Most economists, conservatives, the foreign policy establishment, and many moderates assume that there is an identity between capitalism and democracy. You hear it all the time in public discourse: America stands for representative democracy and free market capitalism, and these are assumed to be the two definitive institutions that guarantee modern liberties and economic growth and development.
But think about what the term “capitalism” means for a second. If the part of the word “-ism” refers to a philosophy and practice that promotes the preceding part of the word as the basic governing structure of society, then “capitalism” is the promotion of “capital” as that basic structure. Society is organized around capital and its promotion. Yet what do people mean by capital? It refers to physical plant, infrastructure, and machines used to make things, to be sure. But it also refers to social institutions and structures that are suitable to the accumulation and concentration of such physical capital - markets dominated by large corporations, and thus of the capitalists who have access and control over the capital. But we have known for two centuries now that unrestrained capitalist economic competition tends to degrade into oligopoly and monopoly, and to create greater inequalities of wealth than ever before in history. (Even in the United States, where neoliberalism and libertarianism are stronger than elsewhere, it has long been recognized, in theory at least, that market competition has to be limited through anti-trust laws to prevent monopolies from completely destroying the markets upon which the system relies.) Monopoly/oligopoly capitalism has also always translated into political systems dominated by the wealthy capitalist few, whether in Victorian Britain, or Pinochet’s Chile, or the United States today. Unregulated capitalism, with its capital concentration, tends to drive a political system towards oligarchy or even military dictatorship, and it ultimately impoverishes the lives of the many for the benefit of the few. There is thus no reason to buy the fiction that capitalism and democracy are natural partners. Capitalism is the natural partner of oligarchy, not democracy (representative or any other kind).
One doesn’t have to be a full-blown socialist to see this. Contrast the word “capitalism” with the word “laborism” or something like that. If democracy is the self-government of the many common people rather than domination by the elite few, then the economy that goes with it should in principle privilege the common people rather than an economic elite. And this means privileging those who work for a living rather than those who, currently, own the capital. What if we created an economic system which put the priority on enriching working people and which gave them most of the decision-making power, rather than one that does so for capitalists? If you want an economy that goes hand-in-hand with, and supports, democracy, then you’ve got to build an economy that does so directly. And we know that unregulated markets dominated by large corporations and lacking in social programs do not do that. Instead, at a minimum you have to impose the standard suite of government programs that supports the quality of life and active citizenship of common people - labor laws and public education, healthcare, and pensions, and so on. You also have to empower labor unions to bargain collectively - this check on capitalists is mandatory for even a semblance of a healthy society with a decent quality of life for most people. Better still would be the full-scale implementation of economic democracy across the economy, making all business enterprises democratically run by their workers and communities. This would remove the class conflict between capital and labor altogether by putting economic decisions in control of everyone in common.
Capitalism doesn’t have a monopoly on markets (pun intended). Indeed, because uncontrolled economic competition destroys markets through the emergence of oligopolies and monopolies, it’s a wonder that anyone at all thinks that they do. And capitalism isn’t the natural partner of democracy, it is the natural partner of oligarchy. If you want a better government that rules in the common interest rather than the special interest of the rich, this is one false assertion that has to be dispensed with.