Democracy: the God that failed

On the most abstract level, I want to show how theory is indispensible in correctly interpreting history. History – the sequence of events unfolding in time – is "blind." It reveals nothing about causes and effects. We may agree, for instance, that feudal Europe was poor, that monarchical Europe was wealthier, and that democratic Europe is wealthier still, or that nineteenth-century America with its low taxes and few regulations was poor, while contemporary America with its high taxes and many regulations is rich. Yet was Europe poor because of feudalism, and did it grow richer because of monarchy and democracy? Or did Europe grow richer in spite of monarchy and democracy? Or are these phenomena unrelated?

Likewise, is contemporary America wealthier because of higher taxes and more regulations or in spite of them? That is, would America be even more prosperous if taxes and regulations had remained at their nineteenth-century levels? Historians qua historians cannot answer such questions, and no amount of statistical data manipulation can change this fact. Every sequence of empirical events is compatible with any of a number of rival, mutually incompatible interpretations.

To make a decision regarding such incompatible interpretations, we need a theory. By theory I mean a proposition whose validity does not depend on further experience but can be established a priori. This is not to say that one can do without experience altogether in establishing a theoretical proposition. However, it is to say that even if experience is necessary, theoretical insights extend and transcend logically beyond a particular historical experience. Theoretical propositions are about necessary facts and relations and, by implication, about impossibilities. Experience may thus illustrate a theory. But historical experience can neither establish a theorem nor refute it.

Economic and political theory, especially of the Austrian variety, is a treasure trove of such propositions. For instance, a larger quantity of a good is preferred to a smaller amount of the same good; production must precede consumption; what is consumed now cannot be consumed again in the future; prices fixed below market-clearing prices will lead to lasting shortages; without private property in production factors there can be no factor prices, and without factor prices cost-accounting is impossible; an increase in the supply of paper money cannot increase total social wealth but can only redistribute existing wealth; monopoly (the absence of free entry) leads to higher prices and lower product quality than competition; no thing or part of a thing can be owned exclusively by more than one party at a time; democracy (majority rule) and private property are incompatible.

Theory is no substitute for history, of course, yet without a firm grasp of theory serious errors in the interpretation of historical data are unavoidable. For instance, the outstanding historian Carroll Quigley claims that the invention of fractional reserve banking has been a major cause of the unprecedented expansion of wealth associated with the Industrial Revolution, and countless historians have associated the economic plight of Soviet-style socialism with the absence of democracy.

From a theoretical viewpoint, such interpretations must be rejected categorically. An increase in the paper money supply cannot lead to greater prosperity but only to wealth redistribution. The explosion of wealth during the Industrial Revolution took place despite fractional reserve banking. Similarly, the economic plight of socialism cannot be due to the absence of democracy. Instead, it is caused by the absence of private property in factors of production. "Received history" is full of such misinterpretations. Theory allows us to rule out certain historical reports as impossible and incompatible with the nature of things. By the same token, it allows us to uphold certain other things as historical possibilities, even if they have not yet been tried.

More interestingly, armed with elementary economic and political theory, I present in my book a revisionist reconstruction of modern Western history: of the rise of absolute monarchical states out of state-less feudal orders, and the transformation, beginning with the French Revolution and essentially completed with the end of World War I, of the Western world from monarchical to democratic States, and the rise of the US to the rank of "universal empire." Neo-conservative writers such as Francis Fukuyama have interpreted this development as civilizational progress, and they proclaim the "End of History" to have arrived with the triumph of Western – US – democracy and its globalization (making the world safe for democracy).

My theoretical interpretation is entirely different. It involves the shattering of three historical myths. The first and most fundamental is the myth that the emergence of states out of a prior, non-statist order has caused subsequent economic and civilizational progress. In fact, theory dictates that any progress must have occurred in spite – not because – of the institution of a state. A state is defined conventionally as an agency that exercises a compulsory territorial monopoly of ultimate decison-making (jurisdiction) and of taxation. By definition then, every state, regardless of its particular constitution, is economically and ethically deficient. Every monopolist is "bad" from the viewpoint of consumers. Monopoly is hereby understood as the absence of free entry into a particular line of production: only one agency, A, may produce X.

Any monopoly is "bad" for consumers because, shielded from potential new entrants into its line of production, the price for its product will be higher and the quality lower than with free entry. And a monopolist with ultimate decison-making powers is particularly bad. While other monopolists produce inferior goods, a monopolist judge, besides producing inferior goods, will produce bads, because he who is the ultimate judge in every case of conflict also has the last word in each conflict involving himself. Consequently, instead of preventing and resolving conflict, a monopolist of ultimate decision-making will cause and provoke conflict in order to settle it to his own advantage.

Not only would no one accept such a monopoly judge provision, but no one would ever agree to a provision that allowed this judge to determine the price to be paid for his "service" unilaterally. Predictably, such a monopolist would use up ever more resources (tax revenue) to produce fewer goods and perpetrate more bads. This is not a prescription for protection but for oppression and exploitation. The result of a state, then, is not peaceful cooperation and social order, but conflict, provocation, aggression, oppression, and impoverishment, i.e., de-civilization. This, above all, is what the history of states illustrates. It is first and foremost the history of countless millions of innocent state victims.

The second myth concerns the historic transition from absolute monarchies to democratic states. Not only do neoconservatives interpret this development as progress; there is near-universal agreement that democracy represents an advance over monarchy and is the cause of economic and moral progress. This interpretation is curious in light of the fact that democracy has been the fountainhead of every form of socialism: of (European) democratic socialism and (American) liberalism and neo-conservatism as well as of international (Soviet) socialism, (Italian) fascism, and national (Nazi) socialism. More importantly, however, theory contradicts this interpretation; whereas both monarchies and democracies are deficient as states, democracy is worse than monarchy.

Theoretically speaking, the transition from monarchy to democracy involves no more or less than a hereditary monopoly "owner" – the prince or king – being replaced by temporary and interchangeable – monopoly "caretakers" – presidents, prime ministers, and members of parliament. Both kings and presidents will produce bads, yet a king, because he "owns" the monopoly and may sell or bequeath it, will care about the repercussions of his actions on capital values. As the owner of the capital stock on "his" territory, the king will be comparatively future-oriented. In order to preserve or enhance the value of his property, he will exploit only moderately and calculatingly. In contrast, a temporary and interchangeable democratic caretaker does not own the country, but as long as he is in office he is permitted to use it to his advantage. He owns its current use but not its capital stock. This does not eliminate exploitation. Instead, it makes exploitation shortsighted (present-oriented) and uncalculated, i.e., carried out without regard for the value of the capital stock.

Nor is it an advantage of democracy that free entry into every state position exists (whereas under monarchy entry is restricted by the king's discretion). To the contrary, only competition in the production of goods is a good thing. Competition in the production of bads is not good; in fact, it is sheer evil. Kings, coming into their position by virtue of birth, might be harmless dilettantes or decent men (and if they are "madmen," they will be quickly restrained or if need be, killed, by close relatives concerned with the possessions of the dynasty). In sharp contrast, the selection of government rulers by means of popular elections makes it essentially impossible for a harmless or decent person to ever rise to the top. Presidents and prime ministers come into their position as a result of their efficiency as morally uninhibited demagogues. Hence, democracy virtually assures that only dangerous men will rise to the top of government.

In particular, democracy is seen as promoting an increase in the social rate of time preference (present-orientation) or the "infantilization" of society. It results in continually increased taxes, paper money and paper money inflation, an unending flood of legislation, and a steadily growing "public" debt. By the same token, democracy leads to lower savings, increased legal uncertainty, moral relativism, lawlessness, and crime. Further, democracy is a tool for wealth and income confiscation and redistribution. It involves the legislative "taking" of the property of some – the haves of something – and the "giving" of it to others – the have-nots of things. And since it is presumably something valuable that is being redistributed – of which the haves have too much and the have-nots too little – any such redistribution implies that the incentive to be of value or produce something valuable is systematically reduced. In other words, the proportion of not-so-good people and not-so-good personal traits, habits, and forms of conduct and appearance will increase, and life in society will become increasingly unpleasant.

Last but not least, democracy is described as resulting in a radical change in the conduct of war. Because they can externalize the costs of their own aggression onto others (via taxes), both kings and presidents will be more than 'normally' aggressive and warlike. However, a king's motive for war is typically an ownership-inheritance dispute. The objective of his war is tangible and territorial: to gain control over some piece of real estate and its inhabitants. And to reach this objective it is in his interest to distinguish between combatants (his enemies and targets of attack) and non-combatants and their property (to be left out of the war and undamaged). Democracy has transformed the limited wars of kings into total wars. The motive for war has become ideological – democracy, liberty, civilization, humanity. The objectives are intangible and elusive: the ideological "conversion" of the losers preceded by their "unconditional" surrender (which, because one can never be certain about the sincerity of conversion, may require such means as the mass murder of civilians). And the distinction between combatants and non-combatants becomes fuzzy and ultimately disappears under democracy, and mass war involvement – the draft and popular war rallies – as well as "collateral damage" become part of war strategy.

Finally, the third myth shattered is the belief that there is no alternative to Western welfare-democracies a la US. Again, theory demonstrates otherwise. First, this belief is false because the modern welfare-state is not a "stable" economic system. It is bound to collapse under its own parasitic weight, much like Russian-style socialism imploded a decade ago. More importantly, however, an economically stable alternative to democracy exists. The term I propose for this alternative is "natural order."

In a natural order every scarce resource, including all land, is owned privately, every enterprise is funded by voluntarily paying customers or private donors, and entry into every line of production, including that of property protection, conflict arbitration, and peacemaking, is free. A large part of my book concerns the explanation of the workings – the logic – of a natural order and the requirements for the transformation from democracy to a natural order.

Whereas states disarm their citizens so as to be able to rob them more surely (thereby rendering them more vulnerable also to criminal and terrorist attack), a natural order is characterized by an armed citizenry. This feature is furthered by insurance companies, which play a prominent role as providers of security and protection in a natural order. Insurers will encourage gun ownership by offering lower premiums to armed (and weapons-trained) clients. By their nature insurers are defensive agencies. Only "accidental" – not: self-inflicted, caused or provoked – damage is "insurable." Aggressors and provocateurs will be denied insurance coverage and are thus weak. And because insurers must indemnify their clients in case of victimization, they must be concerned constantly about the prevention of criminal aggression, the recovery of misappropriated property, and the apprehension of those liable for the damage in question.

Furthermore, the relationship between insurer and client is contractual. The rules of the game are mutually accepted and fixed. An insurer cannot "legislate," or unilaterally change the terms of the contract. In particular, if an insurer wants to attract a voluntarily paying clientele, it must provide for the foreseeable contingency of conflict in its contracts, not only between its own clients but especially with clients of other insurers. The only provision satisfactorily covering the latter contingency is for an insurer to bind itself contractually to independent third-party arbitration. However, not just any arbitration will do. The conflicting insurers must agree on the arbitrator or arbitration agency, and in order to be agreeable to insurers, an arbitrator must produce a product (of legal procedure and substantive judgment) that embodies the widest possible moral consensus among insurers and clients alike. Thus, contrary to statist conditions, a natural order is characterized by stable and predictable law and increased legal harmony.

Moreover, insurance companies promote the development of another "security feature." States have not just disarmed their citizens by taking away their weapons, democratic states in particular have also done so in stripping their citizens of the right to exclusion and by promoting instead – through various non-discrimination, affirmative action, and multiculturalist policies – forced integration. In a natural order, the right to exclusion inherent in the very idea of private property is restored to private property owners.

Accordingly, to lower the production cost of security and improve its quality, a natural order is characterized by increased discrimination, segregation, spatial separation, uniculturalism (cultural homogeneity), exclusivity, and exclusion. In addition, whereas states have undermined intermediating social institutions (family households, churches, covenants, communities, and clubs) and the associated ranks and layers of authority so as to increase their own power vis-a-vis equal and isolated individuals, a natural order is distinctly un-egalitarian: "elitist," "hierarchical," "proprietarian," "patriarchical," and "authoritorian," and its stability depends essentially on the existence of a self-conscious natural – voluntarily acknowledged – aristocracy.

Finally, I discuss strategic matters and questions. How can a natural order arise out of democracy? I explain the role of ideas, intellectuals, elites, and public opinion in the legitimation and de-legitimation of state power. In particular, I discuss the role of secession – and the proliferation of independent political entities – as an important step toward the goal of natural order, and I explain how to properly privatize "socialized" and "public" property.

a point of clarification that may have gotten lost in the shuffle: i define free democracy to be a democracy where the citizens have basic freedoms, but more importantly are not supporting a large government. that is, they keep most of the fruits of their labor. i define a socialist democracy to be a government where you elect the officials, but the government intervenes significantly in your life.

Others on this thread have called what you refer to as "free democracy" a Republic and what you call a "socialist democracy" a Democracy. I think the latter form of government is in rather low regard here. The primary argument against the former is that it inevitably becomes the latter.

i hope that clarifies what i mean. if not, let me go further. democracy in western civilization preceeded the industrial revolution. england was moving to a democracy with the signing of the magna carter in the 1200s i think. it had a strong militia (and had easily defendable borders). it benefited highly from the industrial revolution, and those who invested benefited extremely well. i can make the same comments about the united states -- except replace the magna carta part with the dec of indep.

If we replace "free democracy" with Republic I agree, except in one regard. Were these countries economically free because of or in spite of their form of government?

the industrial revolution bypassed germany initially.

German government was fairly despotic. Bismarck's unification only stabilized the problem of foreign invasion and in that respect only did the German economy benefit. (Side note, some regions were already pretty stable and didn't benefit from Prussian military power. Bavaria in particular.)

Although we are using different terms, I think we're saying the same thing -- that economies only prosper in an environment where property is secure, respected and protected. The question then becomes, how best do we achieve this? I think we can agree that fascism and/or social democracy is marginally better than communism and that a republic ("true democracy") is better than a social democracy.

But how does monarchy measure up? From an economic standpoint, monarchy is almost never communistic and tends to have low taxes and a small bureaucracy. From a civil rights perspective, monarchies can be awful but a careful examination of history shows that for all the horrors inflicted by monarchs, most of this pales by comparison to say, the French Revolution.

Clearly there are good monarchies (I'll call them "polite monarchies") and bad monarchies ("absolute monarchies"). Britain up until the 19th century was a polite monarchy that became a republic in the early 19th century and then became a social democracy in the 20th century. Note that Britain's economic dominance ends pretty much in sync with its rejection of limited government.

In fact the emergence of industrialization amongst the English is clearly to due their rejection of absolute monarchy. Again, limited government is a product of culture rather than governmental stucture, per se.

Hoppe goes even further in his analysis and asks: What would be even more secure than monarchy?

His answer is to identify a natural social order stemming from the concepts of property and the market itself. Those governments that interfere with the market the least have the most prosperous and peaceful societies. So what if our legal system didn't intefere with the natural order at all? What if the idea of a monopoly legal system was rejected outright?

Anyway, food for thought . . .

Many people on Free Republic have claimed that the United States was formed as a Republic, not a Democracy. I have never been able to make a distinction between the two. In fact, I have never been anyone on FR make reference to the political forms which differentiate between terms.

The only difference, I think, is that a Republic observes the Constitution and a Democracy doesn't. There is no analysis of the political institutions which would impel the nation to act as the one instead of the other. Simply a sort of call to order, a remembrance of the good old days when people did care about the meaning of the words that that fore fathers wrote down.

Daniel Webster's 1828 dictionary makes it clear that, to the founders, a Republic was what we today would call a representative democracy while a 'Democracy' is what we call a Direct Democracy (e.g., the form of government of Classical Athens). It would seem quite clear that the FFs did achieve their vision. By their definition, we live in a republic today.

The difference between a "free democracy" and a "socialist democracy" is meaningless. They have the same political form. All democracies ultimately evolve towards fascism. The distinction between "free" and "socialist" simply reflects stages in this evolution.

"The notion that democracy is necessary for industrialization is a myth..."

Interestingly, in England, before the industrial revolution, there was a kind of de facto democracy. The king, or at a more local level, the lord had their way, but when the taxes became oppressive, or whatever, and the peasants had had enough, they rioted. The rioting was apparently more a matter of noise and work stoppage than of violence, but was persistant. Apparently, the reaction of officialdom was tolerant, they took the riots as a sign that they had gone too far and backed off. With the advent of industrialization, such unpredictable disorder was seen as too disruptive for the system and such riots were thereafter forcefully and brutally put down.

A cynic might say that those peasant had more political power than does the voter in a modern "democracy".

I can trace down my source for this, but it will be an effort.

I have read this post I find the debate about democracy interesting but also irelevant. Democracies or Monarchies are merely governments, not idealogy. You can have a free democracy and a free Monarchy, but what you need is for the concepts of Freedom and Individual rights to regain intellectual dominance. This has been acheived but once in the history of mankind, it was called the Age of the enlightenment. The spark of the 18th century fueled the industrial revolution and unparalled prosperity of the 19th, but by the 20th century its intellectual dominance was challenged and defeated resulting in its bloody century. You are indeed right that those who control information, control the world. Well the sheep anyway. Knowledge is power and CNN and the newspapers undoubtably have more power than the President of America. In reality whether you call it democracy, republic or a monarchy. All rule is mob rule, If the masses do not accept your concept be it Capitalism, communism or fuedalism, it won't happen. We simply need to find mediums to get through to them, and the internet will be a worthy tool in this respect. The Bill of Rights is just a scrap of paper today, to most people, because they don't beleive in it anymore.

As several people on FR have noted, the FFs hated democracy, having seen it in action in Athens and elsewhere. They equally hated monarchy and aristocracy. So they imagined a system in which people would get together and select wise men to rule. These benevolent creatures would take care of us all.

This was the idea behind the Electoral College. It never worked and soon degenerated into representative government. As Aurelius notes, the Senate followed the same path. Over the course of the 19th century, state after state moved to direct election of senators.

Eventually we wound up with a system which favored demagoguery. All other western countries followed different paths to the same destination.

Yes, I am in favor of what Hoppe calls the natural order (he shrinks from using its proper name - anarcho-capitalism). Unfortunately, I don't have too many suggestions about how to move to it. The first step obviously is education - to fight the propaganda that democracy has anything to do with freedom or that government, especially federal government, can do anything useful for you.

Short of implementing the natural order, there are many possible steps to improving things. The first is to recognize that the FFs were wrong in one sense: direct democracy, for all its faults, is better than representative democracy. They were also right in another: local government is better than national government.

The Anti-Federalists were right. The federal government was too strong. That's why it eventually broke out of the box that the FFs tried to keep it in.

The first step is to build a confederacy, not a federation. Eliminate all direct election of anyone in Washington and throw out the devils in black robes. The only federal institution which should exist is the Senate - one representative (not two) appointed by each state. What's more, the central government should have no source of monies of its own. Only voluntary contributions from each state.

The next step is to build a mechanism for creating new states out of old ones. The current states are far too large. One of the Greeks, I think it was Aristotle, claimed that a city could not be larger than about 10,000 citizens. Otherwise it grows out of control. You might quibble about the exact number but he had the right order of magnitude. Town halls and plebecites are the place for democracy, if it has a place at all.

thanks. i likewise struggle at the best approach to remove the yoke of the federal government from our necks. i agree that education is required to put truth at least on the same level the crap the media spews. besides what you have said, i would like to see economics taught in high school -- adams style!

a relative drafted a constitutional amendment to eliminate the federal income tax. she was audited several years in a row. it will be tough to make any drastic changes.

the confederacy should mint money, maintain a militia, maintain a foreign policy and possible handle roads. everything else, as you said, should be delegated downwards. i am not against different level of government interference at the state (or sub unit level) -- at least that way i have a choice. but there probably needs to be some common bill of rights package that applies to all states.

the confederacy should mint money, maintain a militia, maintain a foreign policy and possible handle roads

I have to say that I disagree with you on all these points. Money should obviously be supplied by the market. There is no reason for a federal road system. That can be handled privately or the states. Note that the roads between Canada and the US join together, despite the lack of a common authority to manage them.

Foreign policy? Bad idea. The best foreign policy is no foreign policy, as Washington and Jefferson said.

Militia? Possibly something on the Swiss model. But the reality is that, other than a couple of nukes and perhaps some anti-troop carriers, the US doesn't need any defense at all.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.