Peterson, William H.. Free trade and capitalism: America's other democracy. Nova Iorque: Vital Speeches of the Day, vol.65, art.12, pg.374; 1 de abril de 1999.
Free trade and capitalism: America's other democracy
Vital Speeches of the Day; New York; Apr 1, 1999; William H Peterson;
Abstract:
Every one of us has to cope daily with the laws of scarcity, opportunity cost, and demand. Man has figured out 2 ways to cope. The first is the political or coercive way. The 2nd is the market or voluntary way. Both ways are necessary in the Constitutional scheme of things. But the Founders put the greatest scope into the market way. This second democracy is the entire private sector, with virtually everybody voting many times daily. It is the very heart of a free society.
Copyright City News Publishing Company Apr 1, 1999
Welcome to the Dismal Science of Economics and that classic oxymoron, Political Science. Science? A definition of politics can be sensed from its derivation, from its Greek roots. Poli means of course many, and ticks means blood-sucking parasites.
Economics can be sensed from a story told by President Harry S. Truman who had reporting to him the nation's first Council of Economic Advisers. He explained that a one-armed economist would never do, for how could that economist say, "On the other hand ..."?
My talk today turns on free markets, so on economics and politics, and on my immodestly-named Peterson's Law, to be unveiled in a moment.
Anyway, economics got started, in case you didn't know, with Adam and Eve - a couple who have been since renamed by the Feminists as Adam and Even. You recall that this couple had unrighteously partaken of the Forbidden Fruit and soon got into brazen politics' blame game: Adam blamed Eve and Eve blamed the serpent, who, she said, did beguile her. An angry Lord Jehovah drove the two out of the bountiful Garden of Eden with a slap: "By the sweat of thy face shalt thou eat bread."
And so was born a primal law of economics, the dismal Law of Scarcity, a law whose pangs are felt in your tummy around three times daily, if not more often, a law with financial strictures such as your having to meet monthly mortgage or car payments, a law reminding you that to put bread on the table you have first to raise the dough.
Scarcity in turn gives birth to another dismal law, the Law of Opportunity Cost, the dark idea that no matter what you do with your income or time, you do so always at the cost of income, time, or satisfaction denied in some alternative choice of action - always, always.
This Law of Opportunity Cost is also known as the law of tradeoffs, that in choosing A you have to trade off or give up choosing B, or if you choose B you have to give up options X, Y, or Z. That's the way it is.
So no matter whether you choose little things such as what to wear, what book to read, or at what restaurant to dine - or big things such as what profession to pursue, where to live, or whom to marry, you must reject alternative choices. No escape from this central fact of life. Life, after all, is choosing. Even if you choose nothing, that's still a choice.
The Law of Opportunity Cost boils down to the idea there is no free lunch, ever. The law helps explain the last law in this Eco 101 crash review: the Law of Demand: the higher the price the less the quantity demanded and the lower the price the greater the quantity demanded.
Yet, suprisingly, millions of naive Americans -- present company excepted - buy into state schemes involving "free money," i.e. subsidies or privileges: from Socialist Security, to crop price supports for farmers, to federally underwritten college tuition loans for students, to cheap flood insurance for farmers and land owners near the Mississippi and other rivers prone to overflow their banks, to Medicare, Medicaid and tax-deductible company health plans involving third-party payments that make patients oblivious to cost and so help jack up medical prices -- to many other delusions in which bedazzled Americans forget: government has nothing to give save what it first takes away. Politics tries but just can't escape the law of no free lunch.
Another mass delusion lies in what has been called Friedman's Law: Milton Friedman has given us his wisdom on government that nobody spends other people's money as carefully as he spends his own. Voters, be advised. (But, ironically, voters are the worst offenders in breaking this law. Politics a la Machiavelli and Friedman's Law, indeed.)
Back to Adam and Even and all their offspring down to you sitting out there, every one of you having to cope daily with the laws of scarcity, opportunity cost, and demand.
Well, how do you cope? Man's figured out two ways:
The first is the political or coercive way.
The second is the market or voluntary way.
Both ways are necessary in the Constitutional scheme of things.
But let me ask you: Where did the Founders put the greatest scope, in the political or the market way?
They put it into the market way; and to get there the Founders sharply limited the federal government by setting checks and balances: a written Constitution, a Bill of Rights, a tripartite government of judicial, legislative and executive branches, a bicameral legislature, a federalism splitting power between the central and state governments. As George Washington said: "Government is a helpful servant but a fearful master."
Fearful master? Oh yes. For politics has a way of forgetting you, of denying your consent and choice, of rendering you into the Forgotten Man - to use the phrase of Yale economist William Graham Sumner in 1883.
Fearful master? Oh yes. Let me read to you the entire Tenth Amendment to give you an idea of the Founders' fear and their drive for limited government:
The powers not delegated by the Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people.
I repeat the last three words, "to the people," for they spell self-government, meaning government of self, the Fathers meaning Govern Thyself. For let me tell you of America's other democracy, its dominion within a dominion, its amazing second but quite nonpolitical government.
Is expanding this Second Democracy under the rule of law the way to go? And how. Let me tell you why via a riddle and a story. The riddle:
Precisely, what and where is this second democracy? The story springs from Leonard E. Read, founder in 1946 of an early think-tank, the Foundation for Economic Education in Irvington, New York. Read tells of a shopper in a crowded department store during a Christmas rush. After buying some gifts, she remarks to a clerk on how jammed the store is. "Yes," says the clerk, "it's our best day so far." Then the shopper goes over to the post office to mail her packages, again remarking on the crowd. "Yes," says a postal clerk, "it's our worst day so far."
Read's story bears on America's and the West's other democracy, a second government. Think: This other democracy flourishes in the land but does so without taxes, pork, politics, corruption, government waste or state coercion. Too, this second democracy, while imperfect, is bigger reaching overseas for things like coffee and bananas, is self-regulating, again strictly voluntary, and a lot more moral than the first democracy.
To cap it off, this second democracy turns the Forgotten Man into the Remembered Man, winning hands down on such critical matters as individual choice, consent, participation -- voting by virtually all the people, and at practically every age. Here people don't have to register to vote, are not disallowed because of residency, noncitizenship, and the rest. Here minorities win wholesome respect without coercion. Why?
Look. Participation and consent are anything but 100 percent in the first democracy. In 1996 President Clinton won, according to the U.S. Statistical Abstract, on a turnout of 98 million or 49 percent of eligible voters. So less than one out of every two potential voters voted. 100 million eligible voters stayed home or went bowling - a landslide of apathy. Thus less than one out of every four eligible voters directly consented to the Clinton win - or of all Americans but 17 percent.
Well, where is this second democracy, this much unappreciated, unsung, even unrecognized yet vast democracy in Western life? And when seen, why is it put down as self-seeking, narrow, materialistic, even if it involves the very essence of freedom such as choice and self-fulfillment?
First, note that it's under your nose, as near as your phone to call a plumber or doctor, order a pizza or airline tickets, make an appointment with a barber or hairdresser. Look. This second democracy is but the everyday ordinary yet most extraordinary marketplace.
It's more: It's the entire private sector, with virtually everybody voting many times daily. It is the very heart of a free society. It is social cooperation on a vast scale: private companies and schools, private charities and foundations, churches and synagogues, private TV, internet, and newspaper firms, think tanks, CPAS, law firms, private hospitals, book publishers, private charities, private clubs, millions of buyers and sellers, globally billions of producers and consumers busily, willingly, helping each other despite different languages, cultures, and governments.
Think about it. In America's first democracy, again, under 100 million votes were cast in the 1996 presidential election, a quadrennial event. But in America's other democracy, where dollars make up ballots, billions of separate votes or transactions (a word I'll get back to) are cast daily. The market process is an hour-by-hour plebiscite, one that mirrors the changing wishes and demands, efforts and supplies - the aspirations of people everywhere. Hail this 8th Wonder of the World, the free market.
Private democracy then is dynamic, responsive, responsible - yes imperfect - but far more honest and democratic than political democracy, with far more choice and consent, with millions of voluntary governments, from the individual and his/her family, and including, say, GM, IBM, Yale, the Catholic Church, and Captive Aire - how's that for pandering, Bob? All are private hierarchies of power, all voluntary states in a free society.
Think more on this other democracy of one-person-many-- votes. See it as a discovery process for both consumers and producers, as all-pervasive: Apart from your handy telephone, polling booths are ubiquitous, many impervious to weather, some open 24 hours a day seven days a week, with such handy market facilities as an ATM, bank, magazine, mall, airline, restaurant, vending machine, movie house, coin laundry, doctor's office, supermarket, gas station, interactive radio and TV, yellow pages, E-mail, modernized PC - the whole World Wide Web at your fingertips.
All pray for your vote. All are, unlike the officious coercive state, wholly subservient to that vote. All remember you. You vote - the point bears reiteration -- constrainedly with your money, not unconstrainedly with somebody else's money as in the first democracy. Here your vote does count, per Ludwig Mises in Human Action ( 1966, p. 270): The consumers patronize those shops in which they can buy what they want at the cheapest price. Their buying and their abstention from buying decide who should own and run the plants and the farms. They make poor people rich and rich people poor. They determine precisely what should be produced, in what quality, and in what Quantities. They are merciless.
Note, Mises says you, Mr./Ms. Consumer, are merciless, a sovereign who can return merchandise, comparison-shop, drop brands and vendors, induce efficiency, demand and usually get lower prices and better quality. So see U.S. living standards as the world's highest, and ask yourself: Why?
Note too, that your voting in the marketplace is a snap relatively, that every day is Election Day, that the marketplace reflects your and everybody else's free choice, that it regulates itself, with high prices spurring supply and slowing demand, with low prices slowing supply and spurring demand, with market prices adjusting then to ever new supply and demand forces, erasing shortages and surpluses as they arise. Again, the marketplace is imperfect. For example, con artists lurk there. Yet market democracy optimizes not only goods but - imagine -- civil liberties like the right to vote, trial by jury, privacy, property rights, freedom to choose, etc. Hear Mises in Human Action on market democracy and the rich:
In the political democracy only the votes cast for the majority candidate or the majority plan are effective in shaping the course of affairs. The votes polled by the minority do not directly influence policies. But in the market democracy no vote is cast in vain. Every penny spent has the power to work upon the production processes. The publishers cater not only to the majority by publishing detective stories, but also to the minority, reading lyrical poetry and philosophical tracts. Yes, the rich cast more votes than the poorer citizens: but this inequality is itself the outcome of a previous voting process. To be rich, in a market economy, is from success in filling best the demands of the consumers.
Mises was right about the elected rich and the popularity of detective stories over philosophical tracts. The market reflects consumer tastes. If some consumers want pornography and prostitutes, pornography and prostitutes are what they get. Ditto drugs and alcohol, sky diving, bungee jumping, violent movies, mud wrestling, Internet obscenity. The market is human, fickle, hardly perfect. It mirrors mankind, warts and all.
Yet consumer acumen and tastes can be lifted. Broadly, the market gave us Shakespeare and Cervantes, Charlotte and Emily Bronte, Monet and Picasso, Mozart and Beethoven. The market came up with Alexander Graham Bell and Thomas Edison -- both keenly aware of the market potential of inventions like the telephone and the electric light.