A paradigm shift

The novel coronavirus has changed the world in unimaginable ways. Weeks before the virulent virus went global in February 2020, no one imagined that our highly globalised world was so fragile. In its volume, 'Destroying Democracy: Neoliberal capitalism and the rise of authoritarian politics', Democratic Marxism (2021) argued that across the world, democracy is under threat from the wealth and power that is ever more concentrated in the hands of a few. But the rule of the few over the many rests on very shaky ground.

Thomas Piketty (2022), a noted economist, also thinks that the current system of 'hyper-capitalism' has no future. Socialism has failed. As a viable alternative to authoritarianism and Chinese-style communism, he has suggested taking away a large degree of control over corporations from their managers and shareholders and giving it to employees, and creating "a system of egalitarian funding for political campaigns, the media and think tanks." According to him, all this would amount to "a profound transformation of the world economic system." He names this programme as 'participatory socialism'.

Crisis of democratic capitalism

In a path-breaking article titled 'Is capitalism compatible with democracy?', Wolfgang Merkel (2014) argues that capitalism and democracy follow different logics — unequally distributed property rights on the one hand, equal civic and political rights on the other; profit-oriented trade within capitalism in contrast to the search for the common good within a democracy; debate, compromise and majority decision-making within democratic politics versus hierarchical decision-making by managers and capital owners.

According to the author, "capitalism is not democratic and democracy is not capitalist". During the first post-war decades, tensions between the two were moderated through socio-political embedding of capitalism by an interventionist tax and welfare state. The financialization of capitalism since the 1980s has broken the precarious capitalist-democratic compromise. Socioeconomic inequality has risen continuously and has transformed directly into political inequality. The lower third of developed societies has retreated silently from political participation; thus, its preferences are less represented in the Parliament and the government. Deregulated and globalised markets have seriously inhibited the ability of democratic governments to govern. If these challenges are not met with democratic and economic reforms, democracy may slowly transform into an oligarchy, formally legitimised by general elections, the author warned us as early as 2014.

Merkel's paper also reminds us that in the Western Europe, full democracy only took root after 1945, when universal suffrage was introduced in most countries. As democracy was fully established in the Western Europe, Australia, Canada, and New Zealand, a certain type of capitalism developed, not uncoincidentally — a socially embedded, economically stabilised, and nationally regulated capitalism. However, the general tensions between socioeconomic inequality and the political principle of equality remained unresolved. Nevertheless, their effects were mitigated considerably by regulated labour markets, increased economic welfare, strong labour unions and the activism of class-conscious socio-democratic or communist workers or centre-left parties. The coexistence between (social) capitalism and (social) democracy never functioned better than during this period.

This coexistence has gradually become more difficult since the late 1970s. It was challenged by the neoliberal policies of deregulation and privatisation pushed by Ronald Reagan and Margaret Thatcher. The IMF and the neoliberal concept of the European Single Market (ESM) forced their implementation of tax reforms in favour of companies, capital income, and the rich; labour markets and financial markets were deregulated. Even the strongest welfare states of Northern and Western Europe were not able to shield themselves from the neoliberal winds of change.

Following the demise of Soviet-style socialism after 1989 and the transformation of China's economy, capitalism has become the predominant system around the world. Only a few isolated countries such as North Korea have been able to resist the success of capitalism through the use of brutal force. The market has become the main mechanism for economic coordination and maximisation of profits.

Merkel's thesis observed that capitalism can prosper under both democratic and authoritarian regimes but that so far, democracy has existed only with capitalism. Nevertheless, capitalism and democracy are guided by different principles that create tensions between the two. Socioeconomic inequality challenges the core democratic principle of equality in participation, representation and governance. On the vital question of capitalism's compatibility with democracy, the author concludes that it depends on the type of capitalism and on the type of democracy. If one insists that democracy is more than the minimalist concept, as proposed by Joseph Schumpeter, and takes the imperative of political equality, the present form of financialised "disembedded capitalism" poses considerable challenges to democracy.

The third sector

For decades, political thinkers have raised alarm bells about the outcome of an unrestrained market economy and looked for a viable alternative system of governance. One such widely discussed alternative is the 'third sector. It is said that if something is ruled neither primarily by market logic nor via a bureaucratic chain of command, it must be part of the "third" sector. Many current operational definitions follow this basic schema. In practice, 'third sector' is used to refer to widely different kinds of organisations such as charities, non-governmental organisations (NGOs), civil society organisations (CSOs), self-help groups, social enterprises, networks, and clubs, to name a few, that do not fall into the state or market categories. The idea of a third sector suggests that these entities, however diverse, together make up a coherent whole – a sector with its own distinct type of social form and practical logic.

Most accounts of the third sector place it in relation to the state and the market. For the British government, for example, the term is used to distinguish such organisations from the other two sectors of the economy — the public sector ('government') and the private sector ('businesses'). According to a textbook on social enterprises, a national economy can be conceptualised as having three sectors — the public sector, a private economy, and a third sector "with organisations established by people on a voluntary basis to pursue social or community goals"

The UK Government defines the third sector as non-governmental organisations that are value-driven and which principally reinvest their surpluses to further social, environmental, or cultural objectives. In their official document titled, 'The future role of the third sector in social and economic regeneration: final report', released in July 2007 by the HM Treasury Cabinet office, the then British Prime Minister Gordon Brown mentioned, "I believe that a successful modern democracy needs at its heart a thriving and diverse third sector. The government cannot and must not stifle or control the thousands of organisations and millions of people that make up this sector. Instead, we must create the space and opportunity for it to flourish, we must be good partners when we work together and we must listen and respond".

The report had identified four major areas of common interest between the third sector and the government — enabling greater voice and campaigning, strengthening communities, transforming public services, and encouraging social enterprise. These formed the basis of the UK Government's proposed framework for partnership over the next ten years.

In contemporary political literature, civil society has been defined in various ways. Antonio Gramsci — an Italian socialist — in his theory of 'hegemony', argued that any political system, such as democratic capitalism, is maintained in two ways. The political realm or the 'state' exercises its control through force and laws. The private realm of 'civil society' complements the state by maintaining the system by producing consent without resorting to force. However, a more apolitical definition of civil society is used here. It is defined as an intermediary entity, standing between the private sphere and the state. It excludes individual and family life, in-ward looking group activities like recreation, spirituality et al, profit-making business enterprises, and political activities aiming to take control of the 'state'. Civil society involves its citizens to act "collectively in a public sphere to express their interest, passions, and ideas, exchange information, achieve mutual goals, make demands on the state, and hold state officials accountable."

Conclusion

Joseph Schumpeter (1974) had identified the great threat to capitalism as: Capitalism creates a critical frame of mind which, after having destroyed the moral authority of so many other institutions, in the end turns against its own. The bourgeois finds to his amazement that the rationalist attitude does not stop at the credentials of kings and popes but goes on to attack private property and the whole scheme of bourgeois values".

It may be expected that a global network of 'rationalist' civil society organisations (CSOs) that are not nudged into line with grants and assistance from 'foundations' managed by mega-corporations with high stakes in governance and management of production and distribution of the commodities and services required to meet the basic needs of people, will bring in huge changes, through a sustained campaign, in the oligarchic structure of the present system.

In the 21st century, the CSOs are likely to act as a countervailing force against the monopolistic power of the transnational corporations and will largely influence the basic supplies to the citizens in a sustainable way.

Views expressed are personal