This essay will argue that despite obvious tensions, market liberalism is still compatible with democracy as they both believe in the importance of individual sovereignty. However, because the market liberal belief in individualism is strong, it is more compatible with representative democracy – whereby elected officials represent individuals – than with the more communitarian participative democracy – whereby emphasis is put on citizens participating in the direction and operation of political systems. The definition of market liberalism is not straightforward. For the purposes of this essay it will be defined as a form of liberalism that extols the benefits of individualism, negative liberty – the absence of external restraints on the individual – and free market capitalism. This is in contrast to social liberalism, which has a more communitarian focus with a keen interest in the benefits of participative democracy, and a Keynesian economic focus idealising government intervention in the market. It is important to point out that the purpose of this essay is not to provide an argument relating to market liberalism’s normative relationship with democracy, but instead to analyse whether market liberalism is at all compatible with democracy.


It is argued by “communitarian” theorists, such as Benjamin Barber, that democracy is unattainable within a market liberal framework (Barber, 1984; MacIntyre, 1984). For communitarians like Barber it is market liberalism’s extreme individualism, which keeps citizens apart and ‘in pursuit of separate, private interests’, which makes democracy and market liberalism irreconcilable (Thigpen, 1986: 733). For them democracy is not something that can be done individually; it requires the input of all citizens in society. As Sandel puts it, ‘we cannot justify political arrangements without reference to our role as citizens, and as participants in a common life’ (Sandel, 1984: 4). One can understand this point of view. Market liberalism’s form of individualism is so extreme that it makes participation in a democratic community difficult. People do not thus understand community life because they ‘search for principles outside the shared values of particular societies’ (Walzer, 1983: xiv). Thus, market liberalism will only be compatible with democracy if it embraces ‘reciprocal empathy and respect’ leading to ‘the development of “common consciousness” through direct political participation’ (Thigpen, 1986: 737). Individualism has become too much of a priority, with the community regarded as ‘an artificial contrivance’ (Barber, 1989: 56). Therefore, ‘a more dialectically balanced liberal democracy employing the language and institutions of participation’ is required for liberalism and democracy to be compatible (Barber, 1989: 56).


This argument, however, may focus too much on a specific type of democracy. The democracy that the likes of Barber advocate is a more participatory democracy. Whether that is a better form of democracy is not for this essay to discuss.  What can be discussed is whether market liberalism is more compatible with representative democracy.


Viktor Vanberg argues that market liberalism and democracy are compatible because ‘both ideals are founded ultimately on the same normative premise, the principle of individual sovereignty’ (Vanberg, 2008: 2). For Vanberg, the liberal principle of private autonomy and the democratic principle of citizen sovereignty can be best understood as ‘applications of the ideal of individual sovereignty to the realm of the private law society on the one side and to the public realm of collective-political choice on the other (Vanberg, 2008: 28). Hayek similarly argues that ‘by the insistence on a law which is the same for all and the consequent opposition to all legal privilege’ market liberalism has always been closely connected to democracy’s demand for equal political participation (Hayek, 1978b: 142). Furthermore, market liberals argue that the market mechanism is efficient in dispersing power (Hayek, 1960, 1976, 1982; Friedman, 1962). It generates efficiency in ‘generating outcomes from myriads of individual decisions’. Hence, Hayek’s argument that liberalism is against legal privilege. If one applies these arguments to representative democracy – elected officials representing a group of people – one can see that market liberalism is in fact compatible with democracy. Representative democracy maintains individual sovereignty as it represents citizens’ rights through limited government, whilst it does not take as much liberty away from citizens as participatory democracy does because society is not forced to become more collectivist. Yet, when applied to participative democracy, it is obvious that there are tensions, as the communitarian theorists point out.


However, there is an important discussion to be had about majoritarianism, essentially rule by the masses whereby the interests of the majority dominate over the interests of the minority, thus having obvious negative effects on liberty. Liberalism as an ideology has a fear of collective power, notably articulated by Alexis de Tocqueville as ‘the tyranny of the majority (Heywood, 2012: 39). D.J. Manning argues that unlimited power in the hands of those who claim to be representatives is ‘no less despotic than that in the hands of a man who claims to represent no one but himself’ (Manning, 1976: 90). This is a common argument as to why market liberalism (and liberalism as an overarching ideology) is not compatible with democracy. There are certainly tensions between liberalism and democracy but these can be overcome and limited to a large enough degree through the idea of “rights” to make liberal democracy a coherent framework.


Friedrich Hayek was aware of the threat of majoritarianism. He heavily criticised the idea that the ‘majority must also be entitled to determine what is competent to do’ (Hayek, 1960: 107). However, he argued that through institutional reform democracy could be effectively constrained (Hayek, 1979). Liberals have argued that rights can be used as ‘moral trumps’ against majority rule because they ‘limit the sphere of influence of democratic decision-making by making it impossible to legislate in certain areas’. Rights thus secure the ‘basic value of equal concern and respect for each individual’ (McGregor, 1988, 334). Constitutions are also an effective way to limit majoritarianism, whereby rules outlining government powers are codified within a single document. The doctrine of “separation of powers” seeks to prevent an individual or small group from controlling the legislative, executive and judicial functions of government. This can be seen in the US presidential system, which is based on a strict separation of powers between the presidency, Congress and the Supreme Court. Therefore, individual sovereignty is protected to quite a large degree. Of course, there are obvious tensions. The fact that liberal values cannot be guaranteed by democracy demonstrates this. What Dworkin (1984: 71) describes as ‘the normal workings of general institutions’, would not lead to the protection of the individual, thus meaning that rights are artificial. However, these tensions don’t stop liberalism and democracy from being compatible. As Karl-Hermann Flach argues, liberalism is an understanding of the degree of government. Power cannot be eliminated so it must be limited and controlled – which it can be – so that those in power can be easily removed if necessary (Flach, 1971).


There are, however, several critiques of the liberal idea of rights. MacIntyre, for example, argues that judges, when deciding cases involving fundamental rights, are not invoking shared moral first principles because society as a whole has none (MacIntyre, 1984). Similarly, John Hart Ely argues that there is no set of moral principles that can ‘plausibly serve to overturn the decision our elected representatives’ (Ely, 1980: 54). However, one can take issue with these arguments by suggesting that, in practice, rights and constitutions are adhered to in the vast majority of countries, and to a large extent too, which therefore in itself logically suggests that societal rights do exist, and that they have a large impact on upholding individual sovereignty. Michael Walzer argues that liberal rights limit democratic authority. Liberal constraints on democratic procedures usurp the rightful authority of the people to rule themselves. For Walzer it is the procedure by which legislation is enacted and not the substantive rightness of the action that is important (Walzer, 1981). Therefore, Walzer is arguing that liberalism constrains democracy too much. This relates back to Barber’s argument that liberalism gives too much priority to individualism. Walzer’s argument is a strong one, it certainly highlights the tension between liberalism and democracy, however, market-liberals would argue that the protection of liberal values is more important, and that democracy is in actual fact not constrained to the extent that Walzer argues, thus meaning that market liberalism and democracy are compatible.


Joshua Cohen and Joel Rogers argue that the private control of investment resources and decisions is inimical to genuine democracy (Cohen and Rogers, 1983). For them, ‘free and equal persons should together control the conditions of their own association’ (Cohen and Rogers, 1983: 18). Their idea of democracy is that democracy requires that ‘the conditions of equal freedom be satisfied in the arrangement of social arenas that bear on the conditions of public deliberation’. Robert Thigpen identifies key similarities between this argument and John Rawls’ “difference principal” – material incentives are not justified unless the inequalities generated are to the material well-being off those who are least well-off (Thigpen, 1986: 741). This suggests that Cohen and Rogers’ argument is very much a social liberal one. Market-liberals would respond by arguing that Cohen and Rogers are looking normatively at participatory democracy. Whilst market liberalism could arguably be seen as being incompatible with this form of democracy, in regards to representative democracy, where the private-public divide is more explicit and thus public control of resources is not so much required, there is much more compatibility. One could in fact point out that Cohen and Rogers’ argument is incompatible with democracy as they do not suggest the proper extent of the public control of investment. As Thigpen points out, ‘will individuals be able to produce something for profit? Can there be partnerships?’ (Thigpen, 1986: 741). This just goes to show how complicated the relationship between liberalism and democracy is, and highlights how difficult it is for an ideology to claim absolute compatibility with democracy.


Another area of concern for some liberal theorists is the make-up of modern societies. This is a somewhat archaic argument but it still carries some traction and again highlights the liberal fear of majoritarianism, and why they are reluctant to give predominance to democracy. Theorists such as J.S. Mill have argued that political wisdom is unequally distributed, with the uneducated more liable to act according to narrow class interests (Heywood, 2012: 41). José Ortega y Gasset furthered this argument by claiming that mass democracy had led to the overthrow of civilised society, meaning that authoritarian rulers can come to power by appealing to the base instincts of the masses (Gasset, 1994). However, these concerns can be nullified. Firstly, democracy can be considered to be a developmental experience for the individual as it enhances understanding, strengthens sensibilities and leads to a higher level of personal development (Heywood, 2012: 42). Secondly, the modern mechanisms, described above, in many contemporary states in place to defend against extreme majoritarianism, such as that which Gasset describes, should be effective enough.


Another point of discussion is the idea that democracy promotes the key liberal value of consensus and reason within a society consisting of increasingly complex, rival interests. Democracy is seen as being ‘the only system of rule capable of maintaining balance or equilibrium’ because it gives competing groups a political voice and thus binds them to the political system (Heywood, 2012: 43). However, it is questionable as to whether that is the case. Elitist theorists such as C. Wright Mills argue that a ‘powerful elite of great importance does now prevail’ (Wright Mills, 2000: 5). For Wright Mills, the bottom of the power system is very ‘impotent’. Thus, even with democracy, they are unable to attain a political voice. Yet, the situation is probably overestimated, citizens have enough power in society through representative democracy for a general consensus to be established, so the problem of an elite is not so big an issue, particularly with the anti-majoritarianism mechanisms in place.


In conclusion, it is clear that market liberalism and democracy have some considerable tensions, yet that doesn’t mean that the two are incompatible. The extreme individualism of market liberalism and the majoritarian implications of democracy create problems but these are not unsolvable. George Philip gives a wise statement, saying that ‘democracy can in principle be in conflict with virtually anything – depending on how institutions work and what electorates want’ (Philip, 1993: 570). It is probably true that market liberalism is not so compatible with participatory democracy due to the latter’s leaning towards communitarianism. However, one can definitely make a strong case for market liberalism being compatible with representative democracy. As Vanberg states, ‘the liberal ideal would surely be interpreted in too narrow a sense if it were thought to be not concerned at all with the issue of how government should be organised, just as the democratic ideal would surely be interpreted in too narrow a sense if it were thought to entirely neglect the issue of what limits to put on the powers of government’ (Vanberg, 2008: 2). Both concepts have as their common normative foundation the ideal of individual sovereignty. Whilst there are tensions, this ideal is still given priority by both, which is why, in peroration, the two are compatible concepts.













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