The fundamental principle of a free market system is not one member-one vote, but, one dollar-one vote
In societies like Iran with a long history of despotism and arbitrary rule, it is clear why democracy is so desirable. To a large extent it reflects a natural reaction to the constraints imposed by the despotic rule. In societies with this background, how democracy could be established is not simple and straightforward. The danger is, however, if we are not careful, we may sustain and further regenerate despotic rule under a new disguise.
Let me begin to state that I have no doubt that democracy is absolutely essential for economic development. Or to put it differently, under a despotic rule, if you are lucky, you may have economic growth, but your development is most likely to be lopsided. On the other hand, if democracy is properly defined, supported and protected by appropriate institutional arrangements, it could very well protect an average citizen against the abuse of power by those who prefer not to be accountable.
If supportive institutions in defence of democracy and democratic rights are not sufficiently developed, then there would little incentive for capital accumulation and investment, and in their absence, little or no development would take place.
In Iran, the domestic neo-liberals claim that unless free market system is established, there would be no democracy in the country. However, we have seen other neoliberals who sacrificed democracy for the sake of establishing free market system [check what they did in Chile to help Augusto Pinochet in the 1970s]. There are others who argue if you move in the direction of creating a free market system and free trade, the ground would be paved for the emergence and further progress of democracy.
This view is based on the assertion that free market system and free trade would create a knowledgeable middle class that would require and demand democracy. In the last fifty years, however, there have been many occasions that our “democracy- friendly” neoliberals who are so vocal about it; suddenly suffered from a kind of selective amnesia. As long as a despot is pro- west and anti-communist, it does not almost matter what he does with his citizens. It seems as if a discussion about democracy suddenly becomes economically irrational. Do not take my word for it, look at the reign of Suharto [Indonesia], Somoza [Nicaragua], Marcos [Philippine] and the Shah [in Iran]. You may think that our neoliberal advocates of democracy have learnt their lessons. But I am afraid you are wrong. Look at the Middle East just immediately before the Arab Spring. Mubarak, Ben Ali, Abdullah Saleh and in the post -rab Spring, look at the situation in Saudi Arabia, Bahrain, and a few other Sheikhdoms.
There may be some differences between neoliberal advocates of democracy, but there is a common element among them that free market and democracy produce and reproduce one another. To put it differently, democracy promotes free market and free market in turn promotes democracy. Some even go as far as suggesting that without a free market economic system, there could be no democracy. Democracy strengthens free market. If a government is expected to change without violence and revolution, then, there must be a proper system in place to monitor and control and when needs be, combat the abuse of power. At the same time, if politicians could not be removed by non-violent means, what guarantee is there that they would not stay in power for ever, or, would respect private property, or would not impose heavy taxes? If any historical evidence is needed, look at Iran or Egypt. Under this situation, there would be little incentive for investment, and wealth creation and capital accumulation. Market mechanism will be distorted, and as a result there would be little or no development either. On the contrary, when there is democracy, abuse of power will be controlled, and free market system would function effectively and efficiently and the economy develops too.
At the same time, free market would also reinforce democracy and democratic institutions. It would lead to economic development and pave the way for the creation of a class of wealthy individuals who are not dependent on the state and this class would desperately need democracy to ensure that no one would abuse power.
What I have said as far is the official view supported by many in the South, i.e. in developing countries as a political justification for the implementation of Structural Adjustment Programmes. But let us pause for a second. Is it really true that free market system and democracy would produce and reproduce one another
? Is it true that there could be no democracy without a free market economic system?
A sufficient answer to these questions would require a much bigger space than that I have at my disposal here, and further, depending how we define democracy our answer could be different. For the sake of simplicity let me consider the simplest definition of democracy, “one man/woman, one vote” which could be used in a properly conducted election to elect the rulers. Every four or five years, this exercise could be repeated, and those who win, will come to power. But this basic and fundamental principle of democracy has little application in the market place. The fundamental principle of a free market system is not one member-one vote, but, one dollar-one vote. In short, under democracy, independent of wealth, colour, ethnic origin, you have one vote, but under free market, the more money you have, you have more power, i.e. more votes. To put it differently, while under democracy, there is no inequality and citizens are equal, this basic rule is violated under a free market economic system. I would argue that under any unequal system, there could be no democracy. This could be based on free market principles or it could even claim to be “socialist”, as the former Soviet Union did. In my view, the main reason for a very serious democratic deficit that existed in the former Soviet Union was not public versus private ownership but an embedded inequality that allowed party officials to run wild and do almost whatever they liked.
In fact, this conflict was one of the main reasons why 19th century liberals were not so much in favour of democratic development. In their view, democracy would enable the poor to “exploit” the rich via progressive taxation and even nationalization of private property which would in turn kill off any incentive for wealth creation, in turn, damaging development. It was with this possibility in mind that in most European countries, the right to vote was conditional upon having a certain amount of wealth and having paid a certain amount of income tax. In some countries, to be literate was a pre-condition too i.e. effectively barring the majority from voting. For instance, in England, the birthplace of parliamentary democracy even after the reform act of 1832, only 18% of men could vote. In France, prior to Act of 1848, only 2% of men voted and in Italy following the reform of 1882, only 15% of men were eligible to vote. I would like to add that I am not advocating the removal of free market system anywhere. In the recent past, in societies where we did not have the rule of one dollar, one vote, there was little or no democracy either. At the same time, I have no doubt that if commoditification- free market economic system- becomes the only game in town, there would be no democracy either, except for the rich. There are many areas that even for the health of a capitalist economy it is essential that this basic rule will not apply to them.
Just to name a few, higher education, legal decision making, public organisations and state organs, law, medicine and so forth.
If this claim is valid that the basic principle of democracy, i.e. one man-woman, one vote is in an open conflict with the fundamental principle of a free market system, i.e. one dollar-one vote. How could it be an extension of democracy when this anti-democratic principle applies to more spheres of human life?
 Ha-Joon Chang: Bad Samaritans: The Guilty Secrets of Rich Nations & the Threat to Global Prosperity, rh Business Book, 2007. P. 173