Introduction
Democracy and capitalism share a dependency on the art of association and on the disposition of people to look outward to others. In a well-ordered democracy, in which the citizen retains a degree of power, the person develops certain skills and virtues that carry over to engagement in commercial society, or capitalism,Footnote 1 to the benefit of commercial enterprises and overall society. Conversely, democracy and capitalism also share a vulnerability to individualism and, even worse, selfishness. The theory of this essay is that, although the practice of capitalism instills or particularizes virtue in the person, democracy provides the primary antidote to its greatest weaknesses: individualism and selfishness.
In this essay, we adopt Alexis de Tocqueville’s meaning of individualism as a disconnectedness from society, resulting in an inward-looking focus to care for self, family, and friends.Footnote 2 It can lead to selfishness, which is marked by greed and disregard of others. By democracy, we refer not to a pure democracy but to a system of the type that Tocqueville observed in the United States. Whereas limited national powers were centralized under the federal government and whereas state government had centralized responsibilities, local government was distinguishable in that it had citizen participation in deliberation and decision-making. This fostered in the citizen a feeling that she needed the support of others outside her usual circle, and through that dynamic, that her “particular interest merges with the general interest.”Footnote 3 In Tocqueville’s observation, the spirit of the republic—the character of the citizen—lay in having equality of conditions plus an equal share of power over the administration of a set of responsibilities.Footnote 4 That dynamic bound the citizen to the larger constitutional structure and drew her to respect the dignity of others and hope to earn their esteem—in other words, to be praiseworthy.Footnote 5 We contend that this character development similarly serves capitalism. It militates against greed and selfishness.
To analyze these ideas, we use Michael Novak’s framework that a free society rests on a foundation of three realms of liberty: political, economic, and cultural.Footnote 6 The political realm encompasses a society’s governance framework. Under the United States Constitution, that work is the continuing project of the people, who are ultimately responsible for ensuring fidelity to the Constitution as well as for amending it. Likewise, through their elected representatives, the people are responsible for enacting statutory law. The constitutional structure, including the limited powers of the federal government, preserves the general sovereignty of the states and of the people, which in turn for over a century left intact local control of the citizenry over many day-to-day administrative matters. That preservation affirmed the dignity of the human person, later articulated in the principle of subsidiarity, which holds that governments ought not assume responsibilities that can be addressed on more local levels of government or by individuals themselves.Footnote 7
The principles of federalism and subsidiarity favor participatory democracy and local control of day-to-day administrative matters, providing a medium through which citizens develop certain virtues. Citizens bring these virtuous habits to commercial society, with a properly ordered commercial enterprise reinforcing them and particularizing them in furtherance of its corporate mission. To that end, the wise market agent (an enterprise’s owners, directors, and managers with discretionary authority) seeks to affirm virtue in her enterprise’s workers. The development of such virtue does not exist in isolation but is affected by society writ large. This essay discusses the contributions of local political participatory democracy to commercial society.
In democratic capitalism, the economic and cultural realms are fashioned by the members of a particular society. Those realms encompass individuals building intermediary institutions and exercising market preferences in cultural matters such as religion, entertainment, education, and leisure. Among other things, they delineate how persons should interact with each other, facilitating socialization, tranquility, and the building of trust. This includes consumers and market agents, who develop common habits, conventions, and practices that undergird the trust and efficiency necessary for commercial exchange.Footnote 8
Sometimes for the better and sometimes not, those wielding the levers of government intervene in the economic and cultural realms to address society’s problems. That power can be misused, resulting in various degrees of tyranny when, for example, government tramples individual rights or excludes citizens from the political realm. Such tyranny can be instigated by individuals in government, by majority power directing government, or by special-interest factions corrupting government.
In this essay we discuss democratic capitalism as implemented in the United States. Nonetheless, we do not contend that either capitalism or the constitutional design of the United States is fully or faithfully implemented there. To the contrary, the constitutional design has been subverted in favor of government centralization in the federal government and, within that, in the bureaucracy of the executive branch. In turn, that centralization has been used to incentivize states to centralize power that had remained with their local subsidiaries. From an economic perspective, the rent-seeking behavior of market elitists compromises the free market and undermines citizen faith in government integrity.
Democratic capitalism thrives on free human association—the more meaningful the better—and resists being characterized by rousing greed and individualism. In particular, capitalism discourages those pathologies when it exists in tandem with a well-ordered, decentralized democratic republic. Capitalism, properly contextualized, is teleologically necessary for the human person and as such is natural, ordered human activity that encourages the building of character in a person.
Neither capitalism nor democracy are utopian systems. They both recognize the imperfectability of the human person and society. Capitalism assumes market failures, poor decision-making, fraud, and deceit. It attends to those imperfections through insurance, market competition, and the development of conventions, such as those that eventually became enshrined in the Uniform Commercial Code. Similarly, the United States political system rests in part on the concession of human fallibility, including the fallibility of the majority, through the enshrinement of certain unalienable rights, the rule of law, the separation of powers, equality under the law, varying terms of elected positions, and the process of constitutional amendment. As it is for democracy, the free association that undergirds capitalism “begins on the assumption that all who enter the market are equal under the law, that each has dignity, and that each deserves respect.”Footnote 9
We agree with, but do not consider in this essay, the well-founded conclusions of Adam Smith and others that capitalism produces undeniable good that mitigates greed. In capitalist societies, most people see a life of comfort as within their reach. By an order of magnitude, no other system has spurred invention, innovation, and production like the commercial. Nonetheless, this inquiry does not weigh the civic goods that commercial society seeds against its harms. Rather, the present inquiry demands an answer to the question of whether commercial society generally encourages individuals to be better people such that society bends toward tranquility and the treatment of all with dignity.
Dignity, virtue, values, and two perspectives on society
As a general proposition, virtue is those qualities that lead to excellence in being human. Pondering the contours of those qualities stretches at least back to Socrates. Socrates, Plato, Aristotle, Thomas Aquinas, Benjamin Franklin, and others each created their own list of virtues, each reflecting their view of what it means to be a human person. This brings to the forefront an odd division in how people view humanity, in particular on how society should respond to human weakness and creativity. Over the centuries, various philosophers, economists, and other social commentators have touched on that division. In the words of Thomas Jefferson:
Men by their constitutions are naturally divided into two parties: 1. Those who fear and distrust the people, and wish to draw all powers from them into the hands of the higher classes. 2dly those who identify themselves with the people, have confidence in them, cherish and consider them as the most honest & safe, altho’ not the most wise depositary of the public interests. In every country these two parties exist, and in every one where they are free to think, speak, and write, they will declare themselves.Footnote 10
Elitists is a commonly accepted contemporary descriptor for the first group. Elitists are those who are optimistic about the decision-making abilities of one or more specialized individuals acting on behalf of a broader community.Footnote 11 Elitists do not trust the people to create or rule, especially regarding community standards. Instead, a small cadre—even a single person—should set rules; alternatively, some elitists, or tyrants, prefer to hand down edicts arbitrarily, careening from matter to matter. This distinction applies to “virtually every area of human life.”Footnote 12 Those who are not optimistic about the human person tend to extinguish power in the lowest level of government or at the very least strip it of participatory features, centralizing power and distancing it from the people. In contrast, those who are optimistic about the human person embrace the principle of subsidiarity, properly understood, to leave agency with the human person or in the political level as close to the individual as possible.
For the second group, we use the term personalists, emphasizing the “significance, uniqueness and inviolability of the person, as well as the person’s essentially relational or social dimension.”Footnote 13 Personalists are those who are optimistic about the individual’s ability to make decisions concerning her own life.Footnote 14 They hold that the human person can, in the language of Hannah Arendt, speak with others whom they live near and agree on action to be taken.Footnote 15 Personalists believe that the people themselves can form and live according to community standards that they partake in forming. In Michael Novak’s judgment, at the heart of the capitalist system is “confidence in the creative capacity of the human person.”Footnote 16 Accordingly, the spirit of the person is crushed if she is not working for herself, losing a sense of shaping her own life and becoming essentially a mere cog in a machine or in a “system of excessive bureaucratic centralization.”Footnote 17
Not surprisingly, the lists of virtues that one might make will differ according to one’s view of the meaning of the human person and the dignity accorded thereto. If one posits an elitist, undignified view of the human person—for example, a serf, a slave, or an atomized person—the list of virtues will be truncated and their achievement by the human person relatively easy. For instance, for Karl Marx the human person must be viewed scientifically with material good being a chief variable.Footnote 18 In contrast, if one posits a more dignified view of the human person, the list of virtues will be robust and their achievement more challenging. Novak describes a more dignified view: drawing from Jewish and Christian tradition, the human person is made in the image of the infinite, all-good Creator. The person has the capacity to create and is oriented toward others, recognizing in them equal dignity due to the common, infinite cause ascribed to their creation.Footnote 19 Two categories of creation can arise from these interactions: (i) an external good, such as a thing built, an instrument of governance agreed to, or a service provided; and (ii) a relationship between persons. The former good may prove of tremendous utility, but the latter good, that of a relationship, touches upon the very fulfillment of human purpose and happiness.
The values of a particular society may change as the express or implied meaning of the human person changes. While Novak’s political, cultural, and moral realms may be rooted in deeper philosophy, the actual values held represent the negotiated mode of living in which a diverse society coheres. This negotiation may take the form of laws in the political realm, injunctions in the moral, or trends in the cultural. Individuals, political parties, and religious traditions participate in this negotiation by bringing together groups to agree on policy and to offer, among other things, a sense of existential purpose. Commercial society serves this negotiation in a very practical way by innovating and producing goods and services for consumers according to the values upon which they reflect.Footnote 20 Thus, for instance, a society’s various ethnic groups, cultural cliques, and religious and philosophical orientations might all disagree on fundamental questions about the nature of the universe, hopefully productively, but to the extent to which they all accept the value of independence, initiative, or hard work, these might be accepted as the society’s values. Nonetheless, attempts to centralize control of these values characterize the conflict between elitism and personalism.
Personalism and elitism touch on the topic of this essay because the theories of both democracy and capitalism rest on the personalist notion that the person should have the freedom to participate, or create, equally in society. But capitalism and democracy are both susceptible to individualism and, ultimately, selfishness. The effective antidote to this is “political freedom,” in particular participatory democracy.Footnote 21
The charge that capitalism encourages greed and individualism
Stretching back centuries, philosophers and theologians have raised concern that commercial society fosters greed and indifference. Smith ponders the relationship between material wealth, on the one hand, and greed and indifference, on the other.Footnote 22 He charges that the rich “wonder that the insolence of human wretchedness, that it should dare to present itself before them, and … presume to disturb the serenity of their happiness.”Footnote 23
For Max Weber, capitalism evolved under the influence of Calvinism, which imbued the economic culture of the Puritans with the virtues of hard work, personal sacrifice, and a confidence in their work as a vocation. The subsequent loss of religion was, in Weber’s view, disastrous for capitalism because it stripped the sense of meaningfulness from economic activity. Critics of capitalism often follow Weber in pointing to the accumulation of profit over the material good of the consumer or worker, as society loses religious values. For the critics, once the moral veneer of Calvinism was stripped away, the vicious character of capitalism was revealed and culminated in the wretched conditions observed by Friedrich Engels in Manchester, England. On the contrary, we note that this early form of capitalism can hardly be taken as the epitome of the theory. We contend that the Calvinist virtues as described by Weber and as distinct from Christian values generally, provided certain moral benefits to capitalism but also had the negative effect of entrenching division among the population, thereby muting capitalism’s development.
Calvinist theology teaches that salvation comes only from the will of God, with a consistent theme being that the Holy Spirit would provide individual assurance to those destined for salvation. Through methodical exercise, the knowledge of election can be brought to consciousness and thus bring spiritual comfort to the person.Footnote 24 Those who have been saved by grace will work tirelessly according to the life to which God has called them. Moreover, self-confidence would arise from faith, which in turn is the result of grace; a lack of faith could come about by the work of the devil, and so it is the duty of Calvinists to overcome any doubt concerning their salvation.Footnote 25 This leads to personal pursuit for assurance that one’s life is aligned with God’s plan, while at the same time eschewing material comfort. Profit became viewed by many as an assurance of being chosen by God.Footnote 26 For Weber, the primary function of profit in Calvinist society is to provide assurance and avoid self-indulgence, leading to the reinvestment of capital. As religious motivation dissipated, materialism was substituted for Calvinism and profit became an end in itself. Greed was no longer moderated. Some critics view this capitalism unmoderated by Calvinism as its pure form rather than a transitory stage following mercantilism and aristocratic feudalism.Footnote 27 But in reality, Calvinist society itself had simply substituted the old aristocratic divisions of society that it had eschewed in favor of divisions formed along theological lines.
Calvinism tends to separate the elect from the reprobate, or those not belonging to the true, invisible Church.Footnote 28 For the Puritans, it was imperative that the elect maintain political control of society and that the reprobate, inevitably mixed in with the elect, be subject to their authority. However, a fully capitalist society rests on full political equality as the basis for free exchange. Without such equality, the requisite trust necessary for maximal free exchange is lacking, which in turn lowers economic activity. The divisions that appeared in Puritan society were not a function of capitalism, nor did they originate in Calvinism, but were a vestige of feudal society and mercantilist economics. In contemporary times, divisions persist in the form of cronyism and centralization, frustrating and compromising the primary virtue of commercial society: the encouragement of free association among people, attentive to the values and needs of the customer.Footnote 29
In 1991, Pope John Paul queried the effects of unbridled capitalism, noting “there is a risk that a radical capitalistic ideology could spread which refuses even to consider” extant problems of marginalization, exploitation, and alienation.Footnote 30 For his part, Pope Francis delved into the subject in his apostolic exhortation Evangelii Gaudium. He argued against a market system in which the “powerful feed upon the powerless,” thereby forming a society in which “masses of people find themselves excluded … without work, without possibilities, without any means of escape.” Evangelii Gaudium identifies the culprit as a “crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.” This culture of exclusion, which he also identifies as a culture of prosperity, inculcates a “selfish ideal” of indifference in which the excluded are a “mere spectacle.” The primacy of the human person is denied in favor of an “absolute autonomy of the marketplace and financial speculation.”Footnote 31 Evoking the concerns of Smith, Pope Francis worried that the free market encourages an indifference to the suffering of the poor.
The sanctity of private property
At the root of capitalism lies the concept of property. Pope John Paul II noted that certain types of early or transitional capitalism use the monopolization of property in the means of production as a tool of oppression.Footnote 32 Certainly, private activity can stand in distinction to the judgment of mass society, making possible the cultivation of dark thoughts and malevolent plans.Footnote 33 But in a well-ordered society, the concept of property is inextricably intertwined with privacy and is necessary for both liberty and the expression of freedom.Footnote 34 According to James Madison, property consists not just in land, cattle, merchandise, and money, but also in opinions, religion, liberty, safety, and all those things proper to ourselves.Footnote 35 Capital’s “primary meaning is ‘human capital’–the human mind, inventiveness, knowledge, skill, know-how, enterprise, a capacity for organization, habits of cooperation, and initiative.”Footnote 36 From the storehouse of property, we choose the means by which we form relationships with other persons. Given such personal meaning, property is properly held as sacred.
Arendt describes the distinction between liberty and freedom and the importance of property to both.Footnote 37 Liberty is the condition of freedom in that it connotes a separation from restraint or compulsion. Freedom, however, means using liberty to achieve one’s ends, or happiness; it means creatively expressing oneself in a relationship with another who is one’s equal. A curmudgeon might draw others into inveighing against ethnic minorities, and the rights of privacy and speech would seem to protect her. This may be a use of liberty, but hardly an exercise in freedom because she has excluded herself from associating with and receiving the gifts of others. Novak describes a distinction between a libertine, continental sense of liberty and the Anglo-American understanding of liberty.Footnote 38 For the former, liberty is the realm of the permissible: all things not compelled or restricted by law. For the latter, what Arendt calls freedom, what is permitted by law is nonetheless subject to a well-ordered conscience. Novak writes that “liberty is conceived of as the inner form of the law” in the Anglo-American tradition.Footnote 39 Liberty is not an end in itself, but is ordered toward a deeper natural law that derives from reason, serves conscience, and aligns the will with truth.Footnote 40 Insofar as a properly ordered political realm involves compulsion and restraint, it merely protects liberty, though in a marginal way. For Arendt, “the life of a free man needed the presence of others. Freedom itself therefore needed a place where people could come together—the agora, the market-place, or the polis, the political space proper.”Footnote 41 Freedom can only exist in a place of equality, where the free exchange of ideas and other property can take place.
This difference between freedom and liberty echoes Smith’s distinction between the motivation of loving praise and being praiseworthy. Commercial society draws the person outward beyond the closed society of estate, family, and friends. There, the person’s natural desire to associate with others exacerbates a fragility: the fear of being perceived as ignoble or of low standing. Material abundance offers a quick way to ameliorate those concerns, masking the lack of virtue with the trappings of wealth. For the successful market agent, this is an easy, instant way to salve those fears. Thus, the “rich man glories in his riches, because he feels that they naturally draw upon him the attention of the world” and, for that reason, “he is fonder of his wealth.” But this fear is also a concern to the poor man.Footnote 42 And for society overall, it presents the possibility of corruption such that individuals, while drawn outward to others for the purpose of flaunting their wealth, separate themselves from others and the common good. While trading praise (esteem, albeit a low form of it) and goods with others, they are in danger of limiting themselves in a Marxian sense to materialism, descending below the level of individualism (in Tocqueville’s sense of being narrowly concerned with the well-being of self, family, and friends) to selfishness (marked by greed, pleasure, and indifference).
Against these corrupting tendencies, nature and society have interposed other conditions that encourage a more dignified anthropology, demanding rigorous virtue. In the privacy of her thoughts, the person is cognizant that praise for mere baubles and trinkets—and, we might add, physical beauty—is superficial and that those who shower such praise are doing so obsequiously. The person thus desires to be, in Smith’s description, praiseworthy.Footnote 43 She seeks to be a person of substance and to be viewed as such by family, friends, community, and country. That means someone who has contributed something necessary and desirable to society: a coach, inventor, warrior, teacher, businessman.
The right of private property and its attendant privacy are indispensable to this dynamic. Privacy protects the development of one’s character and freedom because, as Arendt points out, in the public eye no action can survive the suspicion of political utility, precisely because it is of utility to the public.Footnote 44 Goodness exists only in private, where, protected by shame, it serves as the receding, tantalizing ideal toward which the self strives. Without a secure space for self-reflection wherein the person is not dependent on the whims of others, the person cannot truly assess her motivations and intentions.Footnote 45 Humility, or the honest reflection on the self in solitude, protects us from the danger of believing praise and thereby being enslaved by it.Footnote 46 A totalitarian regime strips its subjects of privacy in order to prevent shame from taking its full shape of humility, from which genuine action and solidarity can originate.Footnote 47 Likewise, from a humanitarian viewpoint, homeless and institutionalized persons are deprived of a space they can call their own, making it more difficult to separate their thoughts from those that totalitarian-like control their environment.Footnote 48 Without property and its attendant privacy, a community is deprived of its ability to form the landscape of society. For that reason, totalitarianism cannot tolerate privacy, lest in a quiet moment of solitude a person achieves the prerequisite for action.Footnote 49
In Smith’s estimation, a proper education would enable a person to distinguish between praise and praiseworthiness and, in Ryan Patrick Hanley’s words, “recover a reverence for forms of excellence threatened by his own proposed system of political economy.”Footnote 50 Our contention is that the experience of participatory democracy provides a practical education to that end.
The market economy: The market agent’s outwardly looking perspective
Novak proposes the phrase democratic capitalism to describe a system of natural liberty that incorporates politics and economics and rests on a particular inheritance of habits and mores. It encapsulates a single system that includes political liberty, economic liberty, and an underlying moral and cultural liberty on which the first two rest and through which the human person acts for purposes of friendship, spirituality, family life, and so on.Footnote 51 We note that the underlying liberty must include both the private and the public. Privacy centers on the property interest in one’s home and allows for one’s personal life, including the spiritual and familial.Footnote 52
Democratic capitalism carves out space for recognition of the full dignity of the person. The phrase implies that the person has the right to shape her private life and pursue public happiness through an equal share in the political environment. Properly implemented, democratic capitalism puts the human person in charge of her life. The practice of associating with others on a free and equal basis entails recognizing the spheres of liberty in which that association takes place, thus encouraging virtuous self-formation. Disordered acts—both those flowing from liberty and those that do not, such as tyrannical acts—limit freedom, narrowing free interaction with others.Footnote 53 Disorder in any one of the political, cultural, or economic realms leads to disorder in the others as well as the deterioration of society.Footnote 54 From a practical standpoint, this means that, when communism collapsed, the people of Eastern Europe learned that “they cannot have either democracy or capitalism unless they acquire the appropriate moral habits and … adapt both their institutions and their laws.”Footnote 55
The fundamental virtue of democratic capitalism, upon which all other virtues are built, is the creative other-directedness that impels the individual to reach out to others in an act of self-revelation. This other-directedness is nothing other than freedom—not from restraint, but of association. Goods and services exist as a means to serve this purpose. In responding to material needs, the deeper need for association is addressed. Just as individuals overcome their isolation by associating with others, these associations in turn can focus on the needs of the whole of society. Any interruption of this outward direction curtails virtue in society and inevitably in individuals.
Agency and virtue in democratic capitalism
Faithfully implemented, democratic capitalism respects the personal space the citizen needs to flourish and provides the milieu in which the person forms her character. This formation is an essential aspect of both political and commercial societies. It occurs initially under the guidance of family because the recognition of a continuum of rights in life, liberty, and property means that the person can order her personal and family life behind a veil of privacy. There she can contemplate truths, form her family, and imagine her life as she wishes to pursue it.Footnote 56 She forms character and develops virtue within the safety and sanctity of that private realm. She decides how to engage in the public realm—economically, socially, and politically. Those activities are a condition for free engagement in the public realm, because without a chance to form the self and to segregate the public from the private, one cannot act freely.Footnote 57 In that case, one is at best compromised in warding off the meddling and coercion of others, government and nongovernment alike.
In a democratic republic, an essential feature of this process is that the citizen has a share of power equal with other citizens in shaping the public political environment.Footnote 58 In a larger republic, such as the United States, the citizen’s immediate power might be limited to matters of local concern, with central federal and state government addressing matters of broader concern. Arendt points out that Madison recognized federal power rests not in centralization, but in preserving localization, indicating early inculcation of what would later be known as the principle of subsidiarity.Footnote 59 Power arises from free associations and the ability to articulate particular concerns in fine grain in a way that translates into a broader context. In addition to political equality, the critical feature is that the locality must have independence in a portfolio of power.Footnote 60 Those features make the citizen’s public engagement meaningful. Tocqueville writes: “Each man equally weak, will feel an equal need of those like him; and knowing that he can obtain their support only on condition of his lending them his cooperation, he will discover without difficulty that his particular interest merges with the general interest.”Footnote 61 That dynamic demands that the citizen strive to be “as enlightened, as virtuous, as strong as any other of those like him,”Footnote 62 striving, as Smith describes it, to be praiseworthy. Furthermore, in the public eye, the citizen “habituates himself to the forms” of political decision-making, develops a taste for order, and “assembles clear and practical ideas on the nature of his duties as well as the extent of his rights.”Footnote 63
The dynamic unfolds in the sphere of the citizen’s friends, family, and neighbors, disclosing herself in both private and public. This brings to fruition the operation of esteem and shame, which is of particular importance to the formation of virtue. The actor here is within the sight of those who know her, and she expects that frivolous behavior will be noticed. She cannot expect to avoid the judgment of family and friends. She strives to be praiseworthy, seeking their esteem, and avoids being shamed before them. Likewise, she seeks to be esteemed by third parties in the sight of family and friends and to avoid enduring contempt in their presence. Witnessing their parents being esteemed by third parties generates warm sentiments in children and binds them to the political structure through the process of third-party esteem. Similarly, the actor’s other family and friends develop an affinity for the political structure.Footnote 64
Conversely, if power and independence are lacking, the citizen has a radically diminished reason for reaching toward those beyond her circle of friends and family and of demonstrating to them the riches of creating bonds with others.Footnote 65 That deprivation irrationally disconnects people from the business of building their society, contravening the role of the citizen and the civil doctrine of subsidiarity. She is then susceptible to individualism, turning inward to devote more time to the care of family and friends to the exclusion of others. As stated by Richard Cornuelle, this “is the real root cause of the evident loss of the feeling of cohesion and solidarity.”Footnote 66
When the individual has a reservoir of political power, she can sate the natural urge to build her public environment. For the rare city-state, this might mean a more direct share in all matters of government. In the United States this has historically meant a participatory share of local power as part of the larger constitutional structure encompassing state and national concerns. Either way, the citizen acts as a constituent participant in the exercise of power within a larger constitutional framework. Participatory local government gives citizens active ownership in that structure.Footnote 67
At the same time, she recognizes a need for the support of others to accomplish her objectives. To garner that support, she considers her efforts in relation to the common good and in furtherance of virtue. She utilizes the dynamics of shame and esteem, which flow from the natural desire to associate with others. She sees that her future acts, whether in pursuit of public matters or in pursuit of her private endeavors, will likely be affected by the reputation she earns in the public square.Footnote 68 These dynamics have cascading additional benefits that help build public virtue and draw the individual to favor a virtuous life.
First, in becoming aware of the esteem showered upon her by political society, the person’s family and friends develop an affinity for the constitutional project regarding both the constitutional structure and the development of shared, public notions of virtue. The project of building society becomes theirs.Footnote 69
Second, participatory government is the universal dynamic that binds people together and to the constitutional project. It extends to citizens an invitation to exercise their share of power to shape their community, which as described above, necessitates reaching out to others outside one’s circle of friends and family to garner their support. It is universal in that its membership criteria are simply citizenship and residency, devoid of restrictions of profession, class, race, religion, membership vote, participation fee, and so on.Footnote 70
Third, having a share of power in participatory government arouses concern for others and recognition of one’s capability to effect change. It thereby encourages the person to join civic institutions and to think and act creatively to effect change. It also draws the person to contemplate ultimate purposes, leading to deeper contemplative and spiritual lives. This lights the connection between the family and external society, thereby delineating the guidance children need and inspiring plenipotent and engaged parent figures.Footnote 71
These dynamics are most discussed in relation to the development of political society. But they also benefit the formation of the individual, family life, and civic life, including educative and religious associations. They rouse in the individual a sense of having the power and influence to build both one’s private life and the public environment. This draws the person outward to public life as a natural extension of private life. It inculcates an appreciation of two benefits of association: the relationship formed and the material product. These dynamics counter individualism, the inward turn in response to public impotence. They rouse the person to embrace the associations that make up capitalism and serve as a guard against greed and selfishness.
To recap, through participatory local government, the individual gains an appreciation of others and sees her family and friends’ well-being as connected to the well-being of others in their community. This draws the person outward and counters the inward-looking tendency of individualism. The person realizes that she needs to hone the art of association, the “first law of democracy,” to build society.Footnote 72 The person acknowledges the virtue in reaching out to others, to understand their points of view, to seek their assistance, and to offer them assistance. This process effects a universal binding to the constitutional structure in which local participatory government exists, inspires the person to become civically engaged, and rouses care of family by according the person the full power to do so. These dynamics lead to the formation of virtue in democratic capitalist society.
Commercial society’s benefit
The primary activity of being human is to create or build, a process best carried out with the superbly human capacities to reflect and plan. These creations are most meaningfully carried out in association with other persons, who participate in the process or otherwise benefit from the creation. Accordingly, human persons associate with others primarily to build or create family, community, sustenance, property, and wealth. The human person’s associative nature thus demands that both the economic system and the political system reserve space for the creativity of the human person. In other words, the person must have the freedom to interact with others for purposes of shaping one’s environment, politically, socially, and economically. Participatory democracy and capitalism rest on this understanding, as forged and refined through the centuries.
Both the worker and the market agent develop certain virtues in the practice of local, participatory democracy that carry over to commercial society. This is not surprising given that capitalism mirrors democracy in that most of its constitutive activities are associative rather than individualisticFootnote 73 and that, like democracy, a business enterprise will wither if it cannot create goods and services that advance its mission. Because they reflect the nature of the human person, the conditions of democracy and capitalism are conditions of human dignity. Specifically, neither democracy nor capitalism can exist without the rule of law, a basis of human interaction that enables one to trust associating with others, even strangers. Nor can either exist without equality under the law; the necessary trust for associative activities is lacking and replaced by alienation if the law empowers one person or a group of persons over others. In addition, the law must recognize fundamental rights that enable a person to interact with others.
With regard to democracy, at the most basic neighborhood or community level the individual must have decision-making power, and it must be equal to that of others. If so, one acquires the spirit necessary for participatory self-governance, that is, a feeling of being an equal co-creator of the republic. Unlike the anonymity of voting, this activity serves as a platform in which the desire for praiseworthiness dominates the desire for praise. The condition of equal political power imbues the person with humility, inoculating against the arrogance that leads to both paternalism and the oppression of others. Moreover, through third-party esteem, the participator’s family and friends become invested in the civic project.Footnote 74 To be effective in democracy, one must pursue truth, engage in dialogue with others, respect their dignity and opinions, and act in a trustworthy and creative way. In participatory democracy, the person strives to be praiseworthy, because the prime activity is the exchange of opinions and ideas in order to decide policies. Seeking mere praise is inapt for that activity.
These conditions and the virtues required to sustain them compare favorably with Novak’s list of virtues that a “new Aristotle” might flesh out in the age of capitalism: initiative; enterprise; social cooperation; public spiritedness and civic responsibility; the habit of registering dissent without obstructionism; the art of compromise on practicalities; the habit of showing respect to persons, even where disagreeing with their opinions; and the art of speaking kindly.Footnote 75 These virtues all have to do with creativity and association, which lie at the heart of democratic capitalism.Footnote 76
Consideration of the realities of commercial society makes clear that a business enterprise depends on many of the virtues inculcated by participatory democracy, a point made clear by Peter Drucker’s description of the ideal commercial enterprise. Such an enterprise must serve society. This is neither a moralizing sentiment nor a denigration of profit, but simply an adaptation of economic and political phenomena into moral terms. For Drucker, the business enterprise exists “to fulfill a specific social purpose and to satisfy a specific need of society, community, or an individual. They are not ends in themselves but means.”Footnote 77 An enterprise is created to satisfy a human want. The business identifies needs of potential customers by first recognizing their values and then designing a product or service to address them. The business creates customers from two potential starting points: an unmet need or want that a business identifies and meets or a scenario in which there is no want until created by a business, as often happens with new technology. In either scenario, it is the customer who creates wealth by being willing to pay for a good or service that she ultimately values. The successful business merely recognizes the values of the customer.Footnote 78 Even superficial values exploited by the company are still values served. In contrast, if customers do not deem an enterprise’s product to be beneficial, then that company is not serving. Thus, the business exists in the meeting of the seller and the buyer. At root the business purpose is associational and thus a matter of ethics.Footnote 79
In a successful business, a mission statement is the organizational principle that articulates the particular service of the organization to the external community, and it must be communicated to the entire organization.Footnote 80 All levels of the enterprise maintain the vision of service, making that focus an internal ethical principle. Moreover, the mission of the company is always open to revision, because asking questions about it strengthens the understanding of the mission, keeps the enterprise attentive to changing circumstances, and results in workers better equipped to defend the mission.Footnote 81 In this way, workers may participate more freely and actively in the goals and values of the company.Footnote 82 Ultimately, the legitimacy of the mission is affirmed by the market, with the customer, not the enterprise, making the value judgment. This process advances the internal development of virtue among workers and market agents alike. Accordingly, the most effective organizing principle of any association is the opportunity to provide service. This is not to deny pervasive antipathy, but simply to point out that effective organization comes from the motivation to freely associate with others. A properly functioning business organization enriches the associational ecology.
In a properly managed enterprise, every level focuses on its mission. Drucker famously told the story of three stonecutters who were asked what they were doing:
The first replied: “I am making a living.”
The second kept on hammering while he said: “I am doing the best job of stonecutting in the entire county.”
The third looked up with a visionary gleam in his eye and said: “I am building a cathedral.Footnote 83
If the market agent assumes that all the worker can contribute is the performance of a task, then the worker is deprived of consciously participating in the service to the community, and the business is deprived of the insight of the worker.Footnote 84 Only the third stonecutter can find fulfillment. Two identical cathedrals could be built, one by stonecutters of the third sort, and the other by the first and second types. The genius of the architect is manifest in both, but only in the former does the commercial transaction become the embodiment of an intentional community comprised of the workers and the people they serve. In terms of their functionality as an assembly place, the cathedrals are identical, but the primary good created differs. The first is the expression of only the architect. The second is the entire enterprise’s accomplishment, and the enterprise becomes more fully integrated in the local community. It becomes a cultural achievement of the community, improving the associational ecology and making the community enterprise and business more familiar with each other.
To summarize, with respect to the market agent and the worker, experience in local, participatory democracy prepares one for virtue. It inculcates an appreciation of the viewpoints of others through working with them in pursuit of a common goal, conducting oneself in accordance with a common set of rules, and working creatively with others in pursuit of a common objective. A person steeped in these virtues brings them to the commercial enterprise, ready to work with others to build the business enterprise just as she helped build the local political community. Through the enterprise’s internal structure, members of the organization exercise their judgment and leadership. The worker and his work group “are responsible for their own jobs and for the relationships between individual jobs.”Footnote 85 These groups have to exercise decision-making about their own practical organizational issues, a potentially extensive list of tasks concerning the performance of the work team, such as staffing schedules, multi-group task forces, individual performances, attendance, safety, and so on.Footnote 86 It also produces leaders who relieve top management of internal concerns and prepare for the emergence of new leaders. Those processes draw from the worker’s character and contribute to the enterprise’s development.
Participatory democracy also helps acculturate the market agent for commercial society in the same ways that it prepares the worker, inculcating associative virtues in him. As with the worker, engagement in commercial society helps particularize those virtues and habits to the mission at hand. And as with the worker, the market agent is drawn outward to forge ties with the external community, to recognize the needs of society, and to desire praiseworthiness by providing a service to that society.
Notwithstanding the necessity of profit, Drucker impugns the notion that a business exists for the purpose of the so-called profit motive. That notion rests on the mistaken belief that the businessperson’s motive to make money explains his business behavior or serves as a guide to right action. The profit motive does nothing to shed light on the business’s particular behavior or particular profitability. Nor does it explain the business’s particular relationships with its customers and potential customers.Footnote 87
Internally, local participatory democracy prepares the market agent to leverage workers’ self-organizational abilities, insights into work processes, moral sense of personal purpose, and skills of association. Similarly, the market agent benefits from the personal humility developed in empathizing with others. The articulation of a mission statement entails the deference of the market agent to the consideration of the workers to participate more fully. The unique creativity that initially drives the market agent to associate with workers becomes a collaborative of creativity, similar to the dynamics of participatory local government.
There is not, however, complete symmetry between the values inculcated by participatory democracy and those inculcated by capitalism. Top management should always be mindful of the mission, interfering in the other levels only when necessary. Therein lies a major distinction between the two. At the end of the day, the market agent has ultimate responsibility, superseding decision-making of the workers. This is necessary for the ultimate decision-making of the enterprise.Footnote 88 Nonetheless, it can imbue the market agent with elitism, manifesting as paternalistic, corporatist, or fascistic tendencies when it comes to political matters that the corporate agents are attending to in their individual capacity—as citizens. Capitalism does not have a strong internal mechanism to cure this. It can inculcate in commercial agents sound management practices that encourage honest dialogue and respectful dissent and even decision-making. At the end of the day, though, the market agent can overrule the workers. That is a necessary line of authority in a business enterprise, but it is a tyrannical character defect if exercised in the political realm.
If a free society is considered from the Novakian viewpoint, then democracy provides the practical antidote to such elitism. The market agent formed in participatory democracy has an appreciation of the natural decision-making sovereignty of the human person. Participatory democracy recognizes the decision-making authority, or power, of the human person itself as a good. Moreover, the forum of participatory democracy is universal in that entry is automatic, save for residency and citizenship. It does not require a membership fee, standards of proficiency, ceremony, or the vote of other members. The person steeped in participatory democracy recognizes community deliberation and decision-making as a common good that affirms the sovereignty and dignity of the individual in political matters. The danger of a corporate agent who has not internalized those values is that he will try to exert his will on the political community in a corporatist or despotic manner.
Similarly, capitalism draws the person outward to consider the needs of a community in relation to the corporate mission. Yet, such considerations are incentivized by the needs of the corporation. When the market agent is acting in his personal capacity, those incentives likely do not exist or are at least diluted. Participatory democracy has a stronger response, drawing the person outward to see her good in the well-being of others and to shun the inward turn to individualism and ultimately to selfishness.
Centralization of political decisions deprives the citizen of political agency, encourages passivity in the public square, and decreases association and opportunities to practice virtue. Centralization renders the free exchange of ideas less potent, trending toward futility and disincentivizing the human person from engaging in the public square. The person naturally turns inward to individualism—the care of family and friends exclusive of the wider society. The development of public virtue wanes, and with that the culture and trust on which free political and economic exchanges depend. Most significantly, the market agent’s formation is diminished.
Conclusion
The morality of democratic capitalism rests on its capaciousness, especially regarding the freedom to create. Human persons create in terms of shaping the physical, intellectual, and moral world, as with the cultivation of the Earth, artisan works, and improvements of real property as well as cultural works of literature, philosophy, theology, science, music, and the arts. Most profoundly, they create in the forming of relationships with other persons. Humans are made for relationships, as evidenced by their capacities for reflection, planning, shame, and esteem. Human happiness most significantly derives from relationships. Virtue, therefore, consists of those characteristics and habits that increase our capacity for relationships. Virtue is found in the recognition of the needs—including rights and human dignity—of another and the creative response to those needs. Whatever the intermediary goods of an economic system, its final goodness lies in its consistency with these virtues.
Fully implemented, democratic capitalism recognizes in each person the right to associate with others and to work with them to create a product, service, or policy that addresses a human need. Democratic capitalism, though, is a fragile system because it recognizes the liberty of each human person to shape his or her life and because of the elitist tendency to centralize government. For its part, liberty allows for the possibility that individuals will fail, whether significantly or otherwise, to fully embrace their freedom, either by denigrating themselves or by seeking to diminish others. Such imperfections will always be with us, because all are imperfect. That tragedy, though, does not diminish the theory of democratic capitalism: it encourages each person with the chance to create through political, personal, and economic relationships with others.
For its part, the centralization of government deprives the person of public freedom and the benefits of its school of democracy. It eliminates the key forum, local participatory democracy, in which people are drawn out to consider others, to consider their points of view, to recognize their gifts of citizenship, and to work with them to solve common problems and build a shared community. In those exercises, virtue is formed. Moreover, the forum of participatory democracy is universal. Having largely stripped society of that forum, centralized government leads to discord among the citizenry and their alienation from government. It also deprives capitalism of a significant, perhaps the most significant, means of ameliorating greed.
In a well-ordered society, an enterprise’s workers and market agents contribute to the corporate culture, collaborating with other workers to build personal associations and to advance the corporate mission. Because it exists to provide a service to others, the corporate culture can for the most part refine or even form that virtue where it is lacking. With respect to ameliorating individualism and selfishness, though, participatory democracy is essential due to its dependency on universal political equality, a quality lacking in the necessarily hierarchical nature of the enterprise.
Competing interests
The authors declare none.
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