Geoff Hodgson on capitalism and democracy

9780226419695A quote from my current reading on the nature of capitalism which I found particularly inspiring. Hodgson argues that many thinkers have neglected the institutional diversity of capitalism in their push to promote ‘pure’ versions of either market individualism or socialism:

“As long as we are trapped in the Tweedledum-and-Tweedledee debate between planning and markets, we shall be unable to appreciate the intermediating networks and institutions that have played a vital role in the development of modern capitalism. Experience reveals the limitations of both wholesale socialism and atomized individualism. Along with individual property rights, all successful capitalisms have embraced corporate organization and other intermediate layers of organized power as well as varying measures of state intervention. These are important for both its emergence and its vitality.

But while intermediate organization is necessary, it is not sufficient. It guarantees neither dynamism, democracy, nor legality. The experience of fascism in the twentieth century shows that big business can connive with autocracy against democracy and liberty. As US President Franklin D. Roosevelt argued: “The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself.” Excessive corporate or military power can also undermine or constrain democracy. Countervailing power has to balance rather than overwhelm other legitimate authority. The maintenance of politicoeconomic systems with their counterbalanced powers requires constant vigilance.”

Geoffrey M. Hodgson (2015), Conceptualizing Capitalism


3 thoughts on “Geoff Hodgson on capitalism and democracy

  1. The main point made in the quote is incredibly important. It is recognising these subtleties that prevent us from adhering to a mere ideology.

    I am open to refutation by historical data and facts, but for the time being I tend to look at the Third Reich rather as an example of how politics comes to dominate the business world, rather than the other way around.

    I am not denying that the business world is trying to influence political power, but I believe it is far more effective at manipulating government on the level of business specific lobbying rather than determining the nature of the regime in which ultimate power is vested.

    Having worked for powerful banks, I have been surprised at their lack of ambition in influencing the basic parameters of politics, instead preferring to adjust to whatever regime prevails and trying to ensure — within that framework — advantages at the operative and profit-and-loss level.

    This can be a difficult process. It appears the German car industry which has been paying lip-service to “green” policies for a long time (because the dominant ideological paradigm of German government derives from green doctrine), finds itself badly squeezed by the consequences of these green policies (diesel-gate, or the effective undermining of the electro-car by the very German car companies (Daimler e.g.) that purport to favour it, as green-ideology guided government expects them). The destruction of Germany’s energy concerns is another case in point – big business trying to comply with the regime rather than determining its nature, and ending up in pretty difficult circumstances.

    Daimler became pro Nazi when the political system turned pro-Nazi, they have turned pro-green ever since established political power became pro-green. They have not been the drivers of the political paradigm shift. In fact, the greens have chanced on a perfect formula to blackmail “big business.” Big business generally being associated with environmental degradation in the popular mind, they are easily targeted by green “arguments” — one of the reasons why the other parties in Germany have turned “green” /accepted green ideological leadership: totalitarian-apocalyptic propositions are politically more powerful than subtler, more realistic and honest reasoning.

    • Thanks for these interesting comments. I don’t have much to say, as I am not that well up on German politics. Re ideology, I think we all have one, but that is not an argument for rejecting scientific expertise. In the social sciences, value judgements are ever-present, but once more can be hidden by, for example, an adherence to formalism or seemingly elegant mathematical arguments. In other words, I have sympathy with the Marxist argument that mainstream economists are in this situation, but may not be aware of it, since they are living in a capitalist system, in which the dominant ideas are perhaps produced by the structures and relations of the system itself. This idea of ‘false consciousness’ can make many uncomfortable, but maybe that is an indication that their beliefs and ideology could be challenged and even overturned.

      I do often find the work of heterodox economists richer and more informative than mainstream ideas, but perhaps this is because they are addressing a different subject eg the nature of the capitalist system rather than simply the functioning of markets and these larger questions are more interesting to me. This is surely why those outside the mainstream will always struggle to make their ideas into the new mainstream, which may from time to time absorb ideas from heterodox economics and make these part of its own.

      Thanks again.

  2. You write: “This idea of ‘false consciousness’ can make many uncomfortable, but maybe that is an indication that their beliefs and ideology could be challenged and even overturned.”

    False consciousness is a fascinating topic. Not least for the reasons you mention. It is a multi-faceted phenomenon, likely to contain strands of different quality and nature. There can be an objective element to it: i.e. one may be able to prove that an ideology is objectively wrong concerning a certain claim. But this is not incompatible with the fact that it is impossible to lay claim to an objective truth that covers all perspectives and interests involved in human interaction. To insist on this is not same as being a partisan to relativism. Situationally dependent conditions and assessments are part of the objective structure of reality (an important insight of Marx, but one that hh would tend to abuse) but they may also bring about conditions that rule out (in some, indeed in many respects) a uniform perception of one objectively true reality.

    It is wise to adapt to perceptional pluralism through a pluralistic political order—an adaptation that Marx and most Marxists are radically opposed to. Marx had a more or less hidden agenda of being in possession of generally valid objective truth concerning social conditions, which makes him unpalatable to me. Those who disagreed with his view were accused by him of having fallen prey to false consciousness. There is a huge difference between that kind of bully epistemology, and the careful study of the conditions of situationally, individually and socially diverging perspectives.

    In his magisterial biography of Marx (in chapters 10 and 11), Jonathan Sperber has great insights to offer on what I have called in this comment Marx hidden (epistemological) agenda.

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