The Utilitarian Case for Democracy

Closer analysis revealed that private property in the factors of production was not just a privilege of the happy few capitalists, but had a genuine social function. Mises brought the same perspective to bear on government and thus discovered an original rationale for democracy. This institution was not an end in itself. It fulfilled a social function that no other system of government could fulfill.

Traditionally, the champions of democracy had defended this political form with the help of arguments rooted in ethics or natural law. All men are born equal, they claimed, and therefore all men should be equally involved in political decision-making. But this could only be realized in a democracy. Mises did not find this line of reasoning convincing. He believed it was rather obvious that all men were born unequal, and he had little patience with arguments based on claims about natural law, which he considered to be a fiction of the intellect. No agreement could ever be reached on a fiction. Rather, it was to be expected that everybody made up his own version of “natural” law, to buttress his political agenda. Thus natural-law considerations were simply unfit to be applied in politics, because the very point of politics was, from Mises's perspective at any rate, to resolve conflicts.

In Socialism, it became obvious that Mises believed in republican democracy nevertheless. But his rationale for endorsing it differed substantially from the traditional justification of democracy. For Mises, social institutions could be justified only to the extent that they improved the living conditions of the members of society. Accordingly, the starting point for his reflections was that these living conditions could be improved only through productive efforts, and that the division of labor was more productive than isolated individual activities. To improve living conditions as far as possible was therefore tantamount to encouraging the division of labor and to making it as productive as possible. This had been the guiding light in his analysis of the problems of economic calculation, which had led him to the conclusion that in capitalism the division of labor is more productive than in socialism because only in the former could it be based on economic calculation.

In Socialism, Mises stressed another implication of the same basic idea. Labor can only be divided among people who live in peace with one another. Violent conflicts necessarily disrupt social cooperation. They split society into parties that work against one another, rather than for one another. They destroy scarce resources rather than producing more resources. The improvement of living conditions therefore requires choosing those political institutions that tend to minimize violent conflicts. This is precisely the function of the democratic form of constitution.

Its function is to make peace, to avoid violent revolutions. In non-democratic states, too, only a government which can count on the backing of public opinion is able to maintain itself in the long run. The strength of all governments lies not in weapons but in the spirit which puts the weapons at their disposal. Those in power, always necessarily a small minority against an enormous majority, can attain and maintain power only by making the spirit of the majority pliant to their rule. If there is a change, if those on whose support the government depends lose the conviction that they must support this particular government, then the ground is undermined beneath it and it must sooner or later give way. Persons and systems in the government of non-democratic states can be changed by violence alone. The system and the individuals that have lost the support of the people are swept away in the upheaval and a new system and other individuals take their place.

But any violent revolution costs blood and money. Lives are sacrificed, and destruction impedes economic activity. Democracy tries to prevent such material loss and the accompanying psychical shock by guaranteeing accord between the will of the state—as expressed through the organs of the state—and the will of the majority. This it achieves by making the organs of the state legally dependent on the will of the majority of the moment. In internal policy it realizes what pacifism seeks to realize in external policy^{7, 8}

Mises did not blindly advocate just any notion of democracy: he warned against the dogmatic excesses derived from certain erroneous natural-law schemes. He noticed in particular that there is no special distinction in direct democracy. Politics is a matter of the division of labor, like all other spheres of life.⁹ And he also stressed that democracy must not be conceived as the unlimited rule of the general will:

There is really no essential difference between the unlimited power of the democratic state and the unlimited power of the autocrat. The idea that carries away our demagogues and their supporters, the idea that the state can do whatever it wishes, and that nothing should resist the will of the sovereign people, has done more evil perhaps than the caesar-mania of degenerate princelings.

Mises concluded that “only within the framework of Liberalism does democracy fulfill a social function. Democracy without Liberalism is a hollow form.”¹⁰ The great danger inherent in democracy is to turn the libertarian postulate of equality before the law into the postulate of economic equality.

Here is a fertile field for the demagogue. Whoever stirs up the resentment of the poor against the rich can count on securing a big audience. Democracy creates the most favourable preliminary conditions for the development of this spirit, which is always and everywhere present, though concealed. So far all democratic states have foundered on this point. The democracy of our own time is hastening towards the same end.¹¹