Does democracy need a market economy? Short answer
Many think about whether democracy is necessary in a market economy. The answer in this case does not lie on the surface, since the system of trade relations affects many aspects of human life. On the one hand, freedom provides ample opportunities, and on the other hand, it infringes the interests of other people. Therefore, all the good should be in moderation.
About the feasibility of combining
Before we talk about whether democracy is necessary in a market economy, it is necessary to understand whether such a relationship is advisable in principle. In this aspect, the problem of compatibility of Western and Eastern cultures, as well as their ability to complement each other, is often touched upon. In a democratic reorganization of states, special difficulties arise because of the lack of a normal infrastructure of a market economy.
Any democratic country should act as a guarantor of the existence and high-quality functioning of the system of trade relations. Therefore, there are often analogies between two terms.By freeing the population from various forms of coercion, eliminating all sorts of privileges, democracy creates the optimal conditions for the realization of the economic freedoms of the subjects of society.
Enclosing the market in a specific framework capable of ensuring law and order makes it possible to ensure the legitimacy of free trade relations between the main participants. Freedom in this sense is meant as a function of properly functioning institutions of property. It becomes clear whether a market economy of democracy is needed, because a lot depends on it. The following parameters are important for the existence of a free political regime:
- living standards;
- education system;
- level of urbanization;
- energy consumption;
- lack of sudden changes in social strata.
All of the above depends on the degree of economic development. It should be noted that separately taken free-market relations, under certain conditions, can create obstacles for the realization of democracy, weakening the main points. Their establishment will not automatically lead to the establishment of democratic principles.
To some extent, to get a short answer, whether democracy is necessary to a market economy, will allow a little insight into history. A good example is the presence of Spain in the top twenty developed countries in the early 1970s, with an authoritarian regime flourishing. In addition, a certain group of states in Latin America managed to achieve quite good results in the economy under the same form of government. All the accumulated experience of the last century suggests that a market economy can exist with different government regimes. It can only be slightly deformed. In Germany, Italy and Spain, political forces were created on a capitalist basis, although the entire infrastructure was subordinate to state structures.
What is economic freedom?
To realize whether democracy is necessary in a market economy, one should find out what constitutes economic freedom. Usually, this term means the system of trade relations, the main purpose of which is the formation of optimal conditions for labor with the participation of public control.
Economic freedom can exist only if there is an independent market that acts as an effective mechanism. The benefits of competition for consumers are invaluable. They are provided with ample opportunities in terms of selection of goods. The main obstacle to establishing economic democracy will always be the concentration of power in the hands of some people, with inadequate public control. These may be economically strong categories of subjects, cooperatives, or government bureaucrats.
Loud sayings of famous people
In one of the most famous articles, US economist Robert Barro outlined briefly whether democracy is necessary in a market economy. He stated that in modern history the spread of democracy led to a certain development of low-income countries. However, after achieving a sufficient level of wealth, democracy can worsen the flexibility of the economy.
Denis Rodrik believes that, despite this state of affairs, there is no need to return to dictatorship or other regimes. Democracy has other economic virtues.If we take the medium term, the indicators are more stable. External shocks affect democracies not so significantly, since the system involves the creation of social programs that do not allow plunging a certain part of the population into an impossible situation.
Possible negative effects
To determine whether democracy is necessary in a market economy, it is necessary to consider its negative aspects. Like any other political system, it is not without flaws:
- the risk of destabilization associated with the very principle of the selection process;
- the likely lack of professionalism on the part of officials;
- the possibility of conflicts with political competition;
- the danger of tyranny of the majority in relation to the minority itself;
- low decision making speed.
These disadvantages are more characteristic of young states. In established countries, such flaws are not so tangible. The political course in any case is chosen by people who are controlled by citizens. With a decrease in the number of subjects involved in the process, the risk of making a mistake increases, but the price of such a decision becomes lower.
As a conclusion
On the burning question of whether democracy is necessary in a market economy, social science gives a positive answer. However, at the same time, this political system is not a prerequisite. As world practice shows, there were cases when capitalism was built under other forms of government. True, there are not so many such examples in the entire history.