Capitalism and democracy: friends or foes? | Free exchange | Economist.com

How Capitalism Is Killing Democracy – Foreign Policy (abstract only)

“Why is FREEDOM so important in a market economy? If people in society are not free, can a market economy truly succeed?”.

Friday’s class discussion focused on the different answers to the basic economic questions offered by centrally planned versus market economies. 

The question I left them to ponder over the weekend had to do with an apparent paradox visible in China today: that of a free market economy seemingly thriving in a society where political and social freedoms are severely limited by the communist dictatorship. It has long been claimed that free markets will be followed closely by political freedom, and vis versa. The two are thought to go hand in hand. According to the Economist.com’s blog, Free Exchange:

The late Milton Friedman emphasized that economic freedom promotes political freedom and is also necessary for the sustainability of political freedom over time. His underlying logic is that competitive capitalism separates economic power from political power. One could point to Chile, Taiwan and South Korea as examples where Friedman’s logic seems to hold.

So if, as Friedman said, free markets lend themselves to free societies, then how has China’s thriving market economy not resulted in a freer society, even after 30 years of economic liberalization? Robert Reich, writing in the Foreign Policy Journal examines the issue in some depth:

Conventional wisdom holds that where either capitalism or democracy flourishes, the other must soon follow. Yet today, their fortunes are beginning to diverge. Capitalism, long sold as the yin to democracy’s yang, is thriving, while democracy is struggling to keep up. China, poised to become the world’s third largest capitalist nation this year after the United States and Japan, has embraced market freedom, but not political freedom. Many economically successful nations ”from Russia to Mexico” are democracies in name only. They are encumbered by the same problems that have hobbled American democracy in recent years, allowing corporations and elites buoyed by runaway economic success to undermine the government’s capacity to respond to citizens’ concerns.

Of course, democracy means much more than the process of free and fair elections. It is a system for accomplishing what can only be achieved by citizens joining together to further the common good. But though free markets have brought unprecedented prosperity to many, they have been accompanied by widening inequalities of income and wealth, heightened job insecurity, and environmental hazards such as global-warming.

What can explain the recent divergence of capitalism and democracy in countries like China, Russia and Mexico? The Free Exchange blog explains:

The cause of this divergence, Mr Reich contends, is that companies seeking an advantage over global competitors have invested increasing amounts of money in government lobbying, public relations and bribery. This process of corporations’ writing their own rules has weakened the ability of average citizens to have their voices heard through the democratic process.

So it appears that as capitalism and free markets have flourished, freedom of the individual has been trumped by freedom of the corporation to lobby and thus influence government into creating favorable environments for investment and growth, often times at the expense of society’s health and the best interests of the public as a whole. We will learn a term for this kind of activity in AP and IB Economics: rent-seeking behavior.

As firms grown larger and industrial and commercial power becomes concentrated in powerful multi-national corporations, the priorities of governments seem to be shifting away from individual freedoms and civil rights and towards the interests of the corporate world, whose money and influence run deep through the veins of the world’s governments.

So perhaps I was wrong. Maybe Milton Friedman was wrong too. Perhaps the 21st Century has bred a new relationship where free market capitalism is wed not to democracy, but to a new kind of corporatocracy, a term used by Noam Chomsky, in which governments bow not to the will of the people they govern, rather to the pressures from corporate entities. Freedom and justice for all (firms, that is). Gives you something to think about, huh

Discussion Questions:

1. Do free markets lead to free societies?
2. Is political freedom a prerequisite for a successful market economy?
3. Has “corporatocracy” surpassed democracy as the dominant influence in the rich, developed countries of the world?
4. In what ways could economic strength come at the expense of individual freedom?

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• BBC NEWS | UK | Education | Economics ‘dying out’ in schools

  “There are three times as many pupils taking psychology A-level as economics and almost twice as many taking A-level media studies. Sport and physical exercise and the expressive arts are now bigger subjects at A-level than economics.”

  What’s happening to my favorite subject area in the UK? It appears that economics education and the number of teachers going into economics is on the decline.

  Why? It’s not exactly clear, but the simple answer seems to be, “It’s difficult, so students are chosing not to study it”. That’s unfortunate, especially in an age when economics lies at the root of so many of our world’s social political and environmental issues.

  tags: economics, education

Today marked the first day of the 2008-2009 school year here at Zurich International School. It was a crazy day, where students rushed from class to class for quick introductions and syllabus distribution, barely having time to learn each teacher’s name before rushing to the next one. But if things were crazy for the students, they were just as crazy for us teachers.

Here’s a summary of the year ahead for me personally at ZIS:

• I have five sections of Economics this year, with a total of 77 students.
• One AP Microeconomics – 17 students
• One Year 1 IB Standard level – 6 students
• One Year 1 IB Higher level – 19 students
• Two Year 2 IB HL/SL classes – 35 students
• My 77 students come from around 30 different countries
• In one IB class I have 16 students from 15 different countries, including: Bulgaria, Greece, Switzerland, Scotland, Italy, South Africa, Germany,
  Guatemala, Finland, Romania, Australia, US, Mexico, England, and India.
• I am joined by two other Econ teachers at ZIS: Joe Hauet and Sarah Goudy, both who have vowed to join this blog as occasional contributors this year.
• I have abandoned paper texts this year, and we will instead use e-book versions of McConnell and Brue’s 17th edition “Economics”. Students all have their own Lenovo tablet PCs, which will allow them to read and take notes digitally.
• This blog will continue to be used as a resource for expanding the learning that goes on in the AP and IB Econ classroom. In addition to the over 140 Econ students here at ZIS, around 70 students will be reading and commenting on the blog from Shanghai American School, where my colleague Michelle Close plans to continue her occasional posts on this blog as well.

With that I will wrap it up for today. It has been a truly long and exciting day here in Zurich. Tomorrow I’ll start with the year 2′s and begin picking up where their last teacher left off, with International Economics, and begin the long trek towards external examinations in May of 2009.

Goodnight, and I’ll see you all in class very soon!

This blog has been quiet for some time. Summer will do that to a blogger; gets your mind off work, Economics, teaching, content, learning, all those activities that make up the daily life of a teacher for 10 months out of the year are blissfully absent from our daily routines during the summer months.

Alas, all good things come to an end, as does summer every year come mid-August. With the end of this summer, however, a new adventure begins as I find myself settling into a new school in a new city and country. So far, I have had an amazing two weeks in and around Zurich Switzerland with my wife, who is here for a while before heading back to Shanghai for one more school year.

In my short time in this amazing country, I have already had several ideas for future blog posts analyzing the unmatched economic efficiency I have observed in the daily routines of the Swiss people, buearacracy, transport and waste disposal systems, etc… Switzerland is the country with the highest Environmental Performance Index (EPI) rating, indicating that it best manages its natural and environmental resources, which as I have observed is the result of a well implemented system of economic incentives on multiple levels of Swiss society. From petrol tariffs to recycling schemes to half fair rail passes, all in a country with some of the lowest income taxes in Western Europe, Switzerland has somehow figured out the secret formula that so many developed and developing countries have yet to grasp: how to achieve a strong economy AND a healthy environment.

Throughout the coming school year, during which I will be teaching four sections of International Baccalaureate Economics and one section of Advanced Placement Economics, I will attempt to focus my posts to this blog on some of the issues faced by Switzerland and its European neighbors in the modern global economy. Additionally, I will attempt to unravel some of the Economic secrets that have helped make this city of 300,000 the world’s most livable city for three consecutive years.

I will be joined this school year by some new faces here at Welker’s Wikinomics. Steve Latter of Fairfax, Virginia, will continue to post articles, as will my former colleague Michelle Close from Shanghai American School. I am also hoping to recruit my new teaching partner here in Zurich, who may also be keen on using the blog as a means of extending the learning of his AP and IB Econ students.

For now, I will enjoy my last 10 days before classes begin full speed ahead here in beautiful Zurich, Switzerland. I will resume regular posts sometime later this month, so please stay tuned!