Examining the Relationship between Capitalism and Democracy - Essay Example

260405 Democracy and Capitalism Instructions: Examining the Relationship Between Capitalism and Democracy: General Comments on Then: Examine the relationship between deeper integration in the global capitalist economy and the process of democratization in Mexico After 1988 and Russia after 1992 Further: Did free market reforms advance the cause of liberal democracy in these two countries? If so did they create less favorable consolidation of stable democracy? Then Scholars have attributed the failure of German democracy in the Weimar republic to the economic crisis of the early 1930s. Did these economic factors play a central role in the retrenchment of Russian democracy after Yeltsin? Please note: Sources are not critical but where used will be noted. I will be using this to integrate into larger work Outlined below is an evaluation of the link between capitalism and liberal democracy, which examines how liberal economic, philosophical, and political thought changed from the Eighteenth century onwards. Capitalism started to develop and emerge in the Europe of the late Middle Ages. To a large extent both capitalism and liberal democracy were the inadvertent outcomes of profound economic, political and social changes from the Fifteenth century onwards. Great Britain had slowly emerged as a country that was dominated by classical liberalism as it evolved during the seventeenth and the eighteenth century. Capitalism was inadvertently further developed by two events of the late fifteenth century and the early years of the sixteenth century, namely the discovery of the New World and the Protestant Reformation. The Portuguese and Spanish colonisation and economic exploitation of their New World empires in Asia, Central America, and South America were responsible for greatly expanding global trading links. New World silver and gold alongside the Atlantic slave trade boosted economic development greatly. The wealth exported to Portugal and Spain prompted competition from the Dutch, the English, and the French for colonies and trade England and later Britain was the state most responsible for developing the global capitalist economy. Capitalism, liberalism, and the Royal Navy were a virtually unstoppable combination.1 When Britains economic and military power declined after the Second World War its position of the global promoter of capitalism and democracy was taken over by the United States. In 1945 the United States was the worlds only nuclear power as well as having the largest economy. During the Cold War period the United States certainly promoted capitalism and anti-communism even if it did always further democracy. During the Cold War era capitalism and democracy became even more closely linked together than before. Capitalism whether in its traditional liberal form, or the Keynesian version with its mixed economies dominated Western Europe, North America, Latin America, and Japan. The Americans were not averse to interfering in other countries if their democratic choices threatened capitalism, for example in Argentina, Brazil, Chile, Guatemala, and Iran. Unlike Russia in the early years of the 1990s Mexico was already (formally at least) a liberal democracy with a capitalist economy in the late 1980s, and its neighbor of the United States as well. Although Mexico was officially a liberal democracy it was one that was ruled by a single political party, the PRI. Other political parties were not allowed to challenge the position and the hold on power of the PRI, which it had held for several decades at the start of the 1980s. During the 1970s the exporting of crude oil and natural gas enhanced the position of the PRI and the Mexican economy. The situation was different in the early years of the 1980s as oil prices fell and the debt crisis adversely affected Mexico alongside other countries in Central and Latin America. The Mexico City earthquake of 1985 caused widespread economic and structural damage as well as the death of 200,000 Mexicans. The PRI certainly retained some mass popular support up to the late 1980s yet there was a growing political opposition and even armed insurrection against the government, with the PRI presidential candidate being murdered in 1993. The political opposition claimed that one party rule was bad for Mexican democracy as well as been poor for Mexico taken as a whole. The political opposition to the PRI frequently claimed that the government was corrupt besides being inefficient in running the country and also the stumbling economy. Indeed during the 1980s and the 1990s PRI members and leaders were caught in several corruption and drugs scandals, which helped the opposition gain support. Support and believe in democracy in Mexico was assisted by the fact that the PRI did eventually lose political power. The PRI was unable to maintain its hold over political office, and did not stop the opposition taking power at the end of the 1990s. For Mexico the 1990s were a decade that witnessed wide-ranging political and also economic changes, which included the breaking down of the PRIs hold on political power, and the consequences of Mexican currency devaluation in 1994. Such was the shambolic state of the Mexican economy that the PRI government had to receive substantial financial aid from the United States. The inability of the PRI government to avert the economic crisis and humiliating currency devaluation in the early 1990s put more pressure on it to finally give up power if it lost democratic elections. Capitalism if not liberal democracy was arguably affected by the foundation of the North American Free Trade Area (NAFTA) with Mexico being a member alongside Canada and the United States. Mexico had already been hit hard by the recession of the early 1990s; sometimes its proximity to the United States does not seem such an advantage. Mexico joining NAFTA was not very popular with many Mexicans who were concerned that they would lose their jobs. Mexicans feared becoming unemployed due to Mexican businesses not being able to compete with American multinational corporations.2 Capitalism and democracy were strengthened with the end of the Cold War. From the late 1970s China began to embrace capitalist economic reforms although its ruling Communist regime has never surrendered any of its political power. The Soviet Union certainly during the late 1970s was unwilling to carry out economic or political reforms despite economic stagnation. In the end economic decline was so marked that Mikhail Gorbachev felt that there was no alternative to his attempted reforms. The unintended consequences of these reforms were the disintegration of the Soviet Union after the collapse of communism in Central and Eastern Europe.3 The end of Communism meant that countries such as Russia had to introduce capitalism and democracy overnight. There were grave social and economic consequences for the use of shock therapy, which arguably made it harder for democracy to establish itself in Russia. Russia had a difficult and highly traumatic transition to a capitalist economy after the collapse of the Soviet Union in 1991. Capitalism had been outlawed in Russia from 1917 through to 1991 and nobody had any idea of how to introduce capitalism without drastic shock therapy and large-scale social dislocation. Shock theory brought about widespread unemployment, poverty, and the dismantling of Soviet -era industrial infrastructures. The Russian transition to capitalism and democracy were officially successful yet many economic and political observers believed that these transitions were flawed. Russias new capitalist economy especially in the 1990s was considered to be corrupt and allowing too much influence and power to the wealthy businessmen known as the Oligarchs. These Oligarchs amassed personal fortunes whilst having close links with the Russian President Boris Yeltsin. President Yeltsin and the Oligarchs needed each other with the latter bankrolling Yeltsins re-election in 1996. Yeltsin had strengthened his declining popularity with the war against Chechnya. Russia suffered many problems during the 1990s, issues, which were related to the weakness of its newly established democracy and capitalism, not to mention flaws relating to President Yeltsin as an individual. As a country Russia was effectively bankrupt due to the end of the highly ineffective communist planned economy. At that point Russia experienced steep economic decline, and exported little abroad apart from vast sums of capital, much of it obtained via dubious means. In the early 1990s the present was bleak, and the future looked as if it was going to be even worse for everybody within Russia apart from the Oligarchs and those linked with President Yeltsin and his family. The Russian economy was certainly hindered by declining worldwide prices for crude oil and natural gases throughout the majority of the 1990s.4 Whereas President Yeltsin and his governments had to contend with low fuel prices those of President Putin after 2000 were lucky to be boosted due to record crude oil and also natural gas prices. President Yeltsin and his governments had to acquire financial help from the Oligarchs because he could not gain loans from anywhere else except the International Monetary Fund / World Bank, as crude oil exports failed to fill the Russian treasury. The Russian government gave the Oligarchs shares in state owned oil companies in return for those loans increasing international concerns about possible corruption and the lack of a democratically responsible government. Of course the effectiveness of the Russian government during the President Yeltsin era was further reduced by Yeltsin’s health problems. Yeltsin’s declining health was widely attributed to his heavy consumption of alcohol as well as his old age. President Putin had the advantage of being younger, fitter, and sober. The Weimar Republic in Germany is arguably one of the most notable examples of the relationship between democracy and capitalism going wrong. Democracy and capitalism are not always a workable combination. The Weimar Republic was the republican regime that replaced the German monarchy after the end of the First World War. Prior to the First World War Germany had combined a strong democracy with a dynamic capitalist economy, and even provided a welfare state to support those who could not work. The Weimar Republic lacked economic dynamism as well as political legitimacy, it was a regime that the radical Left and the reactionary Right wanted to destroy. In the years 1918 to 1920 the prospect of communist revolution seemed real enough. The Far Right despised the Weimar Republic for signing the Treaty of Versailles forgetting that the German General Staff had lost the war and the civilian government had no option other than to agree to the Allied terms. All Germans claimed that the reparation payments the country had to pay to the Allies crippled their economy.5 The early years of the Weimar Republic were ones of severe economic crises, which culminated in the hyperinflation of 1923 that wiped out many small businesses and wiped out the savings of many ordinary Germans. The scale of the hyperinflation crisis prompted financial assistance from the United States that actually helped to stabilise the economy and the political situation in Germany. However the stability of the Weimar Republic was more apparent than real, as the economic crisis of the early 1930s showed. The harmful consequences of the Great Depression devastated the Weimar Republic after the collapse of the leading Austrian and German banks in 1931. Unemployment reached six million whilst the Communist party the KPD and the Nazi Party sought to take advantage by taking power. Big businesses and Nationalist parties were terrified that the KPD would take power and make Germany a communist country. The Nazi Party was seen as the lesser of two evils, Adolf Hitler was seen as a strong leader that would restore Germany’s economic and military power, whilst being controlled by more moderate Nationalist politicians. It was a fateful miscalculation that resulted in the Third Reich and ultimately the Second World War. In many respects the collapse of the Weimar Republic was brought about by a unique combination of economic, political, and social factors. Germany was a country that went from been strong and dynamic, to been weak and divided due to defeat in1918. The electoral system allowed extreme parties to win seats in the Reichstag whilst the democratic parties were not willing to work together to block the KPD and the Nazi party from gaining power. The bulk of the German population was bitter with their defeat in the First World War and detested the Weimar Republic for its weaknesses. The severe economic slump made millions of Germans destitute, and many millions desperate enough to vote for the extreme solutions offered by the Nazi party. There were similarities between the economic situation in the Weimar Republic in its last years and Russia during the early 1990s. High unemployment and mass poverty were experienced in both countries. However there was fewer prospects of radical political consequences in Russia as there was no political extremist with the abilities of Adolf Hitler available to take advantage. There was also a higher degree of financial assistance available to Russia to prevent the collapse of the Yeltsin government. The Communists were the main opposition to Yeltsin yet in many respects it was the economic failures of the Soviet Union that had contributed to the dire state of Russia’s economy after the introduction of shock therapy. Bibliography Eatwell R & Wright A, (2003) Contemporary Political Ideologies 2nd Edition, Continuum, London Ferguson N, (2003) Empire – how Britain made the modern world, Penguin, London Hobsbawm, E (1994) Age of Extremes, the Short Twentieth Century 1914-1991, Michael Joseph, London Woodruff W, (2005) A concise history of the Modern World, 1500 – 2000, Abacus, London Read More