Mises Wire

Why Social Welfare Programs and Democracy Cannot Co-Exist

Writing in his 1922 treatise Socialism, Ludwig von Mises expressed support for democracy, but took a very limited view. Specifically, he suggested the only purpose of democracy is to “make peace, to avoid violent revolutions.” That is, democracy is purely a means to an end and its value lies in providing a way to remove agents of the state without the need to resort to military tools: “The essence of democracy is ... that  lawgivers and rulers ... may be peaceably changed if conflict occurs.” 

Mises was himself a small-d democrat in that he — like many other liberals of his time — saw value in the use of democratic institutions for providing a means for addressing political conflicts that could be disruptive to the economic life of a community. For Mises, the avoidance of situations like wars, riots, revolutions, and other violent uprisings were essential for the maintenance of a functioning market: 

Liberalism, recognizing that the attainment of the economic aims of man pre-supposes peace, and seeking therefore to eliminate all causes of strife at home or in foreign politics, desires democracy.

Mises, was no naive democrat, however. At no point in his writings does he ever assume that democracy is a sufficient condition for peace or that democracy can overcome problems introduced into a political system by faulty ideology. 

Indeed, Mises was always aware of the central role in ideology in how laissez-faire or not-laissez-faire a state might be. If a sizable portion of the people want a totalitarian state, Mises understood, no amount of democracy — or lack thereof — will prevent it.  

After all, Mises writes, “democracy tries to ... guarantee[...] accord between the will of the state — as expressed through the organs of the state — and the will of the majority.” 

But what if the will of the majority leans toward Tsarism? “Well,” Mises would reply, “that’s probably what you’ll get”:

The Russian conservative is undoubtedly right when he points out that Russian Tsarism and the police of the Tsar was approved by the great mass of the Russian people, so that even a democratic state form could not have given Russia a different system of government.

Mises understood that if one were to maintain a laissez-faire political system — whether democratic or autocratic — a sizable portion of the population must actually want a laissez-faire system, or at least something similar to it. 

An Easy Way to Convince Voters to Abandon Laissez-Faire 

But, even if a population tends toward laissez-faire beliefs, there are ways that states can undermine these beliefs and harness human vices such as greed, laziness, and fear to increase the size and power of the state.

Writing in Bureaucracy in 1944, Mises described the problem that arises when a sizable portion of the population receives its livelihood from the state: 

The bureaucrat is not only a government employee. He is, under a democratic constitution, at the same time a voter and as such a part of the sovereign, his employer. He is in a peculiar position: he is both employer and employee. And his pecuniary interest as employee towers above his interest as employer, as he gets much more from the public funds than he contributes to them.

This double relationship becomes more important as the people on the government’s payroll increase. The bureaucrat as voter is more eager to get a raise than to keep the budget balanced. His main concern is to swell the payroll.

Nor was this problem limited to state employees. Mises writes:

There were not only the hosts of public employees, and those employed in the nationalized branches of business (e.g., railroad, post, telegraph, and telephone), there were the receivers of the unemployment dole and of social-security benefits, as well as the farmers and some other groups which the government directly or indirectly subsidized.

Representative democracy cannot subsist if a great part of the voters are on the government payroll. If the members of parliament no longer consider themselves mandatories of the taxpayers but deputies of those receiving salaries, wages, subsidies, doles, and other benefits from the treasury, democracy is done for.

This is one of the antinomies inherent in present-day constitutional issues. It has made many people despair of the future of democracy. As they became convinced that the trend toward more government interference with business, toward more offices with more employees, toward more doles and subsidies is inevitable, they could not help losing confidence in government by the people.

Obviously, in such a situation, no elected official who wishes to be re-elected will oppose a continuation or even an increase in the state’s Social Security, healthcare programs, subsidies, and other types of spending.  

Within such a political system, whatever latent support there may be for laissez-faire otherwise will be gradually swept away by the realization that voting for more government benefits is — seemingly — far more lucrative than voting for laissez-faire. 

John Stuart Mill’s Limited Suffrage 

Mises was not the first democrat to recognize the problem of expanding the vote to those who receive more from the state than pay into it. 

John Stuart Mill, long considered a radical democrat for his support of near-universal suffrage (including women), nevertheless opposed suffrage for those on the dole. In his 1861 book Considerations on Representative Government, Mill writes

I regard it as required by first principles, that the receipt of parish relief should be a peremptory disqualification for the franchise. He who cannot by his labour suffice for his own support, has no claim to the privilege of helping himself to the money of others. By becoming dependent on the remaining members of the community for actual subsistence, he abdicates his claim to equal rights with them in other respects. Those to whom is his indebted for this continuance of his very existence, may justly claim the exclusive management of those common concerns, to which he now brings nothing, or less than he takes away...

As a condition of the franchise, a term should be fixed, say five years previous to the registry, during which the applicants’s name has not been on the parish books as a recipient of relief.

Mill attempted to address this issue by ensuring that all voters were essentially net tax payers in the sense that all voters paid more in taxes than they received in subsidies: 

It is also important, that the assembly which votes the taxes, either general or local, should be elected exclusively by those who pay something towards the taxes imposed. Those who pay no taxes, disposing by their votes of other people’s money, have every motive to be lavish and not to economise. As far as money matters are concerned, any power of voting possessed by them is a violation of the fundamental principle of free government; a severance of the power of control, from the interest in its beneficial exercise. It amounts to allowing them to put their hands into other people’s pockets, for any purpose which they think fit to call a public one...

Representation should be coextensive with taxation, not stopping short of it, but also not going beyond it, is in accordance with the theory of British institutions.

Beyond this, Mill wanted no permanent limitation on the franchise, and wished that anyone excluded from suffrage because of present economic hardship could hope to attain suffrage in the future. That is, any limitations on suffrage should  ”leave the suffrage accessible to all who are in the normal condition of a human being.” 

Dangerous Views of Democracy 

The key factor behind this is ideology. A population that views the widespread growth of government jobs and welfare programs as illegitimate will not tolerate such a situation to arise in the first place. In this respect, if the purpose of democracy is — as Mises claimed — to create accord between the will of the state and the will of the population, then the democracies of the Western social democracies are working precisely as designed and as expected. 

Contrary to what some libertarians seem to think, most people of the Western democracies are not libertarians “who don’t know it yet.“ In fact, the vast majority of the populations in the Western democracies are very much ideologically at peace with large interventionist states that employ large numbers of people and pay out immense amounts of taxpayer funds in social benefits and subsidies to private businesses. Their voting patterns and stated preferences make this clear. As expected, the democratic states reflect the ideologies of their citizens. 

Without a change in this ideological reality, no significant change should be expected. 

Nevertheless, extending the vote to those who receive more in subsidies than they pay in taxes will accelerate the process of economic impoverishment and instability. 

The first step in reversing this ideological problem lies in adopting laissez-faire as a dominant political ideology. The second step is moving back toward Mises’s view of democracy as merely a mechanism employed for certain ends. Democracy is not, Mises believed, an extension of natural rights, or personal sovereignty, or the manifestation of some mystical public will.

Moreover, Mises argued, these ideas lead to dangerous beliefs that democracy can imbue the state with limitless power, or that there is no difference between the will of the state and the will of the people. 

Once these troubling notions of democracy are accepted, we are in deep trouble indeed. Mises concludes: 

Grave injury has been done to the concept of democracy by those who, exaggerating the natural law notion of sovereignty, conceived it as a limitless rule of the volonté générale. 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. 

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