled by consumers or are subject to only the loosest and most indirect controls: they are effectively the prerogatives of capital.

Secondly, business can extort favors, virtually without limit, from the political authorities. For polyarchal governments have a deep interest in continued and increasing productivity, but they have very little power over the owners of capital. In order to get businessmen to do their job, they must provide extensive protection, not only against violence but also against economic risk. Hence the importance of subsidies, tariffs, tax rebates, government-sponsored research, and so on. Lindblom ridicules the idea that “the vast productive tasks performed in market-oriented systems could be motivated solely by exchange relations between buyers and sellers. On so slender a foundation no great productive system can be established.” Businessmen require governmental intervention, but only at points of their own choosing, and since they can (and do) threaten poor performance if they don’t get what they want, governments must, by and large, accommodate them. The political rulers negotiate with the economic rulers. Businessmen don’t always win the concessions they seek in these negotiations—there is conflict as well as accommodation—but they can’t be radically displeased if the economy is to function.

Thirdly, businessmen intervene directly in political life (in order to control political interventions in the economy)—primarily with money, in amounts that dwarf every other source of political financing. As Lindblom shows, unions lag incredibly far behind in their ability to collect and allocate money for political purposes. Moreover, considerable amounts of corporate wealth are paid out each year for advertising and educational materials aimed at upholding generally the values of free enterprise. (Indeed, the officers of Mobil Oil thought Professor Lindblom’s arguments so important that they paid for an advertisement in The New York Times attacking them—not, presumably, with their own money.) This too is a form of political intervention, and it makes for “circularity” in the liberal regime, shaping the preferences of the voters whose votes in turn shape the politics of the state.

As the many are to the few in votes, so are the few to the many in wealth. Long ago we were told that this situation would make for sharp antagonism between democracy and capitalism. But that antagonism has been postponed, Lindblom believes, by the success of class indoctrination and by the survival in polyarchal market societies of patterns of deference established in earlier regimes. Today, deference and indoctrination are failing, and the result is a steady rise in the demands made by workers on the capitalist economy. These demands shake stability even though the unions that press them cannot yet challenge the power of capital. “Union power may be ‘too much’ for the survival of private enterprise long before it is great enough to match the privileged position of business.” Businessmen need, it turns out, an enormous amount of cosseting from the political authorities, and relatively minor successes for democratic movements may deprive them of what they need. Then they won’t invest, they won’t expand, they won’t innovate. The result (Britain may be an example) is an economic slowdown that threatens the stability of the liberal market regime.

What is to be done? Lindblom is loath to tell us in any very direct way. He understands, perhaps, that the freshness of his analysis (I have barely been able to indicate how lively it is and full of unexpected detail) derives from the fact that he is neither an apologist nor an advocate. Committed to polyarchy, he manages, in Montesquian style, to look at liberalism like a perfect stranger. His method throughout the book precludes any programmatic conclusion. Nevertheless, he hints at a possible program, which I—myself an advocate—will call a program for polyarchal market socialism. Yugoslavia provides a partial example: Lindblom devotes the next to last chapter in the book to a generally sympathetic review of the Yugoslavian effort “to break market system and private enterprise apart…and thus use the market system in a new way, without private enterprise and instead with worker control.” Some sort of factory democracy seems crucial—both to restore the legitimacy of the polyarchal regime for men and women hostile to the creeds of free enterprise and to give these same men and women a new interest in the economic system and a plausible reason for self-restraint.

But the overall pattern of the Yugoslav system is authoritarian: the party’s hand is still heavy and elementary freedoms are denied. An advocate of polyarchy is likely to find himself in jail. The big economic decisions are made at the center. Could they still be made, and enforced, under conditions of full democracy? So much has to be decided by public authorities once the discretionary power of private capital is abolished or radically curtailed; so many decisions which looked automatic must now be made in public; the risks of political (and in countries like Yugoslavia, communal) divisiveness are very great. But Lindblom seems to believe that it is possible to devise constitutional arrangements for democratic decison-making in the economic realm. That is not to say that the people will, either spontaneously or under direction, adopt the correct ideological position or that they will choose wise and humane leaders. The peculiar optimism of vanguard politics is missing from Lindblom’s final pages. But he manages very tentatively to sound a note of chastened hopefulness about the capacity of ordinary men and women to restrain and govern themselves—the right note, I think, for democratic socialists.