Capitalism is an inevitable byproduct of democracy

PUBLISHED : Monday, 03 September, 2007, 12:00am
UPDATED : Monday, 03 September, 2007, 12:00am

'Democracy begins with the premise that all are created equal. Capitalism begins with the premise that competition will inevitably produce inequality, depending on differences in talent, industriousness and fortune. The two value systems have been the reigning philosophies in two different spheres of life.'

Al Gore,

Former US vice-president,

The Assault on Reason, p83

Another politician who doesn't geddit. I've yet to run across a full-time one who does.

A friend recently recommended Al Gore's latest book (Al's pumping them out almost as fast these days as I put out columns) and I decided to pick up a copy when I saw it at the bookstore a few days later.

The book starts off with a lament - Why are people no longer interested in what their politicians do? People are just putting no time into trying to understand the big political issues of the day and that's a Bad Thing.

Listen, Al. I have come to accept that you politicians, when in government, can stick a gun to my head to take away my money and make me do what you tell me to do. You have that power and you're the only ones who can consistently get away with it.

But if I'm not interested in other things you do then you can't force me to be. There are hundreds of things that absorb me and it is just possible that being a politics junkie isn't among them. If you bore me, the reason may just be that you're a bore rather than that I'm irresponsible. If I then switch you off, that's my right.

And, by the way, that's not called democracy. That's called a civil liberty. Democracy is about rule by majority vote. Civil liberties are things that I can do even if the majority vote says that I shouldn't do them.

It is civil liberties that are the real foundation of a free society. Democracy is only a way of getting there. Democracy happens to be the best way of getting there because all other forms of government invariably suppress civil liberties at some point but let's remember that democracy is still only a means to an end.

And capitalism is not a polar opposite of democracy or a contender against it. Capitalism is a civil liberty. It goes along with freedom of association, freedom of religion and freedom of speech. Capitalism is the freedom of the market, the right of each individual to buy and sell goods and services at prices mutually agreed by buyer and seller.

So I've got to tell you, Al, that I think you've lost the plot when you talk about democracy and capitalism being the reigning philosophies in two different spheres of life.

Democracy is indeed a reigning political philosophy but the contending political philosophy is called fascism. It is usually practised these days by governments that call themselves socialist or communist. They also used to call themselves nationalist too but we stamped that out in the second world war.

Capitalism, like all civil liberties, thrives best in democracies. It doesn't work well in fascist systems. It only really works in systems that begin with the premise that all people are created equal.

It then, as you point out, Al, allows talent, industriousness (awful American noun) and fortune to play on this equality of opportunity and the result is that some people grow richer and others poorer, although never to the extent that they do in fascist systems.

When democracy fosters true equality of opportunity in the market place, it is rare to see a huge divide between rich and poor. It is simply very difficult to grow obscenely rich when you have to fight for every cent you earn against people who are as clever as you are. A few people do it but not many.

I don't know, Al, whether you number any garment traders or electronics manufacturers among your friends. If you do, you would know that most of them are able to make a decent living but often work themselves to skeletons and frequently have to take big risks with their money.

The coin doesn't always come up heads when they do it. Sometimes they lose. That's why they mostly live in ordinary homes, maybe a little better than ordinary, but certainly not palaces. This is democracy in action and capitalism, a civil liberty, is one of its best expressions.

Look a little more closely at the sources of wealth of the very rich, however, and you invariably find that freedom of the market didn't really operate when they made their money.

Take your country's richest man, Bill Gates, for instance. He made his money because your government protected his software copyrights. This may be entirely fitting and proper. Call it so if you will but don't tell me that Bill Gates operated in a free market. He is rich because his government made him rich.

It works that way here in Hong Kong too. Our richest individuals made their money by exploiting market inefficiencies. These invariably stemmed from government interventions in the market, some perhaps justifiable and unavoidable, some just muddled and some more dubious.

In short, Al, if you want to know why capitalism doesn't always operate as well as it should, look in a mirror.