Democracy or capitalism

Fol­gen­den Vor­trag hat Wolf­ram Bern­hardt am 27. Okto­ber 2017 in der Main Public Libra­ry of Copen­ha­gen im Rah­men der Ver­an­stal­tungs­rei­he “Euro­pe – Mani­festo!” gehal­ten. Die­se Ver­an­stal­tungs­rei­he wird orga­ni­siert von der Main Public Libra­ry of Copen­ha­gen, dem ATLAS Magasin, dem Goe­the Insti­tut Däne­mark und dem Insti­tut Fran­cais.


Democracy or capitalism


The point I want to make is strai­ght­for­ward and effec­tive. We are in a situa­ti­on whe­re we have to deci­de bet­ween demo­cra­cy and capi­ta­lism.

It has beco­me more and more obvious that in the radi­cal form of each con­cept, one con­cept exclu­des the other.


Wolf­ram Bern­hardt stu­dier­te BWL mit dem Schwer­punkt auf Finanz- und Kapi­tal­märk­te. Er ist Grün­der und Her­aus­ge­ber der agora42.

For a long time we thought that we can com­bi­ne the­se two con­cepts. That a demo­cra­tic socie­ty can regu­la­te capi­ta­lism. In Ger­ma­ny we have a won­der­ful word for this sce­n­a­rio “Sozia­le Markt­wirt­schaft” – soci­al mar­ket eco­no­my. Howe­ver, this is not capi­ta­lism.

Recent­ly, the Ger­man chan­cellor Ange­la Mer­kel pro­po­sed ano­t­her con­cept of how the­se two con­cepts can be com­bi­ned, which she cal­led “markt­kon­for­me Demo­kra­tie” What she meant with this was to align demo­cra­cy with the mar­kets. Howe­ver, that is not demo­cra­cy.

Unfor­tu­n­a­te­ly it beco­mes more and more obvious that this was not only a pro­po­sal, but actual­ly a very pre­cise descrip­ti­on of what we have wit­nessed over the last few years: a vol­un­ta­ry sub­or­di­na­ti­on of demo­cra­tic insti­tu­ti­ons to the mar­kets.

Ange­la Mer­kel said the­se famous wor­ds when most of the par­lia­ments around the world set up bail-out packa­ges in order to save the banks. The logic behind this rea­so­n­ing was quiet simp­le: If the banks go bankrupt, we will face glo­bal reces­si­on, mil­li­ons of jobs will be lost and we will enter a peri­od of cha­os and tur­moil.

In order to pre­vent this deva­sta­ting sce­n­a­rio bankrupt­ing the world, bil­li­ons of dol­lars whe­re spent to bail out and save tho­se who actual­ly cau­sed this situa­ti­on. And all this hap­pen­ed as poli­ti­ci­ans around the world united – pro­bab­ly for the first time in histo­ry – in the belief, that the­re was no alter­na­ti­ve.

Sin­ce then all major cen­tral banks redu­ced their inte­rest rates in a his­to­ri­cal low. Even though this was meant to sti­mu­la­te growth most of this money never left the finan­ci­al indus­try. Hence this money did not lead to eco­no­mic growth. What it did lead to was to an infla­ti­on of finan­ci­al asset pri­ces, an increa­se in ine­qua­li­ty and hig­her vola­ti­li­ty.

I am sure non of this is new to you. You are pro­bab­ly asking yours­elf why I con­si­der this topic worth tal­king about while deba­ting the sta­te and future of Euro­pe?

Let me give you three ans­wers to this ques­ti­on:


First­ly: I con­si­der the incredi­ble power the finan­ci­al indus­try has gai­ned not only in Euro­pe, but world­wi­de as a thre­at equal­ly dan­ge­rous to our socie­ty as glo­bal war­ming – espe­ci­al­ly as we will not be able to effec­tively tack­le glo­bal war­ming if we aren’t able to regu­la­te the finan­ci­al indus­try.

Why is that? Becau­se glo­bal war­ming is a result of eco­no­mi­c­al growth. And becau­se the finan­ci­al indus­try depends on eco­no­mic growth in order to earn the expec­ted inte­rest on the respec­tive inco­me.

In a situa­ti­on whe­re the world GDP equals 73 tril­li­on US$ (2015) and the sum of all sha­res, bonds and deri­va­ti­ves equals approx. 763 tril­li­on US$, the pres­su­re from the finan­ci­al indus­try on the eco­no­my to deli­ver the nee­ded growth rate is tre­men­dous.

The effect of a gro­wing eco­no­my on glo­bal war­ming can also be seen when loo­king at the glo­bal CO2 emis­si­on in 2009 – the year the finan­ci­al cri­sis lead to the worst reces­si­on after WW2: As the world eco­no­my was tumb­ling in 2009 we were howe­ver able to obser­ve a decrea­se in glo­bal CO2 emis­si­ons for the first time in 27 years.

To sum­ma­ri­ze my first point: If the world is gone(destroyed), Euro­pe is also gone. So we bet­ter think about ways to pre­vent this from hap­pe­ning.



Second­ly I don’t see any other sta­te or nati­on or supra­na­tio­nal insti­tu­ti­on being bet­ter sui­ted to start regu­la­ting the finan­ci­al indus­try.

Why is that? As a result of the finan­ci­al cri­sis Euro­pe has not only seen an eco­no­mi­c­al cri­sis, but has also expe­ri­en­ced a major cri­sis in demo­cra­cy.

At least that is what I call a situa­ti­on,

  • when par­lia­ments had not­hing to say, as bil­li­ons of tax payers money was used to save the banks;
  • when governments whe­re forced to repay their debts in order to save the Ger­man and French banks from rea­li­sing a loss;
  • when we accept that the pre­si­dent of the Euro­pean Com­mis­si­on was respon­si­b­ly for set­ting up Luxem­bourg as a tax haven wit­hin the Euro­pean Uni­on that costs the fel­low mem­ber sta­tes bil­li­ons of Euros;


You might argue that this is not­hing spe­ci­fi­cal­ly Euro­pean, but in con­trast to the US, the­re is still hope. Com­pa­red to the US, whe­re the finan­ci­al indus­try employs five lob­by­ists for each mem­ber of con­gress, the lob­by situa­ti­on in Euro­pe is still much bet­ter – despi­te it wor­se­ning at a freigh­ten­ing pace.

We have access to pro­ven con­cepts of how the eco­no­my can work without just aiming for the maxi­mum pro­fit, be it in agri­cul­tu­re, be it in soci­al and health care or even in pri­sons – did you know that the pri­son indus­try as a who­le accoun­ted for over $5 bil­li­on in 2011 in the US?

I fur­t­her belie­ve that most of the inde­pen­dent move­ments we wit­ness in Euro­pe stem from a desi­re for more self asser­tiveness, which is an ori­gi­nal demo­cra­tic impul­se. It is also worth remem­be­ring that demo­cra­cy liter­al­ly trans­la­ted means “rule of the peop­le” and is made up of a 99% majo­ri­ty and not the 1%.

By remem­be­ring this very basic truth I sug­gest we empha­si­ze three princi­ples of demo­cra­cy that distan­ce it from capi­ta­lism.

  • Demo­cra­cy – at least how we under­stand it fur­t­her stands for trans­pa­r­en­cy, whe­re­as capi­ta­lism stands for con­fi­den­tia­li­ty.
  • Demo­cra­cy is about the equa­li­ty befo­re the law. This idea beco­mes a far­ce when indi­vi­du­als or com­pa­nies can afford the best lawy­ers or when pri­va­te law com­pa­nies even for­mu­la­te the laws, which are pas­sed by con­gress.
  • Demo­cra­cy advo­ca­tes the idea that all peop­le are gran­ted some ina­li­en­ab­le rights. The only right that exists wit­hin capi­ta­lism is the right to buy wha­te­ver one wants as long as one can pay the pri­ce. Or to put it the other way round: If you don’t have money, you don’t have any rights.


Third, demo­cra­cy means free­dom whe­re­as capi­ta­lism in its ulti­ma­te form sym­bo­li­zes the road to serf­dom.

Even though capi­ta­lists or as they call them­sel­ves nowa­days “evan­ge­lists of free mar­ket eco­no­my” gene­ral­ly assu­me that free mar­kets and com­pe­ti­ti­on lead to a maxi­mum of per­so­nal free­dom, they are mista­ken.

Free­dom wit­hin capi­ta­lism is like let­ting a vege­ta­ri­an choo­se bet­ween a steak and a fat­ty sau­sa­ge. The ques­ti­on in capi­ta­lism is not whe­ther we aim for more soci­al jus­ti­ce or a more sustain­ab­le way of life, the ques­ti­on is always: How do I get the hig­hest return on my invest­ment?

As if that were not enough, free­dom in capi­ta­lism is always restric­ted to the very few peop­le at the top. The so cal­led free mar­ket eco­no­my whe­re each indus­try is ulti­mate­ly domi­na­ted by a mono­po­ly or by an oli­go­po­ly. For examp­le:

  • In the tele­com­mu­ni­ca­ti­on indus­try the top four com­pa­nies domi­na­te 42,6 % of the total mar­ket
  • In the pri­va­te equi­ty indus­try the top four com­pa­nies domi­na­te 65,8 % of the total mar­ket
  • In Ger­ma­ny only 1% of all com­pa­nies are respon­si­ble for 66% of all eco­no­mic activi­ties.
  • And in the digi­tal indus­try it’s even worse, look at Face­book, Ama­zon and Goog­le


This situa­ti­on ist not only restric­ted to the eco­no­my, but even­tual­ly leads to a neo­feu­dal socie­ty were your birth deci­des more about your care­er, your net­work, your dis­po­sable wealth than every effort a less lucky per­son under­ta­kes throug­hout his who­le life­time.


If that isn’t the visi­on we have for Euro­pe, we bet­ter remem­ber what demo­cra­cy means to us. First of all and most import­ant­ly, demo­cra­cy means free­dom becau­se the fun­da­men­tal mista­ke of all liber­ta­ri­ans and evan­ge­lists of free mar­ket eco­no­my is that unrestric­ted free­dom ulti­mate­ly leads to des­po­tism to the rule for the few strong ones.

Demo­cra­cy howe­ver means, that we have the free­dom to defi­ne the limits, the bounda­ries of our actions by our­sel­ves. That we can accept the limits to growth, that we can incorpo­ra­te human rights and the values of enlight­ment into a frame­work that leads our collec­tive actions.


So Euro­pe is at a cross­roads. We have to deci­de if we con­ti­nue the path we have taken. The path which ulti­mate­ly leads to serf­dom. Or if we trust in the com­mon sen­se of all citi­zens and that the deci­si­ons we take collec­tively will pave a way in the future that bet­ter meets our expec­ta­ti­ons from an enligh­te­ned socie­ty. A future capi­ta­lism will never be able to offer.


Am 18.11.2017 fin­det die nächs­te Ver­an­stal­tung in die­ser Rei­he statt. Zu Gast wer­den die­ses Mal Nina Power und Dr. Jörg Schaub sein.