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Liberty Is More Important than Democracy

Mises Daily: Wednesday, April 24, 2002 by

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The 20th century was most certainly the most inhuman and brutal one hundred years in modern history. Two World Wars as well as the Nazi and Communist forms of totalitarianism have been estimated to have caused the death of at least 250 million people. This would be equivalent to the mass murder of the entire populations of Brazil, Argentina, Chile, Peru, and Paraguay.

Freedom in all its forms was sacrificed on the altar of nationalism, imperialism, racism, and class warfare. Tyrants and dictators claimed that all their actions were in the name of the people and for the interest of the masses. But the common characteristic of both totalitarian and authoritarian regimes in the 20th century was their rejection of the right of the people to demonstrate their desires and preferences through the democratic voting process. Democracy was condemned as divisive and corrupt. Democracy was declared to be an illusion of freedom, through which powerful social and economic interests manipulated the political system for their own benefit at the expense of the rest of the society.

The rejection of totalitarian and authoritarian regimes around the world has represented a rebirth of the ideal of the democratic order. Hundreds of millions of people have declared their belief in their ability to rule over the political affairs of their own countries. The people of the world have proclaimed their dedication to self-government. But it is important to remember that "self-government" can mean and has meant two different, but complementary, ideals.

Self-government in the political sense means that the members of society shall have the right to participate in and decide through the electoral process who holds office in the government. The people shall choose those who will enact and enforce the laws of the land. The role of political self-government is to assure that those who administer the state are accountable to those whom they represent. Periodic elections enable the people to judge the continuing fitness and integrity of the elected officials, and to help prevent abuses of power at the expense of the electorate.

Political self-government also serves as a means of changing both the men and the policies that rule over the society without recourse to violent revolution or civil war. Democracy introduces civil peace into the political process by eliminating the necessity of taking up arms to remove those in high office. Death and destruction are no longer the price for political change.

But there is a second meaning to the idea of self-government.  This refers to the self-governing individual. The great ideal of the liberal thinkers of the 18th and 19th centuries was that the ultimate goal of political reform away from monarchy and autocracy was to liberate and free the individual from the tyranny of the one or the few over the many. But they also warned of the equal and perhaps even greater danger of the tyranny of the majority over the minority or even over the one.  Their ideal was not unrestricted democracy but individual liberty under a constitutional order limiting the powers of the government.

When they spoke of the sovereignty of the people, they meant that each individual should be sovereign over the affairs of his own life. This was the idea behind the North American revolution of 1776, when the signers of the Declaration of Independence declared that all men are equal in possessing certain unalienable rights, among them life, liberty, and the pursuit of happiness. And that governments are formed by men precisely to secure and protect these individual rights. Any meaningful conception of "human rights" must refer to the individual rights of distinct human beings. There is no "collective" man. There are only separate individuals who think, value, hope, dream ,and have goals and purposes that guide their lives.

The liberals of the past also emphasized that freedom is never secure if people do not have the means of living their lives independently of, and sometimes in opposition to, the political authority. That is one of the reasons why they considered the right to private property so essential and crucial. Private property gives an individual ownership and control over a portion of the means of production through which he may choose how and for what purposes he will live his life.  Private property gives him a "territory" that is under his own jurisdiction for a degree of "self-rule" in his home and on his property.  In the free, liberal society, he can design his personal "country" that his private property represents to fit his values, ideals, and desires.  

It is true that no man is an island. Man is a social animal who needs the assistance and companionship of his fellowmen. But in that free, liberal society, human association is brought about through the market and its social system of division of labor. The market is an arena of peaceful, voluntary exchange.  The moral premise of the market is that men are prohibited from using either force or fraud in their dealings with each other. Each man’s freedom to live and choose is respected by the others in the society, just as he is expected to respect their freedom in turn.  

Since coercion is prohibited in the market, if a man wishes the companionship or cooperation of other people, he must learn to practice politeness, courtesy, good manners, honesty, and trustworthiness in all his dealings with them. Otherwise they will turn away from him and will associate and do business with others more respectful and sensitive in their dealings. Thus, the fact that in the market all interactions are voluntary and based on mutual consent results in men becoming more civil and refined in their relationship with others.   

Furthermore, the marketplace is far more democratic than the political arena. In the free market, each individual makes his own decisions concerning a wide variety of tradable goods and services. Given his preferences and his wealth and income, he purchases the combination of goods and services that he considers will most improve the quality, enjoyment, and purposes of his life. And in the private, free market, his decisions and choices do not directly restrict the decisions and choices of others. That one man enjoys purchasing ham and eggs for his breakfast does not prevent another man from buying cold cereal for his morning meal, and still a third individual from choosing to buy nothing at all to eat for the early part of the day and instead spend his money in some other way.

The entrepreneurs and businessmen on the supply side of the market respond to our different demands by competing against each other for the purchase and hire of the resources, capital equipment, and labor services with which the goods can be produced that the consuming public is demanding. Entrepreneurs and businessmen cannot compel the consumers to purchase the goods and services they bring to market. They must persuade the buying public, on the basis of the qualities and prices of the goods they offer for sale. Nor can they force people to work for them, as suppliers of resources and labor services.  Each entrepreneur and businessman competes against his rivals for the purchase, renting, or hiring of those resource owners and workers. And neither are any of those entrepreneurs and businessmen guaranteed to make a profit, or even to break even, unless the consumers choose to purchase what they have for sale.  

What gets produced and the prices those goods are sold for ultimately are determined by the public, who "vote" with their money for what is brought to the market. At the same time, the outcomes of the market are "pluralistic." That is, the market provides a form of "proportional representation." Minorities are supplied with goods and services just as much as the majority and to the degree that reflects the spending of their money "votes" in the market. Indeed, any minority of consumers can receive at least some of the goods and services they desire as long as they are willing and able to offer prices for them sufficient to cover the costs of some supplier bringing those goods to market.

But don’t consumers in the market have an unequal number of "votes" in terms of the amount of money incomes they have with which to demand the various goods they desire? Yes, that is true. But in a free, competitive market, what determines the number of money "votes" each consumer has is a reflection of the income he has earned as a producer supplying other goods that his fellow consumers desired to buy. Thus each individual’s relative income share in the society is a reflection of what the other members of the society think his services are worth in terms of the value they place upon his contribution to a particular production process.    

The democratic pluralism of the free-market economy stands in stark contrast to the outcome that results from the political democratic process. The goods and services provided by government are not open to individual decision-making and choice. We cannot pick and choose among the government goods and services in terms of the relative amounts we would like to have. And we certainly cannot choose to completely reject some of those goods and services and not have them at all. Nor do we have the option only to pay for the government goods and services we do want. Government acquires the financial means to supply the things it supplies to society through taxation, the compulsory taking of a part of the citizenry’s income and wealth without their individual, voluntary consent.

In a dictatorship, this taking is determined by the wishes of the ruler and those closest to him, on the basis of their need and uses for the resources of the nation. In the democratic society, the limits on taxation depend on the extent to which those in political power are able to persuade the general population that the forced taking through taxation is a legitimate reflection of "the people’s" own will as expressed in the electoral process. It is also influenced by the formation of coalitions of special interest groups that participate in justifying and pressuring for various government programs for redistributing income and restricting markets through regulation, trade barriers, and monopoly privileges. These are all claimed, of course, to be in the "national interest," or for the "common good."

It is the use and abuse of the political democratic process for various interventionist and welfare redistributive schemes that is the source of the accusations of divisiveness and corruption in democratic society that are made by the enemies of freedom. But it is not democracy that has failed in the past. The problem has been caused by the extending of political democracy into the areas that properly should be left to both the arena of individual self-governing and personal sovereignty, and the voluntary, democratic pluralism of the free market.  

If democracy is to succeed and thrive in the 21st century, it must be in the form of liberal and limited democracy. Unlimited democracy means that majorities and special interest coalitions that form majorities may violate the freedom and sovereignty of the individual and coercively interfere with the peaceful and productive voluntary relationships of the market.  

Liberal democracy and the market economy require the following:

1. Recognition and respect for the individual’s civil liberties. These include the traditional freedoms of speech, the press, religion, and voluntary association.

2. Recognition and respect for the individual’s economic liberties--the right to real and personal property, and the right to its free use and disposal by the owner, as long as its use and disposal is consistent with the recognition and respect of the same equal rights of all other individuals in the society.

3. All means of production are privately owned. And the use of these means of production is under the control of private owners, who may be individuals or corporate entities.

4. Consumer demands determine how the means of production will be used, with the competitive forces of supply and demand determining the prices for consumer goods and the various factors of production, including labor.

5. The freedom of the market is not confined to domestic transactions, but includes the freedom of international trade and investment.

6. The monetary system is based on a market-determined commodity (for example, gold or silver), and the banking system is private and competitive, neither controlled nor regulated by government. Or if a central bank is in charge of the monetary system, it is strictly limited to a series of narrow rules for management of the money supply to prevent both inflation and its political use for the purposes of special interest groups.  

7. Government is primarily limited in its activities to the enforcement and protection of life, liberty, and property.  The law clearly defines and strictly enforces private property rights.

For the most part, these were the principles upon which liberalism and liberal democracy were based before First World War, before the 20th century ushered in totalitarian collectivism, aggressive political and economic nationalism, authoritarianism of various forms and types, and the interventionist-welfare state. 

If we can establish this liberal democratic and free market ideal the 21st century can be the great century of freedom, prosperity and peace.  It can be the century of tolerance for and the dignity of the individual.  It can be a century of domestic civility and international harmony.  It can be a century with far less political corruption, violence and deception.  Will it be that kind of century?  That depends upon each and every one of us, and whether we want such a liberal world and are willing to defend it as an ideal and to do what is necessary to bring it about.


Richard Ebeling teaches economics at Hillsdale College and is an adjunct scholar of the Mises Institute. Send him MAIL. See his Mises.org Daily Articles Archive. This paper was originally presented at a conference, "The Future of Democracy in the 21st Century," sponsored by Instituto de Estudos Empresariais (Institute for Entrepreneurial Studies) in Porto Alegre, Brazil, April 8-9, 2002.