In 1977 Charles Lindblom published Politics and Markets. In the book he explored what he called “the privileged position of business” in capitalist democracies. Governments depend on private business to invest, create jobs, and maintain economic stability. Economic performance affects elections (“it’s the economy, stupid”) so elected officials are pressured to keep businesses happy. As President Coolidge said “The chief business of the American people is business.” This gives business an indirect veto over public policy—not by voting, but by the threat of disinvestment, layoffs, or economic downturns.
Democracy operates within a market constraint. Policy is bounded by what will keep investors confident. Politicians rarely adopt policies that significantly threaten corporate profits. This relationship turns many political choices into “non-decisions,” problems that cannot even be seriously debated (public ownership of industry, serious wealth redistribution, campaign finance reform, etc.).
In the recent mayoral election in New York, Zohran Mamdani challenged the status quo by focusing on exactly those problems that business and government conspire together to keep in the background.
Capitalism has many benefits that have been well described since the time of Adam Smith. However, markets and democracy are not natural partners. They are in tension. Democracy aims at equality: one person, one vote. Markets concentrate wealth and power. Wealth buys lobbying, campaign spending, media ownership, and influence. Therefore, capitalism inevitably distorts democracy.
Policy-making is dominated by elites and experts. Economic policy is complex, so only technical experts and business leaders influence it. Citizens are largely spectators, not participants. To paraphrase Juvenal in The Satires (Satire X), give them bread and circuses and they will be satisfied
Alternatives to capitalism are systematically delegitimized. Lindblom called this “the language of market governance.” Through education, media, policy framing, and elite discourse, market solutions are treated as “rational,” while state ownership or radical redistribution are dismissed before debate even begins. Capitalist democracies are market-oriented first, democratic second. They do not produce fully democratic outcomes.
Since Lindblom published his book, history has largely validated his concerns. Corporate power in politics has grown dramatically (campaign finance has exploded, lobbying has become a multibillion-dollar industry, the Citizens United decision has amplified corporate political spending, and regulatory capture in banking, tech, pharmaceuticals and energy is pervasive). This is exactly Lindblom’s prediction.
Business veto power is visible in crises. When governments propose policies businesses dislike markets tank, investors pull out, CEOs warn of job loss or inflation, and politicians retreat. One need not look further than U.S. healthcare, banking, and climate legislation which has been repeatedly blocked or watered down due to corporate pressure.
Lindblom warned that capitalism without countervailing power would lead to concentration of wealth, corporate political dominance, and the decline of labour unions, all of which has happened in the U.S. from 1980 onward.
In some countries (Sweden, Denmark, Norway, Finland, Netherlands, Germany) strong social democracies have been built with powerful unions, high taxes, public goods, and regulated capitalism. Contrary to the concerns of hardcore capitalists, these countries are as successful or nearly so as the United States.
Political scientists from the 1990s to the present (Gilens & Page, Piketty, Stiglitz, Winters, Hacker) have reached conclusions similar to Lindblom: Policy outcomes favor the wealthy, not the majority, corporations dominate lobbying, and economic inequality translates into political inequality.
Lindblom was ahead of his time. In 1977 campaign finance was modest, lobbying was small, markets were less globalized, inequality was lower than today. He predicted corporatization of politics, global capital disciplining national governments, a decline in labor power, deregulation waves, and public policy shaped by investor confidence. His predictions have proved remarkably accurate.
Democracies operating under capitalism are constrained by the need to maintain business confidence. This gives business disproportionate political power. Democracy remains incomplete, limited, and skewed toward elites.
The American Republic was founded in 1776, the same year Adam Smith’s The Wealth of Nations was published. Adam Smith believed that markets work, but only when embedded in morality, justice, and strong public institutions.
Zohran Mamdani has had a lot of press recently, both positive and negative. His ideas may be too radical and too strange for America. To be successful he will have to work with both sides, the free-market zealots and the die-hard socialists. It will not be an easy task. But, it is not a foregone conclusion that he will fail.
Mamdani is advancing a democratic-socialist agenda that directly challenges capital’s dominance in our democratic system. This is good, it aligns with the need for stronger countervailing institutions and citizen voice. The real test is not the campaign but the structure of power that remains afterwards. Will the business class still hold the veto power? Will the market constraint still bite? Will the policies create sustainable economic foundations rather than provoke withdrawal of investment, or just shift power from one elite to another?
Stay tuned.