The Hoax of Democracy in Iraq

Iraq’s recent election – the election that many Iraqi citizens voted in despite death threats – is seen as a success in the eyes of most Americans. However, Richard Maybury wonders if forcing our love of democracy on Iraqis was the right thing to do – or if it will further separate an already divided land…

Iraq’s January 30th election was a glorious day, and a great success, say federal officials and the mainstream press.

A step toward promoting democracy in the Middle East, it was, but is that a good thing?

For Westernized Muslims – those who want their highest law to be democratic – perhaps so.

For the rest who want their highest law to be Islamic, it’s a catastrophe, and further incentive for them to become guerrillas, or give aid and comfort to the guerrillas.

This Western love of democracy is nothing short of ridiculous. Read the literature of the American Revolution. Try to find just one mention of the Minutemen or Sons of Liberty fighting for democracy.

The Western Love of Democracy: The Problem with Democracy

They were fighting for liberty, which is something much different than majority rule. In the Federalist Papers, Madison, Hamilton and Jay made it very clear they had no love of democracy.

In Federalist Number 10, Madison warned that 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."

India got rid of the British in 1947, and went democratic. Then Indians spent 44 years voting for socialism, meaning voting to stay locked in poverty and strife. They did not start getting rational, and more prosperous, until their free-market reforms began in 1991.

What really happened in Iraq’s January 30th election?

Like scores of other countries, the Iraqis joined the Americans-for-a-day club.

Previous members of this club have included the Afghans. They voted, and now almost the entire place is run by warlords, drug lords and various other types you would not want to meet in a dark alley.

Russians got democracy, and what did they vote for? Fascism. President Putin is well on his way to being another Mussolini.

The Western Love of Democracy: The Two Laws that Make Civilization Possible

A key point about Iraq is, for about fifteen years, Kurdish children have been raised in schools that have not been controlled by the central government, but the remaining 80% of the population have been taught to be rabid statists. Liberty is a complex system, even most Americans no longer understand it – certainly no one in the federal government does – and we’d be foolish to assume Iraqis will be any more enlightened about it than, for instance, the Russians.

The two fundamental laws taught by all religions are what make civilization possible. This first law is: do all you have agreed to do. The second is, do not encroach on other persons or their property.

Each religion expresses these laws in different ways, but all teach them. Widespread obedience to these laws is liberty.

The type of government a country has is not very important. What counts is the extent to which the government obeys the two laws. A dictatorship that adheres closely to the laws is far preferable to a democracy that roundly ignores them.

What we do know about the Iraqi election is that the Iraqi economy is a wreck. Official statistics show the unemployment rate stuck at 30-40%, and some economists estimate it at over 50%. This is far more serious than the worst year of America’s Great Depression. We can safely say Iraqis who turned out to vote were doing so in hopes their votes would somehow lead to a better life.

Washington now must deliver that better life, and quickly, for these people are desperate; millions turned out to vote in the face of death threats. If their way of life does not improve dramatically, in a few weeks or months, a lot of them will decide they have nothing to lose by joining the guerrillas.

Was the Iraqi election really the triumph that U.S. politicians boast about? Maybe, but my guess is that like Russia, Iraq will begin moving in the direction of fascism, and all their problems will be blamed on America.


Richard Maybury
for The Daily Reckoning

April 20, 2005

[Ed. Note: Richard Maybury is the same geopolitical/investment analyst who successfully forecasted the fall of the Soviet Union five years before it happened…warned readers a month before the 1987 stock market crash…predicted the Iraq/Kuwait war a full year before it started…and those are just for starters!

The Dow bounced yesterday…after a drop of more than 400 points.

Has the mood of the market changed?

We are talking about moods…about the zeitgeist of our time. About the way a whole generation takes up a particular esprit. St. Peter seemed to notice it 2000 years ago when he urged a crowd to "turn away from this lost generation." W.H. Auden spoke of the "low, dishonest decade," before the Great War. Could our own generation be low, dishonest and lost?

We don’t know. Our generation seems mostly absurd… We have come to believe that things will last forever that couldn’t possibly be true for even a minute. The latest comes from Fed governor Ben Bernanke, who tells us that Americans are doing the world a great favor by being willing to borrow its surplus savings. The globe suffers from a "glut" of savings, says he. The concept is new, but Americans are making an effort to deal with it in an old familiar way – by buying things they don’t need with money they don’t have. They count on overseas savers to lend them the money. The overseas savers, says Bernanke, count even more on American spendthrifts to borrow it.

The trouble with this analysis is not that it is flawed; that is the way things seem to work. But it doesn’t go quite far enough. The transaction Bernanke describes is only half complete. It is like a man who gets dressed in the morning by putting on his shirt, but forgetting his pants. He goes out on the street and looks ridiculous. Anyone who bothers to think about it has to point and giggle at Bernanke’s half-dressed explanation. He’s forgotten the essential part – how and when the lenders get repaid. Ooops… The borrower only really does the lender a favor when he is capable of repaying it on the agreed upon terms. If he cannot, the transaction becomes a fraud…a scam…a con job. Not to mention a big disappointment for the lender.

Incomes in America are stagnant, or actually falling. We face more (and better-organized) competition than at any time since the beginning of the Industrial Revolution. The pool of people willing to work hard for $3,000 a year is enormous. Given such competition, why would U.S. wages go up? And without higher wages, how will Americans ever pay back what they have borrowed?

Implication: U.S. standards of living must fall; foreign lenders must get stiffed.

We know from experience that our moods can change for no apparent reason. One day, we are happier then usual. The next, on exactly the same set of "facts," we are gloomy. One day, we are prepared to start a war. The next, trouble is the last thing we want. One day we think $20 is a fair price to pay for $1 of earnings. The next, even $10 seems too much. One day, we see the facts and they are awful. The next, the very same facts don’t seem so bad.

These moods happen to individuals on a day-to-day basis…and to whole groups of people over long periods of time. One generation is bullish. The next is bearish. One generation wants war. The next wants peace. One generation is lost. The next is found. One is blind; the next can see. Hallelujah!

Markets make opinions, say the Wall Street old-timers. When prices are falling, our opinions fall in line; we become gloomy. But sometimes, opinions make markets. Gloominess sets in, for no particular or apparent reason, and then prices fall. Moods and facts, sometimes in harmony, but often in opposition, struggle to dominate our generation’s zeitgeist.

Currently, both are in harmony. The public’s mood is ridiculous. But so are the "facts." Never before have people been expected to believe so many impossible things before breakfast. But perhaps, never before have so many impossible things seemed, at least for now, true.

And all we know is that they will change.

More news, from our team at The Rude Awakening:


Chris Mayer, reporting from Gaithersburg, Maryland:

"Part of the reason why investors focus so simplistically on return, Klarman thinks, is that risks are so hard to quantify. Some investors buy gold, for example, as a means of avoiding risk. But during some periods of time, owning gold can FEEL far riskier than owning tech stocks."


Bill Bonner, back in London:

*** Gold…gold…gold. The metal has bounced off our latest buying target of $425 all the way to $434.40. It rose more than $5 yesterday, and seems to be in a solid upward trend.

*** What is that sound? Do we hear a fat lady? "Prices have been falling in London for the last eight months," said Merryn Somerset-Webb, editor of MoneyWeek, yesterday. "Just like I said they would," she added.

From the other side of the Atlantic, comes news that housing starts were down 17.6% last month – the biggest drop in 14 years. In other news, the "Economy wobbles under cost of oil," says one headline from the new world. "GM lost $1.1 billion in the first quarter," says Bloomberg. GM is being "eaten alive by a free lunch," says a Washington Post piece. At Ford, prospects are not much better. "Bleak outlook," says the FT of Ford’s future.

*** Kevin Kerr comments on the Consumer Price Index for March, which saw the highest monthly increase in the index in two and-a-half years:

"The impact of surging oil and gasoline prices has certainly been reflected in today’s higher CPI numbers. Short term, this may indicate that a slow down in demand is imminent, albeit very short. Oil prices are struggling to stay in positive territory today, even on the back of the surprisingly bullish inventory numbers. This also indicates that the market price may be a little top heavy.

"There are a great many analysts who strip out food, energy and other essentials from the CPI number. As someone on the NYSE floor said today, if you do that "It’s like we are all naked, living in caves." I agree…CPI is only accurate when looked at as a whole, not piece by piece. Continuing high prices will likely drive some consumers to cut back on discretionary spending until energy costs get reigned in a bit, and we may be seeing that now in the crude which should continue to fall. This will probably only last until the end of summer for crude; conversely, gasoline prices will likely remain very high all summer, I expect to be paying $3 a gallon by July here in Connecticut."

*** The "one, true and holy Church" has a new master, or should we say, a new servant. The white smoke signaled that a new pope had settled onto the throne of St. Peter. What does the new pontiff think? "We are moving towards a dictatorship of relativism which does not recognize anything as for certain and which has at its highest goal one’s own ego and one’s own desires," said Cardinal Ratzinger in his homily. He quotes St. Paul; people are "tossed by waves and swept along by every wind of teaching arising from human trickery."

*** Today is Adolph Hitler’s birthday. "The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man," wrote George Bernard Shaw in "Man and Superman." Hitler was an unreasonable man. Does all progress depend on people like him?

Typically, Shaw lost the plot completely. Reasonable people make progress by taking reasonable steps in their own private lives. Unreasonable people insist that other people drop what they are doing and walk in the direction they tell them. If they are good demagogues, the rabble rouses to them and begins shouting puerile slogans: Tax the rich! Germany needs room for living! Onward to the Holy Lands! Make the world safe for Christians! Make the world safe for democracy! Freedom! Save the Union! Decent housing…and adequate recreation! The next thing you know someone is robbed…shot…or hung from a tree.

The Daily Reckoning