Book Cover

Democratic
Capitalism,  The Way to a World of Peace and Plenty
by Ray Carey

Hard/Softcover/Kindle - 5 May, 2004, Available on Amazon.com

Ray Carey presents the theory and practice of democratic capitalism by coupling his experience with a synthesis of the thought of Adam Smith, Karl Marx, and John Stuart Mill.  The empirical evidence is clear: democratic capitalistic companies produce superior results, and nations that support economic freedom and keep money neutral improve the lives of their people.


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Course 1:18

Enlightenment II
The Integration of Knowledge for Social Progress

18th century

Inspired by Isaac Newton’s identification of order in the universe the Enlightenment sought the best order in human affairs. Men of brilliance and experience in both Europe and America placed the goal of indefinite human progress; with the means more wealth, broadly distributed, and law, instead of violence in the relations among nations,. American Founders tried to design a political structure that would reflect the will and wisdom of educated citizens to displace the egregious mistakes of the powerful few. Francis Bacon’s method combining reason and experimental verification was coupled with Newton’s scientific protocols to specify the means and validate the ideal. Underlying the rational effort was a belief in the worth and potential of each individual.

The Marquis de Condorcet integrated knowledge for social progress in his Tenth Stage, an extraordinary summary of the economic, social, and political contributions of the Enlightenment. A users manual to reach full human potential for the benefit of subsequent generations (DC reference? These few pages in chapter 3 are critical to the whole thesis, please reread) Condorcet, however, knew with concentrated wealth and violence dominating Europe, that new freedoms would have their best opportunity in America “that happy land where freedom had only recently kindled the torch of genius.” 

Most of the world, however, was not ready to shift from policies based on nationalism, imperialism, militarism and big mistakes by hereditary monarchs to those based on people uniting in economic common purpose. George III fumbled his way into the American Revolution; Louis XVI precipitated the French Revolution and lost his head; Condorcet died in prison during the Reign of Terror after passing the baton to America to lead the world to peace and plenty.

Mid-19th century

John Stuart Mill and Karl Marx confirmed Adam Smith’s theory that economic freedom would spread wealth naturally. It had been validated in practice but they pointed out that the system was functioning at a fraction of potential because wealth was still too concentrated. Each proposed that a change in the work culture to trust and cooperation would motivate workers to add more wealth and that a fair share of the improved performance would distribute wealth more broadly.

In two books, Theory of Moral Sentiments and Wealth Of Nations, Smith had integrated the instinct for social cooperation with individual ambition to drive the free market system, concluding that “little else is required to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice, all the rest being brought about by the natural course of things.” 

Karl Marx in Das Kapital criticized the prevailing exploitive system and conditioned social progress to movement to the superior economic system, assimilated by the culture to modify the political structure in its support. 

Marx and John Stuart Mill saw that a change in the work culture from alienation to cooperation would add wealth, broadly distributed. Mill in his Political economy integrated participating workers with private property and competition and proposed that material benefit was maximized by an improvement in the quality of life of the workers in a moral environment! Mill’s integration completed the specification of democratic capitalism.

The intellectual community did not assimilate this integration of knowledge for human betterment initiated by Smith and completed by Mill, consequently, citizens were not educated to use growing democracy to reform economic freedom at home, or unite in economic common purpose abroad. The word “capitalism” came into use as a pejorative expression that implied wealth and privilege. Untrained leaders were nationalistic, imperialistic, militaristic and continued to abuse their power by large mistakes.

21st Century

During the 20th century economic freedom confirmed its capacity to improve lives in both authoritarian and democratic countries; China and India took one-half billion people out of extreme poverty in a decade; collectivist alternatives were tried and failed. The Marshall Plan after WW II, and later the European Union, confirmed that economic common purpose could stop the violence. The Information Age made the world more productive, smaller, and more interdependent with technology that aided communication and education

Despite these positive events, early in the 21st century the world was full of violence, misery, and fear. The root causes had become worse because of failure of American leadership. This “happy land” had lost the “torch of genius” of its Founders.

Reform of the economic system as the starting point can not happen without an epiphany in education in which they realize that they and the university trained popular media are not training leaders, educating citizens, or informing the public. This failure has been documented in recent books by university presidents and deans. Derek Bok, the former, and temporary President of Harvard, has commented on this since 1993: 

Through my two decades of presiding over a university, I cannot recall a single serious faculty discussion of how undergraduate education could do a better job of preparing students as citizens. The results of that neglect are all too visible.”

Bok subsequently got hundreds of university presidents to endorse this view. Francis Bacon cautioned that: ” It is not possible to run the course right when the goal itself has not been rightly placed.” Such clarity of mission is sadly missing in academia, former University of Chicago Dean Stanley Fish challenged Bok in NYT editorial in 2004 commenting:

The task of educating students to be better citizens would deform (by replacing) the true task of academic work: the search for truth and the dissemination of it through teaching.

Dean Fish, now a law professor in Florida, amplified his definition of academic freedom in a recent editorial in the NYT. ( 7/23/2006, p 13) He explained that it was the right to teach anything a professor chose as long as it was not presented as “indoctrination.” 

Is it this abstract search for truth without a goal or focus that has made an educational anarchy in the universities? Bacon criticized the quality of truth seeking in his time, has anything changed?

The primary notions of things which the mind readily and passively imbibes, stores up and accumulates, are false, confused, and over-hastily abstracted from the facts ... whence it follows that the entire fabric of human reason which we employ in the inquisition of nature, is badly put together and built up, like some magnificent structure without any foundation.

The confusion of mission by Deans and Presidents is matched by confusion by professors about the Enlightenment’s “search for truth.” Harvard philosopher professor John Rawls was amazed when his book on a just society sold 200,000 copies. Unfortunately, two decades later, he lost his idealism and commented: 

Whether there is or ever was such an Enlightenment project (finding a philosophical secular doctrine, one founded on reason and yet comprehensive), we need not consider it; for in any case political liberalism has no such ambitions.

Was the conclusion by Rawls that it is impossible to organize human affairs rationally a reaction to the failure of alternative political systems? Did this intellectual fatigue result from failure to perfect society by an elite design: it did not work; ergo, it cannot be done? Was the alternative examined that it did not work because it started at the political, not the economic end? Those who declare defeat and walk off the field leave government policy free for the finance capitalists who spend huge amounts to protect their exploitive system; and the military-industrial complex with its great momentum and political support in the march towards nuclear destruction.

Edward Wilson, a Harvard professor of biology and winner of both Nobel and Pulitzer prizes wrote Consilience about the unification of knowledge for human betterment. Wilsonrespected the Enlightenment:

I believe that the Enlightenment thinkers of the seventeenth and eighteenth centuries got it mostly right the first time. The assumptions they made of a lawful material world, the intrinsic unity of knowledge, and the potential of indefinite human progress are the ones we still take most readily to our hearts. 

Wilson identified single-discipline scholarship in academia and the under-prepared media as serious impediments to the unification of knowledge requisite to the rational organization of human affairs:

The root cause of the problem: ... the overspecialization of the educated elite. Public intellectuals, and trailing close behind them the media professionals, have been trained almost without exception in the social sciences and humanities. They consider human nature to be their province and have difficulty conceiving the relevance of the natural sciences to social behavior and policy

This dichotomy illustrates why knowledge is not integrated for the betterment of the human condition, it is, instead, specialized and fragmented. The curriculum devolves into a state of anarchy as professors and students each chose what they feel like teaching or studying. The search for cohesive, integrated truth about the human condition, that is, all is requisite pieces in a logical relationship, is not pursued but frequently ridiculed. The faculty aggressively protects its freedom, but, freedom from what, and for what? 

The world has continued with folly and violence because the reform minded intellectual community has been satisfied with criticizing the economic system and promoting political solutions while not examining how to refine capitalism. Democratic capitalism is rarely offered for student examination, although the capitalism that tries to maximize profits by suppressing wages and benefits, in an environment of fear and intimidation, receives substantial student visibility through criticism by most professors. Socially sensitive students are “indoctrinated” to an anti-capitalist attitude, not by course material but by their professors and instructors. They do not learn the simple ways to reform capitalism because their teachers cannot teach what they have not learned.

There are no solutions because there is no agreement on the starting point or whether it should be started at all. I believe that identifying the superior economic system is the starting point? A core curricula could examine the integration of knowledge by the Enlightenment summarized by Condorcet. It would begin with practice in the truth seeking process of the scientists amplified by the careful method of Bacon. It would include integration of knowledge by Smith and Mill with an understanding of how close Marx came to the same integration. It would study Kant in order to better understand the need for the U. N. and the need for reform.

The solution to inadequate citizen education then is better education about economic freedom with particular concentration on Smith’s conditions for success. Democratic power will not counteract the lobby power of finance capitalists until citizens understand that neutral money means a supply, cost, and volatility that does not affect the commercial process, and control of currency and credit for the general welfare means limits on speculation with borrowed money. 

Students can also understand the economic alternatives by studying the mistakes by the few: Woodrow Wilson’s ignorance of economic freedom at the 1919 Peace talks that made WW II inevitable, and Herbert Hoover’s three mistakes in the supply of money, taxes, and tariffs that exported the overdue stock market Crash of ’29 into the Great Depression. 

Democratic capitalism should be examined in the Liberal Arts courses because it improves the human condition; it should be examined in business schools because it maximizes profits. Democratic capitalism is a moral system that can eliminate material scarcity and unite people in economic common purpose. The debate over “core curricula” should be over. This is the minimum knowledge needed by all citizens. It will take hard work, however, considering the erosion of idealism by professors like Rawls and the rejection of citizen education by Deans like Fish. 

Does an economic system function better because it is moral? Can the moral economic system be a model for other elements of the culture? Is it true that performance improves in every human association with trust and cooperation? These radical propositions must be examined aggressively because their promise is so great and the alternatives so lacking. 

Academicians are uncomfortable with the concept of a bridge between reason and faith. The record shows, however, that the universities dominated until a century ago by religious dogma have yet to find an alternative after that dogma was abandoned by many. Society needs a universal value system that bridges the secular and religious, one in which faith stretches the horizon of the ideal by transcending the world of misery and violence, and reason specifies the means to the ideal. In a world of increasing violence and clash of cultures this sounds optimistic, if not naïve, but the universal ideal is grounded in the economic system that improves lives in both democratic and authoritarian countries. Young people in totalitarian countries will view the good life on TV and the Internet and, in time, change their governments to provide similar opportunities. Authoritarian countries will gradually move toward political freedom as they learn from world competition that economic freedom works best with full democratic freedoms. The value system of trust and cooperation will spread not because of eloquent sermons, but, rather, because of the inexorable pressure of competition on companies and countries. People of faith will recognize a value system consistent with religious teaching; people who rely exclusively on reason will find the value system consistent with an examination of human nature.

These impediments to social progress, concentration of wealth and violence among nations and peoples, are interrelated and can be eliminated only through understanding gained through integrated knowledge. A core curricula for this examination, however, would be rejected by the faculty. The concept that social progress depends on movement to a superior economic system is alien to most professors. Further, the proposition that this system can be a model for the rest of the culture because performance in every human association improves with trust and cooperation is anathema to those who still harbor feelings that commerce is amoral at best and more likely immoral.

This rejection is due to cultural conditioning that goes back thousands of years and will not be easy to neutralize. It began with the contempt for commerce expressed by both Plato and Aristotle, their love of the political state of their design, and their view that human potential can be reached only in a contemplative life, in contemporary terms, a Ph. D. with tenure. As the mode of production at that time was slavery, most individuals did not have an opportunity to reach full potential and the search for a just society was elitist.

Marx’s criticism of capitalism has been enjoyed by many who at the same time ignore his most important contribution: Priority for the superior economic system, assimilated by the culture, with the political structure modified in its support. Because improvement of the human condition depends on the efficacy of the economic system, this intellectual myopia is the first cause of a society still full of misery, violence, and folly. 

Enlightenment II can educate citizens by a rededication to Bacon’s process to purge the superficial, politicized habits that have contaminated non-scientific truth seeking in the universities. The process can then specify the means and validate the ideal of indefinite human progress, as it did for the 18th century Enlightenment.

Professor Wilson offered this peace proposal:

There is only one way to unite the great branches of learning and end the culture wars. It is to view the boundary between the scientific and literary cultures not as a territorial line but as a broad and mostly unexplored terrain awaiting cooperative entry from both sides. The misunderstandings arise from ignorance of the terrain, not from a fundamental difference in mentality.

The quality of the truth-seeking process employed by Enlightenment II will be critical for citizens to reform their economic system to build more wealth broadly distributed and to reform foreign policy to unite the world in economic common purpose. Those who worry that war and violence are inevitable must give trust and cooperation a chance. They will discover a benign inversion in which the standard of living goes up, and the violence goes down. They will discover that performance improves with trust and cooperation in every human association including families, education, companies, nations, and the world

Ibid., pp. 62-73.
Ibid. p. 432.
Ibid., pp.81-89.
Theory of Moral Sentiments, Wealth of Nations 
Ibid. p. 171.
Ibid. p. 49.
Ibid. pp. 278-291.
Former President Derek Bok, Harry Lewis, Dean of Harvard and President Harold Shapiro of Princeton. Lewis’s book is titled Excellence Without a Soul with a subtitle How A Great University Forgot Education. 
Ibid. 444

Ray CareyRay Carey

Ray Carey learned through managing companies for 33 years how to change the work culture to provide employees with their best opportunities to develop and contribute. This experience began as a 28 year old plant manager and later president of an electric motor company, and concluded with eighteen years as president , chairman, and CEO of ADT, Inc.

See Carey's autobiography of his work career in chapter two of his first book,

Democratic Capitalism, The Way to a World of Peace and Plenty.

For more information about Ray Carey and his advocacy of democratic capitalism, visit the pages of this website.


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