Democratic Capitalism as a Regulated Economic System

Democratic capitalism is an economic ideology based on a tripartite agreement of a market-based economy base on an amalgam of three systems: an economy based predominantly on free markets and economic incentives; a democratic polity: and a classical-liberal moral cultural system which encourages pluralism. (Noval, Michael). The free market creates an intricate web of supply and demand relationships and fosters economic growth, social mobility and innovation. Political liberty allows for a constitutional systems of government in which both individuals and groups are represented. The moral-cultural sphere, which includes values such as a work ethic, individual initiative, honesty, and respect for private propety, is supported by the mediating institutions of family, church, and numerous other voluntary associations (Edward Youkins, 1998)

Most liberals and conservatives generally support some form democratic capitalism their economic practices. In 1776 Adam Smith defined a new industrial system that could eliminate material scarcity, but he warned of the threat from speculators. Smith's vision of economic freedom was complemented by the political freedoms in the new American republic. Robert Owen provided early experimental verification that investment in human capital produces superior results, and Karl Marx and John Stuart Mill enlarged the definition of democratic capitalism by examining worker ownership as a way to distribute wealth broadly. Mill's manifesto contains the radical proposal that industrial performance and the worker's quality of life are synergistic: It is scarcely possible to rate too highly this material benefit, which yet is nothing compared to the moral revolution in society that would accompany it; a new sense of security and independence in the laboring class; and the conversion of each human being's daily occupation into a school of the social sympathies and the practical intelligence. Mill's manifesto and Marx's Communist Manifesto appeared at the same time, 1848, yet the record does not show that the intellectual community synthesized these two powerful statements. I also draw on the Marquis de Condorcet's 1794 summary of the work of the Enlightenment; the examination of the American democratic experiment by another Frenchman, Alexis de Tocqueville; and the march toward freedom described by the German Idealists Kant, Hegel, and Marx. Kant also proposed the imperative of law, not violence, in the relations among nations in order for economic and political freedoms to be functional. Marx’s axiom that social progress depends on movement to a superior economic system is contrasted to the flawed cultural tradition in which reformers are conditioned by a contempt for commerce and a love of state.

Democratic capitalism is a complex concept consisting of three-dynamic and converging systems. The economy is based on a substantially competitive market-system, private ownership and economic freedom while the political system is based on consent by the people, limited government power, a reliance on checks and balances, and a legal order that protects individual rights and voluntary exchange. Economic and political freedom are inextricably linked in democratic capitalism. The ideas of a market economy and political democracy stem from the same reasoning and the same moral-cultural values, institutions, and assumptions. Both the economic sector and the political sector affect and are affected by the moral-cultural sphere, which reflects ideals such as freedom, justice, productivity, and hard work. One of the central areas of dispute revolves around the relationship between capital and labor.

* Eward, Youkins (1998). The Conceptual Foundations of Democratic Capitalism
* Ray, Carey: Democratic: Capitalism, The Way to a World of Peace and Plenty: A Reader's Guide