Bureaucrats pose the biggest threat to democracy in US

PUBLISHED : Sunday, 29 July, 2012, 12:00am
UPDATED : Sunday, 29 July, 2012, 12:00am


In the Soviet Union, capitalism triumphed over communism. In this country [United States], capitalism triumphed over democracy.

Fran Lebowitz, author

A friend of mine sent me this line the other day, heading the e-mail: 'Sad truth. She's American but 'this' could be many countries.'

Sad truth indeed, if true, but I don't think it is, not of any country.

Let's disregard that bit about the Soviet Union. Communism killed itself. It was always a form of economic suicide. Let's note instead that, with three months still to go to a presidential election, the hustings in the US resound to the usual bellowing political rant. Triumph over democracy in the US? I'd like to see someone try.

But there is indeed an insidious threat to it, one that the founding fathers foresaw when they created a political system so full of checks and balances against tyranny that they left little room for initiative.

It started to unravel in the Civil War, when a union of states became the unified state and was steadily further frayed by presidential administrations grabbing power for themselves. A key transition was the infamous Gulf of Tonkin Resolution whereby the executive branch usurped the right of Congress to declare war. The monster is fully grown now. It is a huge bureaucracy nominally under the control of the president but so unwieldy that nothing really controls it, certainly not the Congressmen who supposedly have the legislative oversight of it. A good portion of it is officially independent. All of it has its own glory and majesty at heart.

Now let us look at capitalism. All businessmen would like to see their markets rigged in their favour and most spend a good portion of their working day trying to achieve this objective. But this is not capitalism. Competition lies at the heart of capitalism. Non-competitive practices destroy capitalism.

Big bureaucracy, however, approves of non-competitive practices. They mean that certain people can take into their hands decisions that would otherwise be settled by markets. Bureaucrats like the power, prestige and empire- building possibilities of this.

They also have the luxury of being able to shun anyone who could pop the bubble of their conceits. They easily form alliances with businessmen who rig markets.

Thus we had the US Federal bureaucracy deciding in 2008 that AIG must be bailed out of all its irresponsible derivative bets so that its debts to Goldman Sachs could be repaid in full. The financial system would otherwise collapse, you see.

Thus we now have a Federal Reserve Board determine that savers will be deprived of returns on their money, retirees cheated of their pension incomes and homes made unaffordable to the masses so that the Fed can stimulate a tired economy with ultra-low interest rates. The economy wants a rest but the bureaucrats know better. Thus we find them deciding that they know better than the American people what cars the American people want to drive and pouring billions of public money into selected troubled car companies.

General Motors executives will go along with this. There are no capitalists in GM, just the usual market-riggers rubbing their hands at the prospect of the bureaucrats giving them the all-clear.

There is still capitalism left in the transport business in the US, but in some sectors there has long been none at all. Agriculture is entirely a play on subsidies. Housing could have been one by now, too, except federal mortgage agencies made a mess of it. But have you ever heard these people concede that they have perhaps made a mistake and will withdraw from making decisions in matters they don't understand? They always blame others.

And one of the saddest things about it is that it makes income polarity worse. This always happens when economies are made inefficient by official intervention. It creates opportunities for greedy people who exploit the inevitable mistakes the bureaucrats make.

It is not capitalism that does this. It has nothing to do with capitalism. This is capitalism denied. This is the price mechanism of the market replaced by the executive fiat of government officials.

And it does indeed pose a risk to democracy. It does so particularly when people mistake the danger as coming from capitalists because government represents the people and it would not therefore undermine their liberties this way.

Oh yes, it would. Oh yes, it does.