"Democracy, Dear Democracy."
So America worships a demigod in our media, legislatures, textbooks broadcasting a one-word message, "Democracy," to a near-deaf world. Near-deaf? Why? Well, such worship of democracy hasn't always been shared or sought. Hear, for example, the prescient speech of Benjamin Disraeli, a young novelist and thinker then a back-bench Tory M.P. but later twice becoming Britain's Prime Minister in the House of Commons, March 31, 1850 (Mencken, A New Dictionary of Quotations, Knopf, 1942, p. 484):
"If you establish a democracy, you must in due time reap the fruits of democracy. You will in due season have great impatience of the public burdens, combined in due season with great increase of public expenditure. You will in due season have wars entered into from passion and not from reason; and you will in due season submit to peace ignominiously sought and ignominiously obtained, which will diminish your authority and perhaps endanger your independence. [Per Vietnam and Iraq, Dear Reader?] You will in due season find your property is less valuable, your freedom less complete."
Or ruminate on this corroborative editorial in The London Times shortly afterward on February 7, 1852 (ibid., p. 940): "Concealment, evasion, factious combinations, the surrender of convictions to party objects, and the systematic pursuit of expediency are things of daily occurrence among men of the highest character, once embarked in the contentions of political life."
So, Dear Reader, let's seek out the political implications of Disraeli's prescience and that London Times editorial. Note first how earlier thinkers on democracy were like-minded. Plato, for example, saw democracy in his Republic (c. 370 B.C., Bartlett's 15th ed., p. 85) as "a charming form of government, full of variety and disorder, and dispensing a kind of equality to equals and unequals alike." Aristotle in his Rhetoric (c. 322 B.C., Mencken, op. cit., p. 275) also censured democracy as "when put to the strain, grows weak, and is supplanted by oligarchy." So later thinkers such as George Bernard Shaw hit democracy in his Maxims for Revolutionists (1903, ibid., p. 277) for substituting "election by the incompetent many for appointment by the corrupt few." Or as economist Hans-Hermann Hoppe at the University of Nevada-Las Vegas, who in his Democracy The God That Failed (Transaction, 2001, p. 96), holds that "majorities of u2018have-nots' will relentlessly try to enrich themselves at the expense of the u2018haves'."
Or take account of how America's Founding Fathers themselves suspected political democracy of mindless self-extinction for the habit of many voters to embrace "factions" or special interests. James Madison spoke for his peers in No. 10 of The Federalist Papers (Mod. Lib. ed., p. 58). Here he worried over the lures to a majority to "sacrifice the weaker party or an obnoxious individual," adding that "such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths."
No wonder the very word democracy is missing throughout the entire Declaration of Independence, Constitution, and Bill of Rights. Indeed, note how sternly anti-democratic are the first five words of the First Amendment on matters of abridging religion, speech, press, assembly, and petition: "Congress shall pass no law …. " Repeat, "pass no law." So Ben Franklin, asked outside Independence Hall what kind of state the Fathers produced, replied with a famous proviso, "A republic, if you can keep it." Big if. I think Old Ben was warning us:
As political democracy grows the individual shrinks.
Yet voil see how Austrian economist Ludwig von Mises lit up an unknown yet safe and highly effective daily democracy. In 1922 in his book Socialism he saw it at work in our vast marketplace. See it around you today: from the shopping mall to online buying to ordering by telephone to getting cigarettes from a vending machine to filling up at the gas pump by credit card to business consumers ordering supplies for their operations. So do all these market voters vote, as a rule, not but every other year but again and again every day. Check Socialism (Liberty Classics, 1981, p. 11), which gives such democracy a crucially-needed political dimension today. As Mises wrote: "When we call a capitalist society a consumers' democracy we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, can only be acquired by means of the consumers' ballot, held daily in the marketplace." Democracy? Voting daily, hourly, or even more often than that? Exactly. Mises stood on solid ground.
For just what is political democracy? Well, check its Greek roots: rule or "kratia" by the people, the "demos." But see the mean politics of Big Government today and ask: Who rules whom? Why do state hegemony and intervention, deficit finance and shady politics, reign if not rage today as near givens in America and over the democratic West, why does the free individual fade, how come inflation (of money and credit) ever bites into the value of currencies across the globe (in the U.S. M.D.s charged $2 for an office visit, $3 a home visit in 1930 when I was growing up in Jersey City (today an office visit can cost $80), when a first-class stamp cost two cents but 37 cents now , when a N.Y.C. subway ride cost a nickel but now $2, when I worked at the A&P for the minimum hourly wage of 25 cents (if I now curse the very idea of a minimum wage)? And, why does our very political majoritarianism tend to divide or even polarize society us vs. them, them vs. us so graphically on view in the late unlamented 2004 presidential campaign?
So I say "Three Cheers" for free capitalism, private property rights, the Mises market democracy, all punished and deeply misunderstood today, yet still the very fount of our wellbeing and employment. Hope then that in the heat of current debate of what passes for public policy, market democracy will be reborn, rethought, and reinforced. Note its basis in equal rights (so unequal today) and a limited state (so unlimited today). Note how it stars entrepreneurs with their private tools of production of goods and services, how they're ever goaded by competition to ply consumers with more for less, how fallible executives, when exposed (Enron, Tyco, etc.), get hit far faster by the stock market than by the courts or the Securities and Exchange Commission. For firms are led by and, if need be, democratically punished by their customers, by their, said Mises, "sovereign consumers" everywhere. Note their make-or-break "orders" (what a word) and their key price signals of "demand" (again, what a word). So market democracy enthrones you, Mr./Ms. Consumer, or for another metaphor, puts you in the driver's seat.
Whither then, thanks to rabid state interventionism, our berated, underrated, much overregulated and overtaxed, much misread and misapplied, capitalism? Yet isn't it still, per our Founders (though capitalism as a word had yet to be coined by Karl Marx) a royal road to social cooperation, a vast vital network of private governments of the people, by the people, for the people, all via much-used withdrawable individual assent?
Withdrawable? A key to liberty. For in a free society are countless hierarchies of power, governances such as The New York Times, Harvard, New York Stock Exchange, Microsoft, Southern Baptists, Salvation Army, Wal-Mart and some 25 million other firms, farms and organizations; yet all are totally dependent on withdrawable individual assent. So you can switch from GM to Ford, from Yale to MIT, from Burger King to McDonald's. And vice versa. Talk of democracy! Of your decisive market freedom to choose.
Democracy anyone? Yes. But which one? For isn't today's political democracy a shield for a Pax Americana for democratizing a sinful globe, with the focus now on the raging undemocratic Middle East? But doesn't this serve up Jouvenel's classic riddle (74 AD): Sed quis custodiet ipsos custodes? (But who is to guard the guards themselves?) Thomas Paine saw the fix in 1776 in his Common Sense as "a necessary evil."
No wonder Bismarck likened the legislative process to the unsightly conversion of pigs into sausages. Or per Churchill, democracy is the least awful way to effect a peaceful change of political power. Or per Mencken, an election amounts to an advance auction of stolen goods. Or held Swiss thinker Felix Somary in his Democracy at Bay (Knopf, 1952, p. 6): Political democracy blends two "fictions," one the idea that "an entire people can assume sovereignty," the other the idea of "the innate goodness of man."
So let me, Dear Reader, juxtapose America's Political Democracy with the Mises idea of Consumer Democracy to clarify which is which, and ask you with both democracies needful of repairs which needs the most by far?
Look. In one democracy you vote only every other year for candidates (who may not win) to "represent" you and many others indirectly on myriad issues. In the other, you vote daily, often, directly in a sense, one on one for specific vendors, goods, or services, in an endless plebiscite that goes on every minute of every day, with dollars as ballots. Yes, some get more ballots than others. Yet Mises saw this outcome as mostly passing, as consumers themselves vote "poor people rich and rich people poor" (Human Action, Yale University Press, 1949, p. 270).
So one democracy is public, the other private. One, unequipped with what Mises called "economic calculation," hires no profit-and-loss bean counters and so funds failing programs and choiceless public schools, the other, equipped with economic calculation, does hire bean counters and lets failing firms and weak private schools fail, as sovereign consumers withdraw their life support. One democracy is coercive and centralized, the other voluntary and decentralized. One runs, inadvertently, a growth-impeding win-lose zero-sum game, the other, also inadvertently, runs a pro-growth win-win positive-sum game. This difference, alone, sets America's future, likely including your own.
One democracy runs by politics and legal monopoly (such as public schools, Social Security, Medicare, U.S. Postal Service, and the Federal Reserve central bank). Yes, people in this democracy do vote periodically, if unmindful of Henry David Thoreau's Civil Disobedience of 1849. Thoreau saw "little virtue in the action of masses of men" and voting as "a sort of gaming." The other also votes but far more often and directly as it runs a consumer democracy by market economics and competition. One democracy forgets the individual, per Yale's William Graham Sumner's famed "The Forgotten Man" public lecture in 1883, the other remembers him/her most accountably if not beholdenly (if imperfectly per that spam in your PC).
One democracy seeks legal plunder and plays incumbency ruses: compromises with principle, gerrymandering, log-rolling, grandstanding, warmongering, free-lunch guises such as big federal "grants" (bribes?) to states and localities ($352 billion, annualized, 2nd qtr., 2004), the other is cleansed by competition and cost-cutting by demonstrated producer actions aimed at pleasing consumers, in Milton Friedman's phrase, free to choose.
One democracy veers to electioneering, an amoral short run, the other to moral contracts and the longer run. One, armed with coercive power, yields to Acton's law that power tends to corrupt and absolute power corrupts absolutely. Yet the other, if gloriously voluntaristic, can sometimes slip into corporate misbehavior sly ways of manipulating money or getting into bed with political power to win anti-consumer import quotas, subsidies, special tax relief and other mischief via special interests, despite President Eisenhower's 1961 farewell warning against a "military-industrial complex."
One democracy glorifies war, including class warfare, the other glorifies peaceful trade in a virtual global concordance on private property rights (if widely derided as "globalization") per IBM's old motto of "World Peace Through World Trade." One entered World War One, naïvely, as "The War to End War" and "Make the World Safe for Democracy." Some democracy! Reaping Lenin and Stalin in Russia, Hitler in Germany, Mussolini in Italy, Franco in Spain, Tojo in Japan, Tito in Yugoslavia, Mao in China, Peron in Argentina, Castro in Cuba, Allende in Chile, Pol Pot in Cambodia, Chavez in Venezuela, Mugabe in Zimbabwe, with lesser imitators throughout Asia, Africa, Central Europe, Latin America, and the Middle East. Yet the U.S. still seeks to "democratize" the turbulent Middle East, citing Japan and Germany as post-World War II successes, yet remaining silent on failures such as North Korea, Vietnam, Bosnia, Somalia, Kosovo, and Haiti (the Clinton military action there gamely tagged as "Operation Democracy").
One democracy rues income disparity and, like Robin Hood, "transfers" wealth, the other, per John F. Kennedy launching a big across-the-board tax cut in 1962, "lifts all boats." One denies itself crucial market feedback data, or, again, what Mises called "economic calculation," predicting in 1920 the ultimate implosion of socialism à la the USSR, the other uses that calculation to help allocate limited resources to their perceived optimum market uses. One wastes capital and talent (human capital), the other saves and invests it self-interestedly, yes. Yet, if under a moral code and the rule of law, it does so spontaneously, harmoniously, constructively, as Hayek abundantly demonstrated.
One democracy tends to divide or even polarize the people and works the dubious rule of winner-take-all, sometimes touching off revolution or war. The other is inherently peaceful and explains the success of the West via the Adam Smith "invisible hand" idea of sharing self-interest in a system of "natural liberty," of self-help by helping others, including the poor or per his famed line in The Wealth of Nations (1776, Mod. Lib. ed., p. 14): "It is not from the benevolence of the butcher, or the brewer, or the baker that we expect our dinner, but from their regard of their own interest." No question capitalism or market democracy is far and away our greatest, most hopeful democracy. Yet this friendly peace-inducing democracy is, as such, nearly unknown, invisible, and, because it's driven by "evil" profits, frowned upon here and abroad.
So facing us are three challenges: Challenge One, can we free up our market democracy from the tightening binds of preemptive heavy taxation, regulation, and power grab, to bring it into broad public grasp, approval, and esteem? Challenge Two, can we use America's second democracy to widen individual freedom and help tame or relimit political democracy la our Founding Fathers in 1776? And Challenge Three, will we welsh on what freedom remains and let political democracy with its latent authoritarianism go the way it did in Ancient Greece?
Surely there's a better way, a far freer way, the way of IBM's Thomas J. Watson and his motto of "World Peace Though World Trade," the Mises way of Consumer Democracy.
Call it power to the people or, better, America's Other Democracy.
November 5, 2004