An Uneasy Pact: Capitalism & Democracy

The system which is prevalent across most developed nations is a mixture of
democracy and capitalism. With the exception of what is largely now a minority of state-run enterprises, the economy is primarily driven by capitalism, with democracy acting largely as a retrospective corrective force, through means such as taxation and benefits, and taxation and spending.

The notable thing therefore is that this liberal democracy does not challenge the core tents of capitalism, including profit and private property; if anything it supports them. Instead, it acts after the fact, to redistribute some wealth, and provide insurances and assurances.

In a previous article I tried to summarise how capitalism promotes the further accumulation of wealth among those who already have it, and how that paradigm extends to all forms of power. This time we’ll focus on political power, and how it remedies and exacerbates aspects of capitalism respectively.

The idea that democracy means rule by the common people is a revisionism. It’s basic form has been the cartel of capital: a forum for the landowning class. That is why it has developed side by side with capitalism. As suffrage has been expanded, property has had to make concessions to the majority, which democracy becomes a manageable forum for, while property also tries its best to influence the electorate and exercise more power through it. In that sense, democracy ensures that capitalism makes the compromises it must in order to continue its existence.

Then there are the opportunities of both formal lobbying and simply
socialising with political connections. The impact of the informal social layer bonding politics and big business should not be underestimated. With regard to the electorate, private media has significant influence, along with strategic spending. Although national democracy gives the impression of vital involvement to everyone, usually only the voters in swing-seats or swing-states have a deciding influence.

The deal is for the balance of individual against collective needs. In the most cynical way, democracy functions as a cartel whereby capital may impose restrictions on its members – universally so as to create no competitive disadvantage — for the good of the whole. Corporations will accept some restrictions that might be harmful if placed upon one of them, so long as there is no or little disadvantage when it is applied to all of them.

Here, capital within itself behaves in a remarkably socialist manner. That is not to dismiss however that genuine democratic movements exist. Limited
concession is intentional and rational. It is one reason why this system has become so common. The Cold War taught Western democracy some lessons: that propaganda must learn subtlety, and that for the illusion of freedom and power to be complete, it must not be entirely fictitious.

A genuine benefit to adding a strong state to a market economy is that it can act in a Keynsian manner, providing a ‘flywheel’ that charges up in good times, and releases back into the economy in bad times to get it going again. Unfortunately, the model has rarely been followed and rarely do governments set aside funds in the good times to prepare.The redistribution of wealth from rich to poor, where it occurs, is a compromise on the part of capital. The state taxes not just capital, but labour also. For capital’s partial contribution, it ensures that the workforce will largely be kept in health, be able to get to
work, et cetera. It also, just as importantly, meets the demand from many who would otherwise be uncooperative with the system. Finally, this conveyor belt of redistribution prevents economic failure resulting from a lack of demand; it moves money from those with a low propensity to spend — the rich — to those with a high propensity. It allows just enough wealth to move down to keep consumerism going. If the poor are too poor, there can be no consumerism. In doing so, the rich pay a fee for stability.

This contributes to a state effort to keep unemployment within an acceptable margin. There must be unemployment, to keep bargaining power in favour of capital, but not so much as to cause dissent. The public sector, including the military, can be used to soak up excess unemployment. The state manages concessions on labour laws according to popular acceptability. In the post-war period, war bureaucracy, nationalism and democracy collectively gained the upper hand in negotiation with capital; in the 1980s it was capital that bent the majority to its will. These ebbs and flows are not always beneficial to capitalists, but the general mechanism is beneficial for the survival of capitalism, in the face of both external opposition and internal contradiction.

One thing the right has right is that we are overtaxed. It should not cost us as much as it does for the services we receive. Some existing taxes are indiscriminate and some are steeply regressive, hitting those less well off hardest. Further to this, the number of taxes and the complexity of this system hides the true value. How much do you earn? After income tax and national insurance? After council tax and road tax? On what is left, after VAT or sales
tax? Then there’s the bureaucratic cost of assizing and appropriating all of those taxes.

The 1980s also demonstrated the usefulness of the state in breaking strikes. Restrictions on unions — on free association — is another way in which the state favours capital. Corporations are inherently a form of collective bargaining, whereby the entity as a whole negotiates wages with individual workers. Shareholders have this freedom of association to act as one. In order for this balance to be redressed, workers must have this same freedom to associate and collectively negotiate in return, or their bargaining power is
significantly reduced compared to the larger economic entity of the corporation.

The contribution of limited liability from the state to capital is a double-edged sword. It allows those with only a moderate amount of money to set up in business without worrying about assets unrelated. On the other hand, it is also deliberately exploited by large companies to effective outsource their risk to the state and to their creditors. If the business is ‘too big to fail’ then the state picks up the full bill. Related is the issue of captive regulation, whereby regulators act in favour of existing oligopolies. For example, by establishing a minimum size for any new market entrant, or fixed costs that could only be profitable above a certain scale, they can deter at least that competition that hopes to start smaller and grow.

The EU’s Common Agricultural Policy is not merely about agriculture; it acts to subsidise landowners while simultaneously keeping house prices unaffordably high. We are often told that ‘Britain is full’; that is true, but it is not full of housing, but agricultural land. That land is not productive in a free market sense, with many fields making a loss that is only made up for by subsidy. By doing so, the CAP disincentivises the sale of that land for other
purposes like housing. In the grand scheme of things, the European taxpayer is forking out to make housing more expensive for themselves. The American equivalent is the subsidisation of the corn industry, with manufacturers trying to find new uses (see: HFCS) for an utter surplus of corn, however because of the US’ much greater land area, the effect on housing is not nearly as pronounced.

Contrary to the claim that the state exists to protect the environment from companies is the reality that many states subsidise the extraction of fossil fuels. The great irony here is that a consistent argument against renewables has been that they cannot be viable without subsidisation, while fossil fuels are subsidised. Meanwhile, the state has been a major factor in ensuring that nuclear power is more expensive than it need by, prioritising the production of plutonium for weapons, which adds an extra expense and design concern. Yet another problem is when the state mandates the purchase of something from the private sector, especially when the industry is highly oligopolised. Car insurance is an excellent example. Although there are some very good reasons to require that all drivers have insurance, the industry is composed of an incredibly small number of underwriters who have little incentive to compete more strongly, because if they do, then they all ultimately lose out. Meanwhile, consumers who cannot find a good deal are prohibited from the consumer’s ultimate defence; the temporary withdrawal of purchasing to force competition.

Somewhat related are the purchases that the state makes itself. The public sector gets a notoriously bad deal, concentrating on ‘preferred suppliers’ that often have to be approved by lengthy bureaucratic processes, often excluding small businesses. In doing so, it artificially reduces the competition that it could benefit from. There is also a propensity for the public sector to get fleeced by accepting contracts that provide very good terms for the supplier, often meaning that when a project goes over the estimated timescale,
rather than the supplier being penalised, they are rewarded by charging for extra time; in other words, there is literally an incentive to be as late as one can get away with! Beyond this, the consolotation of state service provision in the hands of a small number of service providers also grants those providers a quasi-state level of power and authority in themselves, whereby they often make significant decisions affecting the public unilaterally. Capital, collectively, gets back a lot of what it pays in taxes through state contracting.

Copyright and patents are not an intrinsic negative, but a perversion, particularly the latter. Patents came about as a way to stop big businesses simply taking the ideas of small innovators and using them without rewarding the latter, thereby maintaining the incentive for individuals and small businesses to innovate without fear. In a cruel irony, they now hinder innovation and punish small innovators. If patents are too short, they do
not give the inventor chance to make back the money spent on R&D; if they are too long, they exclude a concept from further development. The trend in both patent and copyright length has been to lengthen and lengthen, even though in many technology industries, innovation is fast, cheap and short-lived. Worse, what can be patented has been broadened immensely to now allow patents over things that can barely be called innovations, such as ‘swipe to unlock’. If all solutions to an issue are obvious, they not only do not merit patenting, but doing so unnecessarily demands that new innovators of full
products, that use these small features, must avoid the simple and create ever more elaborate mechanisms simply to avoid being sued.

The other benefits of the state to capital are simply the stated objectives of the state, including the protection of property from threats foreign and domestic. Property is disproportionately protected compared to people.

Democracy itself has some fairly intrinsic problems, leading to it being labelled by some, “the tyranny of the majority”. It is often talked about as if it were not a political system, but a universal virtue, as if more democracy and more things under democratic control always results in better outcomes. Clearly, this is not the case: should the general public vote on what you and I have for dinner?

Like democracy, taxation is often talked of as if it were a universal virtue by the left, and indeed the debate over taxation has largely been reduced to a left wing that argues for more tax, and a right that argues for left. Yet many taxes are regressive and actively redistribute wealth away from the working class. Council tax in Britain is one example: due to its banding structure, there is an upper limit, which means that working class families pay proportionally far more on a £150,000 house than someone will on a £10
million house, who pays no more than someone in a £750,000 house.

Liberal democracy also shares disadvantages with state socialism, especially where it grows and becomes more alike the latter. In the direct provision of services, the absence of profit motive can lead to great inefficiency; budgetary arrangements can even encourage overspending or undersupply. It is difficult to replace state functions that are entirely dissatisfactory. The amount of investment or spending in particular areas is often arbitrary. Where the state service is bad, having already paid for it through taxes, consumers are stripped of choice.At the same time, the system is fundamentally capitalist and shares drawbacks with capitalism. That is to say that while government compounds the problem in some aspects, it does not create it.

Although the fundamental elements of capitalism are prolific worldwide, we do not genuinely have global free trade. Free trade must include the freedom of movement of all resources, including labour, allowing workers as well as companies to seek a better deal in any part of the world. Just as American companies might seek cheaper labour in China, Chinese workers must be allowed to seek better wages in America. Migration is rarely talked of in political terms as a matter of free trade, although many large corporations do
support relatively liberal migration. The same irrationalities that affect capitalist and mixed economies internally also apply globally. As we have come to understand, the general level of employment in an economy
operated on capitalist principles — that is, the market mechanism combined with private property and capital — depends on the consumption and investment of the capitalist class. In a country where the capitalist class is small, or only marginally wealthier than the working class, there are two problems: firstly, the demand created by a small capitalist class is insufficient to require employment of a great proportion of the local population; and secondly, without sufficient capital to invest — specifically, real wealth or money that can be spent internationally — the ability required to bring in greater means of production is limited. Where the working class also is generally poor, any new business setting up only has poor consumers to sell to. The issue becomes a cyclical lack of demand. This situation applies to some pre-capitalist societies with a small ruling class, or nations that
are failed, highly corrupt, or despotic.

The major benefit of free trade is therefore the inward flow of foreign investment. While in theory we speak of an influx of money, that money is merely a proxy that immediately leaves again, to be replaced with an influx of what matters: machines, technology, expertise; the means of advanced production. Since local workers may be operating in a subsistence arrangement, or in industries where there is a low level of surplus, the
opportunity of jobs working with more advanced means of production provides a somewhat higher income than that to which they were previously accustomed.For the investor, of course, paying a wage that is slightly higher in real terms than the produce of a subsistence farmer still makes for a source of astonishingly cheap labour compared to in their home country. In this way, there advantages to both sides, however it is the uneven relative power that allows for a small improvement on the client state, and a large profit for the investor. The increase in liquidity in the economy also allows small
domestic capitalists, including more foresightful members of the old elite, to establish their own businesses either producing for export, or acting as middle merchants. These companies often have considerable power relative to their workers, but often not compared to large foreign investors or purchasers.

Foreign investment comes with a range of other advantages and disadvantages. In a country that is slowly trying to build up wealth and boot-strap its way into more productive industries, foreign investors can bring both an immediate supply of capital and of more advanced technologies. Technology is obviously crucial to raising production efficiency and therefore the amount of wealth created relative to the work put in. The disadvantages of allowing this foreign investment are similar to an individual business selling off its shares for investment. Yes, there is a short-term boost in capital
that allows things to get going, but the catch is that long-term profits will then be taken back abroad. This means that initial development may happen quickly and returns will likely be high, but much of it will leave the country again.Globalisation also gives local suppliers the chance to trade with companies abroad and export their products. By opening up access to consumers in wealthier nations, their demand levels will far exceed those found locally. Consumers abroad may have the means to pay many times more for the same product, and there may be opportunities to provide
products that cannot even be sold locally. This angle works when the expansion of the supply elsewhere is difficult, e.g. oil, or with regional products that have value in their authenticity. Consumers and businesses are also able to import goods that cannot be produced at a reasonable price given the country’s own level of technology. The significant disadvantage of this is again, in the long term, that local companies will struggle to enter the market when it is already saturated by foreign competition.

For wealthier countries, there are of course advantages too. Aside from the profit made by individuals, and occasionally the state, on foreign direct investment, allowing the import of goods from countries where wages are lower and there is less regulation means opening up to an influx of cheap commodities. This effectively represents an increase in real wages for the population of the richer country. Businesses may also benefit from cheaper supplies. The effects are usually drastic: in 2011 the USA imported nearly 400 billion USD of goods from China, including a large quantity of electrical goods, toys and clothes. This has brought some very real benefits to American consumers, lowering the prices of both luxuries and everyday items, and making Americans wealthier in real terms. On the other hand, it tends to render the domestic producers of the same commodities uncompetitive, which has been seen in both the British and American manufacturing
industries since the expansion of free trade, and now voices itself in the newfound protectionism from Trump, for example.

Where trade occurs bi-directionally, it is quite possible for both parties to benefit from the exchange of goods, even if one party is more efficient at producing both goods in absolute terms. The classic example was described by David Ricardo, of the labour theory:

To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of 90 men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth

Even though a country might be able to produce both goods more efficiently, it is still advantageous to produce entirely the good which it can produce most-efficiently, and then trade. Both countries therefore benefit from the trade, provided that the comparative advantage is due to some genuine technological or geographical difference.

It is fair to say from previous reasoning, that while money wages could be cut in one place, provided the forces of competition acted effectively, prices would be reduced. Since those workers were also consumers, what was cut from their wages was also cut fromprices, maintaining real wages in the long term. This all relies however, on one fundamental assumption: that the population of workers is also the population of consumers. In a completely free global market, such an equilibrium is maintained because — bar a few transportation and transactional costs — anyone is able to work for any company and purchase from any company. The forces of competition act both on general commodities and labour in both directions, across the board. Workers are able to move where the best-paid jobs are and also buy products from where they are cheapest. Effectively, the world becomes one single marketplace.

What we have however is not a completely free global market. What we have is a free trade market where perversely, one commodity, labour, is burdened with extraordinary protectionism. This fundamentally undermines the free market relationship between wages and prices. Some workers are forced to remain where the choice of jobs is very limited. When wages increase in Western countries, so do the real incomes of workers there; prices can increase but there is no link to increase the wages of workers in countries where the goods are made, workers who cannot simply move to the West to take advantage of the higher wages there. Such constraints on freedom of movement are wrong both economically and morally, yet exceedingly popular at the present time.In the same way that companies are affected by competitive losses within a single nation’s economy, the same is also true of competition between the economies of nations. One of the side-effects of the allowing free movement of capital and trade is that companies are now effectively free to base themselves in whichever country suits them
best. Thus the private capital complex can force the state into competition with other states to present the most favourable environment for it, whereas, with restrictions on movement and cross-border unionisation, workers are unable to do the same, creating a crushing imbalance for labour.

The most obvious example of a resulting loss is in the form of taxation. It is normal for any individual state to levy a tax on the profits of companies and on the earnings of individuals. In a closed economy, revenues would generally rise or fall with taxation rates, however in an open economy, companies have the option of moving elsewhere. This means that any country where taxes are relatively higher is at a competitive disadvantage, even if in isolation, raising taxes would be the right thing to do. One intended solution is to levy taxes based on where companies trade, rather than where they are based, but this has two problems: firstly, it is relatively easy to launder money out of the country through a complexity of financial instruments that evades regulators;
secondly, even where tax evasion were eliminated, and even if a higher-tax country were still profitable to trade in, it would become the lowest priority for investment.In summary, the situation is a reverse Tragedy of the Commons: taxation is beneficial to each state if every state engages in it, but there is an advantage to be gained by not doing so. It only takes a minority of states to operate low taxation to hurt those states that are trying to implement moderate taxation. The ‘race to the bottom’ condition is
therefore created. Some small states have entirely specialised in providing a low tax home for companies. These states are, through the low taxes they charge, selling state sanction for profit. Since advances like the welfare state, at least under the present model of liberal democracy, require taxation, this condition therefore hampers the development and improvementof the welfare state, public transport, emergency services and all other public services that would be perfectly affordable otherwise. This is the problem that
France has recently faced by trying to unilaterally implement heavier, progressive taxation while still being part of the European single market.
The same effects apply in the area of workers’ wages. Any country that seeks to introduce a minimum wage is at a competitive disadvantage if it does so unilaterally, since the cost of operating there will henceforth be higher. Western countries have been able to introduce a minimum wage, but at the sacrifice of a large proportion of their manufacturing industries. To cite this, as many right wing analysts do, as an argument against the minimum wage in the present system is to stop short of the real issue: the minimum wage itself is, within the current paradigm, an intrinsically good thing and is
beneficial to an economy in many ways, not just to those on said minimum, but it is the refusal of other countries to implement the same minimum that hampers competitiveness. That is not to say that the minimum wage is ideal: ideal is the abolition of the capital-power complex, rendering labour’s power to negotiate such that the minimum wage would be irrelivant, however as far as fixes to the current economy go, it is a fair one.

The same can be said for regulation. The extra cost of complying with regulations to protect consumers and the environment is not usually prohibitively high in itself, and if all companies were simultaneously made to comply with the same regulations, then their profitability would only fall slightly. Regulations designed to prevent workplace injuries, prohibit unfair dismissal and ensure equal opportunities, for example, are all intrinsically
good for the working people of a country. Unfortunately, all of these things create a competitive disadvantage where they are implemented unilaterally. Since the capitalists can simply trade elsewhere, again it is the working people who suffer, but only because of the inaction of other nations. Even if all nations aspire to a high minimum wage and comprehensive environmental protection, it is quite futile them trying to implement that
one by one.The classic models of international trade are in many ways based on a national-level view. It is assumed that, for example, Japan trades a certain amount of electronics for a certain tonnage of coal. This however, is a naïve simplification. In reality, it is not nations collectively that engage in trade, but the individual companies within them. It is quite feasible therefore that one company may import something that another exports. Where
the good in question has significant qualitative differences, for example with electronics, this still makes sense. If however, one company exports a certain tonnage of iron from America to China, and another imports iron from China to America, on a national level, there has been a crossover of imports and exports leading to nothing but increased transportation costs. Such examples, in theory, should not occur. The commodity should either be cheaper in one place than another and the transportation cost should disadvantage the trade option. The two local suppliers should simply trade with each other. However, in real life, prices are not always set by open market auction, and thus it is
entirely possible that American company might negotiate a cheaper price with a company in China than they can with their neighbour; their neighbour might negotiate a better sale price with a company in China, which for whatever socio-political reason, cannot negotiate a good price with the other Chinese company.

If this sounds ridiculous, consider that we still live in a world where ‘businessmen’ are taken out to strip bars by companies vying for their business. All the cajolery and politics that has nothing to do with rational business decisions, yet permeates the entire corporate world,is in itself an open demonstration of how irrational and whimsical business negotiations
can be. It is therefore not unheard of for two ships carrying the same aggregate goods to pass each other in the opposite direction.

When I introduced the benefits of free trade, I mentioned the well-known theory of comparative advantage and how it can provide a significant benefit to both partners in a trade. Comparative advantage also applies to workers and businesses within a nation. It is the basis of genuine trade, in the sense that different individuals have different strengths and skills. In a fair and equal market this means the exchange of labour according to its
optimal distribution based on those abilities, without distortive power making that exchange unequal. Comparative advantage in this sense, like Ricardo’s wine and cloth, gives a real increase to both parties. Internationally however, there was however one important subtlety I have held back until now. That subtlety is easily hidden in the language. Capitalism advocates have a tendency to assume that money is a completely accurate representation of the underlying physical world. Therefore, if something is cheaper, it must have been produced in a way that uses less labour or resources. This however, is not always the case. The theory of comparative advantage relies on the idea that different nations will be efficient at producing different commodities. In times gone by, this was likely to be the result of one country having technologies that the other didn’t. But international trade and investment has meant that
technologies are no longer kept within national borders; the companies that own and buy those technologies too, span national borders. Human labour is much the same the world throughout; the only difference in the form of skills that can be taught. The same technologies and techniques that can be bought and employed by capitalists in New York or London are available too to the capitalists of India and China.

We realise therefore that the only difference in real production efficiency, from a geographic perspective, is where natural resources or use of the land is concerned. Imports and exports of raw materials and food are a good example of this. But where the difference is purely down to process; more efficient machines, techniques, et cetera; then the difference is between companies rather than localities. There is no resource difference whether the same factory operates in China or Scotland. The difference then, comes purely in the form of a monetary advantage: an hour’s labour for an unskilled
labourer in China is little different to an hour from an unskilled labourer in Scotland, but the former can be paid far less than the latter, due to laws and social expectations. There is therefore a monetary comparative advantage, but no real comparative advantage. In resource terms then, the extra transport and transactional costs are senseless. In other words, the act of shopping around the world for geography and skill has been replaced by shopping around for socio-political advantage; or rather, disadvantage on thepart of workers, to maximise the relative power of the investor. The prohibition of free movement removes the remedy to this.

The classic theory of comparative advantage formed by Ricardo has since been updated to form the Heckscher-Ohlin-Samuelson (HOS) model. The primary difference is that rather than assuming differences in productive efficiency due to technology, the differences that make trade beneficial are to do with the relative reserves of different factors of production; i.e. capital and labour resources. This does more-accurately reflect trade in the modern world, where technology generally moves with companies rather than being
constrained by national boundaries. The problem is that both capital and labour resources are all weighed in financial terms. This doesn’t make the theory wrong about the money relationship, but again, the money
relationship is a false economy in terms of physical efficiency. The market distortions that we have already discussed pertaining to the domestic economy also affect the viability of trade and reduce its real efficiency significantly.

One of the more obvious concerns about outsourcing and importing is the inevitable loss of jobs domestically. While this often gets laughed off with excuses about how the country in question should simply compete ‘better’, we already know that it is simply not possible to compete better. One can compete harder and bring jobs back, but in return, wages will be lowered for the workers of that country, which negates the benefit; or one can compete less hard and improve conditions for those who are in work locally, but risk
losing more jobs to outsourcing. When the competition is for which nation can present the most disempowered workers, there is no benefit to this negotiation for workers. Neo-liberalism has consistently ignored this complaint from the working class, which is part of the backlash that has fuelled the rise of people like Trump. Trump’s arbitrary and steep
protectionism however is an ill-constructed solution.

Some claim that the import and retail of foreign-manufactured goods compensates for the jobs lost. There are of course, some jobs created in these fields, but it is ambitious to believe such activities will provide as much employment as both manufacturing and retailing goods locally. In reality, because real wages are subsidised by imports, domestic companies have to pay staff less in real terms for the same quality of life. This makes it more affordable for companies to spend large amounts on advertising and other areas that, as we already know, gives them a competitive advantage, but does not contribute to the real value of the economy. Essentially, where the nature of the commodity allows it, some developed countries simply import their real goods and then spend their resources fighting over the how those goods are allocated. If labour were any other commodity then the idea of comparative advantage and specialisation would imply that these countries should simply produce less labour and specialise in capital, but given that the usage of
labour — employment — is also the means of wellbeing, countries then have to go against the tide of specialisation to create jobs. Indeed, if the comparative advantage for trade with another country is entirely based on lower labour standards, then, as with the HOS model, the more developed nation will
then be incentivised to invest in capital lending and investment over developing labour.

That means that the optimal profit will come from the more developed country rent-seeking on capital while using the labour of the less developed country, at the neglect of labour in the former. Labour in the more developed country is exposed to a race to the bottom condition where it has to compete with labour that is likely less efficient in real terms, but whose wages are suppressed. The choice is then whether to cut minimum wages and regulation to compete, or to disregard labour and benefit from specialising as
a provider of capital. The latter is essentially what the UK has deliberately chosen to do: cull its industrial production, focus on global usury through banking, and hope that provides enough of a ‘trickle down’ within the UK. Unfortunately, since the very rich have the lowest propensity to spend, and even lower within the same country, the demand created does not equal the demand lost. The results confirm this: since the decline of industry in favour of international usary, the finance sector has boomed while average labour wages have stagnated since the 1970s and fallen since 2000. The existing position of developed countries can be used as pressure for social change.

The offer of trade and technology can be used as incentive for improvements in civil liberties, but if this isn’t done carefully, the refusal of trade can do more harm than good.It can also be used negatively bad thing: demanding a country change its stance on drug prohibition because their approach does not match your own. The War on Drugs has been an international embarrassment of governance. Inherently, the influx of capitalism and the
corporations that come with it has an impact on culture. From Coca-Cola and McDonalds to Disney and Fox News, the corporate muscle of the United States is a high-pressure hose of American culture. That isn’t entirely free of positive influences, but it does risk drowning out the cultural value of the countries it overwhelms. It also places Western broadcasters in a position of immense political power.

The last seventy years have seen the establishment of various global and continental political bodies, including the UN, the EU, the IMF and the World Bank. The EU, for example, has done a great deal of good in terms of standardising regulations, upholding human rights laws, providing free movement and travelling rights, and maintaining peace in Europe for an unprecedented period. The EU even helped fund development in its
poorer states knowing this would improve trade conditions for all in future. At the same time, it has generally been guided by and for capital, with its primary objective corporate freedom more than individual. The single currency area has suffered because of separate nations implementing their own labour and revenue policies, alongside a common currency policy, which does create a downward race condition for taxation and redistribution, without the ability to compensate through currency changes between
nations. Membership criteria fundamentally mandate capitalism and liberal democracy for member states, preventing more radical change, and the EU has become a vehicle for enforcing austerity.

The IMF and World Bank have taken a similar approach, lending money to the most vulnerable countries and then using that debt as political leverage. Counties are ‘encouraged’ to accept free trade in a way that benefits the West — with no offer of free trade for labour — once again knowingly trapping them into low-level industries; meanwhile they are not allowed to protect their infant industries in advanced areas, which might be a good source of long-term wealth if only they were allowed a gestation period without being instantly crushed by existing foreign competition.

Due to the way the free movement of capital benefits the richest in Western society, and foreign markets with no regulation are the most attractive for investment, governments and corporations in the West have a history of supporting regimes that are otherwise oppressive, or supporting free market systems that to not benefit the local people, purely because these arrangements suit Western investors. The UK government of Margaret Thatcher, for example, supported the Chilean dictator Augusto Pinochet, who
implemented economic reforms that boosted profits, but increased inequality. Meanwhile, aid has been withdrawn from countries that have rejected market liberalism. Saudi Arabia, despite its human rights abuses, is supported as both a security and market foothold in Middle East.

With all that in mind, we therefore have a complex arrangement whereby the state and capitalism counteract, and compound, many of each other’s benefits and drawbacks. It is difficult to say that simply removing the state as it stands today would achieve much good; nor, instead, expanding it to its extreme.
The operation of free trade on illusionary advantages, like disempowered and
empoverished labour, creates a perverse incentive whereby investors from developed countries are better off maintaining that position for labourers, alongside allowing a tame middle class to rise as a privileged intermediary. Like an economic sterling engine, they are powered by the difference in wealth and regulations, and profit by moving goods between economies. There is profit in taking cheaply produced products from developing countries and selling them in more affluent markets; there is also profit in taking hoarded capital from developed countries and selling it as loans and investment in developing countries. These profits can only exist so long as the inequality itself exists, so the companies that take advantage of it will use whatever political leverage they have to perpetuate or increase inequality.

Globalisation and trade have enormous potential benefits for both developed and developing countries, but the fundamental problem is the asymmetrical manner in which these measures have been implemented. The global system has been designed to benefit those who were already in positions of dominance, rather than to create a world marketplace where developing countries are brought up to the level of the developed and where trade occurs through genuine specialisation. Thus no matter how beneficial the trade relationship to the junior partner, if it benefits the senior yet more, then in terms of the power relationship it further widens that between the two, developing the junior in exchange for its subordination. In this way, the
smaller, less developed nations of the world, like the individual worker, are forced to choose their masters, and in doing so they add to the power of those masters.

Is it surprising that we find again, oligopoly, on the world stage? That between the wars nations are pushed to one side or another; one to Russia, another to the USA. Here the accumulation of power applies also.

As for liberal democracy and the mixed economy itself, what does it become when we take it to its ultimate extreme? It is fascism. Oh, but the protests start from the left: fascism is the extreme of right wing ideology! And from the right: fascism is the extreme of left wing ideology! So how can it stem from the moderate centre? Yet, what is it that underlies the brutality and provides fascism’s economic power? Is it not a mixed economy, where state and market alike work to the advantage of the nation? And what is ‘the nation’ in that sense: fascism excludes the minority from power — merely as
democracy does, but to the extreme — in favour of the minority. It attacks capital and labour alike where they defy the interest of the majority. What is its vision? A fusion of national authority with a landed middle class. How do fascists rise to power? Mostly through democracy, with the firm support of the majority. It is opposed to genuine conservatism, because the latter supports aristocracy; it is opposed to right-libertarianism, for all of its state interventions for the majority against the individual; and it is opposed perhaps most oppositely by left libertarianism in that the majority, with
capital in one hand and the state in the other, crush the individual between them. The spectrum of authoritarianism therefore looks like this: Stalinism and its ilk on the left; aristocracy and theocracy on the right; and fascism between the two. Left and right then, not wishing to own the concept, both attribute it to the other, both disavowing that which they each have in common with it.

And how does this terrifying thing happen? When both left and right get their way. The extension of both state and corporate power leads to a unification of the two. Left and right goad each other into becoming more authoritarian. Both demand something be done against the other and demand power with which to do that.

The uneasy pact too quickly descends into cooperative oppression. As both traditional corners vie for collective power, the only solution is to return power to individuals.