Voting Bureaucrats Endangers Democracy and the Future of Capitalism

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Voting Bureaucrats, Democracy, and Capitalism: Capital Flow Analysis Democracy, Voting Bureaucrats, and Capitalism

Voting Bureaucrats: Democracy's Snare

Many countries identify themselves as democracies, but there is no common understanding of what democracy means.

Who votes and the electoral process defines democracy.

Both the Soviet Union and Communist China defined themselves as People's Republics.

The United States calls itself a democracy and its leaders claim to be responsive to the people.

To understand what a democratic government is likely to do, we must examine the electoral process and the demographic composition of the voters.

The Founding Fathers' Democracy

Writing of nineteenth century American culture, Alexis de Tocqueville, predicted that democracy would eventually spread throughout the world.

He also said that majority rule could be as oppressive as the rule of a despot. America after the Clintons was radically different from the America of Thomas Jefferson.

America's founders hoped for a government that would be small and decentralized.

America's founders hoped for a country in which government would be small and decentralized.

Their model was the tiny city-state of ancient Greece and a world in which agriculture predominated.

Freedom of the press referred to a simple printing machine with capacity to produce newspapers and pamphlets for local readership.

The natural limit of free speech was the distance that the unaided voice could carry.

The founders expected that congressional representatives and senators would meet occasionally to decide matters, returning home to manage their farms and other business interests.

Only those who held property could vote.

A Nation of the Self-Employed

The founders envisaged a patriarchal society made up of self-employed families in which the women did not participate in elections.

There was no income tax and there were almost no regulations.

In early America, there were too few public servants to influence elections.

Politics reflected the views of farmers, shopkeepers, and other independent owners, motivated by interests specific to their region or line of business, including the right to keep slaves.

Since there were few public servants, their votes had no effect on elections.

The founders hoped that democracy, unlike monarchy, would provide government with interests identical with those of voters.

It never occurred to them that a permanent governing class of civil servants and their beneficiaries, living off tax dollars, might become the majority.

Democracy's Snare

There are defects in all democracies.

The American founding fathers never foresaw the danger that the number of permanent government office-holders could expand to the point that public servants would have more votes than those working in the private sector.

In 1998, there were almost twenty million Americans on federal, state, and local government payrolls. In addition, there are over thirteen million Americans employed under federal grants, contracts, and mandates.

One-third of government employees were union members, debasing the concept of promotion for merit.

By 2001, more than one-third of government employees were union members, degrading the concept of promotion for merit.

There is now a powerful constituency consisting of federal, state, and local public servants, employees of public authorities, their dependents, and other beneficiaries of tax money, similarly motivated, such as university professors, government contractors, and those receiving government loans and subsidies.

Although no one can be sure, a reasonable estimate would be that over seventy million Americans derive their sustenance from salaries and wages directly paid by government, or as dependents of someone paid by government.

The Sweet Side of the Tax Dollar

In addition, millions more receive government monies as welfare checks and transfer payments for which they provide no services.

In the 1998 Congressional elections, only forty-two million Americans voted.

This was far less than the number of people who benefited from government checks.

Annual growth of federal, state, and local government revenues averaged about eight percent from 1950 to 2000 — faster than the growth of the population and Gross Domestic Product.

It seems unlikely that government will become smaller or that tax laws will favor entrepreneurs.

Without a way to measure the usefulness of public employees or the power to fire the incompetent or the unnecessary, the size of government increases and productivity declines.

The depressing outcome of the permanent hegemony of these beneficiaries of tax money has been increasing inefficiency, despite ever-higher salaries and public facilities that are progressively more sumptuous.

Since those who are economically dependent on government will vote in their own financial interests, unless voter participation were to increase dramatically, there are few foreseeable circumstances in which the U.S. government will become smaller or that tax laws become significantly more favorable to entrepreneurs.

This does not bode well for the future supply of equities.

A Turned-Off Electorate

This permanent, non-democratic bureaucracy is the elite force that decides what government wants.

The bureaucrats' authority to write rules and selectively enforce a vast, unknowable mass of regulations and interpretations is the veiled authoritarian force that controls American lives.

The percentage of Americans voting has declined over the last one hundred years.

Furthermore, Congress has set up rules that steal the franchise by delivering the mandate of millions into the hands of privileged committees, selected by party and tenure.

Wealth, power, intermarriage, and connections going back for generations have fostered non-democratic, hereditary political dynasties, similar to the nobility of Europe, with such famous names as Kennedy, Bush, Rockefeller, Byrd, Humphrey, Wagner, Gore, Talmadge, Lee, Long, LaFollette, Adams, Dingell, Breckinridge, Rogers, Baker, Brown, Church, Bayh, Roosevelt, and Taft.

Perhaps recognizing the futility of the electoral process, the percentage of Americans that bother to vote has declined over the last one hundred years.

Political discourse about the size of government and taxation is now constrained to a choice between big or bigger government, the groups to whom government money will flow, and the rate at which taxes and regulations will increase.

An Entrenched Elite

Americans like to believe that they live in a democracy, with government, in Lincoln's words, 'of the people, by the people, for the people'.

However, the truth is somewhat different.

For those who believe Vox Populi Vox Dei, the non-voters may simply be saying that the franchise is of no concern to those who cannot influence the outcome.

A Nation of Hired-Hands

When voting bureaucrats make up so much of the American electorate, can the remaining voters be an effective counter force?

In the 19th century, most voters were self-employed.

They might be if, as in the nineteenth century, most voters were still self-employed – owners of their own farms and small businesses.

Unfortunately, the hard, practical sense of economic reality that goes with running a business is often lacking in those whose outlook is that of third-generation hired hands.

Ninety-five percent of Americans are now employees and descendants of employees – either in the private or public sector.

Waning Capitalism

Almost half of citizens with the right to vote do not own stocks or bonds.

Only about five percent of the electorate are in business for themselves.

For practical purposes, there is no longer a significant capitalist voting block in the United States.

There is no signficant capitalist voting block in the United States.

There are many passive 401(k) investors interested in capital gains and inflated stock prices, but this is hardly the healthy view of capitalism that fosters economic development and progress.

Most Americans do not realize that their material well-being is now more dependent upon foreigners holding dollar reserves to finance the trade deficit (and consumers' debt), than on the ability of American industry to produce goods that might be sold to the rest of the world.

The voting habits of a nation of shop clerks are quite different from Adam Smith's nation of shopkeepers.


Before proceeding, check your progress:


Alexis de Toqueville, writing of American democracy, said that:
Choice 3Democracy would one day spread worldwide.
Choice 1Democratic rule was never tyranical.
Choice 2Democracy would soon die out.
Choice 4Democracy would be replaced by Monarchy.
In 1998, the number of Americans on government payrolls was about:
Choice 15,600,000.
Choice 210,100,000
Choice 320,000,000
Choice 450,400,000
Under civil service laws of the United States:
Choice 3government employees are easily fired.
Choice 1it is difficult to dismiss government workers.
Choice 2public servants are highly efficient.
Choice 4government employees must be elected.

Investment Theory: Capital Flow Analysis Democracy's Snare: Continued >

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