Democracy Eating Itself

“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” – H. L. Mencken

As expected, the Fed cut rates by 50 bps on Wednesday.

Stocks approved, with the S&P 500 hitting a new all-time high yesterday.

With the “will they, won’t they” handwringing over Fed action behind us until after the election, the market’s attention will turn to which party will win and what will change as a result.

We could wake up on November 6th with the promise of tax cuts and government downsizing.

Or, corporate America faces getting pinned with the blame for causing inflation through price gouging—a galactically ignorant charge, by the way—while political bureaucrats breathe a sigh of relief that their parasitic careers remain secure.

No matter who wins, however, the U.S. will remain as divided as before. The losing side will reject the results.

And the winning side will give the losers their dose of democracy, good and hard.

The Inside Threat

You hear a lot about threats to democracy lately.

According to the narrative, Trump, misinformation, AI, free speech, and Western individualism stand ready to storm the gates of the American political system.

At least that’s the charge sounded by liberals and their new best bud, Neocon Republicans.

Progressive academics build their careers pontificating about these threats.

Politicians rally their constituents by pointing them out.

And the political muppets masquerading as media flood the networks with warnings of how democracy will soon die.

Now, I agree that democracy is at risk.

But not from any threats standing outside the gates.

The threat lies within.

It’s the result of a flaw inherent to democracy itself.

And no matter which party emerges victorious on November 6th, this flaw will eventually eat its way through the American political system.

A Broken Consensus Mechanism

Democracy is a process.

It’s a tool we use to achieve consensus about policies and rules on how to govern a society.

Consensus is possible when most people in that society share a common set of values. Not everyone agrees with the rules, but they are tolerable to almost everyone.

But when values diverge to the point of incompatibility, that tool becomes a weapon.

For most of America’s history, those common values were to secure property rights and liberty so that the individual could have the freedom to build a life they were capable of building.

For as long as that remained true, the democratic process provided a useful way to arrive at a consensus to make that possible.

But another value set has emerged. One wholly incompatible with those foundational American values.

“Look at what you built with what you had” has become “you didn’t build that, we did” for a large portion of American society.

Consensus is no longer possible because those two sets of values are incompatible.

They are mutually exclusive.

America’s founders anticipated this flaw when they wrote the Bill of Rights. It was their way of preventing democracy from stampeding “life, liberty, and the pursuit of happiness“.

The Bill of Rights chained democracy to protect those foundational American values.

But those chains have been loosed.

Democracy has been weaponized. It’s two wolves and a sheep voting on what’s for dinner. It’s still a democratic process. But one that eats itself rather than building political stability so that peace and prosperity can thrive.

Fifty-one percent pushing the other forty-nine around is not common ground. It’s a tug-of-war.

And that tug-of-war will persist until we either put democracy back in chains as intended or the process eats itself until it no longer exists.

Think Free. Be Free.

Don Yocham, CFA

Managing Editor of The Capital List