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The Crisis of Democracy

by Joachim Hirsch Monday, Mar. 25, 2019 at 2:32 PM

Decisions affecting social development are in the hands of private investors and state policy depends on their actions. The increasingly unequal income and wealth distribution was the result of a strategic government policy that reacted to a capitalist crisis.


By Joachim Hirsch

[This article published in January 2019 is translated abridged from the German on the Internet, www.links-netz.de.]

The crisis of democracy is a top theme at events, discussions and feature sections. So, the Frankfurter Goethe University recently hosted a book review for a book “How Democracies Die” written by Daniel Ziblatt. The question is what is now in crisis. Democracy exists as a political form in Germany. Several things should be clarified. Is our crisis about dominant politics or about democracy?

The spread of right-wing populist parties and movements in Europe and beyond in many parts of the world is striking. The situation is not unequivocal. Recent mass demonstrations were not only from the right. There are many very active civil society initiatives and projects. The widespread political engagement should be welcomed from a democratic theory perspective…

Many are convinced nothing good can come from this state form and authoritarian attitudes increase. This fact triggers great fears. Fears of falling, social exclusion and social division and a spreading isolation are often cited. Help is expected from more grassroots politics, strengthened “social cohesion” and improved communication…

The crisis of democracy is not new or temporary phenomenon. Its dominant liberal-capitalist form is structurally in a crisis. As everybody knows, bourgeois-capitalist democracy is characterized by a separation of state and society and politics and the economy. Decisions affecting social development are in the hands of private investors and state policy depends on their actions. To act and exist, the state financed out of taxes depends on a flourishing economy and grows under capitalist conditions. Business decides over this first of all. Thus, state politics cannot act against its own interests without pulling the rug from under its own feet. At best, the state can act as an “ideal capitalist,” as Friedrich Engels explained. This can lead to social-political interventions in the conflicts over reduced working hours in Europe, as Marx showed…

Therefore, the disappointment and frustration over politics have structural reasons. The “Yellow Vest” demonstrations in France are directed against a “reform policy” aimed at improving the international competitiveness of capital. These experiences are the breeding ground for populist movements against “those above” including their media and academic followers. Thus, populism is a phenomenon imminent to liberal democracy and by no means an exception or special case. A space for right-wing populism opens up when the left does not offer a plausible alternative. This characterizes the political situation in more and more countries.

The structural crisis of liberal democracy is expressed differently and in different ways. Liberal-democratic conditions formed in parts of the world that enjoyed a certain economic prosperity because of the imperialist hierarchy of power. Let us look back for a moment. The democracy crisis remained latent up to the 1980s in the time after the Second World War, the era of “Fordism.”

Enormous investment- and profit-possibilities were offered capital after the destructions of the war. The foundations were created that generally accepted Taylorist mass production of consumer articles. This was the era when “national parties” formed and stabilized the political system. They appealed to a kind of social contract that included wide circles of the population under the premise of a seeming identity of interest of “labor and capital.”

This changed with the crisis of Fordist production beginning at the end of the 1970s. The implicit social contract was cancelled. One reason was that the rationalization reserves continued in the Taylorist production mode were exhausted and the existing social power relations – marked by strong unions and social-reformist national parties – began to threaten capital profit. Growth was weaker and mass unemployment occurred again.

At the same time, capital began to internationalize in the Fordist phase and therefore became independent of individual state policies. That was the prerequisite for the effectiveness of the argument of “location competition.” The state reacted to the crisis of Fordism with a neoliberal policy turn independent of the political orientation of the respective ruling parties. The profit possibilities of capital had to be secured under the changed conditions. This necessitated a far-reaching liberalization of international goods and capital traffic which clearly worsened the competition of the locations. The pressure on wages and the social state dismantling began. Economic deregulation encouraged the acceptance of new technologies in the IT-realm. Large-scale privatizations and extensive tax cuts opened up new investment possibilities for capital while costs were simultaneously reduced. Profits were assured and growth picked up speed again.

This “politics of capital” was largely at the expense of a majority of the population, particularly wage-earners. The increasingly unequal income- and wealth distribution, precariousness and social division are decried but this development was the result of a strategic governmental policy that reacted to a capitalist crisis. It did not fall from the sky… In view of ever-faster technical development and the related social upheavals, the uncertainties grow regarding life situations, jobs and social status. This is also true for the isolation and de-solidarity often cited as causes of the democracy crisis. This development was provoked by the competition mobilization in all social realms and the spread of neoliberal models and social ideas to the smallest social ramifications.

The social consensus that made possible the relative stability of liberal democracy up to the 1970s was based on the widespread insight that the general prosperity would grow more and more and “the children would have it better.” In the meantime, this has reversed even in the so-called middle classes. Looking to the future opens up uncertainty and anxiety and not hope any more.

The neoliberal offensive produces complex consequences. It has led to the crisis of the multi-party system because the relatively homogeneous interest blocks of the post war era are eroded and the promises legitimating this cannot be fulfilled any more. In speaking about the crisis of democracy, we may not forget how much the liberal public has changed.


Joachim Hirsch, Markets as a Fetish,


Joachim Hirsch, What are the Alternatives to Neoliberal Capitalism?


Thomas Piketty, Wealth Tax


Thomas Piketty explains how Elizabeth Warren's wealth tax is American as apple pie

Last month, Democratic presidential hopeful Elizabeth Warren proposed an annual tax on the largest fortunes in America, with some of the cash generated by the tax being funneled into the IRS to catch dodgers who move or hide their money to escape the tax.

The Warren proposal was modeled on the work of French economist Thomas Piketty, who set out the case for a global wealth tax as an engine for economic growth and political stability in his blockbuster Capital in the 21st Century.

Now, Piketty has published an editorial endorsing Warren's proposal and connecting it to the history of US tax policy, arguing (with data to support his position) that historic tax rates -- which were much higher than they are now -- were the key to US growth and avoiding the malaise, instability and horrific wars that rocked Europe for a century.

He says that the Reagan/Bush tax-cuts (which kicked off the current race to a state of massively unstable and unfair inequality) "turned their backs on the egalitarian origins of the country, by counting on historical amnesia and by fuelling identity-based divisions."

To understand this, let's look back. Between 1880 and 1910, while the concentration of industrial and financial wealth was gaining momentum in the United States, and the country was threatening to become almost as unequal as old Europe, a powerful political movement in favor of an improved distribution in wealth was developing. This led to the creation of a federal tax on income in 1913 and on inheritances in 1916.

Between 1930 and 1980, the rate applied on the highest incomes was on average 81% in the United States, and the rate applied to the highest inherited estates was 74%. Clearly this did not destroy American capitalism, far from it. It made it more egalitarian and more productive, at a time when the United States had not forgotten that it was their level of educational advancement and their investment in training and skills that was the backbone of their prosperity, and not the religion of property and inequality.

Reagan, then Bush and Trump subsequently endeavored to destroy this heritage. They turned their backs on the egalitarian origins of the country, by counting on historical amnesia and by fuelling identity-based divisions. With the hindsight we have today, it is obvious that the outcome of this policy is disastrous. Between 1980 and 2020, the rise in per capita national income was halved in comparison with the period 1930-1980. What little growth there was, was swept up by the richest, the consequence being a complete stagnation in income for the poorest 50%. There is something obvious about the movement of return to progressive taxation and greater justice which is emerging today and which is long over-due.

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