The Importance of Liberty from a Fiscal Perspective


After the results of the 2008 Presidential Election I believe it’s important for us to consider our basic notions of democracy and the democratic process that comes with it.  With Barack Obama as our President-elect, many people believe he will bring about the positive “change” needed in the United States.  But what is this “change?”  It was in 1776 when our founding fathers gathered together to draw out and construct the basic guidelines of our democratic society.  Since then it has been 202 years since the inception of our Constitution and I believe many people have lost the knowledge of the fundamentals of democracy.  This article will attempt to lay down the typical understanding of democracy and its two different interpretations and show why liberty is more important than democracy in terms of a free market.  This especially applies specifically to the global economic crisis.  How this applies to President-elect Barack Obama and his new and upcoming administration shall be up to the reader to decide.

As someone who feels this instinctive notion of the good when it comes to autonomy and choice, I believe I have developed a good grasp and intrinsic understanding of the importance of democracy.  But despite my adherence to this political system, I do believe that liberty is more important than democracy.  Why?

In some sense I feel that the politically democratic process, though legitimate, can potentially be abused.

Let me explain.  As we saw in the twentieth century, two World Wars as well as the Nazi and Communist forms of totalitarianism caused the death of at least two hundred and fifty million people.  This is equivalent to killing the entire population of Vietnam, Germany, and the Philippines combined.  Freedom, in all its forms, was sacrificed at the altar for imperialism, nationalism, racism, and class warfare due to tyrants and dictators who claim that all their actions were in the name of the people and for the interest of the society.  Look closely though.  The common characteristics shared by both totalitarian and authoritarian regimes in the twentieth century are their rejection of the people’s right to demonstrate their preferences and aspirations through the democratic voting process.  They deemed democracy to be discordant and corrupt; a simple illusion to freedom through which commanding economic and social interests manipulate the political system for their own self-interest at the expense of the rest of the society.

As we moved into the twenty-first century, the rejection of authoritarian and totalitarian regimes around the world has brought about a resurgence of the democratic ideal.  Hundreds of millions of people have supported the belief that individuals should have the ability to rule over the political affairs of their own country.  In fact, people have rebelled and died for their dedication to self-government.

But this notion of self-government can mean and has meant two different, but complementary, ideals.

The typical understanding of self-government is perceived from a political sense.  People conceive it that members of a society have the basic right to participate in and decide through the electoral process who holds office in government.  Only the people may choose those who will enact and enforce the laws.  In a sense, the role of political self-government is to assure that those who administer the state are accountable to those whom they represent.  Political self-government also serves as a means of changing both the policies and the people that rule over the society without resorting 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 the second meaning of self-government refers to the self-governing individual.  People forget that the great ideal of political thinkers of the eighteenth and nineteenth century was the ultimate objective of political reform away from autocracy and monarchy was to liberate individuals from the tyranny of the one (or few) over the many.  But these thinkers warned of something even more destructive and counterproductive: the tyranny of the majority over the minority and especially the individual.

The ideal of these liberal thinkers wasn’t unrestricted democracy but individual liberty under a constitutional order which limits the powers of the government.

When Thomas Jefferson talked about the sovereignty of the people, he meant that each individual should have sovereignty over his or her own affairs in life.  This was the foundation behind the American revolution of 1776.  The signers of the Declaration of Independence asserted that “all men are equal, possessing certain unalienable rights which among them were life, liberty, and the pursuit of happiness.”  In an ideal world there would be no need for governments.  In a Kantian sense, if every person respected each other’s autonomy, then governments would never be required.  But humans are not perfect.  Governments are formed precisely to protect and secure these individual rights.  Any meaningful conception of human rights must refer to the individual rights of distinct human beings.

If you love democracy and support human rights, you must understand that there is no “collective” man.  There are only separate individuals who simply hope and dream the goals and purposes they have in their lives.  Freedom is never secure if people lack the means of living their lives independently of political authority.

Aristotle said long ago that man was a social animal; this credo still rings true.  People need the assistance and companionship of his or her fellow citizens.  But this assistance and companionship is brought about through the market and its social system of division and labor.  This market is the arena of peaceful and voluntary exchange.  The moral foundation of the market lies in the fact that men are prohibited from using either force or fraud in their dealings and negotiations with one another.  In a society, each man’s freedom of life and choice is respected by each other, just as he is expected to respect their freedom in turn.  This idea is just a fundamental understanding of social contract theory.

The fact that, in the market, all interactions are voluntary and founded mutual consent, individuals as a result become more civil in their interactions with one another.  If an individual wishes the cooperation and companionship of his fellow man (since coercion is not allowed), that individual must learn the practices of courtesy, good manners, honesty, politeness, and trustworthiness in his or her dealings with them.  If the individual doesn’t, that person will just reject him or her and will associate and do business with other individuals more respectful and sensitive.

The market arena is also far more democratic than the political arena.  The free market, in general, allows individuals to make their own decisions concerning a wide variety of tradable goods and services.  Given the individual’s preferences plus his or her income and wealth, he or she purchases a combination of both goods and services that will bring about the most improvement to his or her quality and enjoyment of life.  The decisions that this individual makes in the free market do not directly restrict the choices and decisions of others.  For example, if I wanted to enjoy green eggs and ham for breakfast, it would not prevent another man from buying cold cereal for his morning meal, and it would not prevent a third individual from choosing to buy nothing at all to eat in the morning and spending his money some other way.

Businessmen and entrepreneurs on the supply side of a free market respond to people’s diverse demands by competing against one another for the purchasing and hiring of the capital, equipment, resources, and labor services producing the goods that the consuming public is demanding.  Businessmen and entrepreneurs cannot force the consumers to purchase the goods and services they bring to market.  They must persuade the public on the demand side on the basis of the qualities and prices of the goods they offer for sale.  They can’t force people to work for them either (as suppliers of resources and labor services).  Each businessman and entrepreneur competes against his or her rivals for the hiring, purchase, or renting of those resource owners and workers.

None of these businessmen and entrepreneurs is guaranteed to make a profit or even break even unless the consumers chooses to purchase what they have for sale.

The goods that are produced and sold are ultimately determined by the public who, in essence, “vote” with their money for what is brought to the market.  The outcomes of the market are also “pluralistic” as well because the market provides a form of “propositional representation.”  Both the majority and the minority are supplied with goods and services to the degree that reflects the spending of their money “votes” in the market.  In fact, any minority of consumers can receive at least some portion of goods and services they desire as long as they are willing and able to offer prices for them adequate enough to cover the costs of the suppliers bringing those particular goods to the market.

One could argue that consumers in the market don’t have an equal number of “votes” in terms of the amount of money incomes they have with which to demand the various goods they desire.   But in a competitive and free market though, what determines the number of money “votes” each consumer has is a reflection of the income he or she has earned as a producer supplying other goods that his fellow consumers desired to buy.  Therefore, 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.

After conceiving the two distinctions of self-governance, the democratic pluralism of the free-market economy stands in stark contrast to the outcomes that result from the political democratic process.  The goods and services provided by government are not open to individual decision-making and choice.  As consumers we cannot pick and choose among the government goods and services in terms of the relative amounts we would like to have.  Also we are unable to choose to completely reject some of those goods and services and not have them at all.  We also don’t have the option of only paying the government goods and services we do want.  This conception of the government acquires the financial means to supply the things it supplies to the society through taxation which is the required taking of a part of the citizen’s income and wealth without their individual and voluntary consent.

Let’s look at authoritarian and totalitarian dictatorships in comparison to the political democratic process.  In a dictatorship, this taking is determined by the wishes of an absolute 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 solely depends on the extent to which those in political power are able to persuade the population that the forced taking through taxation is a legitimate reflection of “the people’s” will expressed through the electoral process.  The democratic society is also influenced by the formation 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.  Of course, these are all claimed to be in the “national interest” and the “common good.”

As you can see, it is the use and abuse of the political democratic process for various interventionist schemes of welfare distribution that is the source of the accusations of divisiveness and corruption in democratic society.  It is not democracy that has failed in the past though.  The underlying problem has always been caused by extending political democracy into areas that should be left to both the arena of individual self-governing and personal sovereignty, and the voluntary, democratic pluralism of the free market.

Therefore, if our democracy is to succeed and thrive in the twenty-first century, it must be in the form of a liberal and limited democracy.  Unlimited democracy allows majorities and special interest coalitions (who directly interfere with the free market) to violate the freedom and sovereignty of the individual and coercively interfere with the peaceful and productive voluntary relationships of the market.

So the question arises: is the economic stimulus plan proposed and supported by the Democrats and the coming Obama administration beneficial to the economy at all?  Is this the right course of action in solving the global economic crisis?  This is for you, the reader, to decide for yourself.

Cuong Nguyen (’11) is a Philosophy major at Johns Hopkins University.


Note: Homepage thumbnail taken from ~makhor’s deviantART.

One thought on “The Importance of Liberty from a Fiscal Perspective

  1. Really, democracy is unimportant in a benevolent state. If the state were “good,” that is, it respected your liberties, then you would simply want the most qualified man to lead. Democracy is important specifically because it can provide some safeguard to liberty. Still, majorities absolutely can tyrannize. If you are the tyrannized minority, what comfort can you take in living in a “democratic” society? Should you consider the situation improved with each additional foot on your throat?

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