As I have set out elsewhere, J.S. Mill should be seen as the point of departure between liberal democracy and social democracy. Liberal ideology contains a contradiction within it. Its manifestation arises with the utilitarian theories of Jeremy Bentham. Bentham acknowledged the concept of diminishing utility. But, on this basis, that the more you have, the less utility you obtain from any additional wealth/income, arises the idea that if the greatest utility is to be achieved, this requires some redistribution of wealth and income. It is on this basis, that social democracy arises, as a more developed form of bourgeois democracy. Liberal Democracy had represented the interests of the bourgeoisie as a whole, divided into a mass of individual, small private capitalists, but by the second half of the 19th century, particularly after around 1865, the nature of British capital had changed. Industrial capital was now dominated by very large companies that had burst asunder the fetter of the monopoly of private capital, and been transformed into socialised capital. As the effects of the Limited Liabilities Act began to be felt, these large companies were marked by a separation into the company as a legal entity in its own right, and the money-capitalists that loaned money to it in return for shares. The interests of the former were represented by the Liberal Party, which drew behind it also the workers, whereas the interests of the latter were represented by the Tories, the traditional representative of the landed and financial oligarchy. The high point of liberal democracy, and its point of transition to social democracy is provided by John Stuart Mill.
Social Democracy is a form of bourgeois democracy. Where liberal democracy arises on less developed forms of capital, on large numbers of small, competitive private capitals, social democracy arises on the basis of the more developed forms of mature capitalism, on the basis of socialised capital, and the need for an interventionist state to plan and regulate the economy, so as to facilitate long-term capital accumulation. The function of a liberal regime is to protect that most important bourgeois freedom, the freedom to acquire private property, and in particular capitalist private property. It is to facilitate the accumulation of capital.
It may seem ironic in societies where the concept of liberty has become synonymous with the concept of democracy, but the dictatorships of Cromwell, Bismark, Napoleon, Louis Napoleon can all be described as liberal, because these regimes facilitated the acquisition of private property, and capital accumulation. The same can be said of those Bonapartist regimes in Latin America in the 19th century such as that of Simon Bolivar. As Lenin describes, in his analysis of the development of capitalism in Russia, the Tsarist regime could in no sense be described as democratic, but the Tsarist governments, via its Ministers such as Stolypin carried forward a liberal agenda of facilitating the acquisition of capitalist private property and capital accumulation. In the 19th century, the feudal regime of the Mikado in Japan also set about the modernisation of the economy, by introducing similar liberal measures to facilitate the accumulation of capital.
Liberal ideology seeks to minimise the role of the state for as long as the bourgeoisie itself does not have complete control over it, a control that can only arise when the bourgeoisie is itself strong enough as a class, and when the economy itself is dominated by capitalist production, so that the state is forced to further the needs of capital in order to further the needs of the economy, and of the state. As soon as, the bourgeoisie has such strength, it can seek to utilise the state for its own ends, to establish a liberal state, but such a liberal state, as the above examples show, does not have to be a liberal-democratic state. Where society is characterised by the domination of horizontal cleavages, the bourgeoisie is able to establish a liberal-democratic state to pursue its interests, such as that established in Britain as a result of the 1832 Reform Act, which gave the bourgeoisie the right to vote, and began to end the domination of the political regime by the old landed aristocracy. Yet, for the reasons set out by Hayek, this gave every reason for the bourgeoisie to support the establishment of only a liberal democracy, i.e. a democratic regime, whose main function is to regulate society on the basis of defence of private property, and the accumulation of capital.
As C.B. Macpherson says,
“It was an uneasy compound because the classical liberal theory was committed to the individual right to unlimited acquisition of property, to the capitalist market economy, and hence to inequality, and its was feared that these might be endangered by giving votes to the poor.”
(“Post-Liberal Democracy?”, in Ideology in Social Science, Robin Blackburn Ed., p 19)
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