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Has Democracy Failed Capitalism?

Readers who enjoy the works of Ludwig von Mises might enjoy reading Hans-Hermann Hoppe’s book, Democracy: The God that Failed. Hoppe is a distinguished fellow of the Ludwig von Mises Institute, a libertarian theorist and economist of the Austrian School who worries that democracy is destroying freedom and civilization. For in Hoppe’s view, economic freedom and property rights are essential for the preservation of civilized order. Hoppe explained his idea as follows: “The process of civilization [is] set in motion by individual saving, investment, and the accumulation of durable consumer goods and capital goods….” Stagnation and decline, he wrote, “can be brought about only if property-rights violations become institutionalized….”

Hoppe argues that latter-day democracy is progressively institutionalizing property-rights violations. In fact, he says that democracy is worse than monarchy in this regard because if “the government is privately owned (under monarchical rule), the incentive structure facing the ruler is such that it is in his self-interest to be relatively farsighted and to engage only in moderate taxation and warfare.” Under a government which is “publicly owned,” however, the incentives are different. According to Hoppe, “the decivilizing effects of [democratic] government can be expected to grow strong enough to actually halt the civilizing process, or even to alter its direction and bring about an opposite tendency toward decivilization: capital consumption, shrinking planning horizons and provisions, and progressive infantilization and brutalization of social life.”

Therefore the transition from monarchy to democracy, says Hoppe, “represents not progress but civilizational decline.” Democracy, in fact, opens avenues for the violation of property rights and state interference that monarchy – with its more limited sense of power over society – wouldn’t have dared. Indeed, there is a kind of relativism in democracy wherein a majority vote forever menaces the market. With the advent of pressure-group politics increased welfare expenditures are inevitable. Ever-growing regulation also occurs, along with the encouragement of a permanent indigent class. The bankruptcy of the system is therefore built-in. The eventual collapse of civilization, sudden or gradual, is guaranteed.

How can civilization and the market be saved? “Above all,” says Hoppe, “the idea of democracy and majority rule must be delegitimized.” In fact, he argues, the overwhelming majority in Europe accepted monarchy as legitimate one hundred years ago. Just because democracy is considered legitimate today we cannot assume it will always be accepted as such. We must, he says, postulate an idea of natural order from which a better, more legitimate system can emerge. On what might such a system be based? According to Hoppe civilization is founded on “private property, production, and voluntary exchange….” To sustain civilization there must be what he calls a nobilitas naturalis (a.k.a., a voluntarily acknowledged natural elite).

“The natural outcome of the voluntary transactions between various private property owners is decidedly non-egalitarian, hierarchical, and elitist,” Hoppe explained. “Owing to superior achievements … some individuals come to possess ‘natural authority,’ and their opinions and judgments enjoy widespread respect.” Due to the selective mating which typically occurs between elite families, the heads of such families would quite naturally “act as judges and peacemakers … out of a sense of obligation required and expected of a person of authority or even out of a principled concern for civil justice….”

Here we see into the origins of monarchy itself. According to Hoppe, “The small but decisive step in the transition to monarchical rule … consisted precisely in the monopolization of the function of judge and peacemaker. The step was taken once a single member of the voluntary acknowledged natural elite … insisted … that all conflicts within a specified territory be brought before him.” Thus monarchic monopoly swept aside a pre-monarchical system based on “a natural order of competing jurisdictions.”

Since it is not possible to go back to monarchy (which is hardly perfect to begin with), and democracy is eating away at civilization bit by bit, Hoppe thinks the answer may be found in a return to ‘natural authority’ accessed through “ideological support” for decentralization and even “secessionist social forces.” The fundamental error of liberalism, says Hoppe, is the failure to recognize that “every government is destructive of what they want to preserve, and that protection and the production of security can only be rightfully undertaken by a system of competitive security suppliers.” In other words, private property anarchism (as advocated by Murray Rothbard).

If the state is to be wiped away in favor of a system of competitive security suppliers, the question then arises: who will protect society from the armed market? This is a question that Hoppe does not address. No doubt he is correct about democracy and decadence, but his solution is not of easy application. History teaches certain lessons, and the lesson we learn again and again is that political balkanization is dangerous. Instead of contributing to peace, it tends to contribute to conflict. While many have criticized the nation-state as a formation that has disrupted market activity through world wars and lesser conflicts, the era of petty principalities was perhaps less peaceful – with greater obstacles to trade and commerce.

However, Hoppe makes a point that may be unanswerable. The state has a tendency to become ever more centralized, ever more controlling. The market is being constricted. Nothing yet has reversed the socializing course. Civilization grows weaker. We grope in the dark for solutions. If Hoppe’s solution is not correct he has nonetheless identified our problem. How will we get out of the straitjacket of the socialist welfare state? Is reform still possible? Will the system correct itself in time? Can property rights be preserved?

If only we knew the answers.

About the Author

jrnyquist [at] aol [dot] com ()