DemocracyThe God That Failed

by Hans-Hermann Hoppe

  3As a rough indicator of this tendency one may want to relate successive expansions of the electorate during the late nineteenth and early twentieth century to the rise of the socialist and social-democratic voter turnout (and the parallel decline of classical liberal parties). A few examples will have to suffice here. (1) Germany: For the years 1871,1903, and 1919, the total number of votes cast was 4.1, 9.5, and 30.5 million respectively; the socialist voter turnout was 3, 32, and 46 percent respectively; the liberal voter turnout was 46, 22, and 23 percent respectively. (2) Italy: For the years 1895,1913, and 1919, the total number of votes was 1.3,5.1, and 5.8 million respectively; the socialist voter turnout was 7,18, and 32 percent respectively; the liberal voter turnout was 80,56, and 35 percent respectively. (3) United Kingdom: For the years 1906, and 1918, the total number of votes was 7.3, and 21.4 million respectively; the socialist voter turnout was 5, and 21 percent respectively; the liberal voter turnout was 49, and 25 percent respectively. (4) Sweden: For the years 1905,1911, and 1921, the total number of votes cast was 0.2, 0.6, and 1.7 million respectively; the socialist voter turnout was 9, 28, and 36 percent respectively; the liberal voter turnout was 45,40, and 19 percent respectively. (5) Netherlands: For the years 1888,1905, and 1922, the total votes cast was 0.3, 0.8, and 3.3 million respectively; the socialist voter turnout was 3,17, and 27 percent respectively; the liberal voter turnout was 40, 28, and 9 percent respectively.

  4The "tragedy of the commons" refers to the overutilization, waste, or depletion of resources held in common (as publicly owned goods). See Managing the Commons, Garrett Hardin and John Baden, eds. (San Francisco: W.H. Freeman, 1977).

  5See on this Joseph A. Pechman, "The Rich, the Poor, and the Taxes They Pay," Public Interest (Fall 1969); Murray N. Rothbard, For A New Liberty (New York: Collier, 1978), pp. 157-62.

  6See on this Edward C. Banfield, The Unheavenly City Revisited (Boston: Little, Brown, 1974), esp. chap. 3. Typically, Banfield explains, poverty is merely a transitory phase, restricted to the early stage in a person's working career. "Permanent" poverty, by contrast, is caused by specific cultural values and attitudes: a person's present-orientedness or, in economic terms, its high degree of time preference (which is highly correlated with low intelligence, and both of which appear to have a common genetic basis). Whereas the former—temporarily-poor-yet-upward-moving—-individual is characterized by future-orientation, self-discipline, and a willingness to forego present gratification in exchange for a better future, the latter—permanently poor—individual is characterized by present-orientation and hedonism. Writes Banfield:

  If [the latter] has any awareness of the future, it is of something fixed, fated, beyond his control: things happen to him, he does not make them happen. Impulse governs his behavior, either because he cannot discipline himself to sacrifice a present for a future satisfaction or because he has no sense of the future. He is therefore radically improvident. ... He works only as he must to stay alive, and drifts from one unskilled job to another, taking no interest in his work He is careless with his things ... and, even when nearly new, they are likely to be permanently out of order for lack of minor repairs. His body, too, is a thing "to be worked out but not repaired." (pp. 61-62)

  7See on this Armen Alchian, "The Economic and Social Impact of Free Tuition," in idem, Economic Forces at Work (Indianapolis, Ind.: Liberty Fund, 1977); Rothbard, For A New Liberty, chap. 7. Other examples involving this type of redistribution are farm subsidies, favoring in particular large wealthy farmers, minimum wages, favoring higher paid skilled (and unionized) workers at the expense of unskilled (and nonunionized) workers, and, of course, all forms of "business protection" laws (protective tariffs), favoring wealthy owners of corporations at the expense of the mass of comparatively poor consumers.

  The recognition of democracy as a machinery of popular wealth and income redistribution in conjunction with one of the most fundamental principles in all of economics that one will end up getting more of whatever it is that is being subsidized provides the key to understanding the present age.8

  All redistribution, regardless of the criterion on which it is based, involves "taking" from the original owners and/or producers (the "havers" of something) and "giving" to nonowners and nonproducers (the "nonhavers" of something). The incentive to be an original owner or producer of the thing in question is reduced, and the incentive to be a non-owner and non-producer is raised. Accordingly, as a result of subsidizing individuals because they are poor, there will be more poverty. By subsidizing people because they are unemployed, more unemployment will be created. Supporting single mothers out of tax funds will lead to an increase in single motherhood, "illegitimacy," and divorce.9 In outlawing child labor, income is transferred from families with children to childless persons (as a result of the legal restriction on the supply of labor, wage rates will rise). Accordingly, the birthrate will fall. On the other hand, by subsidizing the education of children, the opposite effect is created. Income is transferred from the childless and those with few children to those with many children. As a result the birthrate will increase. Yet then the value of children will again fall, and birthrates will decline as a result of the so-called social security system, for in subsidizing retirees (the old) out of taxes imposed on current income earners (the young), the institution of a family—the intergenerational bond between parents, grandparents, and children—is systematically weakened. The old need no longer rely on the assistance of their children if they have made no provision for their own old age, and the young (with typically less accumulated wealth) must support the old (with typically more accumulated wealth) rather than the other way around, as is typical within families. Parents' wish for children, and childrens' wish for parents will decline, family breakups and dysfunctional families will increase, and provisionary action—saving and capital formation—will fall, while consumption rises.10

  8On the economics of redistribution see Ludwig von Mises, Socialism: An Economic and Sociological Analysis (Indianapolis, Ind.: Liberty Fund, 1981), esp. chap. 34; Murray N. Rothbard, Power and Market: Government and the Economy (Kansas City: Sheed Andrews and McMeel, 1977),pp. 169ff.; idem, ForANewLiberty, chap. 8.

  9For a detailed empirical investigation of these and numerous related issues see Charles Murray, Losing Ground (New York: Basic Books, 1984).

  As a result of subsidizing the malingerers, the neurotics, the careless, the alcoholics, the drug addicts, the Aids-infected, and the physically and mentally "challenged" through insurance regulation and compulsory health insurance, there will be more illness, malingering, neuroticism, carelessness, alcoholism, drug addiction, Aids infection, and physical and mental retardation.11 By forcing noncriminals, including the victims of crime, to pay for the imprisonment of criminals (rather than making criminals compensate their victims and pay the full cost of their own apprehension and incarceration), crime will increase.12 By forcing businessmen, through "affirmative action" ("nondiscrimination") programs, to employ more women, homosexuals, blacks, or other "minorities" than they would like to, there will be more employed minorities, and fewer employers and fewer male, heterosexual, and white employment.13 By compelling private land owners to subsidize ("protect") "endangered species" residing on their land through environmental legislation, there will be more and better-off animals, and fewer and worse-off humans.14

  10Concerning the effect of "social security," compulsory school attendance laws and the prohibition of child labor on the progressive destruction of families see Allan C. Carlson, What Has Government Done to Our Families? (Auburn, Ala.: Ludwig von Mises Institute, 1991); also Bryce J. Christensen, The Family vs. the State (Auburn, Ala.: Ludwig von Mises Institute, 1992).

  11For one of the earliest, most profound, and most farsighted analyses of this see Mises, Socialism, pp. 429-32 and 438-41. Writing in the early 1920s, Mises described the effects of "social insurance" as follows:

  By weakening or completely destroying the will to be well and able to work, social
insurance creates illness and inability to work; it produces the habit of complaining. ... In short, it is an institution which tends to encourage disease, not to say accidents, and to intensify considerably the physical and psychic results of accidents and illnesses. As a social institution it makes a people sick bodily and mentally or at least helps to multiply, lengthen, and intensify disease, (p. 432)

  Moreover, Mises proceeds to the heart of the matter and explains why insurance against most health and accident risks, and in particular against the risk of unemployment, is economically impossible:

  The value of health and accident insurance becomes problematic by reason of the possibility that they insured person may himself bring about, or at least intensify, the condition insured against. But in the case of unemployment insurance, the condition insured against can never develop unless the insured persons so will Unemployment is a problem of wages, not work. It is just as impossible to insure against unemployment as it would be to insure against, say, the unsaleability of commodities. . . . Unemployment insurance is definitely a misnomer. There can never be any statistical foundation for such an insurance. (p. 439)

  On the logic of risk and insurance see further Ludwig von Mises, Human Action: A Treatise on Economics, Scholar's Edition (Auburn, Ala.: Ludwig von Mises Institute, 1998), chap. 6; on the dysgenic consequences of social "insurance" see Seymour W. Itzkoff, The Road to Equality: Evolution and Social Reality (Westport, Conn.: Praeger, 1992); idem, The Decline of Intelligence in America (Westport, Conn.: Praeger, 1994).

  Most importantly, by compelling private property owners and/or market income earners (producers) to subsidize "politicians," "political parties," and "civil servants" (politicians and government employees do not pay taxes but are paid out of taxes),15 there will be less wealth formation, fewer producers and less productivity, and ever more waste, "parasites" and parasitism.

  12On crime and punishment see Murray N. Rothbard, The Ethics of Liberty (New York: New York University Press, 1998), chap. 13; Assessing the Criminal, Randy E. Barnett and John Hagel, eds. (Cambridge, Mass.: Ballinger, 1977); Criminal justice? The Legal System vs. Individual Responsibility, Robert J. Bidinotto, ed. (Irvington-on Hudson, N.Y.: Foundation for Economic Education, 1994).

  13On the law and economics of "affirmative action" and discrimination see Richard A. Epstein, Forbidden Grounds (Chicago: University of Chicago Press, 1992); Discrimination, Affirmative Action, and Equal Opportunity, Walter Block and Michael Walker, eds. (Vancouver: Fraser Institute, 1982).

  14On conservation and environmentalism see Murray N. Rothbard, "Conservation in the Free Market," in idem, Egalitarianism as a Revolt Against Nature and Other Essays (Washington, DC: Libertarian Review Press, 1974); idem, Power and Market, pp. 63-70; idem, "Law, Property Rights, and Air Pollution," in idem, The Logic of Action Two (Cheltenham, U.K.: Edward Elgar, 1997); Llewellyn Rockwell, Jr., The Anti-Environmentalist Manifesto (Burlingame, Calif.: Center for Libertarian Studies, 1993).

  15See on this Rothbard, Power and Market, chap. 2, and pp. 84ff. To recognize this important truth it is only necessary to raise the question "What would happen if all taxes were abolished?" Would this imply, for instance, that everyone's income would increase from net (after-tax) income to gross (before-tax) income? The answer is clearly "no." For something is currently done with the taxes collected. They are used, for instance, to pay the salaries of government employees. Their salaries could not possibly rise if taxes were abolished. Rather, their salaries would fall to zero, which demonstrates that they are not paying any taxes at all. As Rothbard explains: "If a bureaucrat receives a salary of $ 5,000 a year and pays $ 1,000 in 'taxes' to the government, it is quite obvious that he is simply receiving a salary of $ 4,000 and pays no taxes at all. The heads of government have simply chosen a complex and misleading accounting device to make it appear that he pays taxes in the same way as any other men making the same income" (ibid., p. 278, also p. 142). Once this has been understood it becomes obvious why certain groups such as school teachers and university professors are almost always and uniformly in favor of higher taxes. They are not thereby generously accepting a greater burden imposed on themselves. Instead, higher taxes are the means by which they increase their own tax-financed salaries. On the issue of taxpayers versus tax-consumers (or tax-eaters) see also John C. Calhoun, A Disquisition on Government (New York: Liberal Arts Press, 1953), pp. 16-18.

  Businessmen (capitalists) and their employees cannot earn an income unless they produce goods or services which are sold in markets. The buyers' purchases are voluntary. By buying a good or service, the buyers (consumers) demonstrate that they prefer this good or service over the sum of money that they must surrender in order to acquire it. In contrast, politicians, parties, and civil servants produce nothing which is sold in markets. No one buys government "goods" or "services." They are produced, and costs are incurred to produce them, but they are not sold and bought. On the one hand, this implies that it is impossible to determine their value and find out whether or not this value justifies their costs. Because no one buys them, no one actually demonstrates that he considers government goods and services worth their costs, and indeed, whether or not anyone attaches any value to them at all. From the viewpoint of economic theory, it is thus entirely illegitimate to assume, as is always done in national income accounting, that government goods and services are worth what it costs to produce them, and then to simply add this value to that of the "normal," privately produced (bought and sold) goods and services to arrive at gross domestic (or national) product, for instance. It might as well be assumed that government goods and services are worth nothing, or even that they are not "goods" at all but "bads," and hence, that the cost of politicians and the entire civil service should be subtracted from the total value of privately produced goods and services. Indeed, to assume this would be far more justified. For on the other hand, as to its practical implications, the subsidizing of politicians and civil servants amounts to a subsidy to "produce" with little or no regard for the well-being of one's alleged consumers, and with much or sole regard instead for the well-being of the "producers," i.e., the politicians and civil servants. Their salaries remain the same, whether their output satisfies consumers or not. Accordingly, as a result of the expansion of "public" sector employment, there will be increasing laziness, carelessness, incompetence, disservice, maltreatment, waste, and even destruction—and at the same time ever more arrogance, demagoguery, and lies ("we work for the public good").16

  16On the fundamental errors involved in the standard national income accounting procedures, and a constructive alternative, see Murray N. Rothbard, America's Great Depression (Kansas City: Sheed and Ward, 1975), pp. 296-304; idem, Power and Market, pp. 199-202.

  After less than one hundred years of democracy and redistribution, the predictable results are in. The "reserve fund" that was inherited from the past is apparently exhausted. For several decades (since the late 1960s or the early 1970s), real standards of living have stagnated or even fallen in the West.17 The "public" debt and the cost of the existing social security and health care system have brought on the prospect of an imminent economic meltdown.18 At the same time, almost every form of undesirable behavior unemployment, welfare dependency, negligence, recklessness, incivility, psychopathy, hedonism, and crime has increased, and social conflict and societal breakdown have risen to dangerous heights.19 If current trends continue, it is safe to say that the Western welfare state (social democracy) will collapse just as Eastern (Russian-style) socialism collapsed in the late 1980s.

  However, economic collapse does not automatically lead to improvement. Matters can become worse rather than better. What is necessary besides a crisis are ideas—correct ideas—and men capable of understanding and implementing them once the opportunity arises. Ultimately, the course of history is determined by ideas, be they true or false, and by men acting upon and being inspired by true or false ideas. The current mess is also the result of ideas. It is the result
of the overwhelming acceptance, by public opinion, of the idea of democracy. As long as this acceptance prevails, a catastrophe is unavoidable, and there can be no hope for improvement even after its arrival. On the other hand, as soon as the idea of democracy is recognized as false and vicious—and ideas can, in principle, be changed almost instantaneously—a catastrophe can be avoided.