How Today’s American Capitalism Undermines Democracy
Magazine / How Today’s American Capitalism Undermines Democracy

How Today’s American Capitalism Undermines Democracy

Book Bites Money Politics & Economics
How Today’s American Capitalism Undermines Democracy

Grace Blakely is an author, journalist, and commentator. She attended the University of Oxford, where she graduated with a first-class honors degree in philosophy, economics, and politics and later obtained a master’s in African studies. Her writing has appeared in the Tribune and the New Statesman.

Below, Grace shares five key insights from her new book, Vulture Capitalism: Corporate Crimes, Backdoor Bailouts, and the Death of Freedom. Listen to the audio version—read by Grace herself—in the Next Big Idea App.

Vulture Capitalism Grace Blakeley Next Big Idea Club

1. Capitalism is not a “free market” system.

Most of us have been taught to think that “capitalism” means the same thing as “free markets,” where small firms compete with one another to produce goods and services as efficiently as possible. Free markets are supposed to guarantee, well, freedom. But capitalist markets aren’t really free.

Modern economies are dominated by a number of extremely large and powerful corporations that cooperate with one another as much as they compete. Many of these businesses are so big that they can dominate their entire industry, meaning consumers don’t have as much choice, and workers have much less bargaining power.

Big businesses have been capturing a much greater share of the economic pie for many decades now. Rather than investing in research and development or sharing the spoils with their workers, these companies have opted to dish out billions of dollars to shareholders. The result is an economy characterized by high inequality, low investment, and lower productivity.

2. Big businesses and states are on the same team.

You might think it’s the state’s job to deal with the problem of monopolies and oligopolies. Many progressives—and even some libertarians—argue that governments should take a much stricter approach to enforcing competition. Some have even called for a break-up of the big tech companies. There’s just one problem with this analysis—governments and businesses are on the same team.

The state is not a neutral player in the economy. Instead, policy outcomes are influenced by the balance of power within society. So, when big corporations dominate the economy, they’re also able to dominate the policymaking process—whether through lobbying, influencing the debate in the media, or simply threatening to leave if they don’t get their way.

“The line between the public and private sectors has become increasingly blurred over the years.”

It’s not just that big businesses are buying off individual politicians. The line between the public and private sectors has become increasingly blurred over the years. Huge multinational corporations like Boeing are deeply imbricated in the U.S. military-industrial complex. This company doesn’t just get billions of dollars’ worth of government contracts, it also receives vast sums of corporate welfare from a government that needs it to continue operating. Boeing is equally dependent on the American state—as became very clear during the COVID-19 pandemic, when the company received a huge bailout. All this means that when Boeing commits horrendous crimes, it is never held to account because Boeing and the US state are on the same team.

3. Capitalist economies are planned economies.

Most people think of central planning and capitalism as opposites. In the old command and control economy of the USSR, the state controlled everything, and the system was incredibly inefficient as a result. But in the U.S., the free market determines the production and allocation of resources, promoting freedom and efficiency. You can only have central planning under Communism, so the argument goes.

In fact, capitalist economies are also planned economies. But this planning is hidden in plain sight. Big businesses are sufficiently insulated from competition so they can make decisions about what to produce without worrying about what the market is telling them to do. Within these corporations, decisions are made through a rigid hierarchy that allows managers to exercise immense control over their workers.

Financial institutions are also often large and powerful enough to ignore market signals and instead invest based on personal relationships or political capital. Big asset managers like Blackrock own significant stakes in almost every large publicly traded company, giving them immense power over the financial system.

Capitalist states work alongside big businesses and financial institutions to ensure the economy benefits them. Just look at the bailouts from the financial crisis or the COVID-19 pandemic. During every crisis, which are supposed to be times of “creative destruction” in free market economies, governments step in to bail out the strong and impose the costs on the weak.

4. Capitalist planning undermines democracy.

When big businesses, financial institutions, and governments are able to work together to plan who gets what, it undermines our democracy. Big businesses and banks are able to make decisions about investment, wages, and production that affect everyone, yet they do so without any democratic accountability. We’re told that the market acts as a counterweight to their power, but these institutions are often powerful enough to override the diktats of the market and do exactly what they want.

“Our ‘democracies’ are characterized by rampant corruption, and there’s very little that the average citizen can do to stop it.”

While capitalist states are supposed to be democratic, most of the time, politicians ignore the interests of the vast majority of people and instead focus on providing handouts to the already wealthy and powerful. Our “democracies” are characterized by rampant corruption, and there’s very little that the average citizen can do to stop it.

This is why trust in democracy has fallen so low in recent years. People have watched while successive governments—of all different political stripes—have dished out cash to the rich while everyone else has been faced with lower wages and higher prices.

5. It doesn’t have to be this way.

Throughout history, there are thousands of examples of ordinary people coming together to take on the interests of powerful few and take back control of the economy and society for the many.

In the 1970s, workers at Lucas Aerospace developed a plan to transform the struggling business from a weapons manufacturer into a democratically owned and run producer of socially useful technologies—like wind turbines and kidney dialysis machines. In the 1990s, the participatory budgeting movement emerged in Brazil, where ordinary people were given control of the municipal budget and used it to invest in health, education, and resources for their communities. In Jackson, Mississippi, ordinary citizens came together to establish Co-Operation Jackson, a network of cooperative enterprises that provides work and resources to members of the community and helps them to organize to elect progressive leaders to the municipal government.

If we want to fix all the major problems afflicting our societies today—from climate breakdown to inequality to the erosion of democracy—we need to demand change. This means we have to get organized.

We live in extremely individualistic societies in which we’re all taught to believe that we’re competing against each other for scarce resources. But when you’re competing with your fellow workers, rather than cooperating, you’re easier to exploit. Forty years ago, if you couldn’t afford to put food on the table, you’d talk to your fellow workers and organize to demand your boss pay you a fair wage. Today, you’re more likely to take out a high-interest payday loan and think of yourself as a failure. When you blame yourself in this way, your boss gets to walk away with higher profits, and politicians don’t have to worry about citizens organizing for change.

Instead of individualistic societies, we need to build collectivist ones. We need to work together—in our communities, in our workplaces, and on the streets—to demand change. We need to make our democracies work for us, rather than just a privileged elite.

To listen to the audio version read by author Grace Blakeley, download the Next Big Idea App today:

Listen to key insights in the next big idea app

the Next Big Idea App

app-store play-market

Also in Magazine