Democracy, High Time Preference and Everyday Life

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One of the deductions that Hans-Herman Hoppe is known for is his conclusion that democracy differs from monarchy in the area of responsibility-continuity. As he elaborates in Democracy: The God That Failed, democracies are run by temporary custodians, who must maximize their advantage in a short-term manner because their position is only temporary. There is no incentive, beyond an "idealism" that is much easier to bully-pulpit than to seriously implement, to make permanent improvements to the nation’s economy. Such incentives that are subject to the influence of promoting a legacy (favorable mention in the history books) do not dovetail with economic improvements. They do dovetail with winning the respect, or awe, of the writers of the history books, which itself is subject to the credibilities of the general public. Thus, there is no logical connection between democracy and economic growth, even if there seems to be in the short term. Such short-term incentives, though, are confined to gaining credit for any growth trend, or assigning blame for any contraction trend, in whatever way is most expedient for gaining, or keeping, elected office.

Interestingly enough, democracy can coexist with a somewhat free and growing market, although not to the extent that the old democrats assumed. The trusteeship nature of democracy does apply to war, as Joseph Schumpeter discussed in the chapter "Imperialism As a Catch Phrase" in Imperialism and Social Classes. Just as the democratic politician has no incentive to add permanent improvements to a nation’s economy, so it is that a democratic politician has no incentive to launch, intentionally, a long-term war, one where the victory will not come until he or she is either retired or dead. This is the root of the notion that democracy and war are mutually exclusive. Note, though, that it says nothing about short-term wars, ones that can be declared, prosecuted, and "won" within the timeframe of a single career as political head honcho. The typical war fought by the United States — and there have been many of them — is prosecuted according to this plan. In terms of time, the longest "hot" war ever fought by the U.S. military has been the Vietnam War, which lasted approximately ten years. Both Presidents that were Commanders-in-Chief during its full prosecution left office in disgrace, essentially for hypocrisy. This provides, for the United States specifically, a lesson for any future President: long, drawn-out wars, ones that get stuck in the "Big Muddy," entail political suicide. The incentive for, and consequent expectation of, quick victory is evidently self-reinforcing. So, a bias towards high time preference in politics does have its advantages, as the obvious tendency of national "statesmen" to treat the nation’s goods and people as a War Treasury is limited by the short-term orientation of democratic politics.

Given the obvious disadvantages of a high-time-preference State, though, there does emerge a kind of tension, or clash, between economic maximization and maximization of political advantage. Economic growth under capitalism does rest upon capital accumulation, which requires general habituation to low time preferences. This habituation, though, is foreign to democracy. Thus, capitalists and democrats have a tendency to look askance upon each other. The grand compromise "democratic capitalism" tends to rest upon capitalists being amenable to politicians taking credit for the capitalists’ own accumulation, or to politicians ascribing credit for it to "the people" — the voters. When the latter course is taken, capitalist democracy enjoys a kind of stability, because the "people" being given credit do tend to be low-time-preference in habits. In this sense, the people’s flattery, although it paints with too broad a brush, is roughly accurate in a democracy with a low-time-preference culture.

Unfortunately, this coexistence is not a stable one. One of the disturbing conditions of such an arrangement is the rise of a class that is more capitalistically inclined than the general populace. This development does occur from time to time when a generally unrecognized competitive advantage in cultivating a low time preference arises, because the advantages of doing so are subtle, and are not easily assimilated. They are generally scoffed at during times when the advantage is generally unperceived. An unintended consequence of that competitive advantage emerging, though, is that it makes "the people’s flattery" more and more unrealistic. The politicians, who credit "the people" for the extent of capitalistic development in a nation in those times, appear as if they were assigning the name of the "people" to a low-time-preference elite. This practice, although rooted in capitalist democracy, appears undemocratic, and may very well be so at the time it is seen through. Thus, "inequality of wealth" is not a threat to capitalist democracy per se, but sustained inequality of time preference is.

It should therefore be of little surprise that the economics of Keynes, with its borrower-centric bias, took the democracies of the world by storm in his time. Keynesian politics does show a certain shrewdness in times when inequality of time preferences is jarring, as it ascribes credit for "economic growth" to the consumer, the borrower, and of course the government itself. (The only category that the low-time-preference sort can fit into is exporter.) Lord Keynes spoke very well to the biases of his time, even if, in so doing, he inclined democratic politicians to take credit for economic growth themselves, rather than discouraging them from doing so. It is in this way that a Keynesian democracy is inclined towards corporatism. Keynesian political economy takes hold during times when the high-time-preference class has an opportunity to wreak revenge (for being taken for granted) through democratic politics, at the long-term cost of hobbling the economy.

As democratic politicians grow in influence, so does the high-time-preference lifestyle gain in prestige. Any child raised to be obedient to the State, in such a democracy, will conclude that high-time-preference behavior is good. Don’t the best statesmen act short term? Don’t they demand results quickly? Don’t the best of them get results quickly? Don’t they brag about the generosity of a deficit-running government, and merely pay lip service to the idea of surpluses? Aren’t they somewhat fast and loose with respect to mere promises? If the electorate doesn’t mind that, why shouldn’t Our Leaders be that way? They serve the people, don’t they?

Thus, in a time of statolatry in a democracy, the high-time-preference example set by the political class results in high-time-preference behavior amongst the obedient young. They have indeed followed the example of their "betters" in this regard.

There are equilibrating trends in politics as well as economics. One means by which the low-time-preference sort can limit the resultant hobbling of the economy, as well as recurrent depredations of it, is to promote the idea that anyone living the high-time-preference lifestyle is a "winner" in some way. This makes the resultant inequalities of wealth less aggravating to the electorate.

Nevertheless, it tends to cleave incentives for social success apart from incentives for economic success. In addition, it fails to explain why low-time-preference people gain wealth and influence in everyday life. This latter clash tends to show up in the culture, as a supply of movies, etc., arises to satisfy the demand for explaining it. The typical plot line that fills this demand, in American culture, includes the wicked moneylenders, the wicked businessmen, or the wicked corporations that seem destined to enslave us all. This last American myth reconciles the clash between success in life and following behavioral cues from the political leadership, by encouraging the notion that the wicked corporation "forces" people to act in a low-time-preference manner.

The end result, in a statolatized democracy, is a kind of elitism developing, one where "overnight successes" compose the new elite. Anyone who succeeds, or who appears to have succeeded, in a high-time-preference manner, becomes a folk hero. Such people reinforce the popular stereotype of "Instant Wealth," which reconciles the popular desire for worldly success with popular deference to politicians. These ostensibly favored few, mostly celebrities, serve an important function in a statolatized democracy, as they show that it is possible to "have it all" in a clash-ridden democratic polity. (No need to wonder why they end up with political influence.) This reassures the electorate, who would otherwise have qualms about an existent clash between political success and economic success in a democracy where government is looked up to.

There’s only one way out of such a dilemma, for those who seek economic success in a democracy: rehabilitation of low time preference habits in the general populace. Since deference towards politicians inculcates the habits of high time preference, the restoration of general respect for the low-time-preference mode of life requires putting an end to the practice of revering politicians. They have to be seen as serviceable, and the ones who are good at it seen as rating a kind of cold esteem.

Daniel M. Ryan [send him mail] is a Canadian with a past. He’s currently wearing out his thumb with pen and paper.

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