Part III: Inequality and the Crisis of Capitalism and Democracy

Can Democracy Be Viable with a Wide Gap between Rich and Poor?

Inequality has been a permanent condition in society since the dawn of civilization. Those who try to justify inequality under democracy argue that it is a “fad” to espouse social justice, to defend the rights of the poor, of working people, and even the eroding middle class. In short, just as clothing fashion is a fad so is advocating for social justice because people are looking for a cause to soothe their psychological needs. This attitude is especially indicative on the part of governments that try to project an image that democracy as a political system works harmoniously with capitalism as an economic one, regardless of the level of social inequality. 

Because of modern means of communication in the age of globalization, social justice has become popular with social networks around the world. Progressive individuals and groups identify problems at the grassroots level and propose solutions that would best serve their communities. This is not an issue of pop culture reflecting generational gaps but of grassroots sub-cultures challenging the hegemonic culture responsible for social injustice under the pretense of democracy and thriving capitalism. In other words, the grassroots voices against political and financial elites are universally recognized as the root problem in society around the world. To combat grassroots sub-cultures challenging the elites, governments and business launch public relations campaigns of mega scales showing the world an image that both democracy and capitalist economy are functioning great and no reformist or systemic change is needed.

The Mexican government recently paid SONY Corporation $20 million to make sure that in the next James Bond film there are pictures of modern buildings and a harmonious modern society. Never mind the narco-trafficking, the endemic urban and rural poverty, civil unrest, assassinations of dissidents, systemic corruption at all levels of government and private sector, and extreme inequality. As long as the image projected to the world is a positive one that is all that matters. After all, the assumption is that people believe in images by authority (dominant culture), just as they believe capitalism works for all people because TV game programs (Who Wants to be a Millionaire) make people instantly rich. The expensive PR campaign undertaken by Mexico is nothing in comparison with ceaseless US PR campaigns at home and abroad. that has a widening rich-poor gap and weakening democracy but insists on exporting its institutions, or rather a mythical image of them, to the rest of the world, while dismissing criticism as a “fad” that will pass like clothing fashion. (The Center for Media and Democracy’s PR Watch; Joe Soss, Remaking America: Democracy and Public Policy in an Age of Inequality)

The US political system is based on an 18^th century Constitution and a two-party system with which the majority citizens identify and accept as the “norm”. Alexis de Tocqueville believed that the American system combined democracy and capitalism that captured the imagination of the majority in the 19th century. Of course, such a system included slavery, excluded Native Americans from the mainstream, did not permit women to vote, marginalized non-Western European ethnic groups, and had anti-union policies for workers trying to secure rights in trade unions. Apologists of the system would argue that freedom of speech, religion, and cultural expression are at the core of American democracy that is a model for the world. These are all values of a middle class society, with 18^th century northwest European urban intellectual and commercial roots. 

This is the ideological environment from which the US emerged as an independent nation on behalf of commercial, banking, and agricultural elites represented in the Republic, with the theoretical language in the Constitution and Bill of Rights of extending rights to all men. In reality, what do these and many more freedoms added in the last two hundred years mean to anyone on the margins of or outside of the institutional mainstream? What does American freedom mean to a working mother in rural Alabama? What is the meaning of such “American freedoms” to a coal miner who knows of the American Dream but who will never realize it. What exactly can the poor do with bourgeois freedom and promises of dreams that never materialize? Freedom is a nebulous concept unless one is incarcerated, and the overwhelming majority of those who are belong to minority groups and the poor largely. This is largely because the state has chosen the punitive policy route to deal with the growing socioeconomic gap. (Loïc Wacquant, Punishing the Poor: The Neoliberal Government of Social Insecurity)

Freedom is precious thing but it does not have the same meaning for a billionaire as it does for a janitor. French satirical newspaper Charlie Hebdo received a great deal of support from those believing in “freedom”, just as has WikiLeaks founder Julian Assange and former NSA computer worker Edward Snowden. In every single case, these were issues primarily preoccupying the middle class around the world, as I seriously doubt farm workers in rural Philippines, Guatemala and Ghana had as much interest as a middle class professional in London, New York, or Tokyo. Freedom is not some abstract ideal in life, but a commodity subject to the income status of the individual. 

The “commoditized self” is reflected in how companies advertise products and services, projecting the message that their products and services will lead to a better, fuller and truer self. The commoditized self is subject to and reflects socioeconomic status, as it did during the European Age of Aristocracy (1688-1830). Just as an 18^th century French aristocrat enjoyed more freedom than a member of the Third Estate, so does a 21^st century billionaire enjoy a great deal more freedom in a democracy than a coal miner dying each day to feed himself and his family. Considering the poor have little freedom in comparison to the rich and a commoditized self of less value, they turn to religion and try to find freedom and a higher truth through faith in God. If this world is cruel, unjust, unequal for the masses, the spiritual world offers equality for all and eternal contentment. Democracy allows and even encourages religious worship as we see by the official positions of governments toward religion as much in the US as in developing nations, and values it just as much as it does the media as a tool of engendering mass conformity. (J. M. Barbalet, Citizenship: Rights, Struggle, and Class Inequality)

Without freedom of the press there cannot possibly be a functioning democracy. However, what if the mainstream media is under corporate control, news is really a sanitized version of government and business propaganda and the only issues raised are those intended to induce conformity of the masses to the system? Can this still be called democracy? Can the working poor eat freedom to kill hunger pains, use it for clothing, housing, to secure clean water, food, and medications? What relevance do Western bourgeois freedoms have for the working and non-working poor of the world, when in fact they are a privilege reserved for those that have already secured the rest of life’s material comforts? If freedom from poverty is a human right and if observance of human rights is a core value in a democracy, then most of the world’s democracies, among them the US, are violating human rights and cannot be called democracies. (see Harri Englund, Prisoners of Freedom: Human Rights and the African Poor); Thomas Pogge, Freedom from Poverty As a Human Right: Who Owes What to the Very Poor?) 

Popular sovereignty is one of the fundamental values of democracy, so is personal and community development, and social justice. To what degree does a country labeling itself “democracy” uphold these values not just in theory but in practice, beyond the hollow myth of someday achieving the dream of riches under capitalism? Can a country with very high income inequality maintain democratic institutions and a viable social fabric, or is it merely a façade for a crypto-authoritarian state projecting itself as “democracy” to its citizens and to the world? As some scholars have argued, the poverty of people necessarily means the poverty of democracy. The issue is that the social contract under democracy cannot possibly be fulfilled in a society socioeconomically polarized with even greater prospects for downward socioeconomic mobility. Even for Brazil, one of the fast-growing BRICS members, inequality has persisted as has the continued absence of social justice despite the remarkable GDP growth that markets stress as proof of success. (F. Fukuyama, et al., eds. Poverty, Inequality, and Democracy; Marcos Mendes, Inequality, Democracy, and Growth in Brazil).

There are varieties of modern democracies from the most progressive Norwegian model that consistently earns the highest praise for its commitment to human rights and social justice to Nigeria that is mired in endemic official corruption and has been plagued by internal conflicts from the Biafra uprising (1967 to 1970) to varieties of rebel groups in the last half century all the way up to the present rebel Muslim group Boko Haram. Any country that has elections can call itself a democracy, no matter how unrepresentative the system of the people and how it violates civil rights and human rights, and no matter the level of socioeconomic inequality with a high percentage of the population marginalized from the institutional mainstream.

India is the world’s largest democracy. Despite having one-third (400 million) of the world’s poorest population that has been rising since 1980 along with the poor population of sub-Sahara Africa, the Indian economy in GDP growth terms has been doing fairly well in the last three decades. Apologists of Indian democracy, such as it is, could argue that it has elections as though the electoral process is the alpha and the omega of democracy. This means that no other criteria is considered, such as the quality of life for the broad masses of India’s 400 million poor, a number larger than the entire US population. 

Once we begin to examine the meaning of democracy in India we discover that the constitution is written to do erase the caste system of the past and build a casteless society. We see no evidence that what is written in the Constitution has become reality since independence. Combining the complex caste system with massive endemic corruption and a plutocratic clientist or crony capitalism provides a better picture of what “democracy” means. (India ranks 85^th among 175 nations in the corruption scale) linked to the public sector, with politicians buying votes with everything from cash to heroin. 

According to former Chief Election Commissioner Shahabuddin Yaqoob Quraishi: “We [Election Commission] do not know the nature of this [80 per cent] funding. Is it coming from the mafias? Is it related to drugs or crimes? No one has any idea. We do not know if it is corporate funding…Why the EC asks to stop these collections from corporate groups is because you [political parties] get beholden to this. If you take money from corporate groups, you will end up giving them contracts … so it is not just fund collection. It is about their [political parties] nexus with corporate groups and it is very serious, while everybody knows about this. It is crony capitalism led by corporates which is running the country. They get their bureaucrats … their ministers appointed”. The Hindu, (22 December 2014) 

The electoral system that India equates with democracy not only lacks transparency, but it hardly addresses the welfare of its citizens, focused only on capital concentration for those making campaign contributions and perhaps bribes and hoping in this manner to raise GDP levels regardless of the income distribution issue. This is because India and other governments under the capitalist system view poverty and income inequality not as a systemic problem that the political economy generates but as a “technical” matter requiring “technical” solutions. If social inequality as inherent in capitalism is never identified as the core problem of uneven income distribution owing to the process of legalized state-sanctioned appropriation, then the problem will never be solved, whether in India or any other nation. India’s “democratic” institutional structure is rooted in its traditional past and heavy British colonial influences. Regardless of the lofty democratic theory, in practice the system favors males to the detriment of women, favors the urban wealthy to the detriment of urban and rural poor, favors foreign corporations over the welfare of its own citizens working for such corporations to the detriment of their own health - the Bhopal gas tragedy 1984, gas leak incident remains the world’s worst industrial disaster indicative of corporate hegemony over the state. 

One could easily argue that conditions in most countries, including many developed ones are not very different, although there may be differences in modalities of how money changes hands from the rich to politicians who are then indebted to award contracts and conduct policy favoring the privileged socioeconomic elites. In other words, crony capitalism and “clientist” politics so characteristic of non-Western countries retards democracy and contributes to economic inequality, but so does the legalized system of capital appropriation in the G-7 nations.

Despite its record as corrupt and extremely hierarchical society, India is part of the fast-growing BRICS countries with great prospects. It has less economic inequality than the US where capital is far more concentrated and downward social mobility a reality since the early 1980s. As a capitalist “democracy”, India has one of the largest middle class expansion rates in the world whereas the US has suffered contraction of its middle class and has worst prospects in this century than India for upward social mobility. Do these statistics make India a more promising democracy than the US, although in both countries the ruling political parties serve the same elites that are responsible for perpetuating inequality in society? 

Not very different from India, Mexico, Chile and Turkey are democracies where capitalism has thrived in the post-World War II. However, these countries are the top three in the world with the greatest income inequality, followed by the US occupying the number four spot and Israel rounding out the top five. Interestingly enough the top ten countries with the least income inequality are all Scandinavian and East-Central European – former Communist countries. At the current rate of income inequality in many countries calling themselves “democracies” the income gap will widen and the so-called democracies will become less democratic. Because the capitalist system and its beneficiaries do not permit better income distribution to benefit the middle and working class, democratic governments have been dealing with the contradictions of growing inequality by adopting stricter laws and police methods toward the lower classes. (Claudio A. Holzner, Poverty of Democracy: The Institutional Roots of Political Participation in Mexico;  Kayhan Delibas, The Rise of Political Islam in Turkey: Urban Poverty, Grassroots Activism and Islamic Fundamentalism). 

The world economy is in cyclical structural cycles of expansion and contraction. There is no doubt that in the next contracting cycle the number of people in the world who will languish in abject poverty will rise, while the middle class throughout the Western World will continue to shrink as it has been in the past 30 years. The chronically malnourished (currently just under one billion) will increase while the real value of labor decrease and middle class living standards will lower throughout Western nations, with few exceptions, among them Canada and Australia. The United Nations working with various private and non-governmental organizations to reduce world poverty keeps promising the world that the goal is zero poverty within a few years. Yet, the reality of the existing political economy continues to disprove the UN and apologists of capitalism that ask people to keep their faith in a system that perpetuates inequality and exacerbates social injustice. 

When the issue of poverty is raised, educated people who should know better rationalize it by utilizing the Malthusian argument. There are too many people and too few resources, therefore there will always be poor people in the world.  Very few have argued that there are not sufficient resources to bail out capitalism to the tune of several trillion dollars paid by labor and the middle classes to strengthen a system that causes and maintains poverty on a world scale in the last recessionary cycle that started in 2008. 

There is absolutely no problem transferring massive wealth through taxation, wage policy, and subsidy programs from the middle and lower classes to the wealthiest because this is the neoliberal dogma that maintains the privileged financial elites, and the dogma that the IMF, World Bank and OECD preach. Unless poverty eradication is somehow linked to a massive foreign investment and trade program that would further appropriate resources and concentrate them, no government, UN transnational or other agency is willing to support. Anti-poverty programs have become a pretext to further exploit the areas where the poor are concentrated.

Feeding a starving child that faces death every five seconds is not nearly as urgent for the state as buttressing finance capitalism, because the value system on which capitalism is predicated rests on creating the wretched of the earth, to borrow Franz Fanon's book title, so that capital accumulation can continue to thrive. The value system and institutional structure in modern society is such that it has shaped the mind not just of the rich, but of the middle class, workers, and even the poor to worship wealth accumulation no matter the human cost. The modern hero is the billionaire that the rest of society must worship like serfs worshipped saints in the Middle Ages. And if the billionaire is a philanthropist who has given back some of the wealth she/he had appropriated through a system that promotes capital concentration, then that billionaires becomes a superhero and held as the model world citizen, rather than robber baron that she/he truly is.

Besides internal forces of inequality as we have seen only from a synoptic perspective, there are also external forces. The colonial power determined class formation and institutional structures in countries that became colonies, semi-colonies, or spheres of influence. For example, Nigeria was a colony and its division of labor and social inequality was molded during the age of colonialism. Even after colonial rule, the legacy of colonial institutions remained as multinational corporations dealt directly with the national government beholden to foreign capital and foreign governments for military aid. Having an elected government of indigenous individuals was fairly meaningless when foreign capital and governments retained a preeminently influential role in determining the unequal social structure. 

External dependence or the phenomenon of dependent capitalism that has its roots in colonialism is also a major factor in geographic and social stratification and inequality. Europe, the US and Japan exploited the labor, markets, and raw materials of non-Western countries, helping to develop a comprador (dependent) capitalist class as an intermediary, along with a dependent political system through various means from intimidation and coercion to bribery. The core countries in the advanced capitalist countries, north Europe, US, Japan, Canada and Australia have been responsible for the geographic and social inequality beyond their own borders. (I. Wallerstein, Africa and the Modern World)

The integration of the non-Western countries into the core economies through loans, trade, and investment determines the division of labor in the latter. Because self-sufficiency in an integrated world economy is implausible as national capitalism, the world division of labor is the outcome of a world capitalist system. Uneven terms of trade and uneven labor values between the advanced capitalist countries and the developing ones account for low living standards and polarized socioeconomic conditions in the latter. 

External dependence naturally keeps a political regime beholden to the patron country or countries under a patron-client integration model NAFTA is a good example of this. The German-dominated EU is also evolving into patron-client integration model intent on the more thorough exploitation of cheap labor in the periphery nations with massive capital transfers to the core, using public debt as a catalyst. Inequality in Mexico has a lot to do with Mexico’s relationship with the US just as inequality in the southern and Eastern EU members has a lot to do with their relationship with Germany and northwest Europe. Paul Collier, (The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It).

Comprador politics and economics is not merely a question of economic and political dependency as we see in the case of hegemonic US over Latin America (1898-present), or northwest Europe (mainly Germany) over Southern and Eastern Europe, but it is also a question of national sovereignty and external forces causing internal inequalities. The issue of national sovereignty and extreme social inequalities was at the root of Arab uprisings. Of course, the US and northwest Europe reintegrated those economies into the international market system once the dust settled, thus nothing changed with regard to extreme inequality in those countries. The global division between strong national sovereign countries limited to the G-20 and within those the G-7, on the one hand, and the weak comprador nations as represented by the bottom 180 nations poses a major question of whether democracy can exist in societies whose destiny rests in the hands of the Great Powers. (Andre Gunder Frank, Lumpenbourgeoisie: Lumpendevelopment)

Can there be less socioeconomic polarization in countries with a weak national capitalist class and strong comprador bourgeoisie, with weak national state structures that yield to the rich nations and to powerful multinational corporations that also enjoy the backing of the IMF, World Bank, OECD and World Trade Organization.  It is true that economic development and social harmony essential to political stability cannot take place where social injustice thrives on a chronic basis in a world where people have access to means of communication and know there is a better way. The signs we have so far from the Arab Spring uprisings, the European grassroots movements and other popular protests from Russia to Chile is that the global model of concentrated capitalism that divides the world geographically and politically results in uneven development and lack of stability. 

Can democracy be viable under socioeconomic polarization that breeds social unrest and political instability? Considering that the answer to this question has been provided by governments turning increasingly to everything from massive propaganda to massive surveillance of their own citizens, from denying due process to violating human rights, the conclusion is that democracy suffers because the political and financial elites fear it and view it as an obstacle to sustaining their privileged roles in society. Ironically, the French nobility had similar views just before the outbreak of the bourgeois-led French Revolution in 1789.  We may not be on the eve of a revolution in the early 21^st century, but conformity to a system that promises dreams of a better life under capitalism and democracy but deliver them only to an increasingly smaller percentage of the people has an expiration date. 

(The last segment of this four-part essay deals with Solutions to the Income Inequality and Declining Democracy. Soon to be posted.)