Capitalism and Democracy: Why Milton Friedman Got It Backwards
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For decades, many people in the United States have been told a simple story: capitalism and democracy go hand in hand. Free markets supposedly lead to free people. Milton Friedman, one of the most influential economists of the 20th century, argued that capitalism was democracy’s “natural home”—that market freedom was the foundation of political freedom.

But as the Jacobin article “How Capitalism Undermines Democracy” argues, this story falls apart when we look at how power actually works. In 2026, as inequality deepens, billionaires buy elections, and corporations shape public policy, it’s no longer enough to say “the system is broken.” The system is working exactly as it was designed—just not for most of us.

Understanding how capitalism undermines democracy isn’t an abstract intellectual exercise. It’s about why wages stay low while profits soar, why public services are starved while the rich get tax cuts, and why so many people feel that no matter who they vote for, the economy keeps serving the same small class at the top. If we care about democracy, we have to confront the economic system that quietly rigs the rules.

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1. Background: Friedman’s Promise vs. Reality

Milton Friedman became famous for arguing that economic freedom—private property, free markets, minimal regulation—was the necessary condition for political freedom. His basic claim:

– Capitalism disperses power by placing it in the hands of many private actors, not a centralized state.
– Markets are “neutral” arenas where people voluntarily exchange goods and services.
– Government should be limited to enforcing contracts, protecting property rights, and maintaining basic order.

In this view, capitalism and democracy are natural allies. The more the state stays out of the economy, the freer and more democratic a society becomes.

This idea wasn’t just academic. It shaped:

– U.S. economic policy from the late 1970s onward: deregulation, privatization, tax cuts for the wealthy, and attacks on unions.
– Global institutions like the IMF and World Bank, which pushed “structural adjustment” and free-market reforms across the Global South.
– Political common sense: even many liberals came to accept that “there is no alternative” to capitalism.

Yet the historical record tells a different story:

– Capitalist democracies (like the U.S.) have seen rising inequality, weakening unions, and growing corporate influence over politics.
– Capitalist dictatorships (like Pinochet’s Chile, which Friedman personally advised) show that markets can flourish under brutal authoritarian regimes.
– Democratic experiments in expanding social rights—like social democracy in Europe or anti-colonial movements—have often been attacked or undermined when they threatened corporate interests.

The Jacobin article argues that Friedman’s mistake wasn’t just theoretical; it was ideological. He treated capitalism as a realm of freedom when, in reality, it’s built on class power—on the ability of those who own wealth to shape society in their own interests.

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2. How Capitalism Undermines Democracy: A Progressive Analysis

From a progressive perspective, the problem isn’t just that capitalism is “imperfect.” It’s that its basic logic conflicts with genuine democracy.

a. Economic power becomes political power

In theory, democracy is “one person, one vote.” In practice, capitalism turns it into “one dollar, one vote.”

– Campaign finance: Billionaires and corporations pour money into elections, Super PACs, and lobbying. Their interests shape what laws even get considered.
– Media ownership: A handful of corporations control major news outlets, framing political debate and limiting the range of acceptable opinion.
– Revolving doors: Corporate executives move in and out of government, writing rules that benefit their industries.

This isn’t a bug; it’s the system’s core feature. When wealth is concentrated in a tiny class, that class will inevitably use its resources to protect and expand its power. The result is what political scientists call “oligarchy”—rule by the few—even if elections still formally exist.

b. “Free markets” are not democratic spaces

Friedman framed markets as arenas of freedom: you can choose your job, your employer, your purchases. But most people experience the economy very differently.

– Workplaces are dictatorships: Most employers are not democratically run. Workers have little say over hours, wages, safety, or how profits are used.
– Job “choice” is constrained: If you need healthcare, rent, and food, you can’t simply “walk away” from a bad job. Economic necessity forces people to accept conditions they wouldn’t freely choose.
– Property rights trump human needs: Housing, healthcare, and education are treated as commodities. If you can’t pay, you’re excluded—even if the resources exist.

Democracy means people collectively shape the rules that govern their lives. Capitalism means those who own capital shape those rules—often in ways that keep everyone else dependent and insecure.

c. Capitalism thrives on inequality

Friedman claimed capitalism would lift all boats. Instead, it’s produced:

– Massive wealth gaps: A tiny fraction of the population controls enormous shares of wealth.
– Stagnant wages: Productivity and profits rise, but workers’ pay stagnates.
– Precarious lives: Gig work, temporary contracts, and weak labor protections leave people constantly on edge.

Extreme inequality doesn’t just hurt people materially; it erodes democracy. When some people are too busy surviving to participate politically, while others have the time and money to shape policy, the playing field is fundamentally tilted.

d. Capitalism pushes back against democratic advances

Whenever democratic movements push for more equality—higher wages, stronger unions, public healthcare, racial justice—capitalist interests often respond with:

– Capital strikes: Threats to move factories, jobs, or investment if regulations or taxes increase.
– Austerity: Demands to cut social spending in the name of “fiscal responsibility.”
– Privatization: Turning public goods into profit opportunities, undermining universal access.

In effect, democracy is allowed as long as it doesn’t interfere with profits. When it does, capital uses its power to discipline or roll back democratic gains.

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3. Why This Matters for Social Justice and Progressive Values

For progressives, democracy isn’t just about voting every few years. It’s about building a society where everyone has real power over the conditions of their lives. Capitalism, as it operates today, stands in the way of that project.

a. Racial, gender, and class justice are intertwined

Capitalism has always relied on racialized and gendered hierarchies:

– Enslavement, colonialism, and segregation built enormous wealth for capitalists.
– Women’s unpaid and underpaid labor has subsidized the system for generations.
– Migrant and undocumented workers are hyper-exploited to keep wages low.

If a tiny class can accumulate wealth by exploiting others, they’ll resist any democratic effort to redistribute power and resources. That’s why fights for racial justice, gender equality, and workers’ rights constantly bump up against corporate resistance.

b. Climate justice is impossible without economic democracy

The climate crisis exposes the limits of capitalist democracy. Fossil fuel companies and other major polluters use their wealth to block regulations, fund denialism, and water down climate policy. Yet the people most affected—working-class communities, Indigenous nations, communities of color—have the least say.

A democratic response to climate change would prioritize human and ecological survival over profit. Capitalism does the opposite. That’s why many progressives argue for eco-socialism, Green New Deals, and other models that put democratic control over energy and resources at the center.

c. Real democracy requires economic democracy

If democracy is to be more than a slogan, it has to extend into the economy:

– Workplace democracy: Unions, worker cooperatives, and shared governance.
– Public ownership of key sectors like energy, healthcare, and transportation.
– Universal public goods: Healthcare, housing, education, childcare, and more as rights, not commodities.

These ideas aren’t utopian. They already exist in partial forms around the world. The obstacle isn’t feasibility; it’s the concentrated power of capital and the ideology that says markets must always come first.

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4. What People Can Do and How to Stay Informed

Challenging the myth that capitalism and democracy are natural allies is the first step. The next step is organizing.

Here are some concrete ways to engage:

1. Support labor organizing
Unions are one of the few institutions that give working people collective power. Support union drives at your workplace, donate to strike funds, and amplify workers’ struggles.

2. Get involved in local politics
City councils, school boards, and local campaigns often decide issues like housing policy, police budgets, and public services. These are key arenas where corporate interests can be challenged and democratic control expanded.

3. Back policies that democratize the economy
– Higher minimum wages and stronger labor protections
– Public or cooperative ownership of utilities and essential services
– Progressive taxation and robust public programs

4. Join or support progressive organizations
Democratic socialists, tenant unions, climate justice groups, racial justice organizations, and feminist collectives are building the power needed to confront capital and expand democracy.

5. Stay informed with critical media
Mainstream outlets often treat capitalism as a neutral backdrop. Progressive media, like Jacobin, offer analysis that connects economic structures to political outcomes.

To dive deeper into how capitalism undermines democracy—and why Milton Friedman’s story was so misleading—read the full Jacobin article here:

https://jacobin.com/2026/08/capitalism-democracy-friedman-class-power

Photo by Taylor Turtle on Unsplash