already have very short working hours compared to Americans and Asians. In some parts
of Europe, the debilitating results can be clearly seen. Unemployment in France and
Germany is around 10 per cent. Of course, a votreprenuer would not tell the truth to his
voters by saying, "Vote for me and you can be lazy because we will get the hardworking
taxpayers to support you."
Instead, he would couch his sales speech in a manner that dulls their conscience and
makes them feel entitled to use their vote to transfer money from somebody's wallet to
their own. This creates a climate of entitlement and dependency which is debilitating.
These entitlements help the middle class more than the poor because that is where most
of the votes are. In the present system, the centre of gravity of the electorate is Mr
Average and this produces mediocre government.
On top of this, dependency on a faceless government has social consequences. It has
eroded the ancient relationship between parents and children. For countless generations,
parents have depended on their children to provide for them in their old age.
Now they depend on the government. Since children are no longer pension funds as in
the past and taxes being so high, people decide to have fewer of them. If you look at the
birth rates of Europe and Japan, you will find that they are below replacement levels. Yet
the young are still expected to provide for the old! This time the provision is indirect -
through the government in the form of higher taxes and welfare payments to the old. As
the population in modern democracies ages, and with lower birth rates, it means that a
shrinking working population has to support the old.
Would it not be better to cut out the middleman? It would certainly shrink the
government bureaucracy if each retired person depended on his children in his old age as
in the past. It would give them greater incentive to have more children and to raise them
well which would also be beneficial to marriages. It was reported in the Economist in
1988 that less than 1% of American poor consist of people who are married, finished
high school and held a job for at least a year. (6) All it takes to stay above the poverty
line a a little bit of effort to get an education, be faithful to your spouse and keep a job.
In other words, all you need are the old fashioned virtues of diligence, discipline and
fidelity to one's spouse.
Nowadays, men find it easy to abandon their wives and children because they know they
won't starve. The state will take care of them. This could have contributed to unstable
At the same time, the votreprenuers also notice that people hate paying taxes. They
want benefits from government but don't like contributing money. So to cater for this
market, they will promise tax cuts. The results are budget deficits and soaring public
If you look at the statistics, most of the OECD governments have huge budget deficits.
(1) As a whole, the OECD is running a combined budget deficit amounting to a tad shy of
4 per cent of GDP. Much of it comes from the US which has a budget deficit of about 5
per cent of GDP.
Japan is even worse at more than 6 per cent of GDP. Some economists have been
warning of economic collapse if something is not done. Sometimes, politicians would
inflate the money supply to pay for their deficit spending, resulting in inflation. Other
times, they would resort to government borrowing which results in higher interest rates.
Should there be an economic crash resulting in massive unemployment or high inflation,
confidence in democracy will plummet. Then people will be ready to put power in the
hands of a dictator. That was one reason why Hitler got into power.
2) Democracy produces short-term thinking
The second thing votreprenuers notice is that they face elections once every four or five
years. This means that they cannot afford to take a long term view of things. Politicians
know that their time in office is limited. To stay in office, they come up with policies that
are popular in the short run even though they know are disastrous in the long run. I am
sure you have heard of the saying, "No pain, no gain."
Democracies are incapable of delivering short term pain for long term gain. They tend to
do the opposite, ie, deliver short term gain at the expense of long term pain. The
growing government debt in the US and other democracies is a good example of this. To
satisfy this present generation of voters, politicians are making future generations pay
the bill. The unborn of course cannot vote. The result of one man one vote is higher
taxes, interest rates, inflation rates and government spending.
Part of the problem is that there is a misalignment between the personal interests of the
politicians with that of the country as a whole. The votrepreneurers want to get elected
by hook or by crook. Sometimes, the policies he promotes are damaging in the long term
even though popular in the short term. Of course, eventually, the chickens will come
home to roost some day, but he won’t be in office by then!
If you ask me, I think the monarchies of the 19th century Europe were better
macroeconomic managers than the democratically elected politicians of the 20th century.
Statistics show that interest rates, taxes and inflation were on the whole lower. So was
government debt as a share of the GDP. (2)
The reason is simple. The monarchs and nobles were confident of being in power for the
rest of their lives and they wanted their sons to inherit the thrones of prosperous
countries. So they tended to think more for the long term. It should also be added that
most of the European monarchs of that era did not have absolute power and had to cater
to popular opinion. If they provoke them too much, they will lose their heads - literally
like Louis XVI.
This balance between royal prerogatives and popular pressure gave rise on the whole to
better macroeconomic management. The former gave a long term perspective to decision
making and the latter checked the power of the monarchs, preventing Saddam Hussein
type leaders from emerging.
3) Democracy has a tendency to divide people
For votreprenuers to win power, they must at least pretend to fight for
the market segments of voters that they deem are sufficient to secure
victory on election day. Some will fight for one ethnic group or the other. Others fight for
different income groups. Some try to court the lower income vote by promising
unemployment benefits while others fight for the higher income groups by promising tax
Still others court the elderly voters. Then there are the social issues. Some are
conservative and religious while others are secular and liberal. Thus we see rich pitted
against the poor, liberals against the conservatives and racial groups against each other.
There is no incentive for a votrepreneurs to take an overall view for the good of the
country as a whole. He is constrained by his need for re-election to satisfy his voting
base that sent him to office. The people will develop a 'me first' mentality without
thinking about the good of the country as a whole.
Antagonism between economic classes and different ethnic groups can be exploited and
turned into votes for the votrepreneurs. Instead of cooling the passions of the people,
they are more likely to fan them so as to pose as their champions.
Often these lead to riots. In France this year, there were two riots - one economic in
nature and the other racial though there was some overlap. In the first riot, people were
protesting a new French law making it easier for employers to fire young workers on
The second riot was racial and religious in nature. Ethnic North Africa minorities who are
Muslim rioted for many days. Race, language and religion divide people into groups. The
presence of each element increases tension. Tensions are at their greatest if all three
elements are different between two groups and lowest if only one is present between two
But whether the tension level is high or low, it needs to be managed.
But instead of managing tensions, votreprenuers heighten them to win votes. Hitler won
votes and power by unfairly blaming the Jews for Germany's problems. When dictator
Tito was in power, Yugoslavia was in one piece with ethnic tensions well managed. But
when democracy came to Yugoslavia, politicians posed as champions for their own ethnic
groups by fanning grievances and demonising others. The result was a civil war.
Summing up, democracy suffers from three weaknesses - its penchant for redistributive
policies, short-term thinking and ethnic discord. These weaknesses are already present in
varying degrees in most mature democracies of the western world. At present, none are
in danger of collapse. But as time goes by, the danger will grow.
In the case of America, there is a huge budget deficit that threatens to destabilise not
only its economy but also the world economy, given America's share of the world GDP. Its
growing minorities, both legal and illegal, have the potential to create discord if ethnic
tensions are not properly managed.
But it is the Socialist countries like France -- with their combination of redistributive
policies and ethnic tensions created by short-term thinking politicians -- that are in
greatest danger of a collapse of democracy. France has a Muslim population amounting to
10 per cent of its total population. The Muslims are of a different race, speak a different
language and have a different religion than the other Frenchmen.
This makes the problem more serious than, say, the ethnic tensions between blacks and
white in America where the only difference is one of race. Also, France has an
unemployment rate of 10 per cent, with many of the unemployed being Muslims. The
recent riots may be the first shots of a civil war. The day may not be far off for a French
version of Adolf Hitler as ethnic tensions increase.
I foresee that European Muslims will within in the next 20 years demand autonomous
regions in cities where sharia law rules. This will provoke the "classical" Europeans who
feel their way of life being threatened and there will be a backlash. The people will fall
prey to racists groups who of course will promise to defend their way of life. While it took
a long time for Europeans to learn to settle their differences peacefully through the ballot
box, this important lesson is slowly being unlearned. The lesson learned from the Danish
cartoon affair is that violence pays.
Most western governments caved in by issuing apologies or condemning the cartoons
instead of defending free speech. Soon groups that oppose immigration will turn to
violence too. If European democracies cannot manage their ethnic tensions, democracy
will break down, ushering in dictatorial rule.
How then should democracy be reformed? We must build a system that balances popular
demands with long term thinking. There must also be a system that matches the right to
vote with the amount of contribution the voter makes to society. If this sounds elitist,
then I am in good company.
The early founding fathers of America were elitist too, especially men like Alexander
Hamilton. They restricted voting to those with property, who were then the educated part
of the population and who probably paid most of the taxes. Being men of property, they
had a stake in the country's long term future and could be relied on to take a longer term
view. Even as late as 1824, only 5 per cent of adult Americans could vote in the
Presidential elections. (4)
Don't get me wrong. I am not advocating restricting voting to rich people. But I do
advocate striking a proper balance between competing needs. I have thought out some
reforms which I believe will improve the situation.
Firstly, I propose that the Senate or Upper House be comprised of people that are elected
for life and their personal interests be more closely aligned with that of the nation. Once
made a Senator, he is no longer subjected to popular pressures that produce short term
thinking. The Senator can only be removed if he commits a crime or is incapacitated. The
House of Representatives will continue as before and its members be subjected to
The elected Senators should be paid in accordance to his 'market rate'. This effectively
means he should be paid the income he has to forgo as a result of going into politics.
Salaries will be adjusted for economic growth. Bonuses will be given if certain economic
benchmarks (eg unemployment, inflation, GDP growth) are attained. These benchmarks
can be reviewed once every 10 years, say.
To further ensure long term thinking, his salary will continued to be paid into his estate
for 10 years after his demise.
By making the Senate a life-time job, we ensure a balance between short term demands
of the electorate and long term needs. We ensure a balance between the voters of today
with the voters yet to be born. Our huge budget deficits and government debt is putting
a burden on future generations who have no vote at present. It is unfair to saddle them
with so much debt. Present voters are effectively taxing their children and grandchildren
so that they can enjoy a profligate lifestyle.
The second proposal I have is that we make the vote transferable to other citizens. Each
voter can buy or sell votes through an electronic marketplace for votes. The logic is like
this. Votreprenuers are already buying votes with taxpayers' money by promising all
sorts of government programs that will benefit this or that constituency. Why not allow
the voters to do it directly without going through the middleman? Why can't voters buy
votes when politicians are already doing that, in effect?
There will still be redistribution of income from the haves to the have-nots but without
going through an often inefficient government bureaucracy. There will be tax savings
from cutting out the middleman. This is what I think will happen in practice: The higher-
income groups will end up with more votes since they have money to spend. But so will
groups passionate about certain causes.
They will use the votes to curb government spending and lower taxes to benefit
themselves. They will also balance the budget because they know it is unsustainable and
eventually ruinous to their stock and bond portfolios.
But the have-nots will be compensated with cash. After some trial and error, a balance
will be reached in which the losses from government entitlement programs will be
approximately equal to the sales proceeds of their votes. Without welfare spending,
Documents you may be interested
Documents you may be interested