Sunday, October 02, 2005

The End Or The Beginning Of History?

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 The End Or The Beginning Of History?
By William H. Peterson

  How can free market capitalism--the secret of Western success for 250 years--gain public insight of its inherent voluntary democracy and so win better understanding and respect in Washington, higher education, the media, the 50 state legislatures, and the American household?

Well, recall how communism went bust rather suddenly throughout Eastern Europe toward the end of the last century. Yet in his acclaimed 1989 essay "The End of History," political philosopher Francis Fukuyama may well have knocked off too much history when he held our generation is witnessing "the end point of mankind’s ideological evoluton and the universalization of Western liberal democracy as the final form of human government."

Final form? But what of the family? Of the church? Of the think tank or other forms of so-called nonprofit organizations? And, importantly, of corporations, co-ops, and farms in the tens of millions in a capitalistic order? For aren’t all these also forms of human government, if with this big difference: While based on voluntarism and democracy including highly-used individual switchable assent, majoritarian "liberal democracy" is based on coercion including tax payments out as far as the eye can see?

For don’t Mr. Fukuyama and America’s political establishment thus misread the nature of democracy and capitalism? Isn’t capitalism still, per our Founders (though the word capitalism had yet to be coined by Marx), a royal road to social cooperation, a vast vital network of private governments, of, for, and by the people themselves? All this with that individual switchable assent unavailable in "liberal democracy"?

Switchable? Yes. See countless private governments or hierarchies of power, such as Harvard, New York Times, New York Stock Exchange, Wal-Mart, Southern Baptists, Ludwig von Mises Institute, Salvation Army, and some 30 million other private firms and organizations of all varieties; yet all rely on individual switchable assent. For as a market consumer the individual is sovereign, free to switch from Ford to Toyota, from Yale to MIT, from Wendy's to McDonald’s. And vice versa. Talk about true private yet noncompulsory democracy!

Credit this idea of market democracy belongs to Ludwig Mises, my mentor in a PhD program at New York University starting in l950. In 1920, of similar interest, Mises had brilliantly predicted the sure failure of socialism (a la the Soviet Union) for its key lack of market democracy, sovereign consumers, and market-driven "economic calculation," forcing socialist planners into gross inefficiency or what Mises tagged "planned chaos."

Note how Mises put such ideas of consumer sovereignty and market democracy in his 1949 major opus Human Action:

"The direction of all economic affairs is in the market society a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship. A superficial observer would believe that they are supreme. But they are not. They are bound to obey unconditionally the captain’s orders. The captain is the consumer. [My underscoring.] Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that. If a businessman does not strictly obey the orders of the public as they are conveyed to him by the structure of market prices, he suffers losses, he goes bankrupt, and is thus removed from his eminent position at the helm. Other men who did better in satisfying the demand of consumers replace him."

Such persuasion is beyond the White House. Like Mr. Fuyuyama, it worships the demigod of political democracy via our media, legislatures, textbooks, even echoing a the 1917 World War I-President Wilson motto of "Make the World Safe for Democracy" to a bemused world. Democracy? I ask you: To what end?

My answer lies in the words of Benjamin Disraeli, then a young novelist, thinker, and back-bench Tory M.P. (later twice becoming Britain’s Prime Minister) in the House of Commons on March 31, 1850. Read them and wonder if you’re getting a recitation on America in the early 21st century:

"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."

Or, read the corroborative editorial on democracy's venal consort of politics in The London Times not long after, on February 7, 1852. Per: "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."

"... contentions of political life"? Ah, that curse of politics: timeless, ubiquitous, politics, the contagious corrupter of political democracy and its minions, from Ancient Greece to America today, as implied in the title of Mises Institute Distinguished Scholar Hans-Herman Hoppe’s book of 2001: Democracy, the God That Failed. Or as implied by Hamlet standing in a Danish graveyard at night, holding up a skull, and wondering if it had once belonged to a politician whom he identified as "one who would circumvent God."

For its part, political democracy long had critical thinkers. Plato, for example, cited democracy 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." Aristotle in his Rhetoric (c. 322 B.C.) hit democracy as "when put to the strain, grows weak, and is supplanted by oligarchy." Later thinker George Bernard Shaw hit democracy for "election by the incompetent many for appointment by the corrupt few." H. L. Mencken defined an election as "an advance auction of stolen goods." (Stolen from whom?)

Or, see how America’s Founders themselves saw political democracy courting self-ruin as many voters join "factions" or special interests which cut into liberty. James Madison spoke for his peers in Federalist Paper No. 10 (1787), to nail democracies as "spectacles of turbulence and contention, [which] 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 word democracy is not to be found in the entire Declaration of Independence, Bill of Rights, and U.S. Constitution. Or look how sternly anti-democratic are the first five words of the 1st Amendment on bills abridging religion, speech, press, assembly, and petition: "Congress shall pass no law [my emphasis]...." Or how the Framers, fearful of democracy, tied up our Constitution with checks and balances from federalism (set back by the Civil War, the 14th Amendment of 1868, and the 17th Amendment of 1913) to the stop on an income tax (undone by the 16th Amendment also of 1913). Recall Ben Franklin, asked what kind of state the Framers had set in 1787, raising a classic proviso: "A republic, if you can keep it." Big if. I think Old Ben was warning us: As political democracy swells, the individual shrinks.

Yet--voila’--Mises lit up a near unknown yet much safer and surer democracy. In 1922 in his Socialism he saw democracy at work in market action. See it yourself today: from the shopping mall to online buying, to getting colas from vending machines, to filling up at the gas pump by credit card, to business consumers ordering supplies for their operations, etc.

So these and other market voters vote not but every other year but again and again every day. An endless plebiscite. Freely. Directly. In a way, one on one: You elect your supplier, you get what you order, you are in charge. Great.

Yet look: Are you not still under an Ancient Roman edict to consumers then and now of Caveat emptor: Let the buyer beware? And let stockholders beware of wayward leadership of firms such as Enron and WorldCom. A few corrupt CEO’s, apart from small-fry fly-by-nights, are the inevitable flotsam in the system, a tiny minority of business wrongdoers often caught and punished.

  Yet did not Mises in his Socialism in his perception of market democracy give America and the West quite a political edge on behalf of freedom and free enterprise? If with a challenge of a steady drumbeat of democracy, democracy, democracy--of the political coercive variety of course? The further challenge then is: How can his edge of voluntary market democracy be put into public opinion play today? Here’s that Mises "law": "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."

Memo to Mr. Fukuyama, the American people and their political representatives: Every day is Election Day under free capitalism in which nobody forces anybody. The end of history? Why not rather seek its new beginning by building on such consumer-friendly capitalism? Doing so by broad state disintervention with as a result much lower taxes and greater capital accumulation? And by free trade and free investment, all leading to renewed individual freedom and free enterprise?


Mr. Peterson, an adjunct scholar at the Mises Institute, is the 2005 Schlarbaum Prize winner of an Award for Lifetime Achievement in Liberty.  


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