Capitalism and Democracy Midterm

Gaventa looking at Lukes

o   Three Dimensions of power

§  First- Pluralist theory: a has power over b to the extent that a can get b to do something b would otherwise not do; what people do and why

§  Second- Elite Theory: agenda setting; a has power over b if a can prevent b’s concerns/interests from being considered; political elites shape outcomes not voters

§  Third- Gramscian Theory: power to shape social meaning- how each group defines their interests not only the outcome of their behavior. Controversial because of the danger that people think they know wha tis going on in someone’s head better than they know themselves  

·         Cramer

o   Demonstrates further nuance, people may not simply being duped by some outside power, this ignores possibility that people arrive at conclusions based on their own experiences

Week 2: Intellectual Origins of Capitalism

·         Adam Smith: godfather of economic liberalism

o   Commitment to free market, private property, individualism, minimalist state

o   Idea of the woolen coat as an example of the expansion of market society and wealth creation

o   Division of labor leads to greater specialization and production of wealth

§  Pin factory example: no one man can make a pin, it takes division of labor to make this possible and productive

§  Friedman applied this idea to concept of a pencil

o   Invisible Hand: Maximizes economic efficiency, growth, and human welfare

·         Robert Heilbroner: conceptualizing rise of modern capitalism within historical context

o   Humans are social and cohere through two main modes: tradition and command

o   Tradition: customs/norms, class, caste, religion, etc.

o   Command: the whip of authoritarian rule

o   Market system: way of organizing economy and society- you own property and you may do with it what you want for the sake of profit

o   Overall, he discusses who has the power to make ideas mainstream

Week 3: Political Origins of Capitalism

·         Barrington Moore: how is power involved in the creation of capitalism and democracy?

o   Three paths to modernity: in transition from agrarian society to industrial society there are three main paths:

§  Market Oriented (capitalist) Democracies: Great Britain, US, France

§  Fascist Dictatorships: Japan, Germany, Italy

§  Communist Dictatorships: China, Russia

o   Politics matter, social groups are key, and the transition was violent (contrast to spontaneous emergence that Hayek sites)

o   No bourgeoise, no democracy: the bourgeoise is key to bringing about social change because they are the ones that don’t see eye to eye with the system in place

o   Pay attention to social actors- rural communities, landed elites, the crown, peasants

o   Cross-class alliances forms: in CD’s, bourgeois town dwellers ally with commercially minded landed elites where peasants removed from the land; FS’s the bourgeois/town dweller weaker and ally with landed elites who are relatively stronger and less commercially minded

o   Enclosure movements: demonstrate that the transition to modern society is marked by violence in all three paths

§  Parliamentary law creates enclosure movements to kick peasants off common land, but how can we create private property when that didn’t originally exist?

·         Sven Beckert: the empire of cotton, explores rise of cotton from a global perspective, examining broader political forces at work

o   Cotton was a global king, used as a springboard to launch the US and Great Britain into early industrialization with the textile industry, how did this become such a crucial commodity?

§  Smith- spontaneously because merchants were freely pursuing their interests

§  Beckert- war capitalism  

o   War Capitalism: capitalism had violent origins; these new ways of organizing production, trade, and consumption were due to slavery, expropriation of indigenous peoples, expansion, armed trade, etc.

o   Ideas and theories of capitalism’s emergence may sound nice, but are not historically accurate

Week 4: Rival Views from the Right

·         Friedrick Hayek: competition as a discovery procedure, member of Vienna Circle, a godfather of neoliberalism

o   Competition as a discovery procedure: not about predictions of theories or ideas, the results of discovery procedure are unpredictable, who will win in the market, what products will be successful, and what products will be present in the future cannot be predicted. However, these results may be explained after they have occurred  

§  Sports metaphor: we have no idea how the Mets will fare at the beginning of the season, there are too many variables. However by the end, we know that through competition the best team will win, even if we cannot predict who this will be

§  Similar to Smith’s invisible hand of the market

o   Catallaxy: makes the market cohere and produces order, refers to the ground level, voluntary interactions among many participants with diverse goals

o   Negative Feedback: Negative feedback ex: price rises, consumers stop buying so much, then suppliers respond, entering market in time of scarcity which brings it back down and stabilizes market; ensures optimal order

o   Positive feedback: Something happens and it just keeps going further; ex: inflation and crypto

o   He has a big problem w/ interference of unions and “so-called social justice” as well…

·         Milton Friedman: American Godfather of neoliberalism, thinks Keynesianism is a failure, capitalism supports democracy

o   Capitalism as Freedom: Freedom to choose what you do for work, accumulate property, enter into the market, spend the money you own rather than having the state dictate how it is spent

o   Capitalism as a check on state power: state doesn’t own the means of production and wealth, making it much less powerful, making it harder to manipulate the system, when politics interfere with the system you head down the road to serfdom

o   Democracy Subverts Capitalism: government robs you of freedom through taxation- negative freedom (absence of oppression)

·         Mancur Olson: Rational choice theorist that argues individual actors seek to maximize their overall welfare, leads to interest groups being more powerful than individuals, democracy subverts capitalism

o   Free Riders: Those that want to receive the benefits without paying for them

o   Interest groups: much easier for them to organize around a specific goal than it is for individuals

·         James Buchanan: Public choice theorist that follows up on Olson’s argument- our problem of high inflation, large deficit, and high unemployment are coming from Keynes, democracy subverts capitalism

o   Public Choice Theory on Deficit: politicians want to give constituents benefits and don’t want to increase taxes, interest groups and individuals seek tax breaks, subsidies, and benefits, and there is a general tendency where government spending will outpace government taxes, impacting market

o   Democracy impact on market: overspending creates inflationary pressures, encourages rent seeking behavior that undermines competition and efficiency, high deficit raises cost of borrowing for others

·         Other notes:

o   Disembedded Liberalism (Hayek and Friedman)- liberalism is referring to the market and you are disembedding the market from broader social and political context from which it was previously fused into  

Week 5: Views from the Radical Left

·         Karl Marx: transition from feudalism to capitalism is marked by progress and fueled by socio-economic changes, creating a new class with new interests, however capitalism creates class conflict and contradictions/crisis that will lead to a socialist revolution

o   Commodity Fetish: treating commodities as a world unto themselves where you buy and sell, you will miss something very valuable- social and labor context. You don’t get profit through cmc (commodity, money, commodity), you get money through mcm (you have money, buy commodities, and end money is larger).

§  Labor and social value are adding to value of commodities, they are not magically generating wealth on their own.

·         David Harvey: contemporary Marxist thinker, describes ‘capital’ as value in motion, and identifies phases of this, and tensions/contradictions found within

o   You can never resolve the conflicts within phases of capital as value in motion

·         Karl Polanyi: the road to a free system was destructive and paved by the state which supports capitalism, the regulating free market system is unsustainable and will produce a double movement

o   Fictitious Commodification: to treat something exclusively as a commodity when in reality it is not, it is with the help of fiction that actual markets for land, labor, and money are organized

§  ex; land is not only a commodity that can buy and sell and use as sinkhole for pollution, there will be pushback from environment

§  cannot treat human beings as if they are only commodities, dehumanized, destructs, and this is what the market does

§  money dimension- we treat money as just as important as certain objects but it's just a piece of paper

o   Also talks about disembedded liberalism: uses land as an example, it was woven into the fabric of society and now we are putting it into a self-regulating economy as a commodity

o   Double Movement: because of fictitiousness, the more destruction there will be, and there will be pushbacks in the form of the double movement

§  If all humans are is labor, there will be destruction

§  Same with land that is polluted

·         Nancy Fraser: Two Karls are better than one, but there is even more context that surrounds these things that are taking place

o   How are workers produced? Women worked unpaid in the house for years, and were exploited but this is ignored

o   Problems can emerge in society as well: there are emancipatory movements that have nothing to do with the economy- civil right’s movement, suffrage movement, etc.

Week 6 & 7: Evolution of Capitalism and Democracy

·         Exploring how these historical (intellectual and political) origins of capitalism play out empirically, accounting for the views of the left and the right through three phases: before and after the Great Depression, before and after the Oil Crisis, after Neoliberalism? 2008 Financial Crisis

·         Compare US, Japan, Sweden- all had some common features: constitutional democracy when Great Depression hit, experienced great hardship threatening to undermine democracy unless they found new solutions

o   Argument between letting market sort itself out and state support

·         Keynes: becomes a relevant thinker during this time as governments determine how they will react to the Great Depression- through supporting capitalism with democracy

·         Different responses to Great Depression:

o   US and Sweden: forge political compromise to preserve capitalism and democracy, opening more room for democracy to allocate resources- US New Deal and Sweden’s foundation for social democratic corporatism

o   Japan: sharp polarization, cannot forge compromise, order collapses, military takeover, democracy is restored after defeat in WWII with US occupation

·         Prior to GD:

o   US: Republican leaders dominated, free-market, pro-business, anti-labor sentiments

o   Sweden: multi-party system, conservative coalition (agrarian party and center right conservatives) in power, orthodox free market, not much in terms of government assistance or labor rights, SDP was too radical

o   Japan: Isolationist, stable system, Perry forced Japan to modernize and embrace international trade eventually through rapid industrialization with social consequences, fragile foundation for democracy

·         Post GD:

o   US: Business interest divided into labor intensive (conservative) and capital-intensive (progressive) businesses, farmers suffering, workers suffering from high levels of unemployment

§  New Deal as a Solution: Democrats win, creates cross-class compromise between labor, farmers, and progressive business- we get social security, strengthen unions, minimum wage, subsidies to farmers, open market rather than protectionism

o   Sweden: New political coalition, Social democrats and laborers toned town rhetoric and championed for better wages and unemployment protection, farmers wanted government price support, business was opposed to higher wages and agricultural prices

§  SDP takeover: dominated from 1932-76

§  Red-Green Coalition: Social democrats form coalition with agrarian party (farmers) and then business begins to join as well

o   Japan: end of democracy in Japan, increased polarization, increased military activities, assassination and war, unstable until US occupation post WWII

·         Postwar Period- Stagflation and the Oil Crisis: inflation and unemployment at an all time high, gas prices at an all time high, intellectual crisis as theorists battled to understand phenomenon that disrupts Phillip’s Curve

o   Emerging Neoliberalism Explanations: the economic model isn’t wrong, the Keynesian policies messed with the market and was harmful to capitalism, all countries swing to right

§  US and Japan swing much farther right than Sweden

§  Hayek: New deal and Unions, higher wages not tied to productivity cause inflation

§  Friedman: New deal and social welfare depriving people of freedom

o   Rise of White Collar Middle Class: decline in farmers and working class sector, and now middle class is the largest voting block political actors must appeal to

§  They are a disconnected class and don’t have a coherent identity, therefore they have different interests

·         Overview of Postwar period: early postwar period was “postwar settlement” or “historic compromise”- “golden age of capitalism”, 70s and 80s questioned this, and despite a general shift to the right during this time, there was much variation among advanced industrial democracies

·         Three worlds of Welfare Capitalism:

o   Liberal Welfare States: low commitment to economic equality, lowest social welfare programs, welfare is limited and only for when there is a failure, those that use is are stigmatized as ‘free-riders’, pensions and healthcare are left to private sector  

o   Conservative Welfare States: higher commitment to economic equality, but solidarity based on occupational status, stronger welfare than liberal, but are tied to occupation, division between “inside” and “outside” workers, traditional male wage-earner model

o   Social Democratic Welfare State: highest commitment to equality, solidarity based on citizenship, strong welfare systems, higher government taxation and expenditures, generous benefits for individuals, high union membership

·         Varieties of Capitalism:

o   Coordinated Market Economies: collective bargaining, equalizing wages at equivalent skill level, commitment to industry level skill formation, long term labor contracts, patient capitalism and long term bank lending

o   Liberal Market Economies: weak collective bargaining, unilateral right to fire/hire at will, high turnover, certification in general skills, low job security, reliance on stock market to finance operations, shareholder capitalism, much more short term

Week 7: Varieties of Neoliberalism

·         David Harvey: defines neoliberalism as a theory of political economic practices that proposes well-being is best advanced by liberating entrepreneurial freedoms and skills, with strong property rights, free markets, and free trades. States role is to maintain framework to sustain practices

·         Neoliberalism’s Freedom: individual market freedom and freedom from the state, freedom to choose occupation, fire and hire workers, buy and sell within market

·         Reaction to Fiscal Crisis: pursue a small government approach, deregulation, privatization, liberalize finance at home and abroad

·         Contrasts sharply with embedded liberal era

·         Financialization: Federal reserve, commitment to lowering inflation

·         Kathleen Thelen: talks about the varieties of liberalization, you can see within these, Liberal market economies have higher levels of inequality, but she is curious about varieties within coordinated market economies

o   CMEs and Inequality: some grew more unequal while others remained committed to equality and solidarity so how do we make sense of this?

o   Japan: conservative welfare, cross-class alliances emerge between business and core regular workers to ensure productivity, division of labor, and unequally better treatment of certain workers

o   Sweden: social democratic welfare, stronger, more unified in terms of alliances, less centeralized coordination, greater flexibility and liberalization of labor market, but with commitment to protecting individual rather than job

§  Flexicurity- labor market flexibility, but strong security for workers

o   Welfare regimes are the key difference