Democracy: The Road to Socialism

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This is a transcription of the Frank Karsten’s talk at the ISIL 2013 World Conference.

Transcribed and edited by Kenli S.

In our book we explain both why democracies are both immoral and impractical. The book couldn’t have come at a better time, now that many democracies suffer from enormous social and economic problems.

So first let’s see what kind of problems there are, after that I will show you some graphs to indicate what problems democracies currently have on average, and that there is a clear trend in these problems in the long term. I will also explain why these problems are inherent to the democratic model, why the dynamics and principles of democracy lead to these problems, and I will explain later on what the alternative would be, and what ways we can work to make democracy a bit more irrelevant.

Rise of Government SpendingThis is the rise of government spending in modern times, and as you can see it has risen from about 10 or 12 percent in 1913, a hundred years ago, to fifty percent and this is from the efforts of the major Western democracies, so its enormous and this is also of course pretty much in line with the tax rate. Of course stifling innovation or productivity etc.

Federal Tax LawThis is the level of regulation, which grew two hundred-fold in the last hundred years. This is the land of the free, for example the UK, in Europe it’s just as bad. This is the tax law——but for record regulation is just as bad. It just consisted of one book a hundred years ago now, it’s two hundred books. That’s just one book for the index alone. Of course this is not exactly motivating people to innovate or start companies.

Karsten Slide 3The growing welfare state, of course again an example from the United States, which is considered less of a welfare state than the Netherlands, and that’s true and Europe is worse. This is only since 1983, and now with Obamacare this of course will expand even more, so higher than 50 percent.

USD Purchasing powerPrint, print, print: the money supply has grown enormously. The dollar is worth only 2 percent or less of what it was a hundred years ago. Well again, a democratic country known for its freedom, but somehow these problems are never related to the democratic method itself.

GDP slowdownHere is the last graph I’ll show you, I think this is a very interesting graph——and I’m glad that I’ve found it, because it indicates that there’s a real trend overall in democratic countries of growth pretty much coming to a standstill.

I calculated the average, and in the 1960s growth was on average 6.5 percent per year and now its 1.4. As we all know, now if we have even just 0.2 percent in the Netherlands—my god! we’ll have a party. We can see what this is leading to, and maybe this is the beginning of the end
of the democratic model. I don’t know. I don’t like to make predictions, but if this trend continues, this will be a serious problem.

Democracy misled faithBut, as I said, people still have faith in democracy, they don’t relate problems to the democratic model itself. It is a worldwide religion, I used to believe in it, fifteen years ago I was great proponent of democracy.

I didn’t know much about it––actually nothing––I just believed the mantra. I believed what be media, the educational system, and the politicians told me: that it was the best thing since sliced bread, your only alternative was a dictator, blah blah blah. Most people still believe that. After studying it, and scratching the surface I came to a completely different idea.

Well, democracies now are pretty much above any criticism. The way I criticize it, directly and without holding prisoners, I am regarded as an enemy of the state.

Well, actually, I take that as a compliment…

So that’s remarkable, and I think it’s important to demolish that belief, because I think that democracy is a form of collectivism, and luckily the experts agree. One of the experts is Karl Marx who said that democracy is the road to socialism, and the Socialist Party of the United States said that Democracy and Socialism are one and indivisible.

In my opinion, democracy is the idea that we can, and often must, decide on almost everything in society collectively. Then the decision that results from that process must be followed by everyone, even the people who are against it——it’s one-size-fits-all.

No money, no individual liberty, no property is safe from majority rule. Just like with Communism and Fascism, the individual subordinates to the wishes of the collective in a democracy. It is socialism lite, it is socialism through the back door, because you think you are getting liberty, but you get socialism.

It is evolving into more socialism, more collectivism, and it suffers from the same problems that I think communism and fascism do, but to a lesser extent: corruption, centralization, loss of liberty, bureaucracy, economic stagnation.

Who of you actually voted during the last elections, come on don’t be shy, you’re amongst friends. I did, for the Libertarian Party. I see that very few of you did, very good, very good.

What are the problems of democracy? Well there are many, many; but I will limit them to a few. One of them is the built-in short-term outlook of the people who run it. Of the people actually, not only of the politicians, but of the voters, the citizens.

US Debt per PresidentBecause the politicians know that whatever problems they create, through money-printing, or through pension schemes that are too generous or whatever, they won’t have to solve it. I mean, their successors will have to deal with the negative consequences. They themselves only have to deal with the positive consequences.

Their successors have the same incentives of course, “let’s just kick the can down the road”. You can see that in the amount of debt accumulated by US presidents. This is some older data, so we have to give Obama some more time, but he will catch up, he will catch up.

Karsten Slide 8The second thing is that it is a system where everyone tries to live at the expense of others, which makes legal what is normally illegal. Everybody—as you can see—wants free education or corporate subsidies, and wants others to pay for that. It is a giant redistribution scheme, and not necessarily from the rich to the poor. Of course, this creates social tensions.

Why? Because the winner takes all in a democracy, so you can see that during the elections, the others—they are the enemy. Whereas in the market you don’t have that problem, because people who decide differently are not your enemy.

Another issue with democracy is that it is not a good way to either control, contain, or direct governments. They can pretty much do whatever they like sometimes, not all times of course, but as we can see with the bailouts of the banks—who was in favour of that? Very few! Of course there are lobby groups that have far more access to power than the average voter, which regarding most schemes they know nothing about.

Politicians never end up in jail for starting foreign wars under false pretences, printing money until no trees are left standing, or breaking election promises——no consequences whatsoever.

One of the most persistent myths surrounding democracy is that it is equal to liberty. And that is of course wrong. Liberty is when you decide for yourself what to do and how to spend your money. Democracy is when the majority——in theory——decides what to do with it.

Of course we can see in our daily lives that democracy hasn’t brought the liberty that we would like. In America you end up in jail——a million people I think——for drug-related felonies.

Another thing is that there is no freedom of contract between employer and employee, doctor and patient, or student and teacher. If you want to change something, a student would probably have to go to the capitol and protest; that is what they often do, to little avail of course.

In the Netherlands, and other democratic countries too, you have 50% of your income on average that you have to spend on the government.

Another persistent myth is that democracy equates to prosperity. In fact that is not true. The reverse is true, that prosperity is the result of economic freedom, low taxes and little regulation. It has nothing to do with democracy.

Democracy is actually the reverse, because it is like going out for dinner with a hundred people and deciding up front that the bill will be split evenly. Of course everyone has a very strong incentive to order the $10 dessert, and you only pay 10 cents. This is called the “Tragedy of the Commons” and everyone this incentive, so the final bill comes out much higher than anyone would like, but unfortunately no one can do anything about it.

So what’s the alternative? People expect me to come up with a model, where I say that there should be three organisations there and blah, blah, blah, and they have these responsibilities along with checks and balances. But I don’t have that, and I don’t need to have that. I just have a model, which is much better. I will explain that later.

The alternative to majority rule is self-rule, and the alternative to voting with your pencil is to vote with your feet——like we do in the market. We know actually that democracy is not the ideal thing, because we don’t use it for everything: we don’t use it in science, we don’t generally use it in companies, and we don’t use it to do our groceries… luckily. So why should we use it to get our healthcare? Or education? We could do that ourselves. For that we need decentralisation, to the level of country (when we speak about the EU), or the level of province, municipality, or individual.

We need secessionist movements.

People say to me, “well, we can’t decentralise. We should centralise (like with the EU. This is very important, because we have to form an economic bloc against the Americans, or against the Chinese.”

Karsten Slide 9But there are countries—and Switzerland is one example—that is now part of one of these blocs and is doing very well. But Switzerland is an interesting country on its own too, because internally it is very decentralised, as we all know. It has 26 cantons, each with on average 250,000 people, and they have rather a lot of autonomy on things like healthcare, taxes, and education. I’ve heard that these are all more and more under threat, but still this is a lot compared to what the Dutch provinces have; they don’t have any tools to compete with others in that regard.

It also has 2,600 municipalities, the smallest with just 35 people I’ve heard. I must admit, there’s not a more democratic country than Switzerland, so you could say “well, see, you need more democracy!”, but I don’t think so, I think the result of Switzerland lies not so much in its direct democracy, but in its decentralised system.

Therefore, we need secession, we need more countries. We only have 200 countries for 7 billion people in the world. That is not a market for governance or for government services, that is more like a cartel; therefore you need secession. Secession is like a safety valve against big government, just as the right to start a company is the safety valve against monopolies and cartels in the free-market.

Jura Secession FranceAn example of administrative secession, where you stay part of the country itself, but get more autonomy is Jura, which is French Catholic, and until 1980 it was still part of the Canton of Berne, which was German speaking and protestant. Secessionism was a way of bringing back social peace, because of the tensions that were rising. It was done very peacefully and orderly.

Another interesting thing that I learned from Lichtenstein, a country that is by some accounts more prosperous and Switzerland itself, is that it consists of only 35,000 inhabitants, and 11 municipalities, all of which remarkably have the right to secede. Can you imagine? It is almost like a small village that can secede and form a country. But still, Monaco is just 2 km, so why not?

I think it is very important that we promote this idea of secession. There are more examples of course, Czechloslovakia, North and South Sudan, but this is a nice example not too far from here.

We need a market for governance, for governmental services, and governmental service providers. For that let a thousand nations bloom, or maybe more!

So how would that play out? Of course there would be countries that would cater to religious people, to eco-hippies, or to conservatives, or to capitalists, libertarians, whatever, and they would all compete for companies and people to come there. They do not have to be democratically managed or ruled, they could be anything in between: authoritarian rule and full-democracy.

Of course with companies, we can see that people that have a vote (in the board), are the people who bought in to it, who have special merits or special positions. It’s not just one man one vote. It can be a kaleidoscope of different influences from different people.

Of course if there were enough small countries in the world they would probably offer you a clear-cut contract. You’re going to pay this much for so many years. These are the rules, and people can change things through the democratic model in the same country, and they can say “No, no, I have a contract with my government stating what to pay, for how long, and what I will get in return.”

I think, if there were many countries like these, there would be more legal certainty regarding this.

Most people think such a thing could not happen, because surely we need a central government to organise this. I don’t think so. We have examples of spontaneous order. One of them is the internet, on the right. When I was first introduced to the internet in 1983, my immediate question was “Oh, who owns this?” Because before this there were companies like America Online, who had their own network. I couldn’t believe that there was something like this, that could arise simply out of spontaneous order. I think the same applies to the market for governance. Of course, you believe in spontaneous order for the free-market, so why not in the market for governance as well?

We need start-up countries. You could say that Singapore was a start-up country, Dubai is a very good example too I think. They are not ideal, but they compete, more competition is better.

Of course it could take the form of a Special Economic Zone like Shenzhen. Another possibility is charter cities. Most recently they’ve tried to start one in Honduras, but unfortunately they didn’t succeed, but the idea still lives on. So that’s good.

Karsten Slide 11Another example is by Patrick Friedman, in the form of seasteading. It might sound a bit too far off, but these are floating islands in the sea, and they are very stable. They can grow bigger, and they can deflate the balloon of big government in a way. This is not the only example.

We would have the contractual society, like I said, I think more than we do now. There is no legal certainty in a democracy. What was illegal yesterday could be legal tomorrow. They say they’re going to give you a pension when you get older, you pay for it, but when you get older they say “oh, sorry! There’s no money, no cigar for you”. That’s bad.

Small is beautiful, of the 20 most prosperous states in the world, 15 are smaller than 8 million people. Lichtenstein, is a fantastic country, I’ve sent my book to Prince Hans, Price Hans Adam II, and he wrote me a nice letter back. I hope he did actually read it.

The conclusion is, if you really want more freedom, don’t look to democracy. If you think that the democratic process will lead to more freedom, I think that this instead more of a distraction. I’m not against Libertarian Parties, but don’t think you’ll ever get the majority. There is something inherently in democracy, that we will never make it into a libertarian system.

We need to promote the idea of secession, I think that is much better. That can be in various ways: administrative secession (like free zones), provinces (with more autonomy), or complete secession.

Beyond DemocracyIs that a viable option? It is difficult to say, but there are reasons to be optimistic, reasons to be cheerful. You see, because technology is a great democratiser, but in a good way, more than democracy itself, because it empowers the individual. We can see that with iPhones, with the internet. The poorest person in the world could start a webshop or start a Facebook page, and people can organise in such ways. So this is a bottom-up approach.

Now through the internet, things are very much possible. People empower themselves, people notice they can sequence their own DNA. They can say, “Ah, I’m a master of my own health in a way”. I don’t need government in it, or a doctor maybe.

Hopefully this trend will continue to governmental issues as well, then we will have more countries, more secession, and we will have a market for governance where we can vote with our feet. I think that is a good thing. Thank you.

Check out more videos from the conference

This is a transcription of the Frank Karsten’s talk at the ISIL 2013 World Conference.

Transcribed and edited by Kenli S.

Kenli Schoolland

3 Comments to Democracy: The Road to Socialism

  1. David Turner

    Of course adjunct to this is freedom of movement, which is something I think we should all be campaigning for very heavily. How is a passport different from an Apartheid passbook?

    • Sebastian Inhabitant

      Although I see the benefit of having more smaller, start-up countries, this has to be weighed against the individual liberties gained from having citizenship in a country that is part of say, a customs union, alongside several others.

      Or perhaps economic integration can be achieved while maintaining national political sovereignty, that is, we can have single, integrated markets with free movement of people, goods, an capital WITHOUT having common external tariffs, common currencies, or supranational governments á la EU.

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