A Lecture on Capitalism and Democracy in the Age of Rising Concentration

Preliminary remark: This is a rather unusual working paper since it contains presentation slides and not the typical “paper”. Yet, we believe that the slides speak largely for themselves and the topic is too important to let the presentation get dusty in a digital drawer on our PC. We presented the slides in a lecture at the Vienna University of Economics and Business on the 28th April 2020.

After the end of Communism around 1990, the world seemed to enter a historical period dominated by liberal democracy and a neoliberal stance towards competitive markets. Thirty years later neither democracy nor competition can be taken as self-evident elements of political and economic life. Autocratic tendencies not just in the periphery but also in the economic core and rising market concentration in North America and Europe (although to a lesser degree) are new stylized facts of our time. This motivates to think again about the relationship between democracy and capitalism, a classical question not least since John Stuart Mill, Karl Marx and Joseph Schumpeter. The presentation slides in this working paper provide a firm-level analysis of the economic and political power of firms. It is argued that current competition policy regimes are probably too narrowly focused on market power and efficiency and neglect the wider implications of rising concentration for democracy and the stipulated equality of citizens in the political process. A well-equipped, competent and impartial public sector combined with a social welfare system are often considered as relevant factors to defend democratic principles and fend off the danger of a plutocracy based on the accumulation of corporate assets in the hands of an economic elite.