Democracy is overrated. Capitalism, on the other hand, doesn't get enough credit. This book, argues that these mismatches between image and reality create significant political and economic problems - inspiring instability, inefficiency, and widespread cynicism.

Acknowledgments xi INTRODUCTION CHAPTER I Capitalism and Democracy: Images and Image Mismatches 5 Capitalism 6 Democracy 7 Ralph's Grocery 10 The Plan of the Book 12 CAPITALISM CHAPTER 2 Capitalism's Image 21 The Capitalist Virtues 22 The Capitalist Virtues and the Monopolist 38 The Essential Insincerity of Capitalist Morality 38 My Nice Guys Finish First 42 Extrapolating the Capitalist Virtues 43 Capitalist Culture, Capitalist Inequality and Unfairness, Capitalist Competition 45 The Profound Irrationality of Capitalism: Investors as Unintended Altruists 54 CHAPTER 3 Sources of Capitalism's Negative Image 57 Socialists and Communists 57 storytellers 58 Intellectuals 61 Religion 65 Aristocrats and the Honorable 66 Ineffective Capitalist Propaganda 68 Capitalists 70 CHAPTER 4 The Consequences of Capitalism's Image for Economic Development 72 The Unequal Rate of Economic Development 73 Superimposing the Capitalist Virtues 75 Virtue as a Business Innovation 77 The Rise of Business Virtue 83 The Relative Importance of Business Virtue in Economic Development 93 The Relevance of an Effective Legal System to Economic Development 95 CHAPTER 5 Development, Happiness, and the Rise of the Politically Incorrect One-Handed Economist 99 One-Handedness 100 Political Incorrectness 104 Four Economic Propositions That Have Become Increasingly Accepted 106 The Prospects for Massive Economic Growth 122 Economic Development, Professed Happiness, and the Catastrophe Quota 123 Development and the Quest for Happiness 132 DEMOCRACY CHAPTER 6 Images and Definitions 137 Defining Democracy: Responsive Government 138 Elections: Useful, but Not Essential 140 Political Inequality 145 Democracy in Practice: Coopting the Wealthy 147 Minority Rule and Majority Acquiescence 152 Democracy in Comparison 153 Democracy and Real People 161 CHAPTER 7 Consequences of the Democratic Image 164 Cynicism about the Democratic Process 166 Hyperdemocracy 185 The Rebellion of Minorities 187 The Trouble with Transitology 189 CHAPTER 8 The Rise of Democracy 192 A Democratic Dialogue 193 The Historical Movement of Ideas 195 The Correlates of Democracy 197 The Marketing of Democracy 202 Examining the Third Wave 212 The Future of Democracy 222 CONCLUSION CHAPTER 9 Democracy and Capitalism: Connections and Disconnections 231 Capitalism without Democracy, Democracy without Capitalism 231 Democracy's Connection with Capitalist Prosperity 234 Democracy's Connection to Capitalist Growth 235 The Connection of Democracy and Capitalism with Crime 238 Conceptional Connections between Democracy and Capitalism 240 APPENDIX An Inventory of Propositions 243 Notes 255 References 289 Index 317

"John Mueller deftly paces us through the practical realities of democratic development, rescuing the very idea of democracy from the idea mongers who have oversold the links between democracy and prosperity and between democracy and virtue. Stepping nimbly through the historic and contemporary links among democracy, capitalism, and virtue, he makes an important contribution to a practical theory of democracy."—Sam Popkin, University of California, San-Diego"John Mueller has written an outstanding book about capitalism and democracy. He argues that each system has existed without the other, but that both are improved when they occur in tandem. Capitalism and democracy differ in cultural repute. Capitalism has a bad press even though as a result of competition, it tends to treat the customer well. Capitalist leaders are not 'robber barons,' but nice guys who finish first. Democracy, on the other hand, is perhaps over-praised: it embodies the play of special interests and while conceding political rights, only benefits the people as a whole when it is tied to a capitalist growth strategy. Fortunately, economists are now able to provide that strategy so that by following their advice, societies can progress. Neither democracy nor capitalism, however, satisfies all human or psychic wants. They are at best a reflection of Ralph's Pretty Good Grocery (where you can get everything you really need) rather than Alice's Restaurant (where you can get anything you want). Mueller has contributed a new and provocative interpretation that will resonate for years to come."—Richard Rosecrance, University of California, Los Angeles"This is a lively, smart, well-written, and often compelling book. The frequent and pointed comments that visions of perfect democracy and markets miss the point of how a society can work are well made."—Russell Hardin, New York University"We have here a seasoned political scientist and thinker with total control over his material. The result is an extremely engaging text, one that will be read for its excitement in the best graduate seminars and the best political science programs in the country. I have little doubt that, even in this heavily researched area of economics and democracy, his book will make a big splash, comparable to Inglehart's Culture Shift or Putnam's Making Democracy Work."—Michael Lewis-Beck, University of Iowa

John Mueller deftly paces us through the practical realities of democratic development, rescuing the very idea of democracy from the idea mongers who have oversold the links between democracy and prosperity and between democracy and virtue. Stepping nimbly through the historic and contemporary links among democracy, capitalism, and virtue, he makes an important contribution to a practical theory of democracy. -- Sam Popkin, University of California, San-Diego John Mueller has written an outstanding book about capitalism and democracy. He argues that each system has existed without the other, but that both are improved when they occur in tandem. Capitalism and democracy differ in cultural repute. Capitalism has a bad press even though as a result of competition, it tends to treat the customer well. Capitalist leaders are not 'robber barons,' but nice guys who finish first. Democracy, on the other hand, is perhaps over-praised: it embodies the play of special interests and while conceding political rights, only benefits the people as a whole when it is tied to a capitalist growth strategy. Fortunately, economists are now able to provide that strategy so that by following their advice, societies can progress. Neither democracy nor capitalism, however, satisfies all human or psychic wants. They are at best a reflection of Ralph's Pretty Good Grocery (where you can get everything you really need) rather than Alice's Restaurant (where you can get anything you want). Mueller has contributed a new and provocative interpretation that will resonate for years to come. -- Richard Rosecrance, University of California, Los Angeles This is a lively, smart, well-written, and often compelling book. The frequent and pointed comments that visions of perfect democracy and markets miss the point of how a society can work are well made. -- Russell Hardin, New York University We have here a seasoned political scientist and thinker with total control over his material. The result is an extremely engaging text, one that will be read for its excitement in the best graduate seminars and the best political science programs in the country. I have little doubt that, even in this heavily researched area of economics and democracy, his book will make a big splash, comparable to Inglehart's Culture Shift or Putnam's Making Democracy Work. -- Michael Lewis-Beck, University of Iowa