The Crisis of Democratic Capitalism

After 1945, it seemed that democracy and capitalism formed a stable alliance. Today, this alliance is in question. What are the sources of tension? Is there a way out?

The Postwar Compromise
Embedded liberalism. Open economy + social protection. Market — for efficiency, state — for fairness.

Elements of the compromise:

Trade unions and bargaining power of labor
Welfare state — social insurance
Progressive taxation
Capital controls — room for national policy

Result. The “Golden Age” of capitalism: high growth, low inequality, full employment, social mobility.

Breakdown of the Compromise
Since the 1980s — neoliberal turn:

Deregulation, privatization
Weakening of trade unions
Liberalization of finance and capital
Reduction of tax progressivity

Results:

Rising inequality
Stagnation of wages
Financial crises
Political dysfunction

Tension between Democracy and Capitalism
Logic of capitalism: accumulation, inequality, power of capital.
Logic of democracy: equality of voices, accountability, representation.

When tension increases:

Inequality converts into political power
Democracy responds with populism or authoritarianism
Capitalism — through capital flight, crises

Ways Forward
Renewed social contract:

Predistribution — primary redistribution before taxes
Strengthening the voice of labor
Stakeholder capitalism
Democratization of economic decisions

Rethinking growth. Qualitative growth, sustainability, well-being — not just GDP.

The future of democratic capitalism is not guaranteed. It is a political project that requires constant work on balancing freedom, equality, and efficiency.