The transformation of capitalism always seems most difficult when it is most needed. Groups that have enjoyed the benefits of the old system fight to prevent any change.
written by Domagoj Juričić
For a nation whose historical memory and tradition of democratic capitalism are so weak and tied exclusively to its own painful experience during the transition period, it is not surprising to see a certain rejection of capitalism. It seems a cruel and unwanted system in which workers are exploited, where the rich become richer, and the poor become poorer. However, these problems cannot be attributed to the capitalist system, but rather to the quality of the institutions that guarantee democracy. The anger and doubt of many are therefore directed in the wrong direction. Democratic capitalism is equivalent to the biological drive for survival and fuels the fundamental principles of competitiveness that are the basis of democratic political practice and the capitalist market.
Adaptability Voters generally reward politicians who make their lives better and safer, and democratic competitiveness directs political institutions to solve problems, even when solutions create new problems. Political competitiveness, it is true, is considerably slower than market competitiveness. Despite the differences, capitalism and democracy have a crucial common point: both mechanisms encourage individuals to seek solutions to problems. There is only one condition for a complex system to survive: it must be adaptable, with internal mechanisms that allow for radical changes. It is a logical conclusion that the main mechanism for the survival of capitalism will be based on the assumption that a problem that is postponed long enough will eventually be solved. No matter what we think about it, this is the very dynamic of the capitalist system. Adam Smith called it the ‘invisible hand’ that guides individual initiatives and the creativity of individuals. Two criteria must be met in this process. First, spontaneous self-organization must be given enough time to produce new adaptations after each periodic crisis of the capitalist system. Second, there must be adequate support for business competitiveness and creativity to address common social problems while simultaneously achieving personal material desires.
Incentives for change I highlight, for example, greenhouse gas emissions. Market incentives today make the use of coal and oil more attractive compared to other energy sources. However, these market incentives could only change through political decision-making. To change this picture, governments could, for example, impose stronger taxes on the use of fossil fuels, which would redirect private interest towards the development of alternative technologies. By using such incentives, market mechanisms would reduce greenhouse gas emissions, and the desired results would be achieved much faster and cheaper than anyone imagines. The greatest mistake of market fundamentalists is the assumption that markets will always independently create the necessary incentives for private enterprises to solve urgent social problems. The transformation of capitalism always seems most difficult when it is most needed. Interest groups that have enjoyed the benefits of the old system fight to prevent any change. They insist that the only correct system is the existing one. Such were the arguments of business organizations opposed to the New Deal and Keynesian economics, as well as labor unions and public service employees against the reforms of Thatcher and Reagan. Today, these are the arguments of banking and financial lobbyists. The media, influential academic circles, and the political establishment most often share such reflections. But moments like these are crucial for confirming the adaptable nature of democratic capitalism. The principle – something will happen – practically holds in capitalist democracies if the political economy is flexible enough to adapt.
