Authors: Lipset
Summary: In about 3200 words, this entry defines capitalism, discusses the relationship between the state and capitalism, and explores the correlation between capitalism and democracy.
The entry defines capitalism as a socioeconomic system where production is controlled by those with capital wealth. In such a system, virtually everything is for sale or available for exchange on the market. Capitalism has provided the necessary capital for tremendous technological and economic growth, but it has also given rise to class cleavages and other social and cultural conflicts.
The rise of the modern state and the rise of capitalism are closely linked. One essential element of the relationship between the two is a high degree of separation between economic choices and the political arena. This clearly distinguishes capitalism from other earlier socioeconomic systems, such as feudalism and twentieth-century state socialism.
The entry clarifies democracy conceptually as a prerequisite to exploring more closely its relationship with capitalism. Democracy is rendered moderately, fitting within Robert Dahl's polyarchy. Its key features include: universal suffrage, accountability of state executives to elected representatives, and free association and expression. Next the entry provides an overview of varying scholarly analysis of the historical interrelationship between capitalism and democracy, with particular emphasis on the growth and significance of the middle class.
In conclusion, the entry considers whether democracy transforms capitalism. The continual interplay over time between the two concepts has fostered the growth of each and also influenced their structural development. The pattern of this mutual growth and development differs from one political system to another, depending particularly upon the balance of power between social classes.