When wealth becomes king, democracy is a poor subject

June 18, 2012

18 June 2012

Tim Soutphommasane.

One mightn’t agree with everything he wrote, but the 19th-century thinker Thomas Carlyle was right to describe economics as ”the dismal science”. At least, he was right in using the phrase to convey how economics was so often concerned with ”finding the secret of this Universe in supply and demand, and reducing the duty of human governors to that of letting men alone”.

In any case, economists over the years have all too readily conformed to the personality of a discipline that Carlyle memorably described as ”dreary, desolate and, indeed, quite abject and distressing”.

One notable exception was Joseph Schumpeter. The Austrian thinker once notoriously boasted that he had accomplished two of his three ambitions in life: to become the greatest economist in the world, the best horseman in Austria and the greatest lover in all of Vienna. Which of the two they were, he never said.

Schumpeter these days is best remembered for his theory of economic innovation. Economic progress, he argued, was caused by waves of ”creative destruction”, unleashed by the ideas, skills and technologies of entrepreneurs.


Yet Schumpeter should be equally remembered as a democratic theorist. This year, in fact, marks the 70th anniversary of the publication of his most celebrated work, Capitalism, Socialism and Democracy. The book was a robust defence of capitalism, but offered its own version of what democracy should involve.

In Schumpeter’s view, capitalism meant the end of a classical concept of democracy, defined by the collective will of the people. In its modern form, democracy was a procedure, a way for the citizenry to select its leaders through electoral competition.

This statement of democratic theory reflected Schumpeter’s own politics; he was no enthusiast for popular sovereignty. As he put it, ”The typical citizen drops down to a lower level of mental performance as soon as he enters the political field.”

I suspect there are many today who would say Schumpeter had a point. Even the most ardent democrat would concede that the state of our civic literacy isn’t as good as it should be. An expansion in education has not resulted in greater political knowledge or civic virtue.

There are signs of a troubling malaise.

The latest annual Lowy Institute poll found that only 60 per cent of Australians agreed that ”democracy is preferable to any other kind of government”. A mere 39 per cent of Australians aged 18 to 29 hold this view.

Admittedly, our politics isn’t business as usual at the moment. Popular disillusionment with democracy may simply reflect the toxic state of our current political debate. In any case, political scientists would highlight that historical surveys on Australians’ trust in government reveal cyclical patterns.

This isn’t to say we should be indifferent to the health of our polity. Can a democracy sustain itself when almost half its citizens are prepared to entertain another mode of government? When they can’t seem to appreciate the self-evident virtue of democracy compared with authoritarian tyranny?

The problem may go beyond the brutal politics of a hung parliament. Maybe it is because we are losing our very ability to talk about a common good. As American philosopher Michael Sandel explains in his recently published book What Money Can’t Buy, economics has become ”an imperial domain”. The logic of buying and selling, of self-enrichment, increasingly governs our social and civic life.

Sure enough, many politicians and commentators seem to think that vision is about having a plan for productivity and economic growth. The transition from market economy to market society is almost complete.

Thus, when last week the Grattan Institute released its report on ”game-changing” policy reforms, it confined itself to the task of boosting gross domestic product. Tellingly, the Grattan paper quoted the wisdom of actress Mae West as its guiding ethos: ”I’ve been rich and I’ve been poor. Rich is better.”

The dangers of such economism are obvious. Embracing it can lead us to think that democracy should be subordinated to capitalism; that the economic should take priority over the civic. We already think of ourselves more as consumers and investors than as citizens.

This may be one reason why so many Australians, especially younger ones, appear to have a tenuous attachment to democracy. Some of us seem to be asking: why have democracy if something else could deliver greater personal wealth?

Schumpeter may well have found all this a validation of his beliefs about the illusory nature of a common good and the ignorance of voters. Either way, Capitalism, Socialism and Democracy is still worth a read 70 years on. But only because the version of democracy it defends is precisely the sort we should avoid.

Democracy can’t merely be a procedure for picking leaders, or an instrument for us to get rich. No matter what Schumpeter or that other democratic theorist Mae West may have to say.