Capitalism and Democracy

This chapter examines the interrelationships between democracy on the one hand and capitalism (or what I prefer to call “the liberal economy”) on the other. Liberal thinkers tend to maintain that the two are allies, at least as long as democracy is (constitutionally or otherwise) limited. Socialists regard them as rivals, as “true” democracy can be realized only under socialism or communism. Joseph Schumpeter stands out as the commentator who argued that there is no strong relationship at all between the two: any economic arrangement can be combined successfully with any political arrangement. I survey both the classical views on this topic and a number of more recent contributions.