Posted by: Dr Churchill | June 27, 2014

Liberty & Democracy are by themselves an Economic System without the need for …ism of any kind — So Sorry to my ideologue friends

Liberty + Democracy = Economically Sustainable Society.

Simple as that.

It works, but only when the key ingredients are in a constant balance. In short when the Liberty and Democracy balance are in a state of a moving equilibrium.

Democracy in the twentieth century has to be in this type of Dynamic Equilibrium with Liberty. Then and only then you can have benevolent government of the people, by the people, and from the people.

Yet today our governance, is unfortunately out of kilter… because liberty and democracy are not recognized as economic and political systems, nor is it understood that at some level they conflict. As an example if the majority rule threatens private-property rights, then there is no holding that liberty and democracy can peacefully coexist for the rest of history in this Euro-pastiche that we call European Union today…

So we need to keep our focus on this dynamic equilibrium, and to understand how this came about and to strike the right kind of balance. Because of that we need to look and examine thoroughly first our Democracy and then the petri dish that the fairly strong American Democracy represents for us.

So let’s put on our scientists white lab coats, and focus our microscope on the petri dish under the observation lens.

At the US’s founding, the ONE principle underlying American government was liberty, and the nation’s new government was designed to protect the rights of individuals.

The American Founders and the Framers of the Constitution, intended to design a government that would protect the rights of its citizens, and at that time the most serious threat to people’s rights was government. Thus, the United States government was designed with a constitutionally limited scope to preserve the rights of individuals and limit the powers of government. By the end of the nineteenth century, Hamiltonian ideas were widely viewed as more appropriate to the industrializing nation, and Jeffersonian ideas of limited government were seen as obsolete.

People began looking to their government not only to protect their rights but also to further their economic well-being. Subsequently the government’s activities during two world wars and the Great Depression greatly increased its involvement in people’s economic affairs, and by the time of Lyndon Johnson’s Great Society, the transformation was complete. By the end of the twentieth century, the fundamental principle underlying American government had been transformed to democracy, and public policy was designed to further the will of the majority.

The result has been a government that is larger and broader in scope. Using the framework of public choice theory, the American government grew more democratic and this resulted in an increase in the size and scope of government. Of course, there are inherent tensions between democratic government and the market economy, and that, as government grows more democratic, this will inevitably result in an increase in the size and scope of government, is not an entirely new idea. The public choice of Hans-Hermann Hoppe is in fact, the intellectual ancestry of this analysis same as Tocqueville’s “Democracy in America” first published in 1835. In “Capitalism, Socialism, and Democracy” Joseph Schumpeter had argued that democracy plants the seeds of its own destruction, because it allows citizens to actively dissent and to vote away their freedoms (1950).

Today we are breaking with conventional wisdom, and treating liberty and democracy as economic systems in and of themselves.

Of course we recognize them as political systems — but everyone views them within political and economic systems as interdependent choices rather than independent ones.

The political Spectrum ranges from democracy to dictatorship, and for economic systems ranges from capitalism to socialism. These systems can exist independently of each other or fully integrated within one country as is almost always the norm today. Thinking along such lines, an author like Fukuyama (1992) declare that the evolution of political and economic systems has come to an end with the ascendancy of liberal democracy as a political system and the free market economy as an economic system.

Yet when one looks closely under the microscope, in fact, as one moves away from liberty toward socialism, the potential range for both democracy and dictatorship increases, and inversely, as one moves from socialism to liberty the potential role for both democracy and dictatorship declines. In other words, the decline in economic liberty and the rise in political democracy are not independent events, and the history of the United States illustrates the relevance of this proposition.

This history by itself does not yet explain why the scope of governmental decision-making will expand and liberty will decline over time as the system drifts toward more political democracy.

Further, the explanation can be related to the issue of man being always the god that failed Paradise 101.

Man and Democracy are most likely to break down precisely when they are most needed, because in contrast to market transactions, which by definition occur only among those who agree to them, democracy increasingly becomes a less satisfactory way of making collective decisions, the more the scope of democratic decision-making expands beyond those areas on which there is a substantial consensus of opinion.

It was Franklin Delano Roosevelt’s New Deal that laid the foundation for the modern American welfare state. The final triumph of democracy over liberty, however, came with Lyndon Johnson’s Great Society programs.

The fact that the erosion of liberty began almost as soon as the newly independent nation was founded was because the war had left a country in shambles that needed quick rebuilt. So, whereas the nation’s first constitution, the Articles of Confederation, tightly constrained the powers of the federal government, the effect of the Constitution, when evaluated in light of the Status-Quo that it replaced, consisted in placing less constraint on the federal government and in allowing those who ran the government more discretion and autonomy and less accountability.

Contrary to the conventional wisdom on the U.S. Constitution, its adoption thus enhanced the powers of the federal government and laid the foundation for two centuries of government growth.

This has commonly been recognized. In fact, prior to Lyndon Johnson’s Great Society programs of the 1960s, major shifts in policy that placed the demands of the majority over the protection of liberty came in response to crises of some sort.

The role of government has expanded in response to crises, such as wars and economic recessions, as well as depressions — always leaving behind a larger government, more responsive to public opinion and less committed to the protection of liberty.
Government grows in response to crises but after a crisis has passed, it never shrinks down to its pre-crisis level.

There is no need to argue that those endowed with governmental power, often engineer crises to aggrandize the state. Attention can be drawn to the fact that the crises and depressions to which government responds, far from being simply “random” or “exogenous” shocks of some sort, are themselves all too often the inevitable consequences of government actions or inactions, and most often are simply the direct result of previous interventions. The dynamics of conspiracy theorists calling a Pearl Harbour or a 9/11 the work of government can be discounted as fringe only because that extreme criminality does not sit within a Democratic Society’s levers of power.

Of course there are intervention of all sorts and interpretations and media manipulations and suspense of disbelief, as well as wrong enemy calling, false flags and red herrings out there. But that is all propaganda and every government indulges on this at least on some conscious or unconscious level. And some are rather good at it — at least up to some point.

In view of the obvious “unworkability” of socialism, however, it can be expected that this evolution ultimately cannot be unidirectional. Sooner or later, a transformative point will be reached at which point, the system starts cycling back in the opposite direction, because of the awareness of our folly or having crossed a bridge too far. Sometimes it is popular demand to lessen the government and sometimes, people will perhaps see the shoals and get scared before they breach the ship of State onto the black rocks. The decade of the 1980s was such a watershed moment and represents a turning point because it brought with it major changes in political attitudes toward the Federal and even the State government.

Is it not true that the governments of Margaret Thatcher in Britain and Ronald Reagan in the United States exemplify the relevance of this proposition?
Is it not true that the great retrenchment of government during the Reagan and Thatcher eras was because popular opinion favoured it?

Is it not true that it happened, because people wanted to reclaim liberty as the underlying principle of government?

Is it not further true that the tradition of the Austrian School of economics, gave both Leaders a solid underpinning of exercising the aims of Liberty as an economic thought in an objective and unprejudiced manner?

As an example, the presence of excessive credit expansion as engineered by the Fed in America is acknowledged as an underlying cause of the stock market crash of 1929. At the level of ideology, the only philosophy competing with that of liberty is Progressivism, which first began to be articulated in the late 1800s, and which means that the government, as a matter of public policy, will look out for the economic well-being of its citizens. In particular, the concentrated economic power of corporations was thought to require more concentrated power of the general public to respond and counterbalance the effects of it all.

However the law of Unintended Consequences as an effect of this kind of policy drift has woken us all up to the challenges arising from this policy.

The Triumph of the Jacksonian Policy and the Free Banking Era shows us how the US embraced what can be characterized as largely “pro-free market” positions and the same came to be true for England. Yet perhaps the wave of deregulation went too far to the point of unregulation. And we are aware of the serious damage it caused, when viewed through the lens of the Lehman collapse and the subsequent Great Recession, bedeviling us today.

Still having lived through the risks, and the wrecks, still a seasoned Political and Economic observer, thinker, leader — will surely recognize that the problems of democracy in the world and the dangers of the very same Democracy show us that we are better off by adopting a consistently libertarian position in strict balance with our cherished Democracy.

Yes, government may not be absolutely necessary, but it is inevitable, because without it predators will be in a position to impose a totalitarian form of government by force.

Throughout history, the most effective protection against this type of predation has been a Democratic form of government.

Robert Nozick’s (1974) well-known position with respect to the indivisible hand of the origins of the state are the key to understand this here.

So the answer to the question “Is government really inevitable?” remains that “It all depends. . . .”

The impact of Locke’s ideas on the political philosophy of the Founding Fathers should not obscure the fact that the Framers owe substantial debt to the inspiring ideas of Hobbes as well. The fundamentally contradictory nature of holding these opposing lines of thought in one’s head, is testament to the intelligence of the men involved in the drafting of the Constitution.

Yours,
Pano

PS:

Methinks, that although the dangers of socialist democracy are not as readily apparent as the dangers of dictatorship, they are just as menacing.

Since in the European Union, the foundations of government have been pushed even further toward socialism as opposed to liberty, it is no exaggeration to assert that the relevance of the Debate on Liberty is paramount.

Let us have our Economic Ideology liberated truly and have the debate not confined to the United States, because Europe needs it more than anyone else right about now.

No doubt the time is now.

Read more in my book coming out this Autumn:

“Democracy Redux”
A case for Political Innovation in our pursuit of Liberty vs the Orwellian State, because the constant erosion of Liberty is the greatest threat to our Democracy, Freedom, and Human Rights.

Friedrich Hayek - If Socialists understaood Economics they wouldn't be Socialists


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