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Can Capitalist Democracy Survive?

The balance between capitalism and democracy has rarely been stable, but in recent decades it has tilted decidedly toward markets and the technocrats charged with regulating them. Against the background of an ascendant China, the question now is whether the eventual counter-movement will veer back toward democracy, or in a new direction entirely.

CAMBRIDGE – Once again, the developed world is feeling the inherent tension between market capitalism and representative democracy. Each institution provides its own mechanisms for allocating society’s resources and distributing the income and wealth generated by their use. Each offers procedures for legitimating the distribution of power, be it in the form of “one dollar, one vote” or “one person, one vote.” Critically, power accumulated in one domain can be exercised in the other, either to redress or reinforce outcomes across the political economy.

This interplay has been crucial to accommodating successive waves of technological innovation that have transformed human existence. But the march of technology has never been neutral in either origin or effect. It can yield new public goods for broad social benefit; it can also create new forms of exploitation and sources of private rents.

For two generations after World War II, the constructive coexistence of capitalism and democracy was largely taken for granted in developed countries – including the former Axis powers. This deep-seated complacency was reinforced by the collapse of the Soviet Union. But the 2008 global financial crisis put an end to faith in the supposed inevitability of liberal economics and democratic politics.