Both democracy and capitalism give the freedom to choose between alternatives

In March, I accepted a daunting assignment: to lecture college students in Pune on The Morality of Capitalism. Predictably, this produced many sniggers. Capitalists are crooks, I was told. They milk you for all they can get. They cheat you in a thousand ways. Banias are notorious for using ‘fixed’ weighing scales and adulterating goods . They black-market goods subject to price controls, ranging from urea to kerosene.

They filch subsidised grain and sugar from the public distribution system and sell it in the open market. Big industrialists are worse, I was told. They make fancy claims about their products in advertisements , but deliver substandard stuff. They demand – and typically get, in return for bribes – sundry subsidies and tax breaks.

They wallow in tax evasion and black money. They manipulate import and export invoices to illegally accumulate dollars abroad in tax havens. They pay lip-service to competition , but actually succeed by using money, muscle and influence to buy or bully their way through the system.

Where’s the morality in this lot? Answer: capitalism empowers people though the freedom to choose what to buy or produce.

Freedom to choose is a high moral principle. Democracy is based on the same principle. Paradoxically, democracy has a high moral cachet while capitalism is looked down on. Yet, democracy can match capitalism flaw for flaw. True, businessmen make fancy claims and don’t deliver.

But don’t politicians also promise the moon, and not deliver? Are promises in election manifestos less bogus than those in commercial advertisements ? Businessmen claim they want to serve the public interest by creating jobs in backward areas, when their actual aim is to get rich. But don’t politicians also claim to be promoting the public interest while lining their pockets?

Businessmen may adulterate their products. But don’t politicians constantly adulterate their supposed policies and principles? Capitalists may wallow in black money. But are politicians any different? They spend thousands of crores on elections – where does the cash come from? Politics is supposed to be public service. In fact, it has become the shadiest of businesses, in which you invest black money (in elections) in order to make even more black money (through bribes and extortion).

Crony capitalism, a sadly widespread phenomenon , is a perversion of capitalism. It is a perversion of democracy too. Businessmen use money to promote their interests. So do politicians. US politician Jesse Unruh said, “Money is the mother’s milk of politics.” Do politicians use muscle? But of course. Once politicians hired musclemen for dirty work. The musclemen have now entered politics themselves in thousands.

In the recent Uttar Pradesh election, 47% of those elected had pending criminal charges. Businessmen use influence to get what they want. Politicians are surely ahead of them in this game. Just ask Congressmen : if you have access to 10, Janpath, all doors open to you. In sum, politicians in a democracy are opportunistic rascals . Yet, democracy is viewed as a highly moral system. Why? Because it empowers citizens through free choice. That makes it superior to any other form of government.

Lenin criticised democracy on exactly the same ground that many criticise capitalism . He said elected politicians were opportunistic rascals representing their own class interest, not the public interest. So, he proposed replacing them with a politburo of noble intellectuals genuinely working for the masses. Alas, this endeavour ended in mass murder, misery and ultimate collapse.

Democracy has a thousand flaws. But as Churchill once said, “It is the worst system except for all the others.” Benevolent dictators often felt they were more principled and moral than crooked politicians in democracies. Yet, all autocracies ultimately failed because of a fatal flaw: they did not give citizens the freedom to choose their leaders.

For the same reason, centrally-planned economies also failed. These too aimed to create noble economic systems free of the greed and grab of capitalism. Yet, they failed for the same reason as autocracies: they did not empower citizens to choose. People repeatedly fled from communist to capitalist countries : from East Germany to West Germany, from Red China to Hong Kong, from North Korea to South Korea.

Now, the communist states had full employment and assured security for the aged and handicapped . Yet, people fled to capitalist countries where neither jobs nor welfare were assured. What was assured was freedom to choose, and that mattered above all. They wanted freedom to choose their political leaders, freedom to choose their job or business, and freedom to buy goods they liked.

Capitalism, like democracy, is “the worst system except for all the others” . It too has rascals parading as leaders. But it too turns out to be the best. This is not just a matter of efficiency . It is, above all, a matter of high morality. Freedom is a fundamental human right. Adam Smith, father of capitalism , disliked capitalists. He said businessmen rarely met without concocting some scheme to milk consumers.

But, he said, once capitalists had to compete in a market system, they had to woo consumers with ever better goods and services, thus producing a social good that was never part of their original aim. Smith said capitalists were rascals, but capitalism was a good system.

He could have said the same of politics: democratic politicians are rascals, but democracy is a good system . Both systems are saved from rascality because they rest on the same moral principle : freedom to choose.

3 thoughts on “Both democracy and capitalism give the freedom to choose between alternatives

  • 2012.Jul.27 at 12:45
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    I read the comments and I hear say that anarchy would be most accurate to be compared with captilism. That is true and not true, but that is irrelevant. Both Captalism and Democracy derive their morality by the freedom of choice, they go about with a different method of implementing it, but the primary principle remains the same.
    I think demcracy was used because of the high standards most people hold it in, and show that Captalism is as much (if not more) truer to that principle as Democracy.

    I personally hold that democracy is a good form of government, but why, that would be an entirely different discussion.

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  • 2012.Jun.28 at 11:22
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    Sir, I had the privilege of attending that session and the difference between capitalism and democracy is ( as defined by milton freidman) In a capitalist ( actually free market) system is that if out of 10 people 6 chose red shirts and 4 chose black shirts, 6 get red and 4 get black, but in a democracy all 10 get red…. Its all about liberty and being responsible for your own choices.. democracy is not compatible with free market because of the very simple fact that if the majority rules then even the most productive person can be forced to share his earnings with a person who doesnt do anything just because the majority ( which isnt the one who is productive) deems it to be right… Out of democracy and free market.. i’d always chose free market..

    About democracy being the best system that we have, i disagree sir. There is a fundamental difference between democracy and Rule of Law. I believe the latter needs to be enforced on the principle of liberty and equity. Democracy is promoted to us as if its a great system because the majority always gets to rule it (its a herd mentality and people are conditioned not to go against it). Moreover, the most important thing we need is that even if the govt is elected through majority, we need to make sure that their role is extremely limited ( National Security, Enforcing contracts and protecting private property rights) for which they may collect taxes. I understand that this may sound inhumane but in the long run (unlike what keynes said, we are not dead) it’ll prove to be more effective and efficient

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  • 2012.Jun.21 at 02:12
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    Your analogy of capitalism with democracy is weak. Democracy allows a ‘tyranny by majority’. Theoretically, 51% of the electorate can subject the remaining 49% to whatever it wants. That’s not the case with capitalism, which is founded on liberty and free transactions. Capitalism is more moral than democracy. In fact, the instruments of democracy—the government—often corrupt capitalism.

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