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<font color="#002864" size="1" face="Verdana">http://www.mises.org/fullstory.asp?control=1277</font>
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<font face="Verdana" size="2"><font color="#002864"><strong><font size="5">America's Greatest Democracy</font></strong></font>
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<font size="4">by William H. Peterson</font>
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[Posted July 29, 2003]
<img alt src="http://www.mises.org/images3/society.gif" align="right" border="0" NOSEND="1" width="209" height="239">"<font color="#0000ff">Capitalism:
America's Greatest Charity</font>" was the title of my article
here last year Today I extend that idea to"Capitalism: America's
Greatest Charity and Democracy," concentrating here on democracy.
But this is not the democracy that Plato spoke of in his The Republic (c.
370 B.C.) as"a charming form of government, full of variety and
disorder, and dispensing a kind of equality to equals and unequals alike,"
nor that Aristotle in his Rhetoric (c. 322 B.C.) chided as"when put to
the strain, grows weak, and is supplanted by oligarchy," nor that which
George Bernard Shaw taxed in his Maxims for Revolutionists (1903) as
substituting"election by the incompetent many for appointment by the
corrupt few," nor that Hans- Herman Hoppe exposes in his Democracy—The
God That Failed (2001, p. 96) that"majorities of 'have-nots' will
relentlessly try to enrich themselves at the expense of the 'haves'."
For see how Ludwig Mises lit up a near-unknown yet highly effective daily
democracy—the marketplace—in his Socialism (1922, 1951 ed., Yale, p.
21), giving this democracy a critically 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."
Mises was on solid ground. For what is political democracy? See its Greek
derivation: rule or"kratia" by the people, the"demos."
But who rules whom? Why do state hegemony and interventionism reign today as
givens, why does the free individual fade across the West, why does
political majoritarianism divide society—or, as put by satirist P.J.
O'Rourke in 2002, why"we vs. me"?
So I say capitalism, so harassed today, should be especially thought through
and guarded in the heat of current debate. Note its basis in private
property, equal rights, a limited state (so unlimited today). Note it stars
entrepreneurs with their private tools of production of goods and services.
Note how its fallible CEOs (Enron, Tyco, etc.) get quickly whipped by the
stock market, far faster than by the courts or the Securities and Exchange
Commission. For firms are democratically led and, if need be, punished, by
their customers—i.e., said Mises, by sovereign consumers everywhere with
their make-or-break"orders" (what a word!) and their key market
price signals.
Whither then our berated, underrated, far overregulated and much misread
capitalism? Yet isn't it still, per our Founders (though the word capitalism
had yet to be coined), a royal road to social cooperation, a vital private
network of governments of the people, by the people, for the people, all
with individual assent—highly-used withdrawable assent?
Withdrawable? Consider in a free society, countless hierarchies of
governance of power, such as the New York Times, Harvard, N.Y. Stock
Exchange, Microsoft, the Southern Baptists, the Salvation Army, Wal-Mart and
some 25 million other firms, farms and organizations; yet all are totally
dependent on that withdrawable individual assent. So you're free to switch
from GM to Ford, from Yale to MIT, from Burger King to McDonald's. And vice
versa. Talk about democracy!
Democracy? But isn't this our political shield for a Pax Americana to police
a sinful, quite undemocratic globe, with the focus now on the turbulent
undemocratic Middle East? But doesn't this serve up Juvenal's classic
conundrum (74 A.D.): <em>Sed quis custodiet ipsos custodes</em> (But who is
to guard the guards themselves)? Thomas Paine saw this snag in 1776 in Common
Sense as"a necessary evil."
Bismarck likened the legislative process to the unsightly conversion of
pigs into sausages. Churchill said democracy is the least awful way to
effect a peaceful change of political power. Or as Swiss thinker Felix
Somary held in his Democracy at Bay (1952, Knopf, 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 I juxtapose below America's Political Democracy with the Misesian point
of our Consumer Democracy to clarify which is which—and ask you, with both
needful of repairs, which needs the most by far?
Look. In one democracy you vote but 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, for specific vendors,
goods, or services, in an endless plebiscite going on every minute of every
day, with dollars as ballots. To be sure, some get more ballots than others.
Yet Mises saw this outcome as transient, as consumers themselves vote"poor
people rich and rich people poor." (Human Action, 1949, p. 270.)
So one democracy is public, the other private, and we need both—if not
"as is." Yet one funds failing programs and schools, the other
lets failing firms and private schools fail. One is coercive and centralized,
the other voluntary and decentralized. One runs, inadvertently, a
growth-impeding win-lose zero-sum game, the other, also inadvertently, a
pro-growth win-win positive-sum game. This difference, alone, sets America's
future.
One democracy runs by politics and monopoly, unmindful of Henry David
Thoreau's Civil Disobedience of 1849 when he saw"little virtue in the
action of masses of men" and voting as"a sort of gaming";
the other runs a market society by economics and competition. One forgets
the individual, per William Graham Sumner's famed"The Forgotten
Man" lecture in 1883, the other remembers him/her (imperfectly per that
spam on your PC monitor).
One democracy plays incumbency ruses: gerrymandering, compromises with
principle, warmongering, logrolling, free-lunch guises such as big federal
"grants" (bribes?) to states and localities ($313 billion,
annualized, 1st qtr., 2003), the other is cleansed by competition,
cost-cutting, demonstrated market deeds for consumers free to choose.
One democracy veers to the Machiavellian amoral short-run in aim, the
other to moral contracts and the longer-run. One, 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 and
does slip into some corporate behavior—money-grasping or getting into bed
with political power to win subsidies, import quotas, and other mischief via
special interests—despite President Dwight Eisenhower's 1961 farewell
message against a"military-industrial complex."
One democracy can glorify 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, naively, as"The War to End War" and
"Make the World Safe for<span class="369232713-29072003"> </span>Democracy"—only
to reap 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, and lesser
imitators throughout Asia, Africa, Central Europe, Latin America, and the
Middle East, which, again, President Bush II bravely seeks to"democratize,"
citing Germany and Japan as post-World War II successes while remaining
silent on our failures like North Korea, Vietnam, Bosnia, Somalia, Haiti (this
gamely tagged as"Operation Democracy"). Building democracy in
Afghanistan and Iraq with their un-Western cultures can be messy and
uncertain, as anti-Americanism rages in the Muslim world if but less so in
the non-Muslim world per a global May 2003 Pew poll.
One democracy rues income disparity and, like Robin Hood,"transfers"
wealth, the other lifts all boats. One denies itself crucial feedback
information—or what Mises called"economic calculation,"
predicting in 1920 the ultimate collapse of socialism a la the U.S.S.R.—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, when under a
moral code and the rule of law—spontaneously, harmoniously, constructively.
Market democracy explains the success of the West via Adam Smith's"invisible
hand" idea of self-interest in a system of"natural liberty,"
of self-help by helping others, or per his famed line in The Wealth of
Nations (1776, Modern Library 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 then that capitalism or a market society is America's greatest
democracy. The question is: Can we tame political democracy a la our
Founding Fathers in 1776 or will we allow it to devour us per Ancient Greece?
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Mr. Peterson, who studied under Mises at NYU in 1950-1969, is an
adjunct scholar at the Mises Institute and a contributing editor to the
Foundation for Economic Education's Ideas on Liberty. <font color="#0000ff">whpeterson@aol.com<</font>
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