The Varying Fortunes of Democratic Capitalism

Are capitalism and democracy compatible with each other? Karl Marx thought they were not. John M. Keynes and Daniel Bell claimed they were. I reconcile both views by pointing that the level of friction (or incompatibility) between both institutional forms has historically varied as a function of the internal structure of capitalism, in particular, the kind of labor skills that were (and are) complementary to capital. Those varying capital-labor complementarities have had a different impact on employment patterns, wages, the distribution of income, and capital's incentives to invest in public goods, and, as a result, on the likelihood of establishing democratic institutions. After exploring this thesis against the development of democracy and capitalism in the last two centuries, I discuss the implications that the ongoing digital revolution (including the development of AI) may have for today's democratic institutions.