The Real Beauty of Modern Democratic Capitalism

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This week marked a milestone in the Western history. On the 5th of May 1789, the Estates General convened in Versailles.

In the popular mind, if there is one, mankind has been on a steady upward slant. From single-celled amoeba to Homo ergaster to Barack Obama…from the chubby carved madonnas found in caves to Caravaggio’s Madonna found in Sant’Agostino to Madonna herself, whereabouts unknown…from crossing the Red Sea out of bondage in Egypt to crossing the Rubicon to crossing the Delaware, it has been a march from the dark depths of history into the sunlight of modern democratic capitalism and consumer credit.

‘It’s all good,’ as they say in America.

Yes, of course, there are occasional instances of backsliding…even a Roosevelt or a Robespierre could be born with a prehensile tail. But the progress of the race continued. Tribal chiefs in skins gave way to emperors with purple on their backs. Wars, revolutions…one regime was replaced by a better one; tyranny butted heads with freedom until, finally, in the Year of Our Lord, 1989, the Soviet Union collapsed…leaving only one system resplendent, triumphant… modern capitalist democracy.

American intellectual Francis Fukayama, drinking too deeply from the victory cup, announced that history itself had come to an end. There would be no further need for wars or revolutions. Like Engels before him, he thought perfection had been achieved. In his mind, not only was he living in the best of all possible worlds, but it was a world that got better all the time. That was the real beauty of modern democratic capitalism; it adapted to change; it improved. “You can fool all of the people some of the time, and some of the people all of the time,” said Lincoln, putting his finger on it, “but you can’t fool all of the people all of the time.” Sooner or later, the residual wisdom of the masses will catch on to flimflam, in other words, and vote the rascals out. (Likewise, the process of what Schumpeter called “creative destruction,” assures that capitalism always sweeps away its old mistakes so as to make room for new ones.)

But the difference between democracy in theory and democracy in practice is like the difference between a filet mignon at the Ivy and a visit to a slaughterhouse. Watching the current U.S. presidential election, for example, calls for white rubber boots…and a good hosing afterward.

Both Hillary and McCain called for a “summer holiday” for the gas tax. Already, fuel costs only about a third of what it costs in Britain. And the effect of cutting taxes on gasoline would be so obviously negative, encouraging drivers to use more gas, even New York Times columnist Tom Friedman can see it is pandering to the voters: “This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks.”

Of course, pandering and lying are what make modern elections more entertaining than an abattoir. But they’re also why capitalist democracies tend to cut their own throats. The politicians may be pandering, but the yahoo voters – as well as the powerful special interests – rarely turn down a chance to pick someone else’s pocket. And once granted, they never give it up. Then, the system doesn’t adapt to change; it tries to prevent it. No one wants a correction. Instead, the banker wants to borrow at lower rates. The homeowner wants to live in a house he can’t afford. The retiree, who forgot to save while he was working, wants someone else’s money to pay for his golden years. And each bailout, privilege, and giveaway brings the knife closer to the jugular.

Who can stop it? For every Paul Volcker and Tiberius Gracchi there are a hundred Alan Greenspans and Hillary Clintons. And the poor voter not only can’t tell them apart – he doesn’t want to. He’s chumped by his own vanity. On Election Day, the ultimate decider-in-chief looks in the mirror and sees a face as wise as Solomon and as good as Billy Budd. But when ballot box gives him a license to steal…he can’t help himself. That’s why every politician, from Caligula to Mussolini to George W. Bush, has found that the best policy is not to confront the mob, but to suborn it, with flattery, inflation and war.

One of the many low points in America’s campaign was reached when all three candidates appealed to fans at a Worldwide Wrestling extravaganza. All three candidates must have felt at home. Professional wrestling is a lot like a national election – staged, comic and appalling. There is probably no group of bigger cornballs outside a state legislature. But each candidate pretended to be just one of the rubes. Obama pronounced some forgettable words of feigned solidarity. Hillary said she was ‘ready to rumble,’ on their behalf. But John McCain (and his McCain-iacs) won the champion’s belt that night. Wrasslin’, he said, “is about celebrating our freedom.”

So spellbinding is the bright promise of democracy that generations of Frenchmen leapt to suicide to protect it. America’s current president has practically bankrupted the nation to try to implant it in Mesopotamia. And Republican candidate John McCain has made it the centerpiece of one of the most boneheaded proposals ever to come out of a presidential campaign. “A league of democracies,” says McCain, will provide a bulwark against tyranny and terrorism.

The 16th Louis called the Estates General for the same basic reason McCain wants a league of democracies – to try to adapt to new conditions while preventing things from really getting away from him. But the assembly soon spun out of control. The Old Order in France was no more willing to give up its ill-gotten gains than American voters are today. The system couldn’t adapt. In the end, Louis mounted the guillotine; sooner or later, so will modern democracy.

Bill Bonner
The Daily Reckoning

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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John
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Seems like being a politican is much more lucrative than a lot of other jobs – you get to lie, cheat, and steal, and then lie some more to cover it up and watch as people buy into it. Makes me wonder why I didn’t go into politics…

BTW another great article, Bill!

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