Economic democracy, or sometimes referred to as free markets, is a market situation wherein there is no government intervention. With this, it is solely the market that dictates the price of a certain good or service. Therefore, consumers are assured that they are not paying the said goods or services higher than what they are actually willing to pay. Consequently, producers are receiving the amount that they are willing to accept whenever a transaction is made between them and the buyers. Thus, market distortions are minimized, if not eliminated.
But, some people speculate that whenever there is an economic democracy, a political democracy follows. However, some say that this is not always the case. Therefore, this paper would analyze economic democracy and political democracy individually, then assess if there really is a link between the two. Specifically, this paper would answer the question, “Will economic democracy inevitably lead to a political democracy?” Such answer is important because it would end the opposing views regarding the relationship between economic and political democracy, and a coherent association between the two would be achieved.
By definition, economic democracy is an integration of a social and an economic concept that serves as a substitute for consumerism and the large-scale capitalism. Economic democracy is able to attain this through giving ample emphasis on individuals, which include the producers and the consumers, rather than mere money of the said economic players. This term is collectively known as anti-globalized economy, which is composed of neoliberal economic policies as well as the huge corporations. Its main objective is to emphasize local and community economies that would restore the significance of the individual and overall human contribution within all aspects of society.
Consequently, a free market is a hypothetical, idealized, or actual market wherein the prices of goods and services are arranged in mutual non-coerced authority of producers and consumers, with demand and supply of those items not being synchronized by the government(Barrons, 1995). Though a free market requires that the government does not control prices, supply, and demand, it also follows that the traders themselves do not persuade or misinform each other, so that the buyers and sellers are ethically voluntary (Foldvary, 2002). However, free market should not be confused with a perfectly competitive market, wherein economic players have perfect information.
The word democracy derives its meaning from the ancient Greek word demokratia. This word was formed from the root words demos, which means “people” (1978a), and kratos, which means “rule” (1978a).
Democracy depicts a string of associated forms of government. Its origins came from South Asia, Rome, and the Ancient Greece, which has grown and stretched out throughout history. Its ideology put an emphasis on the significance of the individuals in the framework of the government. This thought in turn has major influences around the world at present. Although characteristically used in the context of politics, its principles are also appropriate to other organizations and groups, like in the case of economic democracy.
Some of the forms of political democracy include Consensus Democracy (Gutmann and Thompson, 2004), Tribal Democracy (Fadden), Sortition (1978b), Anarchist Democracy (Graham, 2006), Socialist Democracy, Direct Democracy (Allswang, 2000), Liberal Democracy, and Representative.
Will Economic Democracy inevitably lead to Political Democracy?
Given the facts presented in the earlier part of this paper, it can be said that there is no direct association between the two. Therefore, the answer is no. This is because first and foremost, economics and politics are two completely different realms that are concerned with two different matters. Economics concerns itself with the allocation of scarce resources to satisfy unlimited human wants. On the other hand, politics encompasses the course of action and manner of creating resolutions for a certain groups of people. Although one can influence the other, still, there is a certain level of sovereignty between the two.
In addition, some forms of government other than a political democracy could still entail an economic democracy. This could be achieved as long as that type of government does not interfere with the market, because that is a requirement in order to have a democratic economy. More often than not, governments choose to interfere as minimal as possible for they know that such intervention would only cause market distortions like higher prices of goods and services than what buyers/sellers are actually willing to pay/accept, negative externalities, etc.
However, there are also circumstances that the government already has to interfere, like the provision of public goods. This is because public goods are the goods and/or services that the market do not want to provide due to certain reasons. One of the reasons is the absence of profits, the inability to impose property rights, among others. With this, the government has no other choice but to interfere. On the other hand, an extreme case wherein the government has full intervention on the market is when a government practices a Communism type of government.
(1978a) Democracy. Encyclopedia Britannica Online.
(1978b) Sortition. Encyclopedia Britannica Online.
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FOLDVARY, F. E. (2002) Has Deregulation Failed? The Progress Report.
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GUTMANN, A. ; THOMPSON, D. (2004) Why Deliberative Democracy?, Princeton University Press.