Democracy and the Market Economy: Two Social Evolutionary Breakthroughs

This piece ran as a newspaper op/ed in the second weekend of July, 2024.

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If we compare the condition of humankind when civilization first arose full-blown –roughly 5000 years ago – with the condition of those people’s hunting-gathering ancestors, the deeply problematic nature of civilization becomes clear.

• The first cities and empires were organized with a tyrannical few exploiting – generally enslaving – most of the people under their domination. By contrast, hunting-gathering societies were basically egalitarian, without some people forcing other people to serve them.
• Moreover, the evidence of human remains from early civilizations show that the average members of those civilized societies were much less well-nourished than their pre-civilized ancestors had been.

Clearly, how human needs could best be met was not the predominant driver of how civilization first developed. Nor did that change during most of the history since: typically, the majority of civilized people have been “subject” to “the crown” (dominated by powers above them), and have been compelled to live in conditions of considerable deprivation.

An essential part of the challenge facing civilized humankind, therefore, has been to find ways of organizing the civilized world that meet human needs better.

In recent centuries, the emergence of two such ways of organizing societies – one in the realm of power, one in the realm of human economy – have done much to address this challenge.

The political breakthrough was Democracy – putting power in the hands of the people, making the power of the state an instrument for the people to serve their purposes. That was fueled by some revolution in people’s sense of what’s right – e.g. that “the pursuit of happiness” is a God-given right – another essential component involved structural design.

So America’s founders drew up a Constitution, laying down the rules by which conflicts would be resolved: by the Rule of Law, not by raw power.

(The importance of such structural protections is shown by the way the “democracy” instituted by the French Revolution — without such protections — led to a “Reign of Terror,” whereas the American Revolution — with its constitutional follow-up — led to a viable system of government that has done a significant (albeit imperfect) job of controlling Power for more than two centuries.)

Variants of such democratic structures are now found in dozens of other countries, giving hundreds of millions of average citizens lives that are so much freer of oppression than the lives of their ancestors just a few centuries ago.

Anyone who understands how meaningful a breakthrough democracy has been should recognize the folly of supporting any political force that would dismantle that constitutional system, with its Rule of Law, and that would reinstate the old, bad political order where the ruler at the top has unchecked power. (And where the Law — rather than being something to which even rulers are subject — is instead a weapon used by rulers to smite their rivals.)

The second major breakthrough in the ordering of human civilization has been the adoption of a “free market” – an economic systems allowing people the liberty to gain wealth through honest exchanges, which replaced the age-old economic system where wealth went to those who with the coercive power to take from others.

The market system – capitalism – harnesses the desire of people to better their material circumstances to get them to act in ways that enrich the society as a whole. People get enriched by providing what other people want.

The market’s drive to expand wealth eventually put more and more money into the hands of average people, enabling them to meet a wide spectrum of their needs and desires.

By generating more material wealth, and providing “consumers” with means to pursue their own happiness, the market economy has enabled several billion people now alive on this planet to have a much wider ranger of choices, and live a materially more satisfying life, than the people who lived in pre-modern civilized societies.

The market, however, is not perfect.

As I’ve written here in a previous piece – “The Market as a Power System” – the market has important blind spots. Even if there were the “perfect competition” posited by the market ideology in its advocacy for capitalism, the market by itself skews the development of society, and the allocation of resources, in some altogether predictable and clearly suboptimal ways.

The market system, for example, processes the costs and benefits to buyers and sellers with admirable efficiency to generate information (prices) that channel economic activity in ways that are “optimal” — but only in the limited dimension of costs and benefits for people considered solely as separate actors. The market by itself is blind to all those values and interests that people have collectively, as members of a society.

Unless such blind spots are corrected by collective decisions, one ends up with what is often said about America: “private opulence and public squalor.”

Nonetheless, even if the market system – with its imperfections — requires the political system to correct for the way the market skews the allocation of resources, the coming of the capitalist system has made a major contribution to humankind’s efforts to make human civilization better designed to meet human needs.

The market economy, employed in proper ways in a civilized society, has thus been a major step forward – from that era when the average person lived lives of deprivation — in helping people get human civilization under greater control.

(Which is doubtless why virtually all the most decent and healthy societies on earth give the market system a major role.)