9. The False Lure of Democracy

It is a poor mind that will think with the multitude because it is a multitude: truth is not altered by the opinions of the vulgar or the confirmation of the many. It is more blessed to be wise in truth in face of opinion than to be wise in opinion in face of truth.⁷

-Giordano Bruno (1548–1600)

SOME MIGHT ARGUE THAT a few of the propositions made that evening at dinner originated in Never-Never Land, because they seem too far-fetched to be entertained seriously. But are they, in principle, so different from the outcries we continually hear from political candidates, the news media, and special interest groups? The idea that one should not be allowed to own a yacht, as was proposed at dinner, is no different in principle from the 1990 luxury tax imposed on yacht purchases. Both deny people the freedom to spend their earnings as they wish. The idea that an employer should not be allowed to terminate an employee to make a profit, as was also proposed at dinner, is similar to the numerous federal and state restrictions that currently deny employers the freedom to manage their businesses in a way they deem most profitable.

The very essence of democracy encourages everyone to express opinions about human activities that are none of their business. There are few days that someone doesn’t ask me what I think that “we” (the royal “we”) should “do” about this or that individual, organization, or group activity that is clearly neither my business nor theirs. It is not the answers to such questions that should give us concern; the mere asking has become so commonplace—and with such a sense of democratic pride and entitlement—that today nearly every aspect of human activity is considered public domain.

In a democracy, each of us has license to prescribe for others how to live their lives; run their businesses; whom they may hire; what wages they may pay; what prices they may charge; what, where, when, and how much they may buy or sell; what they may teach; what and where they may smoke, drink, and eat; what they may plant; what medicines they may take; what houses they may build and where they may build them; what they may say; how and where they may practice their religion (even what religion); where they may go; where they may live; how they may die; with whom and how they may engage in sex; whom they may marry and with whom they may associate. On and on this intrusion goes, with more “dos” and “don’ts” added every day.

A staggering 78,851 pages of newly proposed regulations were posted in the 2004 U.S. Federal Register, the government’s official daily publication for rules, proposed rules, notices, and executive orders. An even more staggering fact: that annual number is about average for the past ten years. Federal regulations, combined with others from state and local governments, have reached the point where virtually every human act is subject to some kind of scrutiny by a governmental agency.

While many of these regulations are adopted at the urging of self-righteous do-gooders imposing their social and moral values on the rest of us, other regulations are adopted at the urging of organizations that seek entitlements, special privileges, and curtailment of competition. Labor unions, farmers, and other permanent lobbies, such as AARP, are exceptionally skilled at pushing their special privileges through Congress.⁸ In 2005, there were 34,785 registered lobbyists in Washington, D.C.—more than double the number from just five years earlier.⁹ Businesses and other entities engage these experts to introduce legislation, manipulate regulations, and obtain special favors that prevent, subdue, or overcome competition.

In the spirit of “fair trade,” there are 8,757 tariffs and numerous quotas on imports into the U.S.¹⁰ Tariffs penalize consumers by forcing them to pay higher prices for foreign and domestic goods than would otherwise exist in a free-trade market. These higher prices when paid to a domestic producer are equivalent to subsidies. There are also government subsidies paid directly to manufacturers and farmers to overcome foreign competition. Farm subsidies alone reached $177 billion from 1995 to 2006.¹¹ According to the Farmers Weekly Report, nearly 70 percent of U.S. soybean value now comes from the U.S. government in the form of subsidies. As can be expected, this unintended but lucrative incentive has caused a 25 percent increase in soybean planting in the U.S. since 1998. As evidenced by their sheer abundance, quotas, tariffs, and subsidies are especially easy to obtain in a democratic republic where one need only persuade one or two politicians. The “you vote for mine and I’ll vote for yours” Congressional buddy system takes care of the rest of the process.

With every president, senator, congressional representative, governor, and assemblyman trying to make a historical impact on society, it’s no wonder we have an unrelenting flood of new “laws” (more accurately, legislations) enacted every year. Today, virtually every activity is subject to local, state, or federal regulation. During the 2006 California legislative session, there were 4,929 bills written (1,853 in the Senate and 3,076 in the Assembly); 1,172 were passed, and the governor vetoed only 262. On the final day of that session, the Assembly speaker proudly announced, “I think this is going to be a landmark legislative year for us.”

Regulations are very likely a greater impediment to freedom and prosperity than are imposed taxes. As with the imposition of taxes, regulations divert human energy from productive actions to nonproductive actions. As such, society loses the otherwise meaningful production of those bureaucrats involved in the creation and enforcement of regulations, the professional consultants who assist those being regulated, and, to some degree, those to whom the regulations actually apply. Virtually every major U.S. company has a cadre of lawyers, accountants, and consultants who ferret through the perpetually changing labyrinth of regulations to identify those that are applicable to their clientele, interpret their meaning, and then recommend operational adjustments to those clients.

This ever-increasing burden of regulations, however, is predictably met with human perseverance and ingenuity. Human nature will find innovative ways to circumvent the full impact of these bureaucratic restrictions. Many people discover loopholes that require less inconvenience than would compliance, others operate at the regulatory fringe where the ability to enforce compliance is unclear, or they simply operate entirely outside the regulatory arm of the State. All the energy thus diverted from productive activity into meeting or circumventing regulatory compliance simply reduces the production of real goods and services, thereby increasing their end cost to consumers.

A democratic state will naturally gravitate to an ever-greater “tragedy of the commons,”¹² in which citizens try to get a bigger share of the funds acquired by the State. Since those funds are now commonly owned, everyone has a right to claim a share. Even free riders become just as deserving of shares as do society’s contributors. Instead of being ostracized, free riders are now entitled to free rides. These entitlements are further justified by their advocates declaring them as “rights” (active rights), implying they have equal footing with natural rights (passive, or inalienable rights). An active right is a claim upon the life of another, while a natural right obligates others to refrain from any such claims. Therefore, a claimant of a right to a free ride, such as free health care, is a disclaimer of the natural, inalienable rights of the person upon whom the claim is made.¹³ Frédéric Bastiat (1801–1850), the famous French political economist, described the state as the great fiction by which everybody tries to live at the expense of everybody else.

This is not meant to cast blame on those who exploit the democratic system to obtain favors and resources. It is only rational to acquire resources at the least perceived cost. The democratic State simply provides an attractive means for some to acquire the resources produced by others at little or no cost to themselves, while preventing any real recourse for those from whom those resources are taken. Individuals who take resources from others without the strong arm of the State behind them would find it a risky and expensive enterprise.

When the opportunity to punish (ostracize) free riders is absent, the highest producers and contributors to the community typically ratchet back their own contributions to something near the group average.¹⁴ This iterative ratchet effect was demonstrated in many natural experiments that occurred in the former Soviet Union. Soviet agricultural policies nationalized farmland and forced farmers to organize their labor as a collective action. Still, the Soviets allowed 3 percent of the land on collective farms to be held privately, so local farming families could produce food for their own consumption and privately sell any excess. This private land produced an estimated one-third of all agricultural products in the Soviet Union.¹⁵ These small plots saved many Russians from famine. In China, the greatest famine in human history followed the collectivization of all peasant land. Statistics indicate that at least thirty million people starved to death from 1958 to 1962.¹⁶

The periods of famine following collectivized farming exemplify “the tragedy of the commons,” in which each person receives the same share of the total production, regardless of individual productive contribution. The Pilgrims experienced this same tragedy of the commons during the first few years of arriving in America, when their crop production was delivered to a common pool. Facing another disastrous year of crop production and famine, they decided to parcel the land in 1623; each family was rewarded with what they produced. As a result, the Pilgrims celebrated their first bountiful crop in the very same year the plan was adopted.¹⁷

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⁷James Lewis McIntyre, Giordano Bruno (New York: Macmillan, 1903), p. 50.

⁸Center for Responsive Politics, a nonpartisan organization, reported federal political contributions of $1.6 billion during 2006. Labor unions reported $66 million; AARP reported $23.2 million; and agribusiness reported $88.6 million in political contributions during 2006.

⁹Jeffrey H. Birnbaum, “The Road to Riches Is Called K Street—Lobbying Firms Hire More, Pay More, Charge More to Influence Government,” Washington Post, 22 June 2005.

¹⁰James Bovard, The Fair Trade Fraud, How Congress Pillages the Consumer and Decimates American Competitiveness (New York: St. Martin’s Press, 1991), p. 7.

¹¹Environmental Working Group, 2006 Farm Subsidy. http://farm.ewg.org/farm/region.php?fips=00000.

¹²Garrett Hardin popularized the concept “the tragedy of the commons” in an article published by Science in 1968. However, the concept can be traced back to Aristotle, who said: “For that which is common to the greatest number has the least care bestowed upon it. Every one thinks chiefly of his own, hardly at all of the common interest; and only when he is himself concerned as an individual” (Politics, 1261, b34).

¹³I do not imply that there are natural rights, since such rights make little sense to me even though many libertarians base their endorsement of liberty on them. Natural rights imply a privilege that others are obliged to respect. One’s life is one’s sole responsibility, as is the gaining of respect for it. An ideal way to gain respect for one’s life and property is to respect the life and property of others. The “rights” card is often played as a trump card when we are unable to persuade others by reason or unable to get what we desire by cooperative means. Furthermore, demanding respect for natural rights arguably (and dangerously) invites others to demand equal respect for any of their perceived rights.

¹⁴Ernst Fehr and Simon Gachter, “Cooperation and Punishment in Public Goods Experiments,” American Economic Review 90, no. 4 (2000): 980–94.

¹⁵C.A. Knox Lovell, “The Role of Private Subsidiary Farming during the Soviet Seven-Year Plan, 1959–65,” Soviet Studies 20, no. 1 (1968): 46–66.

¹⁶J. Becker, Hungry Ghosts: Mao’s Secret Famine (New York: Free Press, 1997).

¹⁷Gary Galles, “Property and the First Thanksgiving,” 2004, http://www.mises.org/story/1678; Benjamin Powell, “The Pilgrims’ Real Thanksgiving Lesson,” Charlotte Observer and The San Diego Union-Tribune, 25 November 2004.