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13 Mich. J. Int'l L. 908 (1991-1992)
Capitalism and Democracy

handle is hein.journals/mjil13 and id is 918 raw text is: CAPITALISM AND DEMOCRACY

Owen M. Fiss*
Socialism has collapsed. The long, historic struggle between capi-
talism and socialism has come to an end, and capitalism has emerged
the victor. This turn of events was foreshadowed by the privatization
movement of the late 1970s and 1980s that swept England, the United
States, and a number of Latin American countries. History still
awaited the renunciation of socialism by those who lived it, but that
soon came in the form of the revolutions of 1989 in Eastern Europe
and in the spiraling chain of events, set in motion by perestroika,
that ultimately led to the dissolution of the Soviet Union in December
1991. China and Cuba continue to wave the socialist banner, but to
most observers this seems an act of desperation - an effort to pro-
claim loyalty to an ideology that may be integral to their historical
identity, but which all the world has now repudiated.
Capitalism permits of many definitions, but at its core it is a system
designed to tap the motivational force of self-interest. It assumes that
individuals are autonomous actors who advance their own self-inter-
est. Capitalism encourages efficiency and productivity by forcing indi-
viduals to compete with one another and then differentially rewarding
those who are most productive, a standard that is defined in terms of
consumer satisfaction. Consumers are put to the task of choosing how
to allocate their own scarce resources among the products or services
offered, but they remain sovereign in the sense that the entire eco-
nomic system. responds to their desires. The goal of capitalism is to
maximize consumer satisfaction by producing the goods and services
they demand.
The central social institution of capitalism is the market, a theoret-
ical construct in which individuals reveal their preferences, compete
with one another, and exchange goods and services. Government has
a role to play in this scheme, but it is a limited one. It is confined to:
(a) creating a monetary system, defining property rights, and enforcing
contracts so as to facilitate the system of exchange; (b) prohibiting
* Alexander M. Bickel Professor of Public Law, Yale University. This essay has benefitted
greatly from discussions with my colleague, George L. Priest, and from the seminar we taught
together at the Yale Law School in Spring 1991. I am grateful to the students who participated
in that seminar. I also wish to thank Bruce Ackerman, Eric Bentley, Jr., Sarah H. Cleveland,
Robert C. Ellickson, Alan Hirsch, Paul W. Kahn, and Alan Schwartz for their criticism and
comments on this essay.

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