Journal of Political Ideologies (2001), 6(1), 75–94
The market–democracy conundrum
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Research Centre on Development and International Relations, Department of
Development and Planning, Aalborg University, Fibigerstraede 2, 9220 Aalborg,
Denmark
ABSTRACT The objective of this article is to characterize and problematize the
post-Cold War ideological triumphalis m of the free market and liberal democracy. Through a historical–cultural–political approach to studying the concepts
and inherent logic of the free market and liberal democracy and their interactions, this article claims that such an ideological paradigm cannot serve as a
universal political–economic system for nation-states , nor can it be promoted to
become a general principle or guideline in internationa l relations. Furthermore,
the ideology may fail to function in most developing countries, and in the long
run it may decline in the establishe d industrial democracies due to the challenges and contradiction s brought about by the free market forces. The conclusion maintains that liberal democracy will eventually be market-driven, and
the magic ‘invisible hand’ of the free market may rule every aspect of human life
and may hence marketize every right of each individual human being.
Following the end of the Cold War, with the collapse of the socialist bloc, and
the crisis of the Swedish welfare state model,1 it is claimed that two fundamental
Western ideological values appear to have triumphed: free market economy and
liberal democracy. They have become the prerequisite for interactions between
nations expecting political ‘acceptance’ by the international community or
seeking economic aid from international Ž nancial institutions . This had led to the
establishment of two political or theoretical proposition s in post-Cold War
international political economy and internationa l relations—the ‘end of history’2
and the ‘third wave’.3 For both of them, the end of the Cold War means that
history, in the sense of ideologica l con ict, has come to an end with the Ž nal
triumph of the Western ideological value system. Recently, these two positions
are being encompassed by a grander vision—‘globalization ’.
The essence of globalizatio n can be easily conceptualized by its impact on
three basic arenas of social life: the economy, the polity and culture. In other
words, the notion of globalizatio n maintains that a multiplicity of states with
unique political cultures (nation-states ) are being integrated by a common
economic system. The possibilit y of such a common economic system requires
ISSN 1356-9317 print; 1469-961 3 online/01/010075–20 Ó
DOI: 10.1080/1356931012004016 8
2001 Taylor & Francis Ltd
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at the same time a common political culture, social system, common language,
common policies. This is also the point of departure on which the arguments of
Fukuyama and Huntington are based: the nation-states of the world are moving
towards a common political culture of liberal democracy. Contentiously , liberal
democracy implies a commitment to free market capitalism because it is
believed that only the free market can guarantee individual freedom and rights
that lead to liberal democracy. This is the discourse on which the ideology of
free market and liberal democracy is conceptually grounded and the American
‘New World Order’ is politically founded.
The triumph of market neo-liberalism, despite persistent criticism, has nowadays been elevated as the paradigmatic framework to analyse all spheres of
society and human life including international relations. At the same time
democracy has in recent years been elevated to the position of good government
on a global scale. The combination of these two is being promoted to become
what Heilbroner calls ‘science’4—the explanation system, i.e., a way to study
human beings and societies. This article intends to conduct a critical analysis of
this ideological paradigm and reveal the inherent contradictions within each
concept and between them by taking into consideration new transformations of
international political economy that have an impact on individual nation-states as
well as on international relations.
It is often argued that it is impossible for the free market to survive without
liberal democracy, and vice versa. The mechanism of free market economy
needs private property, individual proŽ t-searching, innovation and entrepreneurship, which would not prosper without liberal democracy since it embraces
freedom of ideas, speech and movement and popular support. Hence, they appear
to be mutually dependent and deeply intertwined. However, as this article
argues, the  aws in this ideology lie in the contradiction s between their inherent
logic and interaction in which the free market and liberal democracy tend to
oppose or challenge each other. The outcome of their interaction will always be
one—the ‘marketization’ of democracy.
The free market, on the one hand, which is the pillar of the capitalist economic
order, is argued to be not a value-free concept and institution . It has roots shaped
by particular cultural and religious norms with values that in return promote
particular forms of human interactions and social relations. The outcome of free
market interactions is always the empowerment and inclusion of some, while the
marginalization and exclusion of others creates political and social contradiction s
and inequalities . This is not only true at the individual national level but also at
the global level. Through its mechanism and competitive nature, the forced
universalizatio n of the free market system and the commoditizatio n of human
activities are vertically generating economic inequalities across countries, especially between the rich North and the poor South. This is a serious breach of
the fundamental notions of democracy.
Liberal democracy, on the other hand, which is the pillar of the capitalist
political order, is based on the notions of justice, rights, equality, and freedom
aiming at horizontally embracing all political ideals. However, these values have
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different implications when they are identiŽ ed by the free market. Democracy is
understood as an implicit ‘social contract’ deŽ ning the relationship between the
state and citizens. It can also be conceptualize d as a part of the resilient capacity
of capitalism—a reciprocal and dialectical reform process of compromises and
negotiation s aiming at depoliticizing social contradiction s and social forces. In
recent years liberal democracy has been increasingly associated with civil
societies and non-governmenta l organizations which are in fact utilized by
neo-liberalism as intermediations in order to contain con ictual social forces and
contradictions . However, globalizatio n and the free market forces are at the same
time limiting the capacity of liberal democracy to fulŽ ll its perceived functions.
Understanding the free market
The economic order of market capitalism is philosophicall y and ideologicall y
based on a set of assumptions that: 1) the economy should be the dominant
institutio n in modern society; 2) sustained economic growth is necessary to
provide jobs and to provide the resources to clean up the environment; 3) a
steady increase in productivit y is necessary for continued gains in standards of
living; 4) technological advance and competition are essential for progress; and
5) free and unregulated markets generally result in the most efŽ cient and socially
optimal allocation of resources. All in all, it assumes that ‘all human behaviour
can be viewed as involving participants who maximize their utility from stable
sets of preferences and accumulate an optimal amount of information and other
inputs in a variety of markets’.5 And this assumption is argued to be applicable
to all human behaviour, including different types of human beings and different
cultures.
In essence, the system of capitalism can be conceptualized as a unique mode
of production:
physical capital loses its meaning as an object of use-value to gain a new meaning as a link
in a chain of transactions, the purpose of which is the enlargement of exchange-value (itself
a term that connotes a speciŽ c, although not exclusively capitalist, social setting). This
circuit of M-C-M9 (where M9 . M) is the self-replicating genetic unit of capitalism.6
The M-C-M9 7 formula through networks of exchange is the basic process of
capital and wealth accumulation. It is also the logic of capitalism. One of the key
capitalist networks of exchange is the free market.
The market is the central category and the core of capitalist economics. Blaug
claims that, ‘The history of economic thought … is nothing but the history of our
efforts to understand the workings of an economy based on market transactions’.8 However, the free market is concerned exclusively with capitalism both
as a mechanism of exchange and allocation and as a regulator of human and
social relations. It is not a neutral and value-free genesis. Rather, it has cultural
roots, and is embedded with peculiar political power relations.
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The free market and culture
A pure concept of market exchange can hardly exist if it is based on the
assumption that the market operates free of any political, cultural and socioorganizational constraints. Otherwise, the market exchange as an abstract concept could only make sense if a transaction took place between many actors who
are unaffected by any kind of establishe d social, political and cultural relations.
Neo-liberalism regards the free market as being separate from and autonomous
of social, political and cultural speciŽ cities. It is even seen as ‘the dominant form
of social behaviour or the dominant structuring force in social life’.9
In reality, what the free market does is not limited to its economic function
in allocating resources and distributin g income. To a large extent, the free
market shapes certain forms of culture; cultivates or impedes forms of human
interactions and social relations; and supports a deŽ ned structure of power. The
free market is ‘as much political and cultural institution s as … economic ….
[And our understanding] must be expanded to include the effects of markets on
both the structure of power and the process of human development’.10
To say the free market is a cultural institutio n is to suggest that the way people
interact in the market exchange process (i.e., regulating and coordinating their
economic behaviour) shapes what kind of people they become, because
The Economy—its markets, workplaces and other sites—is a gigantic school. Its rewards
encourage the development of particular skills and attitudes while other potentials lay
fallow or atrophy. We learn to function in these environments, and in so doing become
someone we might not have become in a different setting …. what the text book market
does is limited to allocation or distribution because the parties to the exchange—their
culture, preference, values—are exogenously determined and not in uenced by the
exchange process itself.11
The zealous pursuit of economic rewards through the free market is a product
of the cultural capital which determines not only economic and technologica l
progress but also ideological attitude.
According to Wilk’s studies on the relationship between economies and
culture, 12 all of economic anthropolog y is based on one of three modes of
assumptions about human nature. The Ž rst one regards humans as being only
interested in ‘self’, which is the basis of neo-classical economics. From this
assumption, human identity is strongly associated with the market, where
autonomous proŽ t-seeking individuals interact with one another rather than
collaboratively or with ties of kinship or community. The second sees humans
as social beings whose behaviour is moulded in association with groups. Several
political economy approaches, including Marxist ones, are related to this. The
third believes that humans are moral beings whose worldview is shaped by a set
of values. This is what Wilk terms ‘cultural economics’.
Max Weber was closely associated with the last assumption. In his in uential
book The Protestant Ethic and the Spirit of Capitalism, in which he analysed the
in uence of Lutheranism and Calvinism on the development of capitalism, he
argued that a causal connection existed between the spiritual and the temporal.
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His concern was the effect of religion on economic life. Many scholars like
Weber, including Hegel and even Marx,13 adopted a cultural perspective to
explain the reason why Occidental (Western) societies were able to achieve
industrializatio n earlier than the rest of the world, and why the Oriental (Asian)
societies were not. The implication behind this type of explanation is that
traditional religions and social structures in Asia were inimical to the development of capitalism. This also suggests that modernization is preconditione d by
cultural capital and ideological attitude which must be receptive to capitalism.
In connection with this culturalist interpretation , Alexis de Tocqueville also
maintained that the rise of modern capitalism was an outcome of peculiar
institutiona l developments which found their clearest expression in the capitalist
economy. As the nuclear core of social and cultural institutions , the historical
role of a particular family type—individualisti c bourgeois family with its social
habits and norms—is argued to be ‘the only institutio n sufŽ ciently dynamic
spontaneousl y to engender social processes that made for both the development
of a modern market economy and the rise of civil society during the eighteenth
and nineteenth centuries in the northwestern part of Europe’. And it exhibits ‘the
core features of any social order based on the principles of individual liberty,
political democracy, and a market economy’.14
The evolution of the free market system as well as the development of
capitalism itself can be better conceptualize d through examining the dynamics
emanating from the family structure because it provides ‘the rock-bottom
foundation for the development of corresponding macro-level economic and
political institution s within that society’, and such dynamics are crucial to
understandin g the ‘cultural potentials for future economic and political development to occur’.15 Unfortunately, this cultural background behind modern capitalism has been ignored at the current stage of globalization , where the market is
seen as being universal and irrelevant to cultural speciŽ cities.
The contemporary free market economy implies not only an exchange
institutio n for production of goods and services, but also an updating or
upgrading process from tradition to modernization in which the creation of an
ideologica l conformity between population and corresponding institution s is
indispensable . In this sense, what is necessary to create a modern industria l
society has less to do with cultural, social and political factors, than with market
mechanisms and economic forces. Accordingly, economic development presupposes a revolutionary transformation in ideology, philosophy , cultural traditions and psychologica l attitudes, as well as ways of life. Those very elements
that possibly cause suffering and dislocation are turned into the inevitable
prerequisite for creating a modern, rational, and industria l society.
The free market and political power
Contrary to the neo-liberal conceptualizatio n of the free market where each
individual (or state) is able to act upon his/her own goals, values and objectives
without subordinatio n or subjection to any other individua l or collective, the
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market is a political institutio n that eventually empowers some and marginalizes
others. The free market rules out the free exercise of collectives and other group
or individual initiatives : one is free to do anything as long as it is through market
exchange.
At the current stage of global capitalism, the market is redeŽ ning the concept
of ‘national economy’ within the framework of the nation-state . The relative
decline of state autonomy is a manifestation of the power of capital—the
mobility of transnational Ž rms, Ž nancial institution s and powerful individua l
investors to transfer production to countries or regions where state policies may
be more preferential to capital. This means that investors anywhere, through the
use of global instant communications , can invest their money in anything—
stocks, bonds, property, factories, foreign currencies—almost anywhere in the
world. Thus, they are in a position to monitor aspects of state spending and
in uence state policies, such as employment, social welfare, taxation, and so on.
The threat to move production and investment gives them a strong leverage to
win concessions and favourable policies. In other words, no state is large when
compared to the world market.
Today, the market deŽ nes the limits of state politics and economists exert
unprecedented in uence in policy-making . States no longer have the capacity to
act as buffers between domestic and international economic actors. Rather, they
have to adjust domestic policies or priorities to respond to the world economy.
Consequently, states become ‘transmission belts’ of global economic forces
penetrating local borders and markets.16 The domestic political and institutiona l
spheres face an inherent contradiction : on the one hand, states are the custodians
of society that have obligation s to fulŽ ll the role of providing social welfare and
security and protecting national interests; on the other hand, the indisputabl e
power of capital mobility reduces their capacity to do so.
For example, the old social movements in the West, such as trade unions and
peasant movements, have suffered setbacks under the impact of global market
competition. The weakening of labour movements is precisely the result of the
changing structure of production from a traditional clientele of manual industria l
production to a production which is being restructured on a world scale. The
structural power of Ž nancial and productive capital in the new global order has
weakened the power of trade unions and strengthened that of capital.
For many countries the forced integration into the global market system
entails structural differentiation and functional specialization in the way that
their national labour forces are propelled to divide into formal contract and
temporary workers with members of each group receiving differentiated salaries
and welfare beneŽ ts. Since economic mobility in the hierarchy of the world
economy requires higher levels of production and technology, the ruling élites of
many countries are pushing forward greater vertical linkages to the capitalist
market and deepen their internal accumulations through exploitatio n of surplus
labour. It is hoped that the external linkage of local economies to the world
market could reinforce their position and promote internal expansion. Rapid
industrialization , in their view, must attract foreign investment by providing
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‘favourable’ conditions to global capitalists and multinationa l companies and by
reducing welfare costs.
Lindblom 17 contends that business leaders’ control of production and investment decisions gives them a ‘privileged position’ in a democratic political
system. It is unnecessary to prove that economics/business nowadays occupies a
pivotal position in politics, and that the power relations between capital and
labour have become increasingly unbalanced. This is the situation not only in
developing countries, but also in industrial nations where the threat of disinvestment is enough to hinder citizens and elected government ofŽ cials from
attempting to make reforms unfavourable to business. This evolution cuts across
different political coalitions, national bureaucracies and other domestic social
institution s to ‘peg’ governments to market interests. As Boyer and Drache
vividly point out,
In the 1990s, governments on both the right and left approach policy-making as a
spectacular casino where everybody is trying to guess the next move of the Bundesbank,
the results of the next election in Canada, Germany, the UK or France or the forthcoming
statement by President Clinton on interest rates.18
As a result, the credibility of any government has come to rest on its economic
performance and its relations with the international capital market—a tendency
which makes it politically vulnerable to the setbacks of its domestic economy
and the breakdown of the international Ž nancial market. Many state élites realize
that the only way to stay in power is to promote economic growth and expansion
by all means, even by political authoritarianis m and through harsh labour
exploitation . Hence, the market is being closely connected with political legitimacy and internal power struggles.
The free market, competition and competitiveness
Today, the free market is seen as responding far more rapidly to subtle changes
in both people’s choices and social values than ever before. Theoretically, the
market mechanism where interactions are motivated by proŽ t can only operate
adequately when actors follow certain behavioural norms. Among economists,
there is little dispute about the logic of the market mechanism. However, there
is a fundamental disagreement about whether the market mechanism is based on
‘human nature’ or learned behaviour. Neo-classical economists believe the
response to the market mechanism is an inherent part of human nature in search
for proŽ ts.
The logic of the free market mechanism is entirely built on competition. The
owners of the means of production and Ž nancial capital have to compete with
each other in the market in order to get a larger share of the overall proŽ ts
produced. When competition is driven by proŽ ts, it does not necessarily mean
that actors in the market like to behave in that way. Nor are they addicted to an
endless process of wealth accumulation. Rather, it is because competition
becomes systematic that ‘the interaction of class and competitivenes s create not
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just an economic system but a social system: what happens in the kind of
economy tends to dominate every aspect of our lives’.19
The paradox facing most states is that, on the one hand, they are under
pressure to cut spending for the sake of competition, while on the other hand,
they have to provide the necessary ingredients for competitiveness , such as
infrastructure, education, job training, research and development policies. The
classical economic assumptions of comparative or competitive advantage, mutual beneŽ t and equilibrium are becoming increasingly outdated. The logic and
nature of market competition eventually leads to monopoly and exclusion.
The systematic expansion of capitalism is maintained not only through
competition but also through the constant reproduction of new commodities and
through innovation s and revolutions in modern technology. Those exceptionally
skilled in advanced engineering and computer technologies are supposed to be
rewarded with higher levels of income than those less skilled. As Greenspan
claims, ‘So long as material well being holds a high priority in a nation’s value
system, the persistence of technological advance should foster this process’.20 As
a consequence of severe market competition not only within nation-state s but
also between them, unemployment has also been globalized with migrating
labour in search for ‘higher-paid’ jobs and with capital searching for cheaper
supplies of labour. Not only can national labour markets no longer be isolated
but workers/farmers across countries are also brought into severe competition
with one another. Workers in industria l nations blame the abundant supplies of
Third World cheap labour including in the former socialist countries21 as the
source of their falling wages.
Rooted in the material process of market competition, the ideology of
competitivenes s has been taken for granted as a fact of life to whose dictates
people unthinkingl y acquiesce. It has been seen as a natural law, a natural force
beyond questionin g and resisting. As Rinehart observes, ‘Historically, the
concept of competitivenes s has been used to justify business oppositio n to
unions, reduced hours of work, wage increases, paid vacations, health and safety
regulations, antipollutio n laws, and so on’.22 Nowadays, competitiveness is used
to transform democracy and remove from the agenda of government tasks which
are deŽ ned as barriers to business competitiveness, such as income and wealth
distribution , business restrictions, laws on taxation and protection of union
activities.
The source of inequality and poverty
At the end of the twentieth century, we have witnessed the phenomenon of
‘global poverty’23 which has extended to all regions in the world including
countries of the rich North. Contrary to the neo-liberal argument that the free
market system is the most effective means of reducing poverty, it is actually the
globalizatio n of this system that is pushing forward technological revolution,
Ž nancial and trade liberalization , welfare downsizing, corporation restructuring,
production relocation, free movement of cheap labour, and more importantly, is
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hurting economies in Eastern Europe,24 East Asia and Latin America. The free
market has never been able to lift Africa out of poverty, and on the contrary, it
is bringing poverty and inequality back to those who had achieved economic and
human progress. The recent collapse of the Ž nancial market in East Asia caused
a dramatic decline of living standards of millions of people. Menaced by
privatization and forced bankruptcy of hundreds of state enterprises, millions of
Chinese workers have been or are being laid off. At the same time, the state is
distancing itself from spending on welfare and social programmes. It is
unofŽ cially conŽ rmed that the rich–poor gap in China has already surpassed that
of the United States.
In Latin America and the Caribbean, while average incomes are six times
those in Africa, 200 million people live in poverty. Despite its severe Ž nancial
crisis, Mexico has the world’s fastest growing number of billionaires : thirteen in
1994. 25 In South Asia, home to the world’s largest poor population , despite the
falling proportion of people below the poverty line, the absolute number is
increasing. The worst region is Sub-Saharan Africa, where poverty is rising not
only in terms of the total numbers affected but also as a proportion of the
population . 218 million Africans live in poverty and this number will increase
to 300 million by the end of the decade.26
In the North, the United States, the so-called ‘largest liberal democracy’, is
witnessing the rise of economic inequalities among classes due to the monopoly
of capital and concentration of wealth. 500 giant monopolies accounted for 92
per cent of all income in 1994. During the 1980s, according to UNICEF’s The
State of the World’s Children 1994, an additiona l four million children fell into
poverty, although the wealth generated by the country’s economy expanded by
one-Ž fth. According to The State of America’s Children Yearbook 1994, child
poverty affected 22 per cent of all children by 1992, and infant mortality rates
for black children were more than double those for white children. In the United
Kingdom, the number of people who lived on less than half the average income
reached 12 million, more than double the number in 1979.27
Even so, the free market is still seen as the most efŽ cient way to regulate
society. It is increasingly becoming the societal ideology, and at the same time
economic growth is becoming a standard way of viewing social development. As
a result, the three market elements—supply, demand and price—become not just
exchange utilities, but are embedded with political and socio-cultural implications. In other words, market relations and social relations are implicitly
becoming the two sides of one coin. Accordingly, social relations have to be
transformed or adjusted to aim at creating new ways of thinking in conformity
with the rules and values of the market. To put it metaphorically, the market is
increasingly treated as a bird-cage and a human being as the bird.
Seen from the above perspectives, the current globalizatio n of the free market
system can also be described as a new age of ‘imperialism’. Imperialism today
is not about the confrontation between the capitalist and non-capitalis t world, but
about the relations within the global market system. It is not a matter of
territorial conquest or direct military control. Imperialism is a matter of con83
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trolling the world economy and global markets as well as human activities and
ideologies.
When developing countries have to integrate their economies with global
capitalism based on market parameters—free prices, the removal of subsidies,
the opening up of economies to international trade, freely convertible currencies,
privatization of the state-owned companies, absorbing foreign investment, closing inefŽ cient enterprises and laying off redundant workers—they are actually
playing the market rules set up by the dominant imperialists. In other words,
they are entering a trap as only a rule-player not rule-setter, where they will
always feel powerless. Without a clear comprehension of the production and
class relations in the world system, the free market will never make them
understand the real factors behind the ever-enlarging gap between the developed
and underdeveloped or between the rich and poor.
Understanding liberal democracy
Capitalism, like all other social systems, must require a social structure of
vertical and horizontal order. The market represents the vertical order, whereas
democracy represents the horizontal order. The fundamental task of the capitalist
political order must be not only to protect its economic order through laws and
regulations but also to facilitate all mechanisms in which the market can fully
develop, expand and  ourish. In other words, the capitalist political order must
assist the economic order on which the hegemony of the dominant class is based.
To lose the economic order is to lose the reproduction of the material basis on
which the dominant class will rely to sustain its hegemony.
Democracy and capitalism ’s resiliency
Within a capitalist society, a variety of social relations are embedded in diverse
institution s and organizations such as political parties, trade unions, the mass
media, churches and non-governmenta l organizations . To deal with these complex relations, liberal democracy aims not only at legitimizing the dominance of
capital at the system level, but also at receiving tacit consent to the status quo
from all subordinate classes and social groups, especially from organs of public
opinion such as television, newspapers and various associations.
In many ways liberal democracy can be conceptualize d as ‘the resiliency of
capitalism’s various political forms—a resiliency which exists despite the
fundamental contradiction at a stage in history between the forces of production
and the relations of production’.28 Resiliency implies a reciprocal and dialectical
reform process of compromises and negotiation s between the dominant bourgeois class and subordinate classes. It seems ‘as if the relations of capitalist
production were possessed of a certain capacity for internal adaptation to the
developments of the forces of production, a certain plasticity, which allows them
to “restructure” in periods of crisis’.29
This process of restructuring is what Gramsci called passive revolution,30 in
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which the capitalist classes respond to an organic crisis by making necessary
compromises and modiŽ cations as well as creating social reorganizations in
order to reestablish their hegemony. Capitalist reformism is a way of passive
revolution in which
The acceptance of certain demands from below, while at the same time encouraging the
working class to restrict its struggle to the economic–corporative terrain, is part of this
attempt to prevent the hegemony of the dominant class from being challenged while
changes in the world of production are accommodated within the current social formation.31
Under all circumstances, the upper economic class must create and maintain an
equilibrium between its own fundamental interests and those of subordinate
classes. Hence the dominant mode of production must be preserved. Yet at the
same time the consent from the subordinate classes to the rule of the economic
class is not withdrawn.
From a classical Marxist point of view, in capitalist society the above
equilibrium is not sustainable due to the inherent contradiction s between the
excessive proŽ ts of the bourgeois class and the wage level of the working classes
that tend to break the societal equilibrium . However, as time passes, the
capitalist classes in modern and advanced industrial economies have realized the
necessity to develop a capacity, for the sake of maintaining the economic order,
to reward the material and political demands of the subordinate classes without
giving up the mode of production and their fundamental class interest. In other
words, they are able to maintain the fundamental but often unstable equilibrium:
on the one hand, to earn enough proŽ t for capitalist accumulation and reproduction, and on the other hand, to realize material well-being for the masses so
that they accept with consent the rule by capital.
The free market is understood as the best means to sustain this unstable
equilibrium and maintain what Antonio Gramsci called bourgeois hegemony, i.e.,
to ‘rule by consent’ rather than to ‘rule by force’. To rule by consent is to claim
to represent the universal interests of the whole society not only politically and
economically but also culturally and ideologically . Human ideology is not
something that is separate from human activities. Rather, ideology has a material
existence in these activities. To say that ideology has a material existence is to
indicate that it is embodied in individual livelihood and in the political/economic
institution s and organizations where human activities occur. It is through these
experiences as well as their effects that ideology is formed, sustained and
expanded. The free market offers people an ideal place to associate the process
of ideology-formatio n directly with material life, living-standards , welfare,
wealth and power.
Since the free market emphasizes ‘individualism ’ and ‘freedom’ (e.g., individual choice, freedom of competition, freedom of purchase and sale), it Ž ts very
well the notion of individua l value/rights which liberal democracy represents.
What liberal democracy does is to single out and differentiate individualis m as
pertaining to an individual human being and an individual citizen from the
individual as a member of a speciŽ c class. To put it more clearly, it intends to
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individualiz e people of the subordinate classes into ‘individua l persons’ or
‘citizens’, aiming at dissolvin g the collective core or common basis without
which a class cannot exist. In this sense, every individual member of a
class/group no longer acts qua class/group, but acts qua people or citizen.
Everyone is supposed to have the freedom and rights to participate, as an
individual citizen or voter, but not as a member of a class, in elections,
legislation , government representation as well as political and economic
decision-making.
Such a deliberate separation of the political and economic spheres produces
among the people the ideological conviction that they do exercise self-government in the representative State. This leads to various forms of democracy which
help preserve capitalism while making it more acceptable to both workers and
the petty bourgeoisie. Within the United States, for example, capitalism has been
able to prevent political, economic and social con icts from reaching a level of
revolutionar y crisis—’struggle over the ownership of the means of production,
that is, socialism, has hardly ever reached the public agenda’.32
However, the above understandin g of capitalist resiliency is conŽ ned within
the boundaries of individual nation-states . Now the interesting questions are:
Can capitalism’s resiliency still remain when boundaries between nation-state s
are disappearing? In other words, can resiliency survive under global capitalism
in which no state authority has the power to discipline transnational markets
even within its own jurisdiction? According to the UN World Investment Report,
in 1992 there were more than 35,000 transnational corporations (TNCs) with
over 200,000 subsidiaries, and this number is certain to have risen substantiall y
by the end of the century. Who and what can be the check–balance mechanism
to hold these TNCs democratically accountable?
Hence, the globalizatio n of markets has a direct impact on both the nature and
the future of democracy. The paradox to confront is that, on the one hand, the
democratic impulse is to bring decisions on questions affecting the society at
large under public and popular control. However, on the other hand, decisions
in a free market system with important public consequences are private and are
made by rational, proŽ t-seeking business leaders. Many democratic claims from
citizens who wish higher wages, more public spending, tighter environmenta l
regulations and better working conditions are unacceptable to business owners.
This is because democratic demands often violate the logic of the free market.33
Everywhere electorates are looking to states to be a counterweight to tame
TNCs. On the other hand, states are forced to use market agreements to
discipline the domestic labour force and to limit rights, especially political and
welfare rights.
Democracy, civil society and non-governmental organization s (NGOs)
Civil society received public attention in the 1980s as an endeavour to create
civility in society. It further gained publicity in the former socialist states in
Eastern Europe in the late 1980s and the early 1990s partly due to the
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wide-ranging social transformations taking place there, such as liberalization ,
marketization, privatization and democratization.
Civil society was seen as the opposite of state despotism —a ‘place of
manoeuvre’ connecting society and the state and a precondition for democracy.
The importance of civil society is understood from its relation to the hegemonic
nature of a state. Civil society was understood by Gramsci as comprising all
‘private’ organizations , i.e., political parties, trade unions, churches, various
associations , etc.34 Here, civil society is contrasted to political society which
comprises coercive state institution s such as the armed forces, police, law
enforcement and prison, as well as various governmental departments. Political
society is the primary source of coercive domination, while civil society is the
primary source of consensual power.
One way to understand the hegemony and sustainabilit y of capitalism is to
study the relationship between the state and civil society because
Civil society is the sphere where capitalists, workers and others engage in political and
ideological struggles and where political parties, trade unions, religious bodies and a great
variety of other organizations come into existence. It is not only the sphere of class
struggle; it is also the sphere of all the popular–democratic struggles which arise out of the
different ways in which people are grouped together—by sex, race, generation, local
community, region, nation and so on.35
Based on this understanding , power is perceived in terms of relations, civil
society as social relations also entails relations of power. In this sense, political society can be viewed as visible power, whereas civil society is invisible
power.
The durability of capitalist (bourgeois) political order is understood by
Gramsci as being based on the recognition of the importance of political
institution s and mechanisms in their relations to civil society. In Hobsbawm’s
explanation,
This is why political arrangements have become a powerful means for reinforcing
bourgeois hegemony. Slogans such as ‘the defence of the Republic’, ‘the defence of
democracy’ or the defence of civil rights and freedoms bind rulers and ruled together. This
is no doubt for the primary beneŽ t of the rulers, but this does not mean that they are
irrelevant to the ruled. They are thus far more than mere cosmetics on the face of coercion,
more even than simple political trickery.36
Since the capitalist political order is strongly entrenched in civil society, the
capitalist economic classes often do not have to run the state itself as long as the
state rulers recognize the hegemonic structure of civil society as the basic limit
of their political action.37 It is on these two levels—political and civil society—
that the true and comprehensive notion of hegemony is Ž nally maintained and
consolidated . On the one hand, civil society corresponds to the function of
hegemony, while on the other hand, political society maintains hegemony
through forced coercion of state ‘juridical power’.
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However, although civil society as an analytical framework can be a useful
tool to understand power relations in a society, the counter-positio n of civil
society vis-à-vis the state is a false dichotomy. While scholars from the
transitional economies such as Russia, China and Eastern Europe are intoxicate d
with the concept and role of civil society, they may overlook the basic social
contradiction s that divide the state and ‘civil society’. There are fundamental
differences between the notions and functions of civil society conceptualized at
two levels—from above (the dominant economic class) and from below (the
working class). For the former, civil society wants to reduce statism so as to
protect its economic position and class interest, whereas for the latter, civil
society seeks to break the monopoly of the economic classes. The contradiction
is that on the one hand, ‘civil society from below’ still needs the state to make
necessary social, political and economic reforms so as to protect and improve its
socio-economic position. Yet, on the other hand, ‘civil society from above’ blurs
the differences between social classes so that the hegemony of the ruling classes
remains unchallenged.
Nowadays, civil society is connected with NGOs in many ways. To many,
NGOs are distinct civil societies whose power lies in the fact that they are
unaffected by both state and market. Being ‘non-governmental’ and enjoying the
image of ‘impartiality’, NGOs seem to be ideologicall y pure and incorruptibl e
either by power (state) or by money (the market). During the past few decades,
NGOs have increased in number, size and scope and have risen to pivotal
positions in uencing social, economic and political agenda around the globe.
According to the Year Book of International Associations, there are about
16,000 internationally recognized NGOs, and based on the estimate by the
Human Development Report 1994, there are about 50,000 local NGOs operating
in the South. The Organization for Economic Cooperation and Development
estimates that the total amount of funds allocated to NGOs was US$6 billion in
1994. 38
Since the 1980s, the more perceptive sectors of the neo-liberal ruling classes
have realized that the market forces and globalizatio n were polarizing societies
everywhere, causing social discontent and threatening the capitalist economic
order. Neo-liberal politicians especially from the West began to design and
Ž nance a strategy understood as ‘from below’ aiming at promoting a ‘social
cushion’, i.e., grassroot organizations across the world with an anti-statist
ideology to step in among con icting social forces.39
NGOs, through local, regional and global networks, are intervening in dialogue channels and policy-making processes that are traditionall y dominated by
the state. The ascendance of NGOs’ role as mediators between local organizations, the free-market state, neo-liberal foreign donors and transnationa l companies, according to Petras,40 is aimed at fulŽ lling a number of hidden neo-liberal
agendas: 1) to weaken the national welfare states through pressing them to spend
more on social services to ‘repair’ the damages caused by free market competition and ‘compensate’ the victims of multinationa l companies; 2) to promote
projects such as ‘self-reliance’, i.e., job training, education programs, in order
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temporarily to pacify some groups of the poor affected by global market forces,
and to assist local leaders and to soften anti-market struggles; 3) to represent
neo-liberal forces from below, a ‘community development’, in an attempt to
convert ‘leftist movements’ to become a part of NGO formula and practice,
namely, to conŽ ne Marxist class politics within an NGO framework; and 4) to
sever the link between local struggles and international political movements.
In the current era of global capitalism, NGOs are much involved in facilitating
the effective participation of developing countries in the global marketization
process rather than providing any alternative to them. This is also due to the fact
that NGOs themselves are a part of the global market with increasing engagement in proŽ t-oriented private businesses. Consequently, their ideological orientations and organizationa l practices tend to converge with the market forces. A
number of critical studies have looked into the relationship and interactions
between NGOs, the market and the state. According to Sanyal, the successful
NGOs are those who are in close connection with the dominant institution s in
the public and market domains. And following Bebbington’s opinion, NGOs
need to be understood within the context of competitive markets, both national
and international , which are a necessary condition for their success.41
The role of NGOs within the framework of the globalizatio n of the world
market is becoming increasingly contradictory: they want to play an active part
in ‘mitigating’ state and market failures, but they avoid involving themselves in
worldwide anti-market or anti-capitalis m movements. They commit themselves
to the promotion of local mobilizations , but they are uncritical of the source of
the damage caused by the mobility of foreign investment and by the speculation
of international Ž nancial capital. They dedicate themselves to the promotion of
local projects, but they do not challenge the control of means of production and
capital; they emphasize the importance of education and technical assistance to
developing countries, but they do not question the class-based social and
structural problems in these nations. In reality, what NGOs are doing is only to
address some practical problems in relation to state and market failures and
attempt to solve them in a non-confrontationa l matter.
More importantly, NGOs’ emphasis on ‘non-government ’ and ‘local movement’ in developing countries as a leverage against state power actually destroys
the capacity of the state as a buffer between domestic and international economic
exchanges. They serve the interests of international Ž nancial institution s and
transnationa l companies which can interfere in the socio–economic–political
policies of these countries.
Based on these aspects of analysis, it can be said that democracy as the
expression and essence of civil society or NGOs can be considered as a myth
because it conceals the contradictory character of the hidden social pattern: on
the one hand, democracy promotes consensual integration or social acceptance
of certain values, cognitions and symbols which are supportive of the existing
political and economic system; whereas, on the other hand, the free market
forces tend to deŽ ne democracy by making it subject to the rules of the capitalist
mode of production which inevitably generate undemocratic results.
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Democracy and ‘social contract’
The notion of liberal democracy is very often referred to as that of ‘social
contract’, i.e., a contract between the state and citizens that binds the two sides
together in a collective society. The basic concept of social contract connotes an
agreement that deŽ nes authority and obligations :
Legitimate authority is created when individuals give consent for the initiation of the
agreement. This means that they concede certain individual freedoms and accept certain
obligations in exchange for the provision of certain goods that they would have difŽ culty
attaining as individuals and through other mechanisms.42
In the current era of market-dominate d capitalism, the notion of social contract
as citizen–state interactions has undergone tremendous transformations , namely
that the consent and consensus involving obligations of both citizens and
government and accountability –control mechanisms are increasingly being marketized. In other words, the agreements embodied in the social contract are being
maintained and regulated through market-based mechanisms.
Although the market mechanism as an alternative regulative method has long
existed, it has a strong tendency to break contracts forcing governments to
‘contract-out’ their obligation s in order to respond to competition, productivit y
and efŽ ciency, because
The market notoriously tends to universalize itself. It does not easily coexist with
institutions that operate according to principles antithetical to itself: schools and universities, newspapers and magazines, charities, families. Sooner or later the market tends to
absorb them all. It puts an almost irresistible pressure on every activity to justify itself in
the only terms it recognizes: to become a business proposition.43
For example, in some welfare states like Denmark, governments are beginning
to award private Ž rms business contracts to manage welfare or public services
which used to pertain to the responsibilitie s of the governments.
As a result of the marketization of the social contract, the ‘social’ part of the
contract is becoming less universal than selective, and political participation is
becoming less inclusive than exclusive. Thus, the concept of citizenship as a
means of political empowerment is changed to one of economic empowerment.
This implies the fundamental transformation of the social contract which
emphasizes social and political rights.
Furthermore, the neo-liberal economic discourse that regards citizens as both
consumers and customers threatens to ‘rewrite the traditiona l conceptualizatio n
of the social contract as a social subcontract and, in doing so, fundamentally
change the relationship between citizens and state, as well as the political
foundation of government’.44 As a result, democracy in the form of accountability mechanisms regulating citizen–government relationship is also altered. Under
the non-market-centre d social contract people can use direct political mechanisms to hold the government apparatus accountable. But under the marketdominated social contract, the market is ideologicall y deŽ ned not only as a
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neutral place (institution ) for the allocation of goods, resources and services, but
also as the most efŽ cient mechanism to regulate society and human relations.
Conclusion
Since the end of the Cold War, the quest for the free market economic system
has been one of the most salient features of international relations. Meanwhile
liberal democracy is supposed to be the most effective way to promote global
market liberalization . However, as the analyses of this article indicate, the  aws
of such an approach to understandin g human society are that it deliberately
separates the production/class relations from the market relations so that the
exploitatio n or unequal class relationship in production is hidden while the equal
relationship in the market is exposed. Only the production relations can reveal
the real social aspects of human activities: common need (not individua l
preference), cooperation between divisions , and the relationship between the
owner and the owned. The market tends to make people forget these aspects. It
must not be forgotten that the production/class relations have already more or
less determined the role and position of each individual before she/he enters the
free market.
When economic neo-liberalism speaks of democracy, very often it means the
capitalist free market system. Freedom is mainly freedom for business and
corporations to operate, and rights are narrowly deŽ ned within the framework of
politics. In fact they are the two sides of the same coin. The capitalist economic
system itself is an antidemocratic system of rule. The crucial question is: can
liberal democracy really democratize the key elements within the capitalist
economic system, such as capital, the means of production, wealth distribution ,
etc.?
In addition, liberal democracy focuses on individual freedom and rights and
protects individuals from coercion by the state. Liberal politics relates only to
state institutions , whereas economic and cultural factors are regarded as separate
and irrelevant spheres. To liberal democracy, individual political freedom is
more important than economic equality, and material scarcity is not seen as an
obstacle to enjoying political rights. Political scientists have the tendency to
ignore the market impact on democracy, leaving the Ž eld to neo-liberal
economists, who maintain that democracy cannot be sustained without the
functioning of the free market. Neither have political scientists paid any serious
attention to market impingements such as wealth inequality and exclusion, as if
they were not a peripheral and inherent  aw in democracy.
The free market school of thought believes that the best way for all countries
in a global system is that everyone is subject to the same rules. Yet the
diversities of nation-states mean that ‘the world remains ruled not just by hard
choices about the distributio n of income and power between capital and labor
but also by stark differences among nations in their economic goals and
interests’.45 Even George Soros, one of the world’s biggest Ž nancial capitalists,
openly acknowledges that the origin of the recent world Ž nancial crisis is to be
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found in the global capitalist system itself, namely ‘in the mechanism that
deŽ nes the essence of a globalized capitalist system: the free, competitive capital
markets …’. And he contends as well that the ideology of global capitalism faces
a historical challenge that could produce a strong backlash against the free
market system, particularly in the developing world.46
To bring other political and social perspectives into analysis, we can discover
that the ideology based on the free market and liberal democracy purposefully
conŽ nes crucial issues such as class, race, gender, inequality and ethnicity within
the political scope, but outside the free market framework. In other words, these
issues should remain outside the theoretical purview of the free market structure.
From a Marxist perspective, it is a way to dissolve class consciousnes s through
market competition and consumerism and raise the political consciousnes s of
individual preferences and identity through democracy. But many of today’s
contradiction s caused by the global market interactions are in nature those of
class struggle. Ironically, the global transformation of capitalism is turning the
world back to the Marxist fundamental—the class analysis.
Furthermore, since market power has a strong tendency to deŽ ne political
power, liberal democracy can hardly become a governing principle in international institution s and inter-state relations. Not only are Western bureaucracies
themselves organized on the basis of strict hierarchies, but international organizations like the IMF and the World Bank and especially the United Nations are
also established on and maintained through oligarchical structures where important decisions are made by major economic powers. The democratic principle of
‘one citizen, one vote’ can barely be implemented when the interests of the state
élite classes are challenged. Nor can ‘one state, one vote’ be realized when the
‘national interests’ of Western powers are threatened.
It is believed that, in the long run, liberal democracy will be deŽ ned and
weakened by the free market, leaving political outcomes to be ‘bought and sold’.
If global capitalism continues to develop as it does today, the magic ‘invisible
hand’ of the market may eventually rule every aspect of human life and may
marketize all individual human rights. It will no longer be invisible .
Notes and references
1. The social democratic project used to be considered as a third way between capitalism and communism.
Globalization in the late 1980s and 1990s has widely been viewed as having had profound implications
for national economic autonomy and domestic policy choices. The neo-liberal discourse on globalization
had a special impact on welfare states in general and Northern European welfare states in particular
because their high levels of social security taxes and public spending were seen to cause low competitiveness and high unemployment . Governments in these countries, such as Sweden, responded to the
wide-ranging pressures by distancing themselves from Keynesianism through gradual withdrawal from the
responsibilities of welfare provision and by adopting neo-liberal economic measures (decentralization,
marketization and privatization) in order to become competitive.
2. F. Fukuyama, The End of History and the Last Man (London: Hamish Hamilton, 1992).
3. In his book The Third Wave: Democratization in the Late Twentieth Century (Norman, OK: University of
Oklahoma Press, 1993), Samuel Huntington envisioned a new wave of democracy washing across the
globe. However, in his recent publications, such as The Clash of Civilizations; And the Remaking of World
Order (New York: Simon and Schuster, 1997), Huntington somehow changed his tone and began to argue
that: 1) the victory of liberal democracy has placed Western civilization in clear contrast to other
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4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
civilizations; 2) the United States is in decline, and democracy is limited to Western cultures; and 3) the
West must consolidat e itself in order to win the ‘West-against-rest’ battle.
R. Heilbroner, ‘The embarrassment of economics’, Challenge, 39/6 (1996), 49.
G. S. Becker, The Economic Approach to Human Behavior (Chicago, IL: University of Chicago Press,
1976), 8.
R. Heilbroner, ‘The nature of economics’, Challenge, 38/1 (1995), 23.
M refers to money; C refers to the cost of production (or commodity values used in production), and M9
refers to the money value of sales. M9 . M indicates that M9 exceeds M, which means that the capitalist
earns proŽ ts. This is the basic mode of capitalist accumulation .
M. Blaug, Economic Theory in Retrospect (Cambridge: Cambridge University Press, 1985), 6.
E. Mingione, Fragmented Societies: A Sociology of Economic Life beyond the Market Paradigm (Oxford:
Basil Blackwell, 1991), 5.
S. Bowles, ‘What markets can and cannot do’, Challenge, 34/4 (1991), 11.
Bowles, ibid., 13.
J. M. Acheson’s book review, ‘Economies and Cultures: Foundations of Economic Anthropology, by
Richard R. Wilk’, Annals of the American Academy of Political and Social Science, 554 (1997),
p 233–234.
Friedrich Hegel, comparing China with the Western consciousnes s of the world that created revolutionary
history, placed it in the ‘childhood’ of history. Karl Marx, whose theories and insights inspired the Chinese
Revolution, described China as a society ‘vegetating in the teeth of time’, and discovered in the Great Wall
of China a metaphor for the universal resistance of non-Europea n societies to change: see A. Dirlik and
M. Meisner (Eds), Marxism and the Chinese Experience (New York: M. E. Sharpe, 1989), 17.
B. Berger, ‘The social roots of prosperity and liberty’, Society, 35/3 (1998), 45.
Berger, ibid., 44.
R. W. Cox, ‘Structural issues of global governance : implications for Europe’, in Stephen Gill (Ed.),
Gramsci, Historical Materialism and International Relations (Cambridge: Cambridge University Press,
1993), 260.
C. E. Lindblom, ‘The market as prison’, Journal of Politics, 44 (1982), p 324–336.
R. Boyer and D. Drache (Eds), States Against Markets: The Limits of Globalization (London: Routledge,
1996), 19.
B. Hargrove, ‘The future of capitalism: does capitalism represent the best humanity can ever hope to
achieve?’, Monthly Review, 46/8 (1995), 2.
A. Greenspan, ‘Market capitalism’, Vital Speeches of the Day, 64/14 (1998), 421.
Taking China as an example, it is estimated that by the end of this century or early next century, China
will have about 200 million surplus labourers. Many of them are migrant drifters from China’s remote and
poor areas who sweep back and forth across the country in search of jobs. The population of drifters
consists of impoverished peasants, refugees from areas of natural disasters, and surplus labourers as a
result of increasingly mechanized agriculture, as well as workers laid off from bankrupt township
enterprises.
J. Rinehart, ‘The ideology of competitiveness ’, Monthly Review, 47/5 (1995), 14.
M. Chossudovsky , ‘Global poverty in the late twentieth century’, Journal of International Affairs, 52/1
(1998), p 293–311.
According to the 1996 UNDP report, during the 1990–1993 period alone, average income in Eastern
Europe dropped by a Ž fth or more.
The Economist, 13 November, 1993.
K. Watkins, The Oxfam Poverty Report (Oxford: Oxfam, 1995), p 4–5.
Watkins, ibid., 5.
A. S. Sassoon, ‘Passive revolution and the politics of reform’, in Anne Showstack Sassoon (Ed.),
Approache s to Gramsci (London: Writers and Readers Publishing Cooperative Society, 1982), 135.
C. Buci-Gluksmann , ‘State, transition and passive revolution’, in Chantal Mouffe (Ed.), Gramsci and
Marxist Theory (London: Routledge & Kegan Paul, 1979), 209.
A. Gramsci, Selections from the Prison Notebooks, edited by Quintin Hoare and Geoffrey Nowell Smith
(London: Lawrence & Wishart, 1971).
Sassoon, op. cit., Ref. 28, 133.
R. J. S. Ross and K. C. Trachte, Global Capitalism: The New Leviathan (New York: State University of
New York, 1990), 9.
D. N. Balaam and M. Veseth, Introduction to International Political Economy (London: Prentice-Hall
International, 1996), 252.
A. Gramsci, op. cit., Ref. 30.
R. Simon, Gramsci’s Political Thought (London: Lawrence & Wishart, 1982), 69.
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36. E. J. Hobsbawm, ‘A new science of politics’, in Anne Showstack Sassoon (Ed.), Approache s to Gramsci
(London: Writers and Readers Publishing Cooperative Society, 1982), 32.
37. R. W. Cox, ‘Gramsci, hegemony and international relations: an essay in method’, in Stephen Gill (Ed.),
Gramsci, Historical Materialism and International Relations (Cambridge: Cambridge University Press,
1993), 51.
38. J. L. Fernando and A. W. Heston, ‘NGOs between states, markets, and civil society’, Annals of the
American Academy of Political and Social Science, 554 (1997), 8.
39. J. Petras, ‘Imperialism and NGOs in Latin America’, Monthly Review, 49/7 (1997), 10.
40. Petras, ibid., p 11–12.
41. Fernando and Heston, op. cit., Ref. 38, 8.
42. L. A. Blanchard et al., ‘Market-based reforms in government : toward a social subcontract? ’, Administration and Society, 30/5 (1998), 485.
43. C. Lasch, The Revolt of the Elites and the Betrayal of Democracy (New York: W. W. Norton, 1995), 98.
44. Blanchard, op. cit., Ref. 42, 504.
45. R. Wade, ‘The coming Ž ght over capital  ows’, Foreign Policy (Winter 1998–99), 43.
46. G. Soros, ‘Capitalism’s last chance?’, Foreign Policy (Winter 1998–99), p 55–57.
94