Can Democracy and Capitalism Be Reconciled? This is the foundational question debated in a new book by the same name, edited by Sidney Milkis, White Burkett Miller Professor of Politics, and Scott Miller, director of UVA’s Democracy and Capitalism Lab. The volume, published by Oxford University Press, convenes a multidisciplinary group of distinguished scholars to explore the vibrant historical debate over whether democracy and capitalism can and should coexist in the United States.
Here’s an excerpt:
In modern American civic dialogue, the compatibility of democracy and capitalism [is] a flashpoint. Polling in 2022 by Pew Research found that 40 percent of Americans have unfavorable views of capitalism. If you ask people under 40 years old, those numbers almost double. Likewise, a recent poll by Quinnipiac University found that 69 percent of Americans believe the nation’s democracy is on the brink of collapse.
In our experience as professors at the University of Virginia, young people largely believe that democracy and capitalism are structurally incompatible. Many students at elite business schools also believe this to be the case.
In our experience, young people largely believe that democracy and capitalism are structurally incompatible.
Although current conditions entail new challenges, we believe that a proper understanding of our present discontents requires engagement with the American tradition of debating the meaning and compatibility of democracy and capitalism.
Americans have long questioned the value of consumer economies, private property, and universal political liberty. Americans have long disputed the effect of wage labor on personal freedom, and land ownership on social and economic mobility. Americans have long argued about how to create a democratic culture—or even if one should exist in the first place.
When the fight for American independence erupted in 1775, debates over the balance between what we would now call democracy and capitalism already had a long history. “According to the mercantilist view,” writes historian Alan Taylor, “the government had every right, indeed the duty, to shape the economy to serve its needs for more revenue, ships, and men for use in war.” Commerce and trade existed to boost the wealth and prestige of the state, not the individual. Private markets, free trade, and consumption-based economies remained anathema.
Commerce and trade existed to boost the wealth and prestige of the state, not the individual. Private markets, free trade, and consumption-based economies remained anathema.
In colonial America, the economic paradigm remained even less “capitalist” than in the broader empire. Rather than growth, diversification, and productivity, most 17th-century colonial Americans embraced an extraction economy in which North Americans exported raw materials such as tobacco, wheat, and wood products for processing and reexport.
American mercantilists considered economic growth to be corrupting and believed that foreign trade remained the only legitimate source of wealth. According to this view, banking institutions, local currency, and internal markets diverted resources away from the Empire and were thus frowned upon or outlawed. In other words, many 17th-century American colonists viewed principles of modern capitalism as toxic, corrupting, and deleterious to the public good.
American mercantilists considered economic growth to be corrupting and believed that foreign trade remained the only legitimate source of wealth.
Still, many new English colonies [along with the Puritans] began pursuing what could be called an early or “pre-capitalism” by the mid-17th century. The Puritans of Massachusetts Bay eliminated guilds, commercial monopolies, and wage and price controls, while establishing money markets and private property rights via land reforms. As a result, the Puritans encouraged acquisition, profit-making, and productivity enhancements that dramatically increased their output.
This freedom produced profound advances in general well-being—in everything from rising incomes, falling infant mortality, and the rapid expansion of economic security across the colony.
Despite their “capitalist” successes, the Puritans were keenly aware that money-making and efficiency needed a countervailing force. Like other colonists, the Puritans believed that the accumulation of wealth could tear at the social fabric, leading to corrosive disparities. As such, Puritan culture encouraged a “civic ecology” anchored in religious traditions that mandated care for “the least of these,” even at the expense of personal economic advancement.
Puritan culture encouraged a “civic ecology” anchored in religious traditions that mandated care for “the least of these,” even at the expense of personal economic advancement.
By the early 18th century, a reconceptualization of political economy began to emerge. Rather than serving as extractive “ghost acres” for the British imperial machine, Americans would begin investing in ironworks, naileries, timber mills, and facilities for producing woolen goods. British mercantilism, its advocates argued, would meet its match in a liberal entrepreneurialism fueled by the new technology of finance.
The emergence of this new, liberal faction sparked an ideological war in colonial America. Advocates for investment capital, internal development, diversification, and manufactures argued that this new liberal regime would enlarge the sphere of home rule by eliminating the coercive power brought by dependence on the British empire. Their opponents argued that Americans would become hostages to the vicissitudes of financial speculation and crisis, and the social unrest that would inevitably follow. Even advocates of greater commercial freedom split among themselves. Merchants in different colonies contested the wisdom of financialization, banks, and paper money. Throughout the 18th century, both groups lashed out at each other, claiming that their opponents’ policies would make the colonies less free and less prosperous.
It is alluring to frame the Revolution as the forces of democratic capitalism against royalist mercantilism. Yet during the Revolution itself, Americans (literally) fought about how capitalist they should become.
Far from opening America as a democratic and capitalist paradise, the Revolution spawned a long-running battle over whether Americans could become capitalist and free at the same time.
The Revolution spawned a long-running battle over whether Americans could become capitalist and free at the same time.
Indeed, for centuries, Americans have contested the balance between equality and wealth, government and the private sector, consumption and investment, and labor and management. In many ways, the fight over democracy and capitalism is as American as democracy and capitalism themselves.
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