Economic Democracy: Dahl, Okun, and the Friedmans Compared

Introduction: Democracy, Economy, and the Central Debate

Democracy is a much-desired form of government in today's society, and there is considerable debate about how to achieve the highest possible level of democracy. Particularly important to democracy is the economy, because the political economy and the functioning of a country's economic life are both heavily influenced by government and, in turn, influence government. The relationship between democracy and the economy therefore demands careful study.

In Economic Democracy, Robert Dahl argues for the potential of democracy: "Is it not reasonable to think that democratic leadership will go further in helping to achieve that potential than authoritarian leadership can ever do?" (Dahl 156). This contrasts with the argument of Arthur M. Okun in Equality and Efficiency, who concludes that the pursuit of equality leads to more equality but at a cost to economic efficiency. Milton and Rose Friedman, in Free to Choose, argue that freedom is the paramount value and that it will ultimately lead to equality. An understanding of all three arguments leads to the conclusion that Dahl's perspective — however difficult it would be to attain — is the most beneficial to democracy, because treating the economic sphere as a democracy allows both freedom and equality to prevail.

Dahl and Tocqueville on Liberty and Equality

Dahl's understanding of equality is grounded in Tocqueville's notions of democracy: that if there is to be equality, it must be universal liberty or none at all, and that to maintain equality in liberty there must be protection from the tyranny of the majority. This inherent aspect of democracy suggests that liberty may be more important than equality, since equality can have a detrimental impact. Yet so can freedom, in which the majority imposes its will on the minority. If the minority lost its rights there would be no more democracy — but this does not become a reality because of a powerful feature of democracy itself. As Dahl writes, "if it is desirable that a people should govern itself democratically, then it cannot be desirable that it be governed undemocratically," meaning that democracy is not fundamentally flawed (Dahl 29). It also means that greater freedom will not inherently lead to lesser equality, because people who desire more freedom within democracy do not thereby desire less equality.

Tocqueville, whose evaluation of American democracy has been long-lasting and is admired by Dahl, nonetheless maintains that equality can and eventually will lead to oppression. Yet this widely accepted inverse relationship between equality and freedom is not necessarily true, according to either Dahl or the Friedmans. Dahl's question — "Is the coexistence of democracy, equality, and primary political rights often, perhaps typically, no more than a transitional state between the birth of a new democratic order and its transformation into a mass-based despotism?" — reflects this concern, but he does not accept it as inevitable (Dahl 32). Historical examples show that where democracy turned to authoritarianism, as in the Weimar Republic, there was active popular support for authoritarian government. This demonstrates that equality itself is not what destroys liberty. Dahl, benefiting from many more years of historical evaluation than Tocqueville could draw upon, noted that "under certain conditions, which he thought largely existed in the United States, equality might be reconciled with liberty," meaning it is not necessary to conclude that liberty is more valuable than equality or vice versa (Dahl 45).

Okun's Equality-Efficiency Tradeoff

Okun maintains that there is a double standard in democracy in which people are treated as political equals but are forced to seek inequality in terms of economic advancement. His argument that greater equality is necessary for a better economy rests on the observation that the inequalities produced within democracy create "a tradeoff between efficiency and equality" (Okun 4). Ultimately, Okun concludes that "the conflict between equality and economic efficiency is inescapable. In that sense, capitalism and democracy are really a most improbable mixture," suggesting that economic freedom and a functioning capitalist economy will inevitably erode equality (Okun 120). This is almost a Marxist argument: capitalism generates inequality, yet equality is a cherished democratic value. Okun supports his position with evidence such as the narrowing of racial wage differentials during the 1960s, which implied a gain of nearly one-fifth in the wages and salaries of Black workers.

Dahl counters this argument by proposing that the economy be treated like a democracy, allowing it to flourish on democratic terms. There need not be an inherent paradox between capitalism and democracy. Dahl's argument is more effective than Okun's because his use of Tocqueville's democratic principles and the broader history of democracy demonstrates that equality and freedom can both be real achievements rather than mutually exclusive ideals.

Conclusion: Dahl's Vision Beyond Capitalism and Authoritarianism

Dahl's argument, which would account for drastic changes to the American system and the relationship of democracy and capitalism, accounts for errors in the arguments of Okun and the Friedmans. Perhaps there are no errors in Okun's and the Friedmans' arguments, yet Dahl has found a better solution. He approaches the issue from a perspective that does not assume our current notions about capitalism and its relationship to democracy are permanent or the only possible answer. Liberty and freedom are both achievable in Dahl's framework, and the economy can be made to encourage both rather than undermine either.

His answer is not only logical but reasonable. It may seem impossible — but if capitalism and democracy, liberty and equality, cannot co-exist, what good is democracy? Dahl sought a coherent solution to make them co-exist, and his arguments appear to be ahead of both his time and our own. They may one day render our current assumptions about the co-existence of capitalism and democracy, and the opposition of communism and authoritarianism, obsolete. At the very least, Dahl understands the economy and democracy at a deeper level than conventional analysis allows, and this deeper understanding can only point toward a better future — one characterized by greater equality, greater wealth, and greater freedom, not for some, but for all.