What Capitalists Don’t Know:
Without Democracy, Capitalism Dies
by Craig Barnes

In the 1990s renowned political scientist and author Ben Barber wrote in Jihad vs McWorld that global capitalism was at war with democracy. He was right, of course, and the intensity of that war has only increased since then. Global corporations are battling democracy’s environmental regulations, taxation, labor laws, legislation aimed at fairness or income equality. They are battling democracy’s concern for the long-term survival of community or any values more human than economic.

Emblematic of the global assault is the massive campaign by Canadian oil and gas corporations to construct a transcontinental pipeline across the American heartland regardless of local environmental consequences. Emblematic, again, are the mining corporations suing Ecuador in the WTO to open up that country’s rivers, forests and indigenous landscape to destruction. Emblematic is the 2005 exemption of “fracking” from the U.S. Clean Water Act resulting in millions of gallons of poisoned waste water, allowing global corporations like Halliburton, (headquartered in Dubai), to override the interests of local American governments, farmers, ranchers and cities. Emblematic is Wal-Mart’s aggressive activity in Mexico, consciously subverting the rule of law. Democracy is not strong in Mexico; Wal-Mart has not made it stronger.

A symbol of the global war is in that one five-story building in the Cayman Islands which is the address of more than 18,000 corporations. The Caymens do not levy income taxes. So all the corporations that call that home are opting out of their responsibilities in the U.S.. Apple, Google, and Bank of America are exemplars. They say that they are simply following the tax code and being headquartered in the Caymens is not illegal. That’s right. But they are also turning their backs on an American society that gave them educated workers, roads and bridges, science, health care, and above all, courts and the rule of law. What these corporations do not say is that they spent millions lobbying the U.S. Congress to make tax havens legal. They have made it legal but they have not made it right.

It is clear that these offshore havens create a crisis for democracy by squeezing the money out of government. What may be less clear is that these legislated special privileges also create a crisis for capitalism. In the very short term capitalism may not look like it is in trouble: Major corporations are reporting record profits. Bonuses on Wall Street in 2010 exceeded $90 billion. The Dow Jones in 2012 has been mostly above 13,000. Wall Street appears to be healthy. A Republican-led U.S. House of Representatives thinks it will get even healthier if we just eliminate all government regulations.

Never was an elite in greater delusion. Predatory capitalism is killing the middle class goose that lays the golden egg. That’s the first danger. Secondly, it is unselfconsciously driving toward unlimited exponential growth that is producing climate change which eventually will lead to social and economic chaos. In the longer term therefore capitalism is killing the eco-system that makes golden geese possible. Finally, in both short and long terms capitalism’s oligarchs and supporters in Congress are fixated on a flimsy free market doctrine. In sum, the crisis of capitalism is created by the fact that today’s oligarchs still understand the world in terms appropriate for the agrarian 18th century, are opposed to regulation as if they were combatting a revolution of the proletariat, and their theoretical doctrine is to return to the simplicity of corporate life in times when monopolies were granted by kings.

The result is that today’s 1% are squeezing the blood out of the middle class, creating conditions of predictable eco collapse, and have no doctrine more sophisticated than Ayn Rand. But these, even combined, are not even the greatest danger that capitalism faces. The even greater danger to capitalism is plutocracy’s blindness toward the advantages that come from democracy. These are advantages in innovation, mobility, creativity, and productivity that all arise with popular government. Oligarchs have missed this point entirely. This month The New York Times carries a quote from a former Bain Capital associate of Mitt Romney’s who says, quite literally, “At base, having a small elite with vast wealth is good for the poor and middle class.” He could be an English aristocrat on the eve of the American Revolution.

What the Bain Capital investor and the rest of the elite do not seem to understand is how much he and they depend upon democracy. A prosperous economy requires reliability in contract, truth in science and medicine, widespread, popular education, and nonviolent processes of change. Without these, markets shrink, innovation is endangered, mistrust and corruption replace nonviolent process, and plutocrats themselves become insecure. For examples, look anywhere in the non-democratic world. Look at what is happening in China this month. Bo Xi Lai’s fall, and the power struggle in China that it represents, is no different than the fall of the Caesars, the Borgias, the Stewarts or the Bourbons. Insider power struggles, wrapped in secrecy and murder, rumors of pay offs and spying by one aristocrat upon another, are the hallmark of medieval Europe and still today of Russia, Central Asia, and Latin America, to say nothing of China.

Undermining democracy as the plutocrats seem wont to do undermines all values of equality and mutuality and, without these as a restraint, power concentrates, feudalism creeps back, plutocracy takes over and capitalism is itself endangered. Without democracy, the narrative to expect is like that of the Caesars killing the Republic in Rome, or the Medici’s suffocating the Republic in Florence, or communists stamping out the people’s revolution in 20th century Russia. They all tried democracy a little bit. But they then slid into plutocracy and cut themselves off at the knees.

We therefore live in a time of two crises, one of democracy, another of capitalism. They are intertwined. The solution to the democracy crisis is probably the only long lasting solution for the capitalists. Apparently, most corporate leadership does not understand this. Unfortunately, without that understanding today’s oligarchs are apt to bring both down.

Craig Barnes is the author of Democracy At The Crossroads, Princes, Peasants, Poets and Presidents Struggle for (and against) the Rule of Law. His website is www.craigbarnes.com