JEFFREY HERF
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that every polity requires in order
to
address its problems. But for all these
unlovely qualities, it is the only economic system compatible with the
existence of pluralist democracy in which political parties can peacefully win
political power and no less peaceh.llly agree to give up political power.
Capitalism is a necessary but not suflicient condition for pluralist
democracy because, as Frederick Hayek argued, it is an economic system
which shares political liberalism's attitude toward knowledge. Capitalism and
free markets rest on millions and millions of uncoordinated decisions made by
individuals. The spontaneous and uncoordinated nature ofthese decisions
maximizes the amount of inte lligence in a society. It is impossible for any
centrally planned economy
to
match the creativity unleashed by markets and
independent capitalists. In a similar fashion , pluralist democracy maximizes
intelligence and knowledge by H:;jecting the notion of an omniscient state in
favor of political competition between political parties. Just as a capitalist
economy derives its dynamism fi'om competition, so the dynamism and
strength of democracies comes from competition between poli tical parties.
Onlywhere political parties stand a chance of losing power in an election can
the process of political learning be peacefully institutionalized. In both politics
and economics, stagnation is the product of"the absence ofeflective competi–
tion.
Capitalist economies arc also compatible with totalitarian rule as in Nazi
Germany, and with au tho ritar ian ru le, as in some of the Asian capitalist
economies today. However,
few
historians in Western Europe and the
United States today wou ld defend the Comintern's view of the 1930s, and
the still current East German view that National Socialism was a product of
monopoly capitalism. The American historian Henry Turner, in
Big Busi–
ness and the Rise oj Hitler,
has eflectively laid to rest the notion that Hitler
was a tool of big business. In a book ca lled
Reaclionary Modernism,
I have
argued along lines similar to historians such as Karl Bracher, George Mosse,
and Fritz Stern that Nazi ideolobry, not German capitalism, accounted for the
racist war waged in Eastern Europe and the Soviet Union , as well as for the
Holocaust against the J ews.
From a glance at the variety of regimes in German history - constitu–
tional monarchy, republic, totalitarian dictatorship, and parliamentary democ–
racy - that coexisted with a capitalist economy, it is clear that no necessary
connection exists between capitalism and dictatorship. On the contrary, every
pluralist democracy with meaningful, peacefttl competition between political
parries in the last century has coexisted with a capitalist economy. Because of
the dispersal of power in society it brings abollt , capitalism is a necessary,
though not sufficient condition for democracy.
