Free Market Capitalism And Democracy

I want to spend a little time talking about the relationship between free markets and democracy and about how closely connected the two are to each other.

A free market in this context is a market in which the participants—buyers and sellers, producers and buyers, businesses and customers, i.e., any pairing you’d care to think of involving people exchanging items of value—are free to determine for themselves both what it is that’s of value and the terms, if any, by which they’re willing to exchange those things.  Moreover, since the participants are free to bargain among each other, their collective choices, summarized into a general supply of and demand for goods and services and money determine general—and since voluntary, constantly fluctuating—terms of exchange: what can generally be expected to be available for buying and selling, and at what prices.

Capitalism in this context means private ownership of property, including money, and of the means of production: one’s body, including labor output; one’s thoughts, including intellectual property and output; and physical plant, including the entire gamut from individual hammers and screwdrivers up through whole plants and companies that use plants and employ physical and intellectual labor.  Further, capitalism occurs within the framework of a free market, and it facilitates accumulation of capital in a broad variety of forms for profit, for future expansion, and for development of new products and/or means of production.  Thus, capitalism underpins free markets.

Democracy is a means, often political, by which the members of a community decide for themselves a variety of matters, usually by voting in some manner.  A democracy may use a government as a mechanism for arriving at decisions, but in a democracy that government is subordinate to the people.  This is as opposed to a government originating decisions and handing them down to a subject people, with the people being subordinate to the government.

The aggregate of individual economic decisions is what makes up an economy.  In a free market, capitalist economy, individuals, at bottom, vote on what we want produced, vote on what we want to possess or to consume, with our economic property: dollars (which we earn in another component of the free market capitalist economy, the labor market, in which we sell our labor for a price voluntarily agreed on with an employer) and any other items we might offer in an exchange.

Every purchase we make, every sale we make, is the outcome of our voice speaking and the result of our choice made.  I’ve cited Adams before, but he’s applicable here, too: an individual’s happiness—the pursuit of which is one of those inalienable rights acknowledged in our Declaration of Independence—is this:

All men are born free and independent, and have certain natural, essential, and unalienable rights, among which may be reckoned the right of enjoying and defending their lives and liberties; that of acquiring, possessing, and protecting property; in fine, that of seeking and obtaining their safety and happiness.

Where we are free to choose for ourselves what we will do with our property, we there are free to develop our own lives toward our own goals.  And our economic property is founded on our natural right of property in our lives, our bodies, our minds, and the things we produce with those.  (As an aside, this natural right, among others, is acknowledged in our Declaration of Independence, as well as in Adams’ Massachusetts Constitution.)

It is this democracy of a capitalistic free market that enables us to manage our own ends, to reach for goals of our own choosing.  This is where we exercise our property rights in our own outputs.

And we must do so: if government exercises rights in our property, it also has control over our political property: it can give or withhold from us according to its approval of our voting.  Any time a government determines these things for us, even indirectly, by determining the terms of our exchanges, by determining the things we will be permitted—or required—to exchange, regardless of lofty motive, we individual participants lose our vote, we lose our voice: government is speaking, not for us and saying what we have instructed it to say; it is speaking, rather, to us and saying what its instructions to us are.

This is a two-way street.  Without political democracy, we cannot have the economic democracy of capitalistic free markets.  Within political democracy, we individually and freely vote with our political property for the things we need and want; it is through political democracy that we are able to act to preserve the freedom and capitalist nature of our markets.  The free market, our individual ownership of our property and of our productive facilities, are both demonstration and constructor of democracy.

In the end, free markets, capitalism, and democracy each needs the others; none can exist without the other two.  In fact, they are the same; they are merely economic and political sides of the same coin.

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