America's Other Democracy; W. Peterson

it. Initially, the disinventors would elimi nate the U.S. Commerce, Energy, and Education Departments and some 300 pro grams, including funding for the National Endowment for the Arts and the Corpora tion for Public Broadcasting. Down would go a big chunk of government. Reinventors shake their heads and ask: But what, if anything, takes the place of that chunk? The answer, it seems to me, swings on perceiving and reevaluating what amounts to America's second democracy. This is a largely undiscerned sector under the rule of law which in important respects is larger than the first. Dr. Peterson, Heritage Foundation adjunct scholar, is Distinguished Lundy Professor Emer itus ofBusiness Philosophy at Campbell Univer sity in North Carolina, and author of a forth coming book, Peterson's Law: Why Things Go Wrong, from which this article is drawn. Think about it: There's a dominion within our dominion that works without pork, taxes, political parties, bureaucratic chica nery, and government waste. What is more, this second democracy, while hardly per fection, is strictly voluntary, self-regulating, and a lot more moral than the first democ racy. On the critical matters of consent and participation, this second democracy also wins hands down.

Well, where is this unsung Shangri-La where the people themselves command and control, direct and manage a slew of hier archies of authority? It's all around, under your nose, as near as your telephone from which you can call a doctor or plumber, or order a pizza or airline tickets. This democracy is the com mon-if unrealized and unappreciated marketplace. Indeed, it's the whole private sector. Consider. In America's first democracy 104 million votes were cast in the last Presidential election. In the second democ racy, billions of votes are cast daily to make phone calls or watch TV or pay rent or use some other market facility such as a bank, restaurant, gas station, motel, newspaper, coin laundry, supermarket, brokerage of fice, country club, corner bar, and now interactive TV or the modernized PC. Throughout, dollars are ballots. The Miracle of the Market Note that every day is Election Day in the marketplace, that it is based on free choice, 146 that it regulates itself with high prices en couraging supply and discouraging demand, with low prices discouraging supply and encouraging demand. Free prices thus ever adjust to new conditions, erasing shortages and surpluses as they develop-unheard of in the first democracy.

This is the ordinary extraordinary market which Nobel Laureate F. A. Hayek called a "marvel." Marvelous to behold for its in herent dynamics and growth. Said Thomas Paine in his Rights ofMan in 1791: "Society performs for itself almost everything which is ascribed to government." Note too that in marketplace democracy every producer-candidate is held strictly accountable, that he runs scared all the time, that he daily tries to score with a better product at less cost for the sovereign con sumer-sovereign because of his life-or death power of the purse. (Importantly, the sovereign consumer includes the business consumer.) Indeed, the consumer is king or queen, an absolute monarch ruling this second domin ion with an iron hand. Ordering this. Order ing that. Literally. Even lethally. Your mother (or grandmother or great-grand mother, depending on your age) did in the iceman in the 1920s and 1930s. How? She and millions of her cohorts switched their votes-and bought refrigerators, and today the iceman cometh no longer.

Reinventors complain about America's inequality of wealth. But they don't mention how this wealth is put to work for all Americans-and at risk. As Ludwig Mises says in Human Action: "Ownership of the means of production is not a privilege, but a social liability." Mises explains that savers, investors, landowners, and all other owners of wealth are prompted by self-interest to place their property at the highest possible advantage to the consumers. If the capitalists are slow or inept in advantaging the consumers, they incur losses. And if they don't mend their ways, they lose their wealth. Among cor porate giants who lost market share and had to play catch-Up: IBM, General Motors, Sears, Xerox. 147 Too, with the marketplace invariably based on individual consent, it reflects so cial cooperation and peaceful dealing even with local tensions. Hindus and Muslims, for example, trade with each other-that is, vote for each other-in Calcutta, as do Catholics and Protestants in Belfast, Arabs and Jews in Jerusalem, blacks and whites in Johannesburg.

In a similar vein, says a wise old IBM slogan: "World Peace Through World Trade." Indeed., So sip your tea from Sri Lanka, drive your car with gasoline refined from oil from Kuwait, eat a banana from Ecuador, enjoy your winefrom France, your camera from Japan, your furniture from Fin land, your cocoa from the Ivory Coast. Mil lions of people who are strangers help each other, cooperate with each other, depend on each other. What world leader has achieved such remarkably harmonious domestic and international collaboration across the globe? To be sure, government is essential to safeguard life, liberty, and property-oth erwise we'd plunge into anarchy. But the core problem of the last 66 years of hyper active, interventionist government reaches beyond deficit spending and heavy inflation; it is this: Expansion of the first democracy means diminution of the second-the shrinkage of freedom and free enterprise.

Yet the Father-Knows-Best state stretches from the Davis-Bacon Act to So cial Security, from Medicare to the Envi ronmental Protection Agency, from the Federal Deposit Insurance Corporation to the Fair Labor Standards Act to the pro gressive income tax, to thousands of other state interventions, all highly politicized, all impeding social cooperation. These interventions are at odds with the Mises concept of market-driven economic calculation whose lack befuddles state planners and regulators. This lack is the Achilles' heel of socialism and intervention ism. Nonetheless, state interventions per sist, boomerang, make things worse, set back the second democracy and a key prin ciple of a free society-consent by the individual. D FEE Classic Reprint Inequality of Wealth and Incomes by Ludwig von Mises T he market economy-capitalism-is based on private ownership of the ma terial means of production and private en trepreneurship. The consumers, by their buying or abstention from buying, ulti mately determine what should be produced and in what quantity and quality. They render profitable the affairs of those busi nessmen who best comply with their wishes and unprofitable the affairs of those who do not produce what they are asking for most urgently. Profits convey control of the fac tors of production into the hands of those who are employing them for the best possi ble satisfaction of the most urgent needs of the consumers, and losses withdraw them from the control of the inefficient business men. In a market economy not sabotaged by the government the owners of property are mandataries of the consumers as it were. On the market a daily repeated plebiscite de termines who should own what and how much. It is the consumers who make some people rich and other people penniless.