Capitalism, the game we play; Democracy, the referee

“My job is to try to make it so that every year every team has an equal chance to win the Super Bowl.  The job of every team is quite the opposite.”
 An approximation of a quote attributed to Paul Tagliabue, then commissioner of the NFL

To summarize up to this point:

Economies arise out of the division of labor. The division of labor creates a much more productive economy. It also presents us with make/buy choices.  The more it divides, the more specialized we become, and the more we end up selecting buy over make choices.

Government arises among groups of people with the purpose of protecting property, broadly defined.  Initially, it was intended to protect one’s property from individuals out side one’s own group.  However, with the division of labor threats to property can arise within one’s own group and so rules are set up in the group to protect property in the course of economic transactions. As labor divides and people become more specialized more regulation is required.

As a framework for the relationship of the economy and the government we participate in, I would propose that the economy is the game we play and government makes and enforces the rules.  So what kind of game do we want to play and why do we want to play that particular game?

What should distinguish a democracy from any other form of government is that the object in making and enforcing the rules is, as much as possible, to make the game fair. By fair I mean that that there is equality of opportunity. Fair is certainly in the eye of the beholder and how far we should go to create equality of opportunity varies across the political spectrum but the principle is the same for all of us who accept democracy as the form of government we wish to live under. There are a lot of reasons for this.

To begin with it speaks to our most foundational beliefs. It is why we hold sacred the words that this nation was dedicated to this proposition seven score and 14 years ago.

Democracy by definition is participatory. When people don’t feel the game is fair they are far less likely to participate and more likely to act outside the “rules.” Locke would say they are completely justified to overthrow the state entirely  and then we no longer have a game.

When the game isn’t fair it weakens democracy but it also weakens capitalism.


Capitalism depends on its inherent creative destruction to be self-correcting.  But that creative destruction can be thwarted when one team gets to stay on top. When one team stays on top, we lose the innovation of the rest of the market and the team at the top loses its competitive edge because there is no opposition with which to compete – an opposition which Walter Lippman would define as indispensible.

Moreover, de Tocqueville concerns us with the possibility of creating an aristocracy of the manufacturing class. “ . . . there are every day more men of great opulence and education who devote their wealth and knowledge to manufactures and who seek, by opening large establishments and by a strict division of labor, to meet the fresh demands which are made on all sides. Thus, in proportion as the mass of the nation turns to democracy, that particular class which is engaged in manufactures becomes more aristocratic.”

He ominously notes that, “The territorial aristocracy of former ages was either bound by law, or thought itself bound by usage, to come to the relief of its serving-men and to relieve their distress. But the manufacturing aristocracy of our age first impoverishes and debases the men who serve it and then abandons them to be supported by the charity of the public.”
He finishes by warning, “I am of the opinion, on the whole, that the manufacturing aristocracy which is growing up under our eyes is one of the harshest that ever existed in the world . . .  the friends of democracy should keep their eyes anxiously fixed in this direction; for if ever a permanent inequality of conditions and aristocracy again penetrates into the world, it may be predicted that this is the gate by which they will enter.” 
When an aristocracy is created and we systematically exclude classes of people we diminish the talent pool from which we can derive new and better products and ideas.  Just imagine how impoverished our country would be today if we persisted in the white male dominated culture that was the norm little more than 60 years ago.


Everybody wants to beat the competition, drive the other team from the field, win the Super Bowl every year. It is not in our hearts as capitalists (and we all have that germ of capitalism in our hearts) to want otherwise. But it is toxic to the system, the losers and the winners, if the same team wins year after year.  Just like the NFL needs a commissioner, capitalism needs government to save it from itself, to maintain a level playing field, to optimize the process we call capitalism.

And no form of government is more suited to do this than democracy because equality of opportunity is precisely the object of democracy’s game. And while the relationship between capitalism and democracy isn’t perfect it is at least “more perfect”, and that, at least in this country, was our stated purpose from the outset.

Next time I will start to take a look at why that relationship is less than perfect.