Saturday, January 6, 2018


349. Democracy and market: are they compatible?

In Hegelian dialectics, in opposition between A and B a third element is needed to mediate between them. Here I try to apply that idea to tensions between democracy and market.

In democracy, collective choices are made in deliberation and voting by individuals. In markets, individuals make individual choices for themselves. The two are clearly incompatible, in the sense that you cannot have both at the same time in the same place. You can combine them in assigning some choices to the one and others to the other, but this is full of tensions. How is the choice between the two made?

In the recent past, there has been a shift, in neoliberal policy, from democracy towards markets, in privatization and liberalization. What, if anything, is the mediating third here? For a thought experiment I propose that it is authority, in two forms.

First, there is authority in the form of managerial discretion, in organizations public and private, such as firms. This has expanded its reach and power due increase of scale and concentration of firms (and governmental authorities), in waves of mergers and acquisitions. It is leading to organizations that are internally dysfunctional, in not fitting with present conditions of work, and dysfunctional in relations between firms. In globalization, it is leading to power play by multinationals imposing their will on national governments, under the threat to move their business elsewhere.

Second, there is a re-emergence of authoritarian politics, in countries such as China, Russia, Turkey, Malaysia, Hungary, Poland, pushing aside constitutional democracy, but often in combination with capitalist markets. Here the ideology is that of the will of the people, going back to Rousseau, under the wings of the populist leader who stands up to protect national culture, identity and prosperity. Here, as Žižek noted, a third element between the people and the leader is the scapegoat, that carries the blame as promises of the leader cannot be kept, such as the Jews under the Nazis, and now the refugees (or the lazy Greeks).

And now the question, discussed in preceding items in this blog, is: ‘what to do?’ As indicated there, I want to do away with neither democracy nor markets. But, to quote Žižek, the shift to markets is endangering the commons of various forms, the worst of which is increasing exclusion of unemployables, refugees, and the poor and suppressed. Would it help to have an alternative third element, replacing authority? Isn’t it especially authority that excludes?

The alternative, I venture, might be collaboration. The basic underlying idea is that technology and knowledge have become so far advanced, with rising complexity of processes of production, and social systems in general, that it has become an illusion to think that management or political leadership can supervise and direct labour or citizens. Authoritarianism is not only unjust, in creating exclusion, but now simply does not work anymore.   

There is a parallel here with the dialectic involved in the ‘Liberty, equality and brotherhood’ of the French revolution.[i] Liberty is associated with the market, equality with democracy, and brotherhood with collaboration, solidarity, balance of power and dependence.

Here also, collaboration applies on different levels. On the local level it entails more involvement of citizens in local commons, as argued in item 347 of this blog. Within organizations it entails a shift from authoritarian to inspirational and enabling leadership, and between organizations a shift from mergers and acquisitions to cooperation in alliances, as I have argued for a great part of my career. In outside relations with society it entails a shift from catering to the exclusive interests of shareholders to attention to the combined interests of shareholders and other stakeholders, such as employees, customers, suppliers and the environment. In public supervision of organizations (firms and public bodies) horizontal control is needed, to replace the traditional top-down control, as I argued in item 75. At the supranational level, collaboration between nations is needed to curtail excesses of globalized capitalism.

In all this, are the liberty of markets and the equality of democracy still there? Yes: next to collaboration there will remain competition and rivalry, and collective choices for collective resources, such as the commons of the environment, health care, security, justice, and information. Also, the striving for a balance of power, of mutual dependence, in relations of labour and ownership that are sufficiently durable to yield quality and justice, and sufficiently flexible to avoid stagnation. All this I have studied extensively, as discussed also in his blog.

All this requires the art of trust, not as ‘being nice’ to each other, but to extend the benefit of the doubt, to craft and manage the balances of power and dependence, with the art of empathy in the sense of understanding of how other people think and feel, and the contingencies they face, in Aristotelian phronesis, practical wisdom, with the exercise of the classical virtues of reason, courage, restraint and justice, as I have also extensively studied and discussed, also in this blog.  

Here, counter to the pristine model of libertarianism, markets are not simple, do not work everywhere and where they do work need more or less regulation, and require different forms and combinations of competition and collaboration, depending on the industry involved. I will elaborate on that in a future series of items on the economy and markets.
   


[i] As noted by Žižek, in one of his lectures, Rebecca Comay, in her book Mourning sickness; Hegel and the French revolution, 2011, and Lieven de Cauter, in his book Van de grote woorden en de kleine dingen, discussed in ‘De Wereld van Morgen’, 2 January 2018.