Free Markets: The Purest form of Democracy

The purest form of democracy is the free market.  Every time you select and buy a product, you are voting for that product.  You become a citizen of an association formed around that product.  This voluntary association is the freest form of society.  Inherently, a free market means individual freedom.  It means choice in the true sense.

Contrast this with socialism.  Pure socialism means government-owned industry.  Government over-regulation of industry, almost as stifling, is just a less pure  form of socialism.  In socialism (also known as communism), someone else selects the product for you.  You have no freedom of choice.

The socialist will say variety in a given product is simply a waste of resources.  Produce basic products, he says, and that will be good enough.  Thus, socialism is a one-size-fits-all economy — no freedom of choice and therefore no democracy.  Socialism is state imposed universal servitude pure and simple.  The inevitable result is economic stagnation and the ultimate collapse of that society.  It means misery for all, and maybe death for many.

But socialism isn't just about universal servitude; it is also about the suppression of human potential and individual genius.  The inhabitants of a socialist state become identical, interchangeable parts of a society that Lewis Mumford called the "megamachine."  Stasis is essential in such a society.  Individual initiative is highly disruptive.

I have a friend who formerly was a professor of engineering at Moscow State University.  He had many Soviet patents to his credit but little influence on the Soviet world.  After he came to America, his genius blossomed.  He made critically essential contributions to fiber optics technology.  Without his inventive genius, the internet would be little more than a novelty.  His story is a classic tale of socialist stagnation versus free-market innovation.

A good model for how a Soviet-style socialist economy works is the Pentagon's procurement policy.  It is highly top-down bureaucratic and stifles initiative and innovation.  It does this because of fear!  Make a visible mistake, and the system crushes you.  Make a visible mistake inside the Pentagon, and Congress crushes you.  Ambitious, unscrupulous, congressional politicians ensure that visible mistakes must not be made.  In many respects, the companies in our defense industry are not very different from the old Soviet design bureaus, and for much the same political reasons.

Still, when it is important enough, such as during war or when national survival is a stake, the Pentagon finds ways to escape the political straitjacket, and rapid innovation takes place.  Top secret so-called Black Programs provide one way of getting around excessive and paralyzing bureaucracy.  Visible mistakes don't exist in that world — although trial and error is the norm when pushing rapid technical advance.

Alternatively, the Pentagon system can simply be bypassed by emulating the free market.  Many years ago, I was involved with a defense program of the highest national urgency.  The program was carried out without the slightest fuss.  The program was so secret that it wasn't even classified.  This was so that no paper trail was left in the security apparatus, and we could work freely to get the job done.  Secrecy was maintained based on trust.  Reporting was made, via the program's colonel, directly to the secretary of defense.  Funding was done entirely with the colonel's petty cash vouchers, again leaving no paper trail.  We must have had the world's record cost overrun, given our expenditure of many millions of dollars on a less than fifty-thousand-dollar petty cash contract.  The result was highly innovative, very quickly done, and saved this nation great potential grief.  And Congress was never told.

Unlike socialist countries, free markets are the seedbeds for invention and innovation.  The two are not the same thing; innovation takes invention to the marketplace.

"Better is the enemy of good enough" said Soviet admiral Gorshkov (misquoting Voltaire).  But Gorshkov was a Soviet socialist.  His dictum may be true in war, but it is certainly not true in a society that values innovation.  Variety is essential for innovation.  Variety and competition and natural selection produce increasingly superior products.  That is what technical evolution is all about.  A steadily increasing standard of living is the consequence.

In a free market, associations of buyers determine the success of a product.  It is the group vote that finances the production of the product.  In buying the product, you automatically join the financing group with your vote.  The product's producer is the executive part of that association.  If the executive fails to meet the expectations of his voters (the buyers), he loses the business, and the association formed around the product dissolves. 

Web-enabled crowd-source funding of new products works the same way.

With the advent of the internet, the traditional ad hoc market associations generalize to include information sources such blogs and webcasters.  Special interest groups coalesce around the offered subject matter.  These new, often worldwide, communities are formed democratically.  Voting simply means linking to the website.  Revenues are generated by clicks or advertisements. 

Equally important, this is a participatory market in a new way because involvement need not be passive.  The web makes it possible for the viewer to post reactions, possibly in real time, to the blog or webcast.  This often starts a feedback cycle with unexpected consequences.  Web-based free-market broadcasting and crowdsourcing are new and revolutionary.  Their significance is potentially profound: it means that a fundamental change in the way societies can be organized is already underway.  What this portends is still to be determined.  But totalitarian countries already fear the web.

Some politicians dangle before us the fantasy of a socialist utopia.  There can never be such a utopia.  The good society is a free society, and a free society is a free-market society.  The corollary is simple:  When a politician proclaims his love for democracy but declares himself to be for socialism, he is not a really a democrat.  He is the opposite.

If you experience technical problems, please write to