Democracy and Capitalism

The image below helps us to understand what it means when we refer to different types of societies, in terms of how democratic/authoritarian they are and how collectivized/individualized their resources are, but it does not inform us as to what mechanism, or economic system, is used to attain their financial goals. 

Capitalism is the dominant economic system in the world today so let us explore how it interacts with each of these types of societies. Capitalism is a purely economic system and therefore doesn't live in any one of the four quadrants, but interacts with sociopolitical systems in a variety of ways. Let's take a closer look at each quadrant to see how it interacts with systems that are more and less democratic. 

In the upper left quadrant, COMMUNISM, we can see that while China is indeed still communist today, based on left-leaning wealth distribution coupled with a high degree of authoritarianism, it currently uses capitalism to attain its financial goals. In the past, China relied on state ownership of property/the tools of production and sought to enforce wealth distribution through militaristic means, however after 1978 China moved away from this and toward private ownership. Since then, income inequality has increased as the flow of capital becomes less regulated and, at this point, communism in China is basically a form of state capitalism. 

As China continues to move to the right in terms of individualization of wealth it will become less communist and more fascist (if it keeps its current authoritarian power structures in place and does not become more democratic). There are plans for wealth redistribution through Xi Jinping's "Common Prosperity" goal, which would again push the country toward the left, but there is little movement on the up/down democracy/authoritarian scale. Capitalism, as a tool, can be used by communist societies if it is highly regulated and used to redistribute wealth.

In the bottom left quadrant,​ DEMOCRATIC SOCIALISM, we can see that Sweden also uses capitalism as a financial tool, but it does so in the context of a mixed economy with an emphasis on social services and wealth redistribution. Sweden is not quite a democratic socialist country, due to its reliance on capitalism, but rather a social democracy (some use the terms interchangeably). Unlike in communist and communist-leaning countries, social democracies have a high degree of personal freedom without authoritarian social controls.

In the 1970's, Sweden had the opportunity to transition from a social democracy, where banks and industries are privately held,  to true democratic socialism, which would have fallen outside of the bounds of traditional capitalism. Legislation was blocked (by the fifteen Swedish families that held the reins of the majority of the economy) which would have allowed workers to eventually collectively own all major industries. Despite this, Sweden effectively uses the tool of capitalism to redistribute wealth and insure a high standard of living for its citizens, without restrictive social control. Capitalism, as a tool, can be used by socialist societies if it is highly regulated and used to redistribute wealth.

Moving to the bottom right, we come to LIBERTARIANISM. As previously mentioned, there are no good examples of a Libertarian state as by its nature it wants neither social control, nor economic collectivism, hence no need for a state. If such a state were to exist it would probably look something like Luxembourg if its already very deregulated economic system were to dissolve completely. The only form of capitalism that works with libertarianism is a highly deregulated one, without labor laws or taxation. If a majority of people in a society democratically agree to have a drastically reduced government with little or no resource distribution, so be it, but there is always the danger that unregulated capitalism will lead to corporatocracy. The elected leaders and institutions libertarians so despise can swiftly be replaced by robber barons. Both nature and power abhor a vacuum.

In the top right quadrant is FASCISM. Many political operatives in the Unites States today aspire to a form of fascism, based on their religious beliefs (generally Christo-Fascism) which requires extreme social control, and fits in nicely with their desire for deregulated capitalism. A nation which has already achieved this in modern times is Russia. After the dissolution of the Soviet Union, there was a brief period during the Gorbachev/Yeltsin post-Soviet era when it appeared the country might become more democratic, however under Medvedev and Putin the country has moved solidly away from economic collectivism toward fierce capitalism controlled by a small number of oligarchs, while retaining the high level of social control the Soviet Union was known for.  The form of capitalism that works best with fascism is a highly deregulated one, with weak labor laws and low corporate taxation which benefits the oligarchs. Fascism easily becomes a type of corporatocracy, where economic, political, and judicial systems are explicitly controlled by corporations.

Capitalism is an economic tool that can either be used to redistribute wealth or enrich a few. On the left side of the spectrum, capitalism works when highly regulated, and on the right it works when deregulated. It works with both authoritarian systems and democracies, but beware that if unregulated capitalism merges with a fascist state it is almost impossible to return to democratic norms by any way other than revolution, as all avenues of reform (judicial, legislative, popular opinion via unbiased media) will likely have been closed. This is the quadrant in which corporations, the people behind them, and would-be dictators are most likely to use the levers of democracy to dismantle democracy itself once they are in power.