Like the U.S., many democratic nations are suffering from permanently high unemployment, staggering public debts and budget deficits, and a deep economic recession. Although many people blame politicians for their problems, virtually no one ever considers blaming the democratic system for our woes. If you think about it, however, it’s clear that it’s the collectivist nature of democracy that has led us into this hole.
Over the last 150 years, government debts have grown inexorably. During that period, average government spending increased from 12% of GDP to a hefty 47% among major Western countries.
At the same time, the U.S. Code of Federal Regulations ballooned from one to a whopping 200 books. This shows that government interference into the private lives of individuals has mushroomed and that democracy is a danger to liberty.
These trends are not a coincidence. They are the logical result of the principles and dynamics of the democratic system. In a democracy, politicians experience a strong incentive to make debts and raise taxes. After all, they are in power for a short period of time and, therefore, tend to behave more like shortsighted tenants than responsible, future-oriented owners.
When they overspend, overborrow, or overprint money, their successors will have to deal with the negative consequences, and in their turn feel the same perverse impulse. Despite austerity rhetoric, government debts keep rising in most democratic countries. “Austerity” is a code word for “spending less than we had wanted, but more than in the past.” In the end, they wind up raising taxes, rather than lowering expenditures to cut deficits.
Democracy is like going out to dinner with a group of people and deciding in advance to split the bill equally. If you order a nice $10 dessert, you pay only a fraction of the cost and the others pay the rest. So everyone will eat and drink more than they would have done if they had paid their own bill.
The result is a much higher total bill — and no one will be in a position to do anything about it.
In a democracy, voters have the chance to put their personal desires on the collective tab. Welfare recipients demand higher welfare payments, parents want “free” education, farmers lobby for higher subsidies, and so on. Everyone tries to live at the expense of others. But in the end, almost everyone loses, just like the dinner companions in the example above.
The politician that promises the most, no matter how unrealistic, usually wins the elections.
If democracy has built-in perverse incentives, what would be the alternative? People tend to think that the only alternative to democracy is dictatorship. They’re used to equating democracy with freedom. But this is nonsense.
Democracy is rule by “the people”, i.e., the majority. The logical alternative to majority rule is self-rule. In other words, personal liberty. Instead of the government spending tax money and making decisions for people, individuals should spend their own money and make their own decisions.
Democracy is a form of collectivism in which the individual is subordinate to the wishes of the collective. It’s a one-size-fits-none system in which billions of free individual choices are reduced to a small number of coercive decisions by politicians.
A much better alternative to such a centralized system would be to have many decentralized systems. This would create a market for governance where new types of government could be tried and tested, e.g., startup “countries” like Shenzhen and Dubai.
Getting back to the example of the dinner table: If people could split up into many different tables, the diners at each table would feel the negative effects of their spending much more strongly. Then the feedback mechanism would work far better. In addition, the tables would compete with each other, so tables spending irresponsibly would be quickly deserted. Thus, decentralization and competition would foster responsible behavior.
In the U.S. democratic system, one state or group can live at the expense of the other. In the European Union, one country can burden the other countries with their debts and the more frugal countries can’t escape.
But Switzerland, geographically positioned in the center of the EU, was never part of this collective folly and suffers little from the economic crisis (their current unemployment rate is a modest 3.1%). The country must live within its own means, and others cannot spend at the expense of the Swiss.
The Swiss democracy itself is a very decentralized one. It consists of 26 regions known as cantons, or provinces, that on average have 300,000 inhabitants. These cantons enjoy remarkable autonomy, and they compete on matters like taxes, regulation, health care, and education. Because of that competition, people and businesses can not only vote with their pencils, but also with their feet. That fosters sensible governance, which has led to the prosperity and social stability the country is famous for.
Switzerland has a direct democracy at the federal, cantonal, and municipal level. One could, therefore, counter that this Alpine country offers an argument for more democracy. But its success seems to stem from its decentralized structure with relatively small units.
In governance, “small is beautiful.” Of the 20 most prosperous regions in the world, many have fewer than 8 million inhabitants. A number of those, like Singapore, Hong Kong, Liechtenstein, and Monaco, are not typical liberal democracies.
The current economic crisis cannot be solved by more democracy, centralization, and government interference. There are currently only about 200 countries for 7 billion people. That is far too few. We need a better market for governance in which more countries compete for companies and people. This will drive down taxes and foster economic growth and social stability.
Democracy is broken because it’s a collectivist system, like socialism and fascism. We have to break it up in order to fix it.
Frank KarstenOriginal article posted on Laissez Faire Today
There are plenty of talks at Porcfest from the likes of LFC business cycle guru Robert Murphy, David Friedman (son of Milton), Yuri Maltsev, and yours truly. And for the less theoretical, there are classes like Learn to Build Your Own Black-Powder Rifle.
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Nothing about the past ten years has been boring. And we have been there throughout, trying to help readers make some sense out of our global economy. And hopefully providing a few laughs along the way.
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first and foremost, I specify that I do not understand English I understand the french …,. this message be written on the Google bar good analysis, **********************************************************************************************************which is accommodating and acceptable in contained, I also want to give my analysis or my views and my views on the role of democracy in all these forms if you want, economically, politically and socially, scientifically, call it what you like, even I’m not a politician or an economist, but democracy has almost touches every level of life., without deepening in my opinion, I can say, , that without planning. areas that have a direct connection with the application of standards of democracy, these schedules must be covered with a good supply, in case the failures can occur, even more that, the programs and the management of economic managements that have a direct relationship with the social must be on a same line opting for a consensus goals, I think it’s broader than the sea, an idea for a global summit will be a good basis for a global startup departure., and which may entitle the laws and global visions in order to apply the dimentions of implementing this program on democracy plans as cited above ( social economic, ect), voila, with modest I think everything is based on good planning, and that planning requires a global consensus,, thank you for agreeing to participate, for more large and bright visions for the planning laws of democracy in all its forms.,. :: Mr Zaidi Abdelwahed (Wahid)
Giving “representative” democracy, a label of democracy, makes an an oxymoron: only democracy where voting is done by an electorate on individual “issues” is a real democracy, the one, I am led to believe was the original “system” of the Greeks.
The problem with our democracy is that our politicians were bought and and a large portion of us are easily hoodwinked and controlled. The percentage of the national income spent by the government has nothing to do with the economical level of the country, The percentage o fthe national income controlled by the rich does. And the reason for this is simple, The rich only spend a small portion of the money they make. Think of money as the life blood of an economy. The rich basically open an artery and let the blood spurt out. The blood does not circulated and the organism get sick and dies.
What if we realize that democracy is deeply flawed?
Because it is… Our country was founded as a Constitutional Republic NOT as a Democracy. Here the Rule of Law is supreme not the whims of the majority. Democracy
is majority rule at the expense of the minority. The
problem is that democracy is not freedom. Democracy is simply majoritarianism,
which is inherently incompatible with real freedom. The Declaration of Independence and the Constitution make no mention of the word “Democracy.” Forget about democracy and instead focus on liberty.
Democracy was a failure for the Greeks. The founders knew this and as such they looks more to Romans and not the Greeks when they were crafting the Constiution.
It’s not democracy that’s the problem, it’s socialism. America flourished for over 200 years until the “progressive” movement killed it. Same beliefs cratered the USSR. Must have term limits and allow true capitalism to flourish. We should help the unfortunate, but help them grow out of poverty, not maintain them in poverty and to find more people to join them, which is what we are doing today.
The problem with our democracy is that the US isn’t a democracy, we’re a Republic (a good thing) with democratic leanings.
If there are doubts about this please recall the Pledge of Allegiance and our Constitution.
I would define the writer’s alternative to democracy as actual democracy. People being the rulers of themselves, and the government existing to stop us from murdering each other and to be a facilitator for prosperity. I mean, I don’t want the government taking my money, but on the other hand I do like roads.
My uncle is a hardcore right-winger, but he’s also unemployed with a chronic illness, and you know the only reason he is continuingly able to get treatment for that condition? ‘Socialist’ Obamacare.
If there’s any threat to democracy it’s the thinly veiled influence peddling that allows the rich to control politicians.
Democracy is a means to ensure people are not governed better than they deserve.
George Bernard Shaw.
(or a phrase roughly like that)
“America flourished for over 200 years” ?
Slavery == flourished
OK land grab == flourished
Tamany Hall == flourished
The era before MLK == flourished
It was not democracy which flourished. It was the honourable individuals who served the country. Generals who could have overthrown the government and raised a junta. As well as fortunately generals who failed to win the war for the Confederates. By those great individuals who had realised what they wanted in life and what they wanted to have had on their dying bed
- having been part of a tradition that places equality among individuals is a richer experience than having been a dictator of a junta.
- being a dictator and then leaving your country in taters amounts to null purpose in life – a sentiment that Limbaugh, Sadam, Gadhafi, Musharaf or Mubarak did not seem to have any affinity for.
I know some people wants to overthrow the government now – a temptation that had disgusted the great and influential individuals who had allowed this country to change and mutate in diverse manners.
Fantastic article. I’ve seen the problems inherent in the system for some time. First reasonable solution I’ve read.
Your list neglects Stalin, Brezhnev, Mao, Castro, Mugabwe, Jarulzelski, Chavez, Pol Pot, Ceaușescu, etc, etc – honourable men who place(d) equality of individuals above liberty of individuals. And all of whom, I am sure, knew what was good of the rest of us and were equally convinced of what they want(ed) to have on their dying bed.
-What country exactly does Limbaugh preside over?
My name is Igor and I am 63 years old come July 4th. I came to America from Moscow and lived in Russia until I was the age of 46.
I would like to say some very simple things today: America is the best country on this Earth. It is shameful that Americans (which I am now proud to be) do not see the greatness in this land. Once I left mother Russia I never looked back and for good reason. Just watch the TV short series, The Prisoner, and that is kind of what it was like to live in CCCP. America is the future of man kind, not China, not Japan, not Germany etc. I can say the only thing that is broken in America are the people we send to Washington to do the peoples work. The system is not broken, the people are. It was said, liberty cannot be preserved without general knowledge among the people and therein lies the problem with America today. Take it from an ex-communist!
GIVE THEM INDPENDENCE! or give them Death! cause your liberty==money,has become a GLOBAL WHORE,and can you take it anymore?
i sorry i forgot =====ARRRRRR=AMERICANS DO HAVE,lol INDPENDENCE,lol lol lol lol lol,AMERICANS of THE UNITED STATES,HAVE FEDERAL INDPENDENCE,oh dosent that make you feel all COZY inside.ARRRRRRRRR==HAR! HARR!
Very well said,
Democracy is a party of three going out to a restaurant and two decide that the third should pay the entire bill.
One disagreement about the “Supreme Rule of Law” its not so sacred, it is bought and paid for by the majority, evidence! ObamaCare. Legal use of the IRS as a weapon to extract the insurance payments from every american like it or not.
Very simplistic view of things;
Term limits will not solve the problem, all the politicians will do is work harder to get rich quicker.
Let “true capitalism” flourish while looking after the unfortunate and poor sounds like watered down capitalism with a hint of socialism!
Nice ideals but not realistic.
We saw in the last two elections our choices are now made by uneducated inner city types – mostly from third world origins. America is done my friend and there is nothing that can stop what must come.
And today blacks fare even worse than before MLK. 1/3 of young black males are either in the prison system or have been. When in prison they labor making stuff for prison industries which is essentially slave labor on steroids and when they get out they have a lifelong criminal record which marginalizes them until the day they die.
WHY? Because folks are sick and tired of crime and demand ever longer sentences for criminal misconduct via our democracy.
The fact is our government is turning against the people and IS going bad!
A friend once said there could be no progress in America until we have gone days or weeks without eating and can actually live the life we created!
Today we exist in the nether world where everything is dysfunctional in a comfy kick the can down the road sort of way. Sort of like putting off a beating till tomorrow so you don’t have to deal with it today!
Difference between extreme engineering and adaptive engineering:
Extreme engineering involves no more than four persons, but usually two, individually of extreme expertise, working together in a bull pen.
Adaptive engineering, is continuous beta engineering. There is no mission-accomplished, only milestones. Adaptive engineering not only continually adapts milestone goals to the constantly and annoyingly changing world conditions, it adapts to the available skills of available resources. On the extreme end, adaptive engineering does accommodate extreme engineering, to accommodate people who need to work in extreme technical intimacy.
No company has a monolithic stream of personnel.
No country in the world will have a monolithic personality. Your ideal country exists only in Alice’s wonderland or in the futuristic prophesies of the Bible. Your ideal country seeks to remove the humanity of diversity to be replaced with a monolithic prettyville. Your ideal country seeks to populated by people keen on extreme performance and certainly not on adaptive communitarianism.
You are an extremist perfectionist elitist.
IT IS NOT A DEMOCRACY!!!!!
That’s exactly why ‘these united States of America’ are a Constitutional Republic and NOT a “democracy”. (‘The United States’ is a corporation with land holding limited to “Washington, District of Columbia”, forts, ports, and territories)
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In the write up, Democracy has been explained with an example of a dinner between few at a restaurant! And who are these few? Friends, family, colleagues, neighbours? NO. they are shown to be strangers! Each having no bonding or relation of respect and compassion with any other!
Now a society at large, or a family, or a group of colleagues or even neighbours are not so alien to each other. If they set out for such a dinner cohesively then they also order and eat together with their minds and hearts attached to each other.
Thats what democracy should mean rather than what the author has tried to say about. It seems author has given an example of some bloodhounds going together for hunting with their credit cards!
Can you imagine going out with family, colleagues or neighbours for a dinner and act selfishly by ordering a $10 dessert when others are eating things averaging $1 or $2 ? Yes, you still can but then because they are your ‘own’ people so you will not ask your younger sister, mother, colleague-cum-friend or your favourite neighbour to pay $8 or $9 for you!
Democracy is also about living together with love, compassion, peace, mutual respect, care and concern. So stop giving wrong examples to serve your vicious agenda to portray democracy as a wrong notion!
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There’s a deductive fallacy at work here; blaming “democracy” for America’s economic woes sounds smart, but it fails to respect the fact that there are a number of other social and economic philosophies at work within our system (e.g. various forms of Liberalism, Conservatism, and not to mention the every complicated and controversial Capitalism) all pushing and pulling against one another.
I too once read Plato and turned a suspicious eye on “Demoracy” as a generic concept, but in 2013 the truth is more complicated than that. Consider that we aught to be thinking of ways to adjust Democracy to our 21st century way of life rather than throwing out the baby with it’s bath water.
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The biggest problem with America is that it is too big. Most other countries are the size of one of our states.
and there isn’t a politician in office that really gives a damn about the people or the good of the people. All they care about is keeping their nice jobs and benefits.
First off, I wish people would quit using the word Democracy. Our country is not a Democracy. The world Democracy is nowhere to be found in the Declaration, or the Constitution. We are a Republic that uses Democratic principles. You can add pickles to a hamburger but it does not make is a pickle sandwich.
Well, that is what our Founding Fathers envisioned. Not a gigantic central government, but a bunch of individual states affiliated by necessity, but each independent and self directing. Individual states full of independent individuals self-sufficient able to move to any of the states they deemed most favorable to their success.
They feared exactly what has become. A central government more concerned about consolidating power rather that the success of the individual citizen. The idea was to avoid an all powerful government that bought the liberty of the people, and their states, for beads and trinkets. A government interfering with self determination by making every state a carbon copy of its neighbor imposing such strangling rules such that the individual thinks what is imposed is normal and any who object need mental health intervention.
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The rule of law is broken, but not missing entirely. Most of our problems lie with the interpretations of the interstate commerce clause.
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The ultimate result of corporate capitalism is oligarchy. When a gov’t supposedly of the people and for the people sits numbly watching as laws and rules and regulations are changed or even done away with for the corporate good, all hope is lost. A mere term can differentiate between legal and illegal — loan sharking is bad but mortgages and high-interest loans are okay, bribery is bad but lobbying is okay, monopolies are bad but mergers are okay. Like many other potential forms of government, Democracy sounded good in the saying, and then the human factor entered in. The infamous system of checks and balances doesn’t apply to spreadsheets and P&L statements in boardrooms.
You can tell that a country is lazy with nothing better to do based upon the numerous comments and fights they start over articles. Everyone always talks about change but never does anything about it. They have so much wealth, so little “real” knowledge about how the system works and think they’re all right. To each their own, it doesn’t matter if you love it or hate it. “Truth” is not based on evidence as much as it is based upon perspective. That being said, nothing will ever be right, nor will it be wrong. Its alluring to stick to one side or the other, but to bash one another for beliefs and perspectives is nonsense. The real challenge is to view both sides, consider them and understand how they work as opposed to automatically jumping to blaming one another for them being wrong. I honestly appreciate our Russian friend here for his belief. Those of you who are saying he is incorrect are blind- have you ever lived anywhere but the United States? You judge this country so harshly yet you’ve never experienced anything but. So before you judge our Russian turned U.S citizen here for saying our country is the best, get on a plane and fly somewhere, keep a journal and I’ll bet you a month (or less) into your trip, you’ll want to come back to the U.S. The government may be corrupt, however, none of us Americans have to worry about someone shooting and killing us for our beliefs on something. We don’t have to worry about a massacre happening everyday because the military thought it’s be a good idea.
Anyway, thats my two cents on the matter.
I appreciate this comment. I wrote one up there somewhere but I figured I’d write it again in response to your comment so you can see it.
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He was only saying what Jean Francois Revel said in his great book Without Marx or Jesus, back in the 70′s. As to your relativism, if there is no truth, then it doesn’t matter what is done, tried or proposed. I can plug in 10.8 or 20.8 for the gravitational constant in an equation and it doesn’t matter. e=mc^2 is just as correct as e=mc^10. Its all perspective and belief, isn’t it? In economics or politics then it doesn’t matter if you do communism, socialism, fascism, oligopoly, state corporatism or the free market, They are all good, all equal, all correct depending on your personal preferences.
Then you didn’t understand Rand at all by your definition. In fighting against collectivism of the neo-left, she went to battlefor and to enhance and protect Promethean ideals. She can be read well within the older Marxist tradition as well as the libertarian, as she crosses over both equally.
The small little hamlet ideas are common in many forms of socialism, classical liberalism and in the conservative based distributism. Federationism was once very common even Proudhon adopted it. Kant, Hume, the founding fathers all were federationists. Small, local gov, each independent, each its own petrie dish of experimentation.
Everyone knows it should be the corporate oligarchy making our choices and suppressing the insignificant peons who make up the bulk of our populace.
Of course, when push came to shove, Ayn Rand suckled at the teat of government too, taking Medicare and Social Security in her old age.
Oh my, you totally refuted Ayn Rand’s every word! NOT! I
know you have a blogged mind and can’t think for yourself so you turn toward parroting
propaganda memes, but if Ayn’s taking $1 of SSI totally refutes her, then what
happens to every Billionaire Bolshevik, Limousine Lenin, and Millionaire Maoist?
Crony socialism is as much a “sin” as crony capitalism. Of course,
your “religion” keeps you from having any ability to judge fairly. The fact
that Rand was fully within the older Marxist tradition and was steeped in
soviet realism, wouldnt interest you at all? Being a big neo-leftist as you are
and too trained to vomit up on queue whatever you were taught to say whenever
It makes her a lying hypocrite. If you can’t walk the walk, don’t talk the talk. She didn’t walk the walk.
Yes, gold has intrinsic value. Gold actually is a useful commodity even for nonmonetary purposes. You can wear it, you can fill cavities with it, and you can treat arthritis
with it. In contrast, all you can do with fiat paper currency is use it
in exchange, and you’d better not keep a large fraction of your wealth
in actual paper dollars, since their purchasing power constantly erodes
with the passage of time. FIAT MONEY MEANS FIAT FREEDOM.
The 1970s was a time of monetary chaos. What was worth a buck in
1973 is worth only 20 cents today. Stated another way: a dime is worth
2 cents, a nickel is worth a penny, and a penny is worth…nothing at
all. It is an accounting fiction that takes up physical space for no
Welcome to the age of paper money, where governments and central
banks can manufacture as much money as they want without limit. Gold
was the last limit. Its banishment as a standard unleashed the
inflation monster and leviathan itself, which has swelled beyond
But guess what? Gold actually hasn’t gone anywhere. It is still the
hedge of choice, the thing that every investor embraces in time of
trouble. It remains the most liquid, most stable, most fungible, most
marketable, and most reliable store of wealth on the planet. It has a
more dependable buy-sell spread than any other commodity in existence,
given its value per unit of weight.
But is it dead as a monetary tool? Maybe not. Whenever the failures
of paper become more-than-obvious, someone mentions gold and then
look out for the hysteria. This is precisely what happened the other
day when Robert Zoellick, head of the World Bank, made some vague
noises in the direction of gold. He merely suggested that its price
might be used as a metric for evaluating the quality of monetary
What happened? The roof fell in. Brad DeLong of Keynesian fame
called Zoellick “the stupidest man alive” and the New York Times
trotted out a legion of experts to assure us that the gold standard
would not fix things, would hamstring monetary policy, would bring
more instability rather than less, would bring back the great
depression, and lead to mass human suffering of all sorts.
One thing this little explosion proved: newspapers, governments,
and their favored academic economists all hate the gold standard. I
can understand this. The absence of the gold standard has made
possible the paper world they all love, one ruled by the state and its
managers, a world of huge debt and endless opportunities for mischief
to be made from the top down.
As Murray Rothbard emphasized, the essence of the gold standard is
that it puts power in the hands of the people. They are no longer
dependent on the whims of central bankers, treasury officials, and
high rollers in money centers. Money becomes not merely an accounting
device but a real form of property like any other. It is secure,
portable, universally valued, and rather than falling in value, it
maintains or rises in value over time. Under a real gold standard,
there is no need for a central bank, and banks themselves become like
any other business, not some gigantic socialistic operation sustained
by trillions in public money.
Imagine holding money and watching it grow rather than shrink in
its purchasing power in terms of goods and services. That’s what life
is like under gold. Savers are rewarded rather than punished. No one
uses the monetary system to rob anyone else. The government can only
spend what it has and no more. Trade across borders is not thrown
into constant upheaval because of a change in currency valuations.
This debate isn’t really about monetary policy, much less the
technical aspects of the transition. It is about political philosophy:
what kind of society do we want to live in? One ruled by an
ever-growing, all-controlling state or one in which people have
freedom guaranteed and protected?
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