The financial crisis and lingering economic malaise have resulted in an extended debate as to the proper sphere of markets and government in society. Unsurprisingly, a large number of social critics have ignored the degree of government intervention that existed in financial markets on the eve of the crisis, falsely caricaturing the financial panic as a predictable result of irresponsible deregulation in an environment of “cowboy capitalism.” Markets taking the blame for government distortion is nothing new; it has happened in the past, and it will happen again in the future. However, given how frequently this misplaced blame occurs, we need to reconsider the fundamental narrative prevalent in the minds of those hostile to capitalism. This is not merely disagreement over the role of markets in society. It goes much deeper than that. What these debates reflect is a fundamental divergence in views on the nature of a democratic society—not what particular political decisions should be, but by whom, for whom, and how political decisions should be made.
The United States was intended to be a self-governing polity, in the sense that the great observer of American civil society, Alexis de Tocqueville, understood the term “self-governance.” Democracy did not mean “one man, one vote, the 50% plus one takes all”; instead democracy, reflected in self-governance, was a way of life, embodied in the social relationships between free and responsible individuals. To be democratic meant to solve social problems collectively within the sphere of civil society—through the efforts of local communal organizations, such as churches and fraternities—rather than delegating the responsibility for curing social ills to professional bureaucrats in a distant capital. When solutions to social problems required recourse to government, it was understood that these problems were to be addressed as locally as possible. What could be solved at the town level was not delegated to the county government; what could be solved at the county level was not delegated to the state government; what could be solved at the state level was not delegated to the national government. Americans were jealous of their personal sovereignty as enshrined in their local liberties. The 9th and 10th Amendments to the U.S. Constitution strongly suggest that the rights enumerated in that document did not limit the rights individuals retained, and that any powers not expressly delegated to the national government were reserved for people to exercise in their local capacities.
Today, democracy is more or less synonymous with majoritarianism. Constitutional checks and the division of sovereignty between state and national governments have long been out of fashion. The Constitution is, as it has been for decades, interpreted in a manner that subdues the authority of local and state governments to that of the national government, removing the barriers of protection between the individual and the majority that presumes the right to dispose of him. Through grants-in-aid programs, state governments have largely become implementation bureaucracies for national legislators’ pet projects. The good society is no longer something individuals build with each other in voluntary concert; it is something imposed from on high by experts who approach society as one would approach an engineering problem. While it would be a mistake to attribute the transition from democracy-as-self-governance to democracy-as-majoritarianism to any one person or group, it was clearly driven by an ideology that affirmed the desirability of imposing one’s own narrow vision of utopia on the rest of society. Unfortunately, the major casualty of this well-intentioned but ill-conceived agenda was a meaningful check on political power.
All of this suggests that debates over what degree market processes ought to decide what is produced and how the produce is distributed in any particular industry is a tangential issue. Defenders of markets, to the extent they are defenders of liberty more generally, need to shift the discussion to these fundamental issues of governance. Who gets to make the decisions as to what activities are undertaken collectively: sovereign individuals acting in their local capacity to enact their shared vision of a good society, or a bureaucrat who was appointed by somebody who was appointed by somebody who won an election with 52% of the vote? At what level will these decisions be made: the local level, where individuals have a stake in the community that they are attempting to shape, and thus have relatively strong incentives to engage the issues, or the national level, where benefits are concentrated on politically-connected interest groups, costs are dispersed over the public at large, and genuine accountability is nigh-impossible?
Recapturing the spirit of self-governance will do much to unleash the enriching power of economic growth, the only force that has increased humanity’s standard of living over a sustained period of time. The ability of special interests to lobby government for special favors will be diminished at the local level. The same goes for wasteful spending that allocates resources to low-valued but politically-popular uses, which currently are used by career politicians seeking to retain the trappings of office. It will also lower the costs to individuals of moving to a locality with a more-preferred mix of public and private goods. In addition to voting at the ballot box, citizens will be able to vote with their feet, making it more likely that the mix of enacted policies reflects individuals’ preferences.
Recreating a self-governing polity will be an uphill battle. The special interest groups that currently receive enormous pecuniary benefits from the current top-down governance structure will resist tooth and nail. Social crusaders who mistakenly believe that a 19th-century governance ideal must necessarily entail a 19th-century attitude towards minorities and women will denounce efforts to reclaim local sovereignty as misogynist, racist, or both. Nonetheless, the stakes are far too high not to make the effort. Unless the responsibility of governance is once again taken up by individuals eager to guard their local prerogatives, any pro-market reforms will be transitory at best and illusory at worst. The rights to life, liberty, and property cannot be retained by those who are willing to wash their hands of the responsibilities that come with genuine democracy.
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