Capitalism

Democracy and capitalism, it seems, are actually quite independent: each can exist without the other. However, democracy may benefit on balance from its (erroneously alleged) association with capitalist prosperity, and both institutions, on the other hand, are often unfairly associated with crime, something that could undermine their acceptance. Moreover, although capitalism does not require democracy to function effectively, democracy probably does enhance capitalist economic growth by reducing the threat of government confiscation, by helpfully establishing a reasonably coherent rule of law, by maintaining a fundamental bias toward openness and transparency , by allowing all interest groups (rather than a privileged subset) to enter the political fray, by providing a process for ousting failed leaders, and, lately at least, by gaining a perhaps undeserved association with stability and predictability.

While it is no news to observe that capitalism can exist without democracy - quite a few countries have managed that quite effectively - it is commonly maintained that a country must be capitalist in order to become a democracy. Thus, for Charles Lindblom, "only within market-oriented systems does political democracy arise." And Peter Berger maintains that "capitalism is a necessary but not sufficient condition of democracy under modern conditions," while Milton Friedman finds that "history suggests" that "capitalism is a necessary condition for political freedom." Robert Dahl observes that "it is a historical fact that modern democratic institutions… have existed only in countries with predominantly privately owned, market-oriented economies, or capitalism if you prefer," and then extrapolates this historical regularity: "it looks to be the case that market-oriented economies are necessary to democratic institutions."

The structure of contemporary capitalism has suffered both external and internal changes. The most decisive external changes consist in the two basic historical developments of the contemporary age. First: Capitalism is no longer the sole economic system of the world. The socialistic economy has grown side by side with it until today a considerable portion of the territories, population and material production of the world, which belonged, so to say, to the hinterlands of capitalism before the war, has been taken into the socialistic orbit. Not only has the sphere of the capitalistic economy been narrowed down but moreover the system itself is now open to the powerful influences of its rival, the socialistic system of world economy. Second: By the world-wide collapse of the colonial system, the former colony-holders have lost or are losing the sources of the unfair, self-favoring redistribution of the material resources of the colonies. A radical change in their national industrial structure is an imperative necessity now that they are, stripped of their colonial privileges, compelled under desperate competition in the markets of the world to hold their ground "with equal chances". Moreover, their old colonies are fast turning into new industrial competitive forces in the arena of the world economy.

The process of concentration and centralization of capital, which has brought the above-mentioned changes in the economic structure of contemporary capitalism, is inevitably engendering, as the most notable new phenomenon in this structure, extensive developments of State-monopoly forms with a powerful tendency to transform these State-monopolies into predominant forms of capitalist monopolies. The essential nature of these forms is this: The social character of production has attained such high degree of development as where the direct process of capitalistic production and appropriation of surplus value becomes inevitably bound up with direct utilization by the monopolies, of the State, State organs and State power.

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