The Path of Dictatorship

The Debate

Whether capitalism foments democracy (or vice-versa) or whether capitalism restricts democracy (or vice-versa) has engendered reams of debate (Almond 1991; Noble 1985). The argument most accepted by the public, at least in the North Atlantic, is that the two are mutually reinforcing. This argument does not lack for scholarly defenders, the grandfather of whom was Schumpeter, who argued "historically, the modern democracy rose along with capitalism, and in causal connection with it" (1975 [1942], 296); Schumpeter was not making a general statement, he was referring to "bourgeois democracy," of the eighteenth and nineteenth century (he then argued that in the post-war future, majorities will use democracy to press for socialism) (1975 [1942], 297). Perhaps the most ardent proponent has been Milton Friedman: "History suggests only that capitalism is a necessary condition for political freedom" (Friedman and Friedman 1962, 10). He claims, "The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom…" (Friedman and Friedman 1962, 9). Peter Berger agrees, arguing that "capitalism creates ʻescape hatchesʼ from political power" that prevent totalitarianism; therefore, "Capitalism is a necessary but not sufficient condition of democracy" (1986, 80-81).

Friedman's ideas have not faded over time but been modified by other scholars. David Landes echoes Friedman: "…freedom is a necessary if not sufficient condition of development" (1999, 432). In a 2010 survey of the history of capitalism, Joyce Appleby agrees with Friedman on the congruity between democracy and capitalism, but she sees the two as mutually reinforcing, instead of democracy arising from capitalism. For her, democracy foments capitalism; English political freedoms and open political culture led to the cultural values that fostered capitalism (Appleby 2010, 87-120). She then proceeds to argue that capitalism's attacks on tradition and listless aristocracy, and its openness to talent and positive view of change, helped promote democracy. She concludes that the culture of capitalism in the West "is also the culture that nurtured natural rights, democracy, and a humanitarian sensibility" (2010, 162).

Most of these studies do not consider Latin America at all (a problem we will discuss more below), but one of the most influential, Rueschemeyer, Stephens, and Stephens' Capitalist Development and Democracy, does. The authors' sophisticated analysis does not just make assumptions about the two institutions' compatibility, but carefully considers how capitalism changes societies and how these changes affect democracy's chance for success. They argue, "Rather - we conclude - capitalist development is associated with democracy because it transforms class structure, strengthening the working and middle classes and weakening the landed upper class" (Rueschemeyer, Stephens, and Stephens 1992, 7). One of the most widely used texts on Latin American politics, by Peter Smith, also sees a strong correlation between economic development and the initiation of democratic regimes in the early twentieth century (2005, 50).

Other scholars, following Marx' classic texts, argue the opposite, that capitalism is inimical to democracy. Marx argued that capitalism and democracy would enter into a "comprehensive contradiction": either workers will use their greater numbers to obtain power via democracy and then restrict capitalist exploitation, or capitalists will have to subvert democracy to contain such a threat (1895 [1850], 69). Marcus Rediker and Peter Linebaugh (2000) have shown how hostile eighteenth-century capitalists were to any democratic movements by the poor. Curiously, conservative economists and political scientists, especially Milton Friedman, have argued that modern welfare democracy is a threat to capitalism, as the state erodes capital's independence and free market operation (Almond 1991, 470-472).

This side of the debate, that questions the positive correlation of capitalism and democracy, has found much more reception among Latin Americanists. Guillermo O'Donnell's pioneering work on bureaucratic authoritarianism described the "marked elective affinity" between capitalist modernization and dictatorships (but focused on the second half of the twentieth century) (1979, 198). As Jeremy Adelman notes, "In contrast to Anglo-America, the cradle of many theories about the mutually reinforcing relationship between capitalism and democracy, South America is often portrayed as an inversion, the region in which the structure of capitalism undermined democracy or where democratic activity strangled capitalist development" (2003, 280). Adelman argues that democracies were never strong or legitimate enough in Latin America to survive changes to the economic moment in which they were conceived, falling apart under economic stress (Adelman 2003). While Adelman focuses on contingency, for other Latin Americanists, such as Atilio Boron (following O'Donnell), it is accepted that the military coups of the 1960s and 1970s proved that capitalist development could not tolerate democracy (1995, 2).

A third group (to which Adelman partially belongs) sees no intrinsic, necessary relation between capitalism and democracy (Karl 2018). Phillipe Schmitter and Terry Karl do see a general "long-term compatibility between democracy and capitalism," but not an essential relationship (1991, 86). John Mueller argues that they are "quite independent: each can exist without the other" (1999, 231). A 2000 study by political scientists concluded that there was no direct link between the establishment of democracies and economic development, but that once established, high economic development all but ensures democracies' survival (Przeworski et al. 2000, 269-278). As with most of the social science studies mentioned, no attention was paid to pre-twentieth-century political experiments.

As with this last study, a central problem for this paper is that very few of these works consider Latin America at all, and when they do, they only examine the twentieth century. Nineteenth-century Latin America is basically not considered in these arguments, and the assumption has been that it has not been democratic (or, at times, capitalist). Friedman sees political freedom as developing in and a product of the "Western world" (Friedman and Friedman 1962, 9). Latin America, not part of the West in this vision, is thus not very interesting for the study of the relationship between democracy and capitalism. As Niall Ferguson bluntly stated, the only relevant question is "Why did capitalism and democracy fail to thrive in Latin America?" (2011, 119).