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Capitalism or democracy? This question forms the epicentre of the Eurozone crisis, the axis around which the economic hurricane now revolves, argues Charles Brown.

Less than a week ago, Europe’s leaders were sighing with relief at catastrophe avoided. Now, the prospect that the Greek government might either seek a referendum or collapse, forcing an election, has thrown their plans into disarray. Meanwhile, the gales sweeping through the markets threaten to strip bare the pretense that capitalism can either meet fundamental human needs or respond to the legitimate demands of its people.

For much of the last century, capitalism’s ideologues and cheerleaders have held it as axiomatic that capitalism and democracy are inextricably linked. Throughout much of the Cold War and the period since the fall of the Soviet Union, the political and financial elites have argued that markets and economies flourish best under conditions of liberal democracy and where absent, markets provide a persistent, irresistible pressure, driving democratisation.

Such assertions ignore inconvenient truths such as the willingness of governments to ignore the suppression of democracy when the interests of capital are threatened. From the backing of dictatorial regimes during the wars of national liberation to the suppression of the Chilean revolution; from support for the attempted overthrow of democratically elected leaders like Hugo Chavez to the arming of some of the most repressive regimes of the Middle East – examples illustrating the limited extent to which democracy is tolerated by capitalist and imperialist interests are legion.

Nonetheless, in Europe and North America, politicians, media commentators and academics have managed, albeit with some significant lapses, to maintain the illusion that capitalism and democracy have been two sides of the same coin.

For many modern conservatives the market is inherently democratic. The fiction of a ‘shareholder’s democracy’, created by the privatisation of public assets, provided the ideological core for Margaret Thatcher’s renewal of British conservativism in the seventies and eighties (even if the vast majority of shares were snapped up by big business and institutional investors). The illusion has remained remarkably persistent – until now.

For founders of neoliberalism, economists like Friedman and Hayek, the market’s unsurpassable ability to efficiently allocate resources, made it, rather than democratic intervention, the fundamental guarantor of freedom. Freedom was the goal, not necessarily democracy.

The lie at the heart of such arguments has been demonstrated by an economic crisis and two decades that have seen wealth siphoned away from the vast majority of the population to a tiny elite. The global Occupy movement is questioning this whole thesis, counterposing the interests of the 99% to those of big business and the banks.

European politicians, business leaders and the mainstream media continue to paint a picture of a crisis triggered by financial speculation, overextended banks, elite accumulation and poor growth as one of state overspending and feckless populaces. The solutions by national governments and by the EU all come down the same thing – forcing working people to pay through cuts in essential services, squeezes on public pay and pensions, and increases in taxation.

Behind the rhetoric over sovereign debt is the fear that Greece is just the most exposed of a series of governments – Italy and Spain being next in line – and that a default will trigger a series of crises, as ratings agencies cut credit ratings and speculators seek to play the market. Such fears are compounded by the knowledge that many banks will struggle to ride out another credit crunch, potentially throwing the wider economy into recession or worse.

Eurozone leaders and bankers would prefer that the people carried the burden of the crisis, just as they did in 2008. That was Plan A. Plan B recognises that the burden of austerity faced by Greece was simply too heavy and that the banks would have to take a ‘haircut’ – a 50% write-off and the European Central Bank would have to intervene provided the Greek government imposed a sufficiently punitive cuts and taxation regime.

And it is here that the markets and democracy are colliding.

George Papandreou was expected to do Europe’s bidding but Europe was shocked when ‘the bazooka went off in the wrong direction’. In reality, Papandreou finds himself in an increasingly intractable situation, facing an increasingly militant population on one side and rumbles in the military on the other. Nicolas Sarkozy has said, through gritted teeth said that ‘to seek the approval of the people is always a legitimate step’ but he, like his EU colleagues, knows that it is questionable whether the markets – the system – can afford the luxury of democracy.

Working people in Greece and across the world dismiss the suggestion that they should pay for the failures of the wealthy with their jobs, schools, universities, hospitals, museums and old people’s homes. Yet making these basic demands is now questioning a capitalist economy that is unable to meet them.

The founding programme of the Fourth International, known as The Transitional Programme, advocated the formulation of transitional demands, demands that the ruling class is unable to concede without calling the very basis of capitalism into question.  In 1938, Trotsky and other members of the Fourth International counted sliding scales of wages and working hours, and the expropriation or socialisation of banks as the transitional demands that would serve as a bridge between the minimum programme (reforms) and the maximum programme (social transformation).

Now, democracy itself seems to be emerging as a pivotal transitional demand. Increasingly, national leaders dismiss working peoples’ right to demand services, pensions and jobs in the favour of the supreme rights of the market and capital. But Athens, New York, London, Paris, even in Hong Kong – essentially the 99% – are demanding their rights to a decent life and that democracy should be more than words: it should have a basis in material reality.

Of course, the democratic void at the heart of capitalism has been present within the system since its very birth. Marx and Engels were in no doubt of this, and highlighted it on numerous occasions in works such as The Critique of the Gotha Programme. However, like a black hole at the centre of a galaxy, this void is often undetectable to the casual observer. While a black hole is obscured by a veil of brilliant stars, the democratic void is obscured by a tawdry curtain woven by the media and what usually passes for mainstream political debate.

All that is now changing. The economic storm is blowing away the curtain and the majority are beginning to realise that the only thing that can fill the vacuum is their own, concerted political action. By demanding democracy and an end to the dictatorship of the market, organisations like Counterfire can help galvanise this process.

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