Capitalism, Socialism, and Democracy: An Introduction

Diamond, Larry Jay. Plattner, Marc F., 1945Journal of Democracy, Volume 3, Number 3, July 1992, pp. 3-6 (Article)

Published by The Johns Hopkins University Press

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Finally. The democratic socialist parties of Western Europe have rediscovered the virtues of markets and entrepreneurship. Joseph Schumpeter published Capitalism. In the Third World. as a matter of principle. The United States and other key countries in the West have been governed for the past decade by conservative. the general opinion on these matters appears to have undergone a wholesale transformation. Schumpeter noted that this conclusion was "rapidly becoming the general opinion. Socialism. Yet many of its central conclusions have been called sharply into question by the developments of recent years. there seems to be widespread agreement---especially in the postcommunist countries--that democracy cannot succeed without the introduction of a market economy. It thus provides an ideal starting point for reflection about a question that is no less important or pressing today.Capitalism." He also argued that. his classic study of the relationship between political democracy and alternative economic systems. even among conservatives. pro-private enterprise parties. Socialism and Democracy. the economic affairs of society belong to the public and not the private sphere" is clearly in ideological retreat and political disarray. Even before the demise of the Soviet Union. Though an admirer of capitalism's achievements and not an advocate of socialism. Schumpeter sought to show that "a socialist form of society will inevitably emerge from an equally inevitable decomposition of capitalist society. This about-face on the part of the Soviet leadership made possible the approval of some striking documents on economic matters by the Conference on Security and Cooperation in . Half a century later. there is no incompatibility between socialism and political democracy. communism has collapsed both in Eastern Europe and the former Soviet Union. state-controlled economies have stagnated. Socialism as Schumpeter defined it--"an institutional pattern in which control over the means of production and over production itself is vested with a central authority" and "in which. and structural adjustment and privatization have become the order of the day. and most dramatically. It is a book of magisterial scope and great insight that continues to be widely read and cited by social scientists today." While his own analysis was complex and highly original. in principle if not necessarily in practice. its communist rulers had acknowledged the failure of centralized planning and adopted the goal of moving toward a market economy. Moreover. and Democracy: An Introduction Exactly 50 years ago.

These documents may perhaps be regarded as an official statement of the opinion that now generally prevails on the issues of the economy and democracy. prosperity.4 Journal of Democracy Europe (CSCE). and that "economic freedom for the individual includes the right freely to own. the "Charter of Paris for a New Europe. Freedom and political pluralism are necessary elements in our common objective of developing market economies toward sustainable economic growth. and if so how they should be understood. exercised in democracy and protected by the rule of law. and Democracy" on 3 April 1992 in Washington. buy." In addition. expanding employment. "recognizing the relationship between political pluralism and market economies. Socialism. for example. and respect for human rights. for example. . forms the necessary basis for successful economic and social development . raises the question of whether these terms still retain any clear meaning today." Similarly. sell. affirmed not only the principles of democracy but the following propositions on the link between politics and economics: "The free will of the individual. and otherwise utilize property. nowhere do they explicitly mention either capitalism or socialism. in turn. we were able to convene an international conference on "Capitalism. . D. . be regarded as capitalist." in which the leaders of the CSCE countries on 21 November 1990 officially proclaimed the end of the Cold War.. But there are also grounds on which these conclusions might be challenged. This. the Bonn Conference on Economic Cooperation in Europe affirmed that "democratic institutions and economic freedom foster economic and social progress". and Canada." the CSCE member states endorsed not only multiparty democracy. This special issue of the Journal of Democracy is designed to address the full range of questions involved in assessing the relationship between democracy and alternative economic systems. the rule of law. speak of "social justice" as well as "economic freedom. the United States. or something in between? Obviously." The developments and proclamations recounted above might be taken as evidence that capitalism has triumphed over socialism and that there is an essential connection between capitalism and democracy. that "the performance of marketbased economies relies primarily on the freedom of individual enterprise". and to commission six papers and six commentaries . Should Scandinavia's welfare states. the way in which these terms are defined will profoundly affect how one views the degree of linkage or compatibility that exists between either capitalism or socialism and democracy. but also "free and competitive market economies where prices are based on supply and demand." Moreover. and efficient use of economic resources. socialist. The CSCE documents themselves. On 11 April 1990.C. whose membership embraced the Soviet Union and its former East European satellites as well as the countries of Western Europe. social justice. Thanks to a grant from The Pew Charitable Trusts.

we also asked that they address themselves to as many as possible of the following specific questions: 9 Does political democracy require economy? or depend upon a market 9 Does political democracy require private property? If so. and Democracy 5 from some of the world's leading authorities on this subject. how extensive must the sphere of private property be? 9 Does political democracy require limitations on the size of the state or on its role in the economy? If so. is this an inherent necessity or might it be overcome with future economic and social progress? 9 If you believe that new kinds of economic systems will emerge in the future. but also told that he should feel free to take issue with the way in which we had posed the problem. Socialism.Capitalism. and if so what are its distinguishing characteristics? 9 Are the terms capitalism and socialism still appropriate and useful in discussing the economic requisites of democracy? 9 If you believe that democracy requires certain economic arrangements. While allowing each of them full freedom to determine the focus of his own essay. The essays that appear in this issue are revised and expanded versions of the presentations made at the conference. Each of the six principal authors was asked to contribute an essay setting forth his own view of the relationship between democracy and various economic systems. We encouraged the authors to refer to Schumpeter's original text if they found it pertinent. but did not insist that they do so. what is the nature of these limitations? 9 How would you define the relationship between democracy and capitalism (as you would define that term)? What specific aspects of capitalism are especially conducive or detrimental to democracy? 9 How would you define the relationship between democracy and socialism (as you would define that term)? What specific aspects of socialism are especially conducive or detrimental to democracy? 9 Is there a viable "third way" between (or apart from) capitalism and socialism. to what extent are these likely to be conducive to or compatible with democracy? . Each was sent a statement very similar to that which appears above.

Yet taken together. All our contributors. has a role to play in the economy. sociology. as well as Western Europe and the United States. each featuring two principal paper givers and two commentators. Eastern Europe." but others may find that the degree of ideological passion evident in many of these essays belies that conclusion. At the same time. there is clearly very little consensus on the means of achieving it.T h e Editors . to a greater or lesser degree. This may incline some readers to agree with Kyung-won Kim that "striking the right equilibrium has become an essentially technical exercise. Even those authors who are most sympathetic to socialism endorse a role for the market and stress the value of an independent civil society. seem to accept the notion of the mixed economy. socialism. were encouraged to put forward their own views as well as their comments on the longer papers presented at their respective sessions. and philosophy. and several among them have also played important roles in the public affairs of their own countries. who were asked to write briefer essays. This diversity is fully reflected in the very different approaches and viewpoints that inform these essays. they offer a revealing picture of the state of contemporary thought regarding capitalism. Our 12 authors hail from Asia. It is fair to say that virtually all the essays show the impact of what Francisco Weffort calls the political "earthquake" of the events of 1989-91. and democracy.6 Journal of Democracy The order in which the essays are presented here reflects the structure of the conference. Their academic disciplines include political science. we sought to achieve wide diversity both in geographical and professional backgrounds and in political viewpoints. In selecting the participants for this symposium. Africa. They occupy a wide range of positions on a political spectrum stretching from champions of capitalism to democratic socialists. and South America.. The latter. Yet even the unabashedly procapitalist authors in this issue tend to acknowledge that the state. Though there may be a remarkably broad consensus on the goal of stable and prosperous democracy. then. . One critical point on which there is a great deal both of passionate disagreement and intellectual uncertainty is the relationship between democracy and economic growth in developing countries. economics. which was divided into three sessions. they are highly critical of free-market enthusiasts (termed neoconservatives by Weffort and neoliberals by Adam Przeworski) who see unleashing the market as the key to solving all economic and political problems. though they differ greatly regarding the appropriate mixture between state and market.