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Democracy and Capitalism

By Howard J. Sherman

Originally published as Chapter 9 in Reinventing Marxism, Johns Hopkins University Press, 1995, pp 177-192.

One possible view of the relationship between democracy and capitalism sees the former determining the latter. A popular view in the U.S. media assumes that the voters determine the government, with all voters having equal power; then the government passes laws that determine the economic system in the interests of the majority.

Perhaps no reputable theorist now subscribes to this view, but during the Cold War at least one political scientist, Arnold Rose, asserted that the "power structure of the United States is highly complex and diversified (rather than unitary and monolithic), that the political system is more or less democratic .... that in political processes the political elite is ascendant over and not subordinate to the economic elite" (Rose 1967, 492).

In arguing for the proposition that the United States is democratic in nature, Rose found it necessary to emphasize that political power is to a large degree independent of and superior to economic power. The reason for this insistence is that economic power is distributed in an extremely unequal manner. If political power exactly followed economic power, the degree of inequality would leave little to be called democracy.

Conservative Psychological Reductionism

Rose's view is one form of psychological reductionism. The most popular form of psychological reductionism today is the view that the political ideas of individuals determine the economic system, and not vice versa. It is based on the individual psychology and alleged rational choices of the voter and the politician. The psychology of voters determines the political sphere, and the political sphere determines the economic sphere. This is a one way process, so it reduces the socioeconomic system to psychology. By excluding any effect of the economic process on the political process, it leaves out a very important part of reality. It ignores the role wealth and money play in the political process, a role that is discussed below.

Conservative Economic Reductionism

Another popular viewpoint in the U.S. media equates capitalism with democracy. According to this view, if it is granted that the political system and the economic system are indeed two different things, then the capitalist economic system is the only possible foundation for political democracy. This view argues that in a capitalist economy every person is independent, while a centrally planned economy makes everyone dependent on a huge and arbitrary bureaucracy.

Whatever one thinks of central planning, it is hard to accept the notion that everyone in capitalism is equally independent. It is true that everyone has the formal right to leave a job and start a business. But one needs money to start a business. Most workers have little or no savings (and large debts), so most workers are very dependent on keeping their job. This limits their freedom, because if they are fired for loudly expressing unpopular views, they will join the ranks of the unemployed.

This second popular view is economic reductionist in a way because it says that the political system (political democracy) is fundamentally shaped by the economic system (capitalism). One major criticism of such a view is that so many capitalist countries have had political dictatorships, such as Nazi Germany or Franco Spain or Pinochet's Chile.

Soviet Marxism and Economic Reductionism

The Soviet Union and the Communist parties controlled by it argued for economic reductionism, but they came to a conclusion that was opposite that of conservative economic reductionists. They argued that any government is controlled by the dominant economic class. All Marxian political economists recognize that one cannot study political power without studying economic power, and vice versa. The most vulgar and dogmatic Soviet Marxian ideologues, however, took the extreme view that economics determines everything and that politics is completely subordinate.

Soviet Marxism argued that in capitalism the economy is controlled by the capitalist class. Therefore, the capitalist class exercises its economic power to gain complete control of the government. Workers are the vast majority, but they have no say in the government, so the capitalist government is a dictatorship of the capitalist class. The two classes��workers and capitalists��are in conflict, but the capitalists are always able to use the government against the workers.

On the other hand, in the old Soviet Marxian view, under socialism, defined to mean the Soviet model, the economy is controlled by the working class. Therefore, in the Soviet Union the working class controlled the government because economic power controls political power. Since a large majority of the population were industrial or agricultural workers, the Soviet government was thus democratically controlled, according to the Soviet view.

No Marxian scholar any longer takes such a simplistic view, but it was a very influential view for a very long time. According to many modern interpreters, Marx himself had a very sophisticated and complex view of political sociology (see Avineri 1968; Carnoy 1984; Draper 1977; and Szymanski 1978), but that is not an issue debated here. What is important is the great difference between the old Soviet view and non-Soviet Marxian views.

First, whereas the old view saw only two classes under capitalism, the critical Marxian view sees a multitude of middle classes. Whereas the Soviet theory pictured a unified capitalist class, the critical approach describes strife between factions of the capitalist class. Whereas the Soviet theory assumed automatic capitalist domination of the government, critical Marxism finds a complex, many sided class conflict that may sometimes lead to major reforms helping middle classes, workers, and farmers.

Second, where the old Soviet Marxism assumed that capitalist governments bear a one to one relation to the economic interest of "the capitalist class," non Soviet Marxism shows that governments do have a certain limited autonomy from the dominant class and that politics represent a tangled skein of long run and short run interests of a wide variety of different classes and different factions within classes.

Third, governments have functioned not only to protect the interests of the rulers against the ruled but also to further certain common interests of all classes. For example, in ancient Egypt it was necessary to control the Nile and irrigation. Of course there was also the Egyptian ruling class's need to hold down and repress the slave class in order to exploit the slaves' labor. All U.S. government functions today still have these two aspects: common functions for the community and class functions for the ruling class. For example, the building of highways serves the whole community, but the decision about which highways and how many highways is largely determined by the profit motives of the automobile industry and the construction industry, both of which maintain huge lobbies at the federal and state levels.

Fourth, some of the old Soviet Marxian writers argued as if the capitalist class directly runs the government of capitalist countries. The non Soviet Marxian view, in contrast, emphasizes that the actual day to day running of the government is usually left to a specialized group of politicians, employed in the same way that engineers are employed, so that capitalist control is indirect. Nor is the control exercised by a conspiracy, but by the internal dynamics of the whole system and its institutions.

A Historical Approach to Government

The institution of government is not eternal. The institution of government as we know it did not exist in very primitive societies, and it may change drastically at some time in the future. Marxian social scientists hope that a day will come when there will still be a government, but it will use no force because there will be no class conflicts.

All Marxian writers are very critical of those theorists who insist that there always has been and always will be an elite of rulers and an oppressed mass of ruled. Contemporary, critical Marxism takes seriously the findings of anthropology that many primitive societies are built around the extended family or clan and have no government in the modern sense, and certainly no police or other repressive forces. Marxian anthropologists argue that there was not a repressive state, because there was no class division. In some very primitive societies people were elected for temporary leadership of community functions, but there was no need for repression because there was no exploited class.

Moreover, contrary to the view that government in a democracy merely reflects all of the voters' views in some equitable manner, government does not balance all interests and reach an equilibrium. Rather, different interests fight out battles in the political sphere, and the winners determine policy. In the political arena under capitalism, for example, farmers fight for certain policies, such as cheap loans or subsidies; sometimes they win, but sometimes they lose.

The form of government has changed many times in history, especially when there have been changes in class relationships. Thus, the ancient Roman government was controlled directly by the slave owners, but in the modern capitalist government the capitalist class usually has the greatest influence through indirect means. In feudal society the landlord ruled both the economy and the functions of government and repression. Capitalists rule the economy, but they usually do not directly rule in the government. More commonly, capitalists support politicians who will protect their interests. The politicians may not themselves be capitalists, but often they are lawyers or other hired hands of the capitalist class.

In the Soviet case there was government ownership of the whole economy and central planning of all economic activity, so the governing group was inevitably identical with the ruling economic group. Since the Soviet economy was centrally controlled, whoever ruled the government ruled the economy. In that respect, the Soviet government was like the feudal landlord, having both economic and political power.

In addition to changes in the basic class relations of a society, there are stages within a given social formation that lead to major changes in government policies. During the years of expansion following the Second World War, the capitalist class in the United States was willing and able to continue to increase the real wages of workers. Moreover, the capitalist class in that period fought only rather feebly against the fairly progressive government policies toward redistribution of income from rich to poor, though that policy was always rather limited. When times became much more difficult for the United States after about 1970, not only were higher wages successfully resisted but government distribution policies turned markedly against labor.

Examples of the new stage of confrontation were the tax laws initiated by the Reagan and Bush administrations. More precisely, from 1977 to 1980 all types of federal taxes as a percentage of income rose for the poor and the middle class but declined for the rich. There was a linear correlation from tax increases to tax decreases as the income bracket increased. Specifically, this is apparent if one examines the data for each decile (or tenth) of taxpayers. So, from 1977 to 1990 the poorest tenth of income receivers (the lowest decile) paid a tax increase of 28 percent. There were tax increases of 12 percent for the second lowest decile, 10 percent for the third decile, 3 percent for the fourth, 2 percent for the fifth, and 1 percent for the sixth decile. But the more affluent population enjoyed tax cuts. There was a tax decrease of 2 percent for the seventh decile, 3 percent for the eighth, 2 percent for the ninth, and a very significant 7 percent decrease for the top decile. Moreover, the top 1 percent of income receivers enjoyed a huge 23 percent decrease in taxes (all data in this paragraph are from Steinmo 1993, 5)

A Relational Approach to Debates on Government

Under capitalism, the capitalist class normally has enormous influence and control over government. This is another way of saying that class relationships affect political relationships. The relational approach has produced hundreds of detailed studies of the two way interaction between politics and economics. All Marxian political economists agree that the capitalist class influences the government, but there have been vast debates over both the mechanisms of control and the degree of control. Most Marxian writers emphasize the qualifications on economic control given above. The Marxian relational method emphasizes that the political process also affects the economic process, contrary to the picture of one way causation painted by Soviet Marxism.

Although there is an area of basic agreement, Marxian and other radical economists have recently spent a great deal of time debating a proper theory of government because (1) Stalinism distorted and prevented reasonable discussion on the left for many decades; (2) government is becoming much more powerful in the United States, Japan, and Western Europe; (3) dictatorship still prevails in many underdeveloped capitalist countries; and (4) dictatorship also prevailed in all of the so called socialist countries. These debates are discussed briefly here, but they are discussed in more detail with great clarity in Carnoy 1984.


The simplest Marxian view is instrumentalism. This view sees government as a direct instrument of the ruling class, which uses government for its own benefit. This is an economic reductionist view when it is stated in an extreme form. It argues that capitalist wealth is used to gain many of the key positions in the government for members of the capitalist class. Since this is a very simplistic view, no known Marxian or radical scholar in the United States or Western Europe admits to owning it.

It is sometimes alleged that William Domhoff (1967) held this view because he traced the interrelationships of the ruling class in various spheres of activity and argued that there is indeed only one ruling class. Domhoff, however, specifically stated that he was not an instrumentalist because he did not focus solely on the role of the capitalist elite. Rather, he saw the political sphere as one of class conflict and said that this was basic to his analysis. As one example, Domhoff analyzed labor laws in this perspective and saw a complex three way relation between labor, business, and government. Although there are many criticisms of his analysis, all of Domhoff's early work was extremely useful in terms of detailed description.

Domhoff and many other radicals have described how capitalist wealth is used to influence government. First, capitalists give money to candidates. Of course, a capitalist such as the billionaire Ross Perot may use the money for his own political campaign. The more normal pattern, however, is for capitalists to give money to professional politicians, who then vote for capitalist interests. The very rich do often participate personally at the cabinet level in U.S. government (usually in return for contributions), and millionaires have constituted 20 25 percent of the U.S. Senate in recent decades.

Second, capitalists give money to parties, either directly or through political action committees. Of course the middle class also contributes money, but the amount of contributions naturally declines as income declines. Third, the capitalist class owns and controls the media. In the United States, anyone has the right to own a television network or newspaper chain, but only big business has the money to buy one. Fourth, big business issues propaganda through the media and advertising. Moreover, under U.S. law much of this propaganda expense is legally deductible from taxes. Fifth, the wealthy contribute to schools and universities, so they have some influence over education. This is particularly evident if one examines the lists of trustees and regents of universities. For example, the regents of the University of California are appointed by the governor from among his or her friends. Although there have been some exceptions in recent decades, the regents have tended to be white, male, elderly, and very rich.

Sixth, wealthy capitalists and corporations use lobbyists to influence politicians. This creates spectacular scandals when the lobbying takes the form of bribes and corruption, but it is a very minor part of the whole political process. Seventh, far more important is the fact that as income declines so does political participation. The reason is simply that poor people have less time to themselves, less information about politics, and a greater feeling of helplessness and resignation.

Thus, half of the eligible voters in the United States do not vote in presidential elections, while participation in local elections and primary elections is often very low. Eighth, part of the reason for the feeling of helplessness and uselessness of political participation among much of the population comes from the fact that people take for granted that the economic status quo is the only possible system and cannot be changed. Polling data have often shown that people are not converted to being procapitalist by politicians and the media, but they do get the feeling that nothing can be changed.

Domhoff's early work argues that U.S. institutions are democratic in form but not in content, because of differences in economic power. Thus, a millionaire who owns a newspaper chain has only the same formal political rights as an unemployed worker, but surely their actual political influence is very different. Domhoff discusses

the existence of a national upper class that meets generally accepted definitions of social class . . . that this upper class owns a disproportionate amount of the country's wealth and receives a disproportionate amount of its yearly income, and that [its] members . . . control the major banks and corporations, which . . . dominate the American economy . . . that [its] members . . . and their high level corporation executives control the foundations, the elite universities, the largest of the mass media, . . . the Executive branch of the federal government . . . regulatory agencies, the federal judiciary, the military, the CIA, and the FBI. (Domhoff 1967, 10-11)

The hypothesis is that class interests play a major role in political behavior through some degree of domination by the capitalist class. This hypothesis may be called a more sophisticated version of the instrumentalist hypothesis.


To understand how the strong Marxian reaction against instrumentalism has evolved, one must begin with Antonio Gramsci (1971, written in the 1920s). Gramsci argues that the most important weapon of capitalist dominance is the "hegemony" of bourgeois values and ideology. He sees the state as a key factor in supporting capitalist hegemony. Soviet Marxism often stressed that the state is nothing more than an instrument of violence. Gramsci said that the state is much more than that. Gramsci's spotlight here is on thought��on how thought affects and is affected by the state. Thus, he disowns any simplistic economic reductionism and is thoroughly relational in approach. Since Gramsci, Marxian writers have used the term state to include not only the government and organs of repression but also mechanisms used by the ruling class to legitimate the status quo and control the media and other avenues of cultural domination.

According to Gramsci, it is through the culture (or social process) that the ruled come to accept a conception of the world put forth by the rulers. And it is this conception that keeps the rulers in power. This emphasis on spelling out the importance and the details of the ideological process is Gramsci's most vital contribution.


Althusser (1971) argues that political economy should study social structures, not human psychology. The function of government is to reproduce and protect the relations of production. The government has a repressive apparatus, which includes the armed forces, the police, the courts, the prisons, and so forth. Yet the government also has ideological functions (as Gramsci argued). The government operates to support capitalist ideology through the educational system, political parties, trade unions, the legal system, churches, the media, and the cultural system (even though most of these are formally separate from the government).

Poulantzas's early work ([1969] 1975) is also structuralist, arguing that the government is part of the class relations of production. The government, through its use of laws and ideology, isolates workers as separate individuals to prevent a working class consciousness from developing. The government also uses patriotism to instill a national consciousness, partly as a barrier to class consciousness. The capitalist government is both a product and a determinant of class conflict, but it is not itself a site of class conflict. Poulantzas's later work ([1978] 1980) argues that class conflict also takes place within the government apparatus (for a different, fascinating view of class and government, see Miliband 1973, 1977).

There have been further contributions to the debates by U.S. and Western European Marxists (the contributions of Poulantzas, Miliband, E. Atwatter, Claus Offe, and James O'Connor are reported in detail in Carnoy 1984). One may summarize the literature by saying that the long decades of Soviet domination and stultification of Marxian theory of government have suddenly given way to a blossoming of discussion in Western Europe and the United States. The debates are still under way to shape a new independent Marxian or radical view of government, but no overall agreement has been reached.

If there is any consensus within contemporary Marxism, it is the view that under capitalism the interests and views of the capitalist class, the working class, and other classes clash in the media of propaganda, in the churches, in the education system, in the legal system and the courts, and in the legislative and executive branches of government. In all of these institutions capitalist interests tend to be dominant. There is, however, more or less pressure from and expression of the interests of the working class and other classes. Depending on the circumstances and the level of organization, there are differing degrees of success by the nondominant classes.

In the debate the instrumentalists emphasized that there are innumerable ways in which the economic power of big business is translated into political power, such as control of the media, churches, universities, candidates, and political parties through the direct use of wealth. The structuralists have emphasized that the structure of capitalism forces all politicians, regardless of ideology, to follow the interests of capital. For example, when the Chrysler Corporation was on the verge of bankruptcy in the late 1970s, labor and liberal members of Congress supported a government bailout because it was the only way to protect jobs. Thus, organized labor was forced to support a welfare handout to a large capitalist corporation because of the constraints of the capitalist economic structure. Perhaps the best synthesis would be to say that capitalism influences social and political institutions through both the ways described by instrumentalists and the ways described by structuralists; but as Gramsci emphasized, ideological dominance is often the key to government control, and control of the government is used to ensure control of the economy.

The Degree of Democracy

One specific issue clarified in the debate was the degree of democracy present in different socioeconomic systems. It is certainly true that under capitalism, in some circumstances and to some extent, universal suffrage can make possible the expression of working- and middle class views as against those of the capitalist class. To put it another way, if there is no formal democracy with universal suffrage, then working class views will not be represented. This was the case in Hitler's Germany, as it has been in all fascist and all military dictatorships. Thus, universal suffrage and formal democracy are necessary conditions for a wide degree of political democracy. Another necessary condition, however, is a high degree of equality in income distribution so that everyone has an equal opportunity to participate.

There is still controversy over whether public, or at least cooperative, ownership of most productive property is a necessary condition for a reasonable degree of equality in income and power. With universal suffrage, but with a continued concentration of wealth and power in a few capitalist hands, there can be only a limited amount of democratic control of workers and the middle classes.

Under either capitalism or socialism one cannot say that democracy does or does not exist. Democracy exists to some degree. Where there is formal democracy but capitalist ownership, the degree of democracy for most people is pretty low. There are "democratic" struggles among factions of the capitalist class, but there is a relatively small amount of outside pressure exerted by farmers and industrial and professional workers. Only in crises, such as the Great Depression or the civil rights struggle of the 1960s, are wide ranging reforms enacted.

On the other hand, where there is government ownership but no formal democracy, and where the universal vote is only allowed for the purpose of endorsing a single party, the degree of democracy for most people is infinitesimal. This was the case in the Soviet Union before Gorbachev, though some pressure was always exerted by the nonruling groups in various ways. A high degree of democracy requires both a formal democratic process and a high degree of equality of income, wealth, and economic power. Public or cooperative control of much of the economy may be required to ensure that equality.

In the 1970s and 1980s there was a complex controversy among Marxian theorists over just how autonomous the government under capitalism is from the capitalist class. Theda Skocpol vigorously attacked the economic reductionist position that pictures the state as a mere reflection of "socioeconomic forces and conflicts" (1979, 25). Her work shows in detail how control of political power is used in revolutionary periods to help shape events, as the relational view has always emphasized.

Skocpol also has contributed to the discussion of how major reforms are made even when capitalists have dominant control of the government. She shows how the extensive New Deal reforms of the 1930s were not given away freely by farsighted capitalists, though there were a few such. Rather, the reforms were conceded in response to working class pressure (1980). She thus stresses the importance of organized movements on the political economic matrix. Those Marxian political activists who understand in their hearts as well as their minds that nothing can change without organized activity, no matter what impersonal economic circumstances may occur, have a thoroughly relational attitude rather than an economic reductionist one.

Skocpol's work on revolution also illustrates the fact��emphasized by many Marxian historians��that the relationship of the political system to the economic system varies extremely from one society to another. Thus, no single description of the relationship between economics and politics holds true in all cases, either in normal times or in times of revolutionary crisis. This is an important point in refuting economic reductionism.

The later works of G. William Domhoff similarly stress that "Marxian analysis of the state in democratic societies . . . creates a tendency to downplay the importance of representative democracy. For many Marxists, representative democracy is an illusion that grows out of the same type of mystification that is created by the market place" (1990, 8). Like Skocpol, he is criticizing the economic reductionism of the old Stalinist Marxism, but he is stating a position that is compatible with most of contemporary, critical Marxism. The view of most Marxian social scientists is that popular illusions about democracy do exist, but the illusions are based on the exaggeration of an important aspect of reality. In other words, democratic representation is vital but is very much affected by the economic power of the capitalist class.

The Conflict between Capitalism and Democracy

Conservatives argue that capitalism is an excellent foundation for democracy. Perhaps the best answer to that argument is provided in a book by Bowles and Gintis (1986). They point out that capitalism means the rule of a small elite in the economy and that capitalism keeps spreading to new realms, such as preparation of food by restaurants and fast food places rather than by the family. On the other hand, they point out that democracy means the rule of all the people and that democratic processes also keep spreading to new realms, such as suffrage for women or workers' control of enterprises. Control of an enterprise by a capitalist is dictatorial because the capitalist can hire and fire people (and make other vital decisions) regardless of the wishes of the workers or the community. But democratic control of the enterprise by workers or by the community excludes capitalism. Thus there is a conflict between capitalism (control by a small elite) and democracy (control by all the people).

Bowles and Gintis find that the conflict has been reflected in the fear expressed by the rich that in a democracy the propertyless majority might vote to take over the economy and the wealth. Thus, in the nineteenth century most countries with "democracy" restricted voting to those people who held a certain amount of property. Also, the U.S. system of checks and balances was partly designed to prevent rash actions by the democratic majority.

Bowles and Gintis further point out that economic wealth gives power over jobs, investment, and the media, which leads to extra political power for the elite. Moreover, since capitalists control investment, they can have a capital strike or threaten one unless policies favorable to capital are enacted. For example, corporations have threatened to leave California unless strict antipollution laws are repealed.

So far, two main areas of conflict between capitalism and democracy have been noted. First, in each enterprise there is either dictatorial, undemocratic control by capitalists or democratic, noncapitalist control by workers and/or the community. Second, as long as capitalism continues, there will be inequality and concentration of wealth, which means disproportionate, undemocratic power over the political process by the wealthy.

The conflict between the economic power of the capitalist class and the formal right to vote of the other classes is expressed by Bowles and Gintis as follows: "Liberal democratic capitalism is a system of contradictory rules, empowering the many through . . . citizen rights and empowering the few through property rights" (1990, 39). They define citizen rights as the formal freedoms fought for by the working class, women, and minorities and property rights as the legal reflection of the actual economic power used by the capitalist class. They show that the history of capitalist democracies is the history of conflict between citizen rights and property rights. The result has been formal equality, as in the civil rights acts of the 1960s, but actual continuing inequality for workers, women, and minorities.

Bowles and Gintis stress the clash between "two fundamental historical tendencies. The first is the expansionary logic of personal rights, progressively bringing ever wider spheres of society . . . under at least the formal . . . rubric of liberal democracy. The second tendency concerns the expansionary logic of capitalist production, according to which the capitalist firm's ongoing search for profits progressively encroaches upon all spheres of social activity" (1986, 29). On the one hand, working class parties extended the suffrage to all U.S. white males, regardless of property, in the early nineteenth century, the women's movement extended suffrage to women in the early twentieth century, and the African American civil rights movement extended effective suffrage to minorities in the late twentieth century. On the other hand, corporations grow larger and larger and have more power over government, as was shown in the counterrevolution of the Reagan years, which rolled back many previous reforms.

Like the later Domhoff, Bowies and Gintis attack "Marxists" for paying too little attention to democratic rights, concentrating only on class exploitation. They call on the Left to push for extension of citizen rights, from the political sphere to the economy, a call for economic democracy. They make the point that capitalists exert undemocratic��unelected��power. They argue that all socially important economic authority should be by virtue of democratic elections.

When Bowies and Gintis attack "Marxists," they are actually attacking the economic reductionism of the old Soviet Marxism. All contemporary, non Soviet Marxian political economists, however, would agree with their attack on Soviet Marxism, so they are speaking the prose of present day Marxism whether they care to use that term or not. All non Soviet Marxian writers are profoundly committed to democracy. There are, of course, many differences among Marxian theorists about (a) the tactics needed to achieve political and economic democracy and (b) the detailed characteristics of a future political and economic democracy.

Moreover, Bowies and Gintis's actual political program is no different from that of other Marxian political economists, that is, democratic socialism, which they call "economic democracy." One writer points out that economic democracy is "something qualitatively different from socialism . . . only . . . if one accepts the curious notion that [socialism] . . . is inherently undemocratic .... [But isn't] the extension of democratic rights to the economy precisely what socialism is all about?" (Goodwin 1990, 138, 143). Socialism is defined in this book to be political democracy and economic democracy. (The specifics of economic democracy or socialism are discussed in part IV.)

It is certainly true, as Bowies and Gintis argue, that the fight for economic democracy (or socialism) takes the form of a conflict between liberal democracy and capitalism. For example, it is democratic for the majority to control the environment in order to eliminate pollution. But that means telling automobile corporations how they must build their cars in some respects. To tell a corporation how to produce its product is contrary to capitalism. It is also the case, however, that this fight is "grounded in the contradiction between the material interests of workers and capital" (Goodwin 1990, 142). Thus, the political struggle appears to be a struggle between different ideologies, but its content continues to be one level of class conflict.

The fact that politics is an arena of class conflict does not mean that it is not also an arena of racial and gender conflict. All present-day Marxism, including the book by Bowles and Gintis, stresses the crucial importance of racial and gender conflicts in our society. The civil rights movement, including all minority organizations and minority theorists, showed with great clarity that racial conflicts shape and are shaped by politics and class conflict (see the extensive discussion of the literature in Sherman 1987). The women's movement, including organizations and theorists, has shown with equal clarity that gender conflicts shape and are shaped by politics and class conflict (see, e.g., Hartsock 1985, as well as Sherman 1987). These contributions by women and by African Americans and other minorities have been incorporated into the heart of contemporary, democratic Marxism.

The Effect of Politics on the Economy

There is a huge Marxian literature on how the economic process shapes the political process, but there is relatively little on how the political process shapes the economic process, perhaps because of a lingering residue of economic reductionism. But in a relational view, it is certainly important to specify how the government affects the economy, and vice versa. This influence can be stated only briefly here, but it is presented at length in Sherman 1987, 203-22

First, the U.S. government emphasizes "law and order," which translates into protection of private property. This entails laws, courts, police, and prisons. It is almost always the poor who land in prison, because white collar crimes are seldom prosecuted.

Second, closely related is external "law and order," which translates into military forces designed to kill people from other countries and other ethnic groups. Military spending has been the largest single stimulus to the U.S. economy ever since the Second World War. Military spending led to long economic expansions in the Vietnam War and in the military buildup of the 1980s.

Third, the U.S. government has used higher taxes to ward off inflation and lower taxes to stimulate the economy in order to reduce unemployment. But there is no consensus on what to do if the U.S. economy is faced by both inflation and unemployment. An expanding economy always causes taxes to rise, while a declining economy causes taxes to fall. The overall effect on income distribution of all the different types of taxes in the United States, each of which has a different effect on income distribution, has usually been very slight. When, however, President Reagan lowered taxes on the rich in 1981, it did significantly increase U.S. income inequality.

Fourth, education has mixed effects. To some extent it helps prepare an educated work force for the economy. It is a road to upward mobility for some people, but numerous studies have shown that (1) the percentage of students going to college increases with income and (2) most students end up at the same general level of income as their parents did (see Bowles and Gintis 1975).

Fifth, the government provides some welfare to both the rich and the poor. The total amount going to the poor is a very small percentage of national income. There are also subsidies to rich farmers, including tobacco farmers. And there are numerous other subsidies to business.

Sixth, the U.S. government's macroeconomic fiscal policy has never done much to stimulate the economy, though that goal is often discussed. The goal of cutting the deficit has been set above the goal of stimulating the economy and reducing unemployment. In practice, this means cutting those programs that give something to the poor and the middle class. It is worth noting that the deficit has been countercyclical. In expansions, government spending rises very slowly, while taxes rise much faster, so the deficit declines. In contractions, government spending always jumps because of the automatic increases (such as unemployment compensation), while taxes tend to decline because their sources decline, so the deficit rises.


Under capitalism the government is an integral part of the political and economic system: the government process and the economic process are entwined. Thus, Marxian scholars do not reduce social explanation to either politics or economics, but use a relational view of the two aspects of society. Each government in history has been affected by the type of class relations in that society, so each type of government is historically specific. There are no eternal laws of movement of the governmental process. Rather, the evolution of government has been an integral part of the evolution of the class relationships of society. At the moment, the focal point of Marxian research in this area is the conflict between capitalism and democracy. In the chapter on policy (14), some reforms are discussed that might reduce the effect of wealth on the political process, but the wealthy will always have disproportionate political power as long as capitalism exists.

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