There’s always been a tension between markets and democracy, which market fundamentalists like Friedman sought to elide with brazen statements about ‘Capitalism and Freedom’ that neatly conflate economic and political freedom, as if one necessarily and sufficiently underpinned the other. For the neo-liberal economists who underplay the normative aspect of their ‘discipline’ issues of positive freedom are sidelined; the ‘freedom’ that matters is the ‘negative’ freedom from interference by government, with little recognition of the fact that without certain guarantees that can only be enforced by the democratic state (access to education, healthcare, pensions and social security) the ‘freedom’ on offer to individuals without any power in the market is likely to be nasty, brutish and short.

The general trajectory offered by apologists of market dogma is that the excessive inequalities produced through capitalist enterprise are temporary, and that the great improvements in the lives of the majority in capitalist societies prove the efficacy of free markets. But this offers a complete misreading of economic history. As Ha-Joon Chang has eloquently documented, it was only in states with strong and active government that capitalism could prosper, and it was only in states where the democratic process could tame the more extreme tendencies of <em>laissez-faire</em> that the benefits of capitalism began to be shared through the provision of public services, rising median wages and pensions.

As the power of corporations grew, ‘free markets’ led inexorably to oligopoly, culminating in the ‘Gilded Age’ of excessive and accelerating inequality, and Depression; capitalism started to collapse and had to be rescued by massive government intervention causing a reset in the democratic deficit.  As a result, for a short post-war period, a balance (or stand-off) between the dictates of ‘free markets’ and democratic government acting to promote equality of opportunity resulted in a reversal of the trend to the polarization of income and wealth and a consequent increase in social mobility, with improved access to education and healthcare and a more adequate level of social security.

But this period of social democracy became a victim of its own success, encouraging a belief that markets would now provide the sort of protections only government had hitherto guaranteed. The super-rich fought back under the cover of a neo-liberal ideology that promised ‘Capitalism and Freedom’ – since which time capitalism in its red-in-tooth-and-claw ‘free market’ interpretation has been unleashed, governments stacked with politicians looking for post-parliamentary sinecures have been willingly complicit and the regulatory system duly captured, tied and bound and dumped in a shallow grave.

In truth, Hayek’s ‘Road to Serfdom’ had a fork in it. One way led to authoritarian, over-powerful government, but the other, the path Hayek ignored, led inexorably to concentrations of wealth and political power which have their own feedback loop resulting in oligopoly.

So, in place of parliamentary democracy with one-person-one-vote, we have the democracy of the market, where the oligarchs, through the mechanism of the ‘invisible hand’ can vote according to their bank balances – hence the trashing of the public sector and the privatization of anything of value – with a gun to the head of any government that objects. Our parliaments have little influence on the conduct of policy conducted behind closed doors by technocrats working to the neo-liberal agenda.