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Democracy and Capitalism Are Heading for a Breakup

Once upon a time Marxist-Leninists said that the state, after its seizure by the proletariat, would wither away. Instead, big government grew more oppressive in communist countries. In our own deeply ideological age of global capitalism, the state was supposed to yield to the logic of the free market, while being a self-effacing facilitator of private investment.

Fittingly, global capital initially found its best investment climate in a country recovering from Marxist Leninism: China, where a nominally Communist regime gave subsidies and tax breaks to exporters and foreign investors. The unelected regime’s lack of democratic accountability helped in this process of marketization, especially in the swift and largely unpublicized suppression of dispossessed peasants and factory workers.

But can the state in democratic countries be such a pliable agent of profit-maximizing capitalists? Reading some of the recent commentary bemoaning the state of the Indian economy, I am struck by its basic supposition: that it is the Indian state’s duty to speed up “economic reforms” -- code words for opening up the economy further to private investment and global flows of capital and production. The government is berated for its “paralysis,” apparently so damaging that Indian businessmen are now forced to make most of their investments abroad.

Broken Partnership

The main assumption here is that elected national governments and the global market economy are logical partners in the creation of wealth and in that much slower but apparently steady process, the removal of poverty. But what if this is untrue? What if, as the British philosopher John Gray put it in a prescient book, “False Dawn: The Delusions of Global Capitalism,” “democracy and the free market are competitors rather than partners.”

Writing in the 1990s, Gray was preoccupied with the imminent decline of the European social-democratic model sustained by deficit-financed full employment and egalitarian tax policies. As Gray warned, “global mobility of capital and production in a world of open economies have made the central policies of European social democracy unworkable.” They had also made “today’s mass unemployment a problem without a simple solution.”

Gray predicted that the state -- reduced to managing global economic flows, many of which escaped its oversight -- would lose its political authority. And “the natural counterpart” of a single integrated market economy with its arcane and opaque workings, would be a “politics of insecurity” in states still defined as territorially distinct units with separate political electorates.

Such is Europe today. Angry and fearful electorates stand ready to reject any government seen doing the bidding of transnational organizations or enforcing fiscal discipline at the behest of invisible bondholders.

Capitalism’s Contradictions

Even at the height of the previous decade’s artificial boom, serious contradictions had opened up between democratic politics, which respect the opinions of the majority, and the imperatives of global capitalism, which is geared toward the creation of private wealth.

Most British people have consistently seen mobile labor, a precondition of economic growth, as a threat to local jobs and social solidarity. Regardless of the many pro-immigration editorials in the Financial Times, the Economist and other financial organs, successive governments have tried to show themselves to be in line with public opinion.

And more: European politicians, from Marine Le Pen to Angela Merkel and Gordon Brown, kept up a populist rhetoric of national “values,” (often in opposition to a vaguely defined “multiculturalism”). As their scope of action in the economic arena shrank, Tony Blair and Nicolas Sarkozy also tried to project themselves abroad as missionaries for freedom and democracy.

But old-style nationalism and international posturing can’t compensate for the surrender of economic sovereignty to business and financial institutions, especially in a time of acute crisis, such as the one in Europe today.

A belatedly aroused citizenry holds elected governments to account for the destruction of old guarantees of security and stability. Politicians are accused of pampering elites with transnational loyalties, and for allowing the entrenchment of massive inequalities. But the politicians are of course helpless; the welfare state has withered away and cannot be recreated.

Turning to India, we find a not dissimilar impasse. Unlike in Europe and America, democracy in a largely poor country like India has been inseparable from the promise of material improvement and social and economic justice.

India’s politicians have always sought to bribe their largely impoverished electorate, and reward themselves and their allies. They have tended to fight harder than their European counterparts against the restrictions on their power and authority -- for instance, against the cuts in welfare spending entailed by a deeper integration of the national economy with the global one.

Bawling Bollygarchs

For a while, the tensions between democracy and capitalism could be contained. In the last decade, many in India’s political class found new ways of enriching themselves through alliances with the biggest corporations, which were given the best pickings among the country’s wealth of oil, gas, forests and minerals.

The credit boom helped a sizeable Indian minority feel rich. Many of them retreated to a gated existence in which everything from education to health care and security was privatized. The new private media helped create a general fanfare about India’s imminent arrival as an economic superpower.

But a spate of corruption scandals, accelerating inflation, a slowing economy and the fear of a punitive electorate, most of which has not benefited from globalization, have terminated this age of delusion. The crisis has also induced splits among India’s mobile business class and elected politicians. According to the Financial Times last week, “As India’s growth slumps, delegations of aggrieved business titans are becoming an increasingly common sight in New Delhi.”

These “Bollygarchs,” as the FT calls them, may not get much satisfaction at present from their old political partners. India’s politicians, facing elections in 2014, now have to attend to the business of wooing people who voted them in, and restoring the authority of the state.

Such are the lessons of Greece and India today -- and indeed of many other democratic countries, where the representatives of a much-withered state desperately figure out how to renegotiate their compact with re-politicized and increasingly enraged voters.

(Pankaj Mishra, whose new book, “From the Ruins of Empire: The Revolt Against the West and the Remaking of Asia,” will be published in August, is a Bloomberg View columnist, based in London and Mashobra, India. The opinions expressed are his own.)

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To contact the writer of this article: Pankaj Mishra at pmashobra@gmail.com

To contact the editor responsible for this article: James Gibney at jgibney5@bloomberg.net

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