Will Democracy Survive?

    Because of the substantial issues that American democracy faces such as growing populism, extreme partisanship, and increasing involvement of interest groups the US republic model in its current state makes long-term sustainability unfeasible. Democracy lays within the hearts of the people but also within the virtues of which said hearts come from. To suggest that America is unethical, or the opposite of virtuous would be a hefty sophism. The constitution is the foundation on which our virtues laid upon. Democracy has a chance in this age, but its chance begins with paving over the cracks in our foundation as well as the issues our system faces and will face soon. Promotion of interpersonal understanding of virtue that is absent in our current political system, as well as stricter adherence to the constitution, could be the answers America is looking for. Those who are active in civic engagement will see that overhauling the infrastructure our political institution exists within is beneficial to our society as a whole.

            Our rule of law, the civic institution that encompasses all our society is flawed in the sense that under the Hobbesian problem that centralized monopoly on force has led to negative outcomes for the public good (Bernholz, 1). The effects on the US political system and its climate as result have increased partisanship and social divide among the population. Everything is put into a few categories and looked upon through a biased lens because of the divide among Americans. These days it's Republican and Democrat or liberal and conservative. As a state and as those who make up the state, we should focus our efforts on becoming more virtuous and putting aside the party politics that dehumanizes each side.

            Virtue is a purity that a society, and furthermore a political system must have. As discussed between philosophers and intellectuals alike there are virtuous pillars that we must stand upon so that our existence as a country, a nation, and a society is not undermined or even crumbles under the weight of false virtues. There are virtues that a citizen plays a role in and how these virtues make up the citizen. One being justice, justice, as defined by Plato in Republic as harmony in the city, the soul of it, is governed by reason so that actions are discharged honestly and not to interfere between humans. Being just in Plato’s eye's was something that existed outside of the initial human perception. Perceptions made individually on one’s own accord were to him considered just or virtuous acts. For the citizen, this means that essentially your duty as a living being and that one who functions in the city is to simply live your own life and live the life free from desire and be harmonious in accordance with a form of goodness.

            Speaking of virtue in terms of political philosophy, the role of the citizen must be considered. Simply put, a citizen is one who has a share in both ruling and being ruled. Therefore, one who fulfills the duties of a juror, legislator, or public officer (Skidmore-Hess, 4). To Aristotle, it is up to the citizens in a Democracy to uphold justice as it is them who rule and are ruled. Therefore, it can be inferred that all citizens have justice on their side. The citizen's goal in being a ruler and a juror is to preserve the system in which they reside. For the US this is a very simple and clear argument for preserving democracy but preserving it does not mean a virtue guided citizen must adhere to the political woes of the state we live and cooperate within. It is up to good citizens to set things straight for the country and iron out the creases that make things hard for all of us.

            As Jean Jacques Rousseau said, “Man is born free, and everywhere he is in chains”. What Rousseau was trying to explicate is that in the state of nature individuals form governments out of the need for cooperation. Not only does democracy hold this tenet of Rousseauian theory in high regard, but it is a foundation upon which modern democracy is built. The assertion that all of us come together and form the United States out of an intuitive need for cooperation holds very true in terms of democracy. All individuals have a voice no matter who they are, creed, color, political affiliation, etc. The ability to come together to vote on issues is a right granted upon citizens as apart of civic duty and holds the power of the ruled and ruling. A republic in which virtue is upheld, citizens have the ability to cooperate, exposure and passion for political system as well as civics will ultimately lead to the logical conclusion of all bad or toxic vices being expunged by the free market of meritorious competition between ideas and cooperation.

the reason as to why vices would be pushed out of the cooperative circle can be readily explained in a praxeological approach. For the sake of argument, praxeology is best described by Murray Rothbard on his piece about praxeology and its methods. He defines Praxeology as “Praxeology rests on the fundamental axiom that individual human beings act, that is, on the primordial fact that individuals engage in conscious actions toward chosen goals.” (Rothbard, 19). Harmful vices will be omitted out of a just society as a result of the free exchanges between individuals. Simply, if individual happiness is reduced on an aggregate level due to a perceived vice then those individuals will be less inclined to engage with those individuals who spout those vices or even engage in exchanges in which punishes malicious ideas. So, it can be said that democracy promotes such an action and such an exchange for all.

While in this case, we have insofar described democracy as a virtuous institution through its promotion of human action, justice, and rule of law. However, the problem remains that largely need to be answered. That is, where will democracy ends up in the long run and what are the shortcomings of it on a civics and political level. One shortcoming is the populist push towards streamlining the democratic process. Streamlining includes the passing of faster legislation, abolishment of the electoral college, and constant rewrites of the constitution. Each of these could have explicit treatises but for the sake of the argument, I will quickly run through each of these arguments so that we may come to their logical conclusions.

Faster legislation means changing the balance of equity between state power. Simply, checks and balances and the institutional branches that abide by this equity are unbalanced and therefore the legislative branch has more power to pass more laws. Furthermore, the abolition of the electoral college is based in the same disagreement on equity that the way we vote should be sleeker in its approach in regard to using the popular vote as a way to elect civil servants. Rewrites to the constitution is a more nuanced issue in that those in support of the rearrangement of virtues every generation or so, so it may reflect the whims and woes of the current citizen. With all of these multifaceted arguments considered you could argue that each new proposed “fix” for democracy is one based in reason, that more representation of the masses while being the aforementioned virtuous and just city that Plato argued for. Trevor Shelley highlights the concept of immoderation in his book review over Paul O. Caresse's work Democracy in Moderation: Montesquieu, Tocqueville, and Sustainable Liberalism. “As immoderation reemerges in our day, we have fewer resources at our disposal to mitigate the worst of it.” (Shelley, 491). Immoderation can be defined clearly as a quality of being excessive, lacking restraint and overindulgence.

Shelley describes immoderation as the obvious opposite of moderation but moderation is a virtue, this leaves immoderation as a vice in his eyes. Citing Tocqueville as he asserted the virtue of democratic moderation. Democracy must never overstep its boundaries and overindulge in every process that it sees that it feels it must intervene and absorb into its web of equity-based carnality. “I am afraid [the new societies] will end up all too invariably attached to the same institutions, the same prejudices, and the same mores, so that the human race will stop progressing and narrow its horizons. I fear that . . . man will exhaust his energies in petty, solitary, and sterile lane changes, and that humanity, though constantly on the move, will cease to advance." (Tocqueville). It is here that we see the issue that supporters of progressive egalitarian principles to guide the virtues of our republic assert.

It is under the assumption that these fixes will solve the issues that we as a nation face, but this is the opposite, in fact, it will only deliver us to a far worse system that benefits the more fortunate over the proper citizen. In terms of faster legislation, it will be those who are the lobbyists and the more powerful interest groups who will pass the legislation they want because they can funnel money into the legislative process. This would mean that the legislative body and its constituents and interest groups are not separate but one and the same. As Mary Stuckey asserts in her work over dynasties and their correlation to democracy and how dynasties threaten the integrity of our system “Third, I would argue that we should pay more attention to the back than to the front stage dynasties. Those who run for public office are publicly accountable. Those who fund people who run for public office are not. This difference, it seems to me, is critical to maintaining a healthy democracy.” (Stuckey, 543). This applies to the rest of the proposed fixes that are asserted but the biggest argument espoused is the changing of our constitution to reflect the current civic climate. The problem with this fix is not based in equity but virtue, as I stated cited above in regard to the Aristotelian view on citizenship, it is seen that each citizen shares the power of ruled and ruling. With revisions to our constitution, this shared source of power and force shifts to a monopoly of said power to another generation, simply asserting that one generation is more virtuous than the other when this cannot be the case. The just city exists because all citizens can be virtuous in accordance with justice and the form of the good.

Hence, we arrive at a crossroads with our great republic, going down the status quo path towards stagnation or the quicker path which leads to destruction and barbarism. There is a middle way, a way that a citizen can and therefore our institutions can shift to an equilibrium of virtue. Talking to one another is the last thing everyone thinks of nowadays, no one talks to an individual, actions are solely in terms of stagnation instead of an agency. Understanding another person and reasoning with them through discussion is how one can become virtuous in my eyes. How can we talk together though? Looking at the data from a political science point of view, most citizens are not confident with the state, its institutions, and its leaders. “In 2012 just 37% of respondents to a Gallup poll had, “a great deal” or, “quite a lot” of confidence in the institutions of the presidency or the Supreme Court, and only 13% thought similarly about Congress.” (Theis, 41). Arguing for a higher participation in our political process goes back to the founder’s ideas of how they wanted the nation to sustain itself but these days most individuals are unacquainted with how our basic political institutions function. In higher education this fact is even reflected, students in college are more engaged in movements, clubs, and other extracurricular activities based in civics but students are not involved with their on introspective civic lives as Theis states. “Very few of these civic activities in higher education see students as creators of their own civic lives; rather, they emphasize a passive or subordinate view of students in their communities. Indeed, these forms of political education on campus are about amassing facts and making expert arguments while lining up converts on your side rather than listening to different perspectives or interests and working toward a common solution. They are attempts to engage students in adversarial politics.” (Theis, 42).  Pushing for a more talkative, action individual will ultimately lead to a higher participation among citizens. Pushing for this is easy but enacting it is another thing. In higher education and even lower levels as low as 1^st grade we should be teaching about our system, after all these children and college graduates will be the future of our nation. Instead of making them the most virtuous by force we instead teach them virtuous axioms.

Thus, in terms of fixes for democracy I have laid ones that are not empirical by praxeological and reasonable. Democracy and therefore the citizens who inhabit can only be salvaged by ourselves. We are in this together and for Democracy to survive we must go back to our roots and till what remains of our still fertile soil and creating a more perfect union for all citizens living in America. Not just for us but to set an example of virtue across the world for others to follow. We are still in the stages of democratization and we have to approach the ideal state of democracy in a way that reflects reason (Shahid, 417). Our fearful trip isn’t done just yet but we must follow our paths to arrive at its conclusion.

           

           

           

           

           

Works Cited

Köster, B. (2017). Gersbach Hans: Redesigning Democracy—More Ideas for Better Rules. Journal of Economics, 123(1), 93-95. doi:10.1007/s00712-017-0571-3

Shahid Qadir, et al. “Sustainable Democracy: Formalism vs Substance.” Third World Quarterly, no. 3, 1993, p. 415. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=edsjsr&AN=edsjsr.3992478&site=eds-live&authtype=sso&custid=s8992667.

Shelley, T. “Paul O. Carrese, Democracy in Moderation: Montesquieu, Tocqueville, and Sustainable Liberalism.” Society, vol. 54, no. 5, Oct. 2017, p. 491. EBSCOhost, doi:10.1007/s12115-017-0169-y.

A Case for Free Banking

A Case for Free Banking 

  Free banking is a monetary system or arrangement that is free from special regulations that usually central banking systems undergo. This is not a new monetary standard, free banking as a concept has been around for a long time and has been implemented around the world in various time periods each with an interesting history and can give interesting insights for policymakers today and solutions for problems that our monetary system faces and in turn us citizens who are affected by monetary changes and fluctuations on a grand scale. United States monetary policy has been vigorously debated, discussed and analyzed throughout history mostly because the topic is a very nuanced but an empirical subject. Many problems within the US monetary system reveal the faulty foundation it is laid upon and handled year by year. Reverting to an older more stable process, while costly in the short run, will help us in the long run by avoiding an economic downturn and inappropriate handling of the money supply.

            A more in-depth look at free banking reveals a relatively simple approach to fiscal protocol but before describing deregulation of banks we first must look at the current American system of central banking and the fractional reserve system that is used and its inherent flaws[MG1] [MG2] . Central banking is a monetary authority with monopolized granted privilege to control credit and money through production and distribution. Money produced and distributed by the central bank ttoday is a type of currency called Fiat currency. Fiat currency is a type of money that holds no intrinsic value compared to that of commodity money which is backed by a certain commodity, usually gold or silver. Fiat money’s value comes from the regulation and backing guarantee of the government. Central banks exist outside of the market and are an anticompetitive institution, America’s central bank known as the Federal Reserve is not a government agency and not legally owned by the government, but their practices are protected and enforced by law. Its legal monopoly status allows it to issue bank notes and cash while commercial banks cannot and can only issue things like checking deposits. Central banks set federal interest rates as well usually these interest rates are between banks which goes into the fractional reserve system that America also practices which will be described as well.

Now that I have gone over what a central bank is I will highlight some of its functions briefly. There are many functions to a central bank such as handling monetary policy but there are a few big things that it also does, such as manipulating the money supply which is the total amount of money in circulation at a time. The Fed does this through issuing currency and setting interest rates through rates and bonds so that they may keep the economy stable and achieve certain economic goals like full employment. The central bank also regulates other banks through capital requirements and reserve requirements, reserve requirements go into a fractional reserve system which means that only a fraction of bank deposits are kept on hand and backed by actual cash and are up for withdrawal. For example, if an individual deposit $100 into the bank, that bank cannot lend out the entire amount they deposited but also the bank does not have to keep the entire amount either. Usually, the Federal Reserve will set reserve requirements but usually its about 10%. Increasing the reserve requirement takes money out of the economy while decreasing does the opposite and puts money into it, the Fed does this for a multitude of reasons most of which have been highlighted already.

After describing how central banking and to a lesser extent fractional reserve banking functions we should look at some of the flaws. A glaring flaw to our system is that the Federal Reserve is not a government agency, it is essentially a nationalized industry that goes unchecked and has the authority to control, produce, and spend money where it sees fit to help our economy. While the fed does not help the government in its role of authority and its monopoly on force it does overstep its boundary of forbidding free individuals to make decisions for themselves. Money is a medium of exchange, it can range from gold to silver, to shells, or pieces of paper but all these commodities have one thing in common. That is, their value is decided and voluntarily agreed upon by individual’s who use these commodity’s to voluntarily exchange goods or services.

The currency in which we stand upon today is seemingly backed by the value of what the state says it is and we must take their word for it to put it simply. This is not a feasible practice for handling banking or even money, money is a finicky thing and can change depending on a multitude of factors such as the market environment, events happening in the world, time preferences for individual’s, etc. The government can change the money supply at whim depending on what they say is the right thing but as I stated money is a finicky thing and nobody knows exactly how it works so the government will change the money supply in an inappropriate manner. A good example of this is the Phillips Curve which asserts that unemployment and inflation have an inverse relationship to one another the central bank aims to hit economic goals through monetary policy such as reaching full employment or keeping inflation under control, or even pacing the economy at certain speed. It does this by keeping the curve in mind but is this curve really the best way to look at handling the economy from a monetary standpoint?

Harald Uhlig, an economist at the University of Chicago would disagree “One may be tempted to say: this is so, despite the empirical evidence accumulated over the last four decades. Do we know what the empirical evidence says? Are we “discovering” the empirical evidence that fits our view of the world that was established long ago? Are we looking at the data with glasses tinted by our theoretical prejudices? Have we been ignoring the empirical evidence all along? Or has the empirical evidence perhaps always been there, as a number of macro-econometricians forcefully argue?” (Uhlig 11). What Dr. Uhlig is saying that even though the Philips curve is a highly questionable model that has been disproven through various means of modern evidence the Phillips curve still prevails and sticks around and is a leading model and equation for the government to enforce the monetary policy. The relationships of data found in the Phillips curve between 1948-1959 and then again in 1959-1970 are not stable if policy seeks to manipulate this relationship if used. Indeed, it has been shown that exploiting the use of the Phillips curve results in little correlation that the model asserts. For now, Dr. Uhlig says “The Phillips curve now appears to be flat, judging by the data from 1992 to 2008. The current mainstream view is that the central bank has succeeded in stabilizing inflation, whereas something else is moving unemployment.”  (Uhlig 11)

A model that is highly questionable in its accuracy that is being used by a nationalized bank that has monopolistic privilege when dealing with monetary policy is a concerning situation for us individuals. This is concerning mostly because our money is our property and by letting the state regulate and mishandle how our money functions to coerce us into using more inferior capital. So, what is our alternative that offers a far more tight and constrained system that in turn benefits our market and all citizens who inevitably use money in their everyday lives? Free banking as I said is a relatively older concept that existed marginally in the US from 1830-1860. While the American model was still very much regulated there are important insights to be gained from the era. An important look into other free banking models such as the Scottish model proves very interesting insights showing that free banking can work as a system. Free banks inherently regulate each other by competing with one another offer a better service to a possible individual who would want to open an account with them or use their bank notes. Randall Koszner points this out in his research paper “Competitive rivalry thus had the salubrious effect of forcing rivals to maintain reasonable reserve ratios.” (Kroszner 7).  The consumer demands for reasonable banks practices and even a healthier amount of capital i.e. a more reliable note.

As I distinguished earlier, nobody knows exactly how money should function and what the objectively best option for money is. But the inherent problem with a central banking system is essentially the fact that the central bank assumes that it knows exactly what the market demands and what consumers want. So, it implements policy that thinks will help but this has an inverse effect, it has a possibility of tanking economies of weakening it. For example, The Great Recession of 2007 has origins in government regulation and specifically the Federal Reserves action within the financial system. As Larry White states in his write regarding a free banking system and how it would have prevented or at least restrained the boom and bust. “The Fed sowed the seeds of the bust 2007-08, by over expanding credit, keeping interest rates too low for too long. The Fed made these mistakes despite our having been assured that it had learned from past errors and that the art of central banking had all but been perfected.” (White 497). Even though the Fed had made copious amounts of errors in the past nothing changed, and it led to one of the worst recessions in recent history for America and these slip ups of one agency that isn’t even legally owned by our government comes at the expense of us the citizens. Free banking would have slip ups sure, but it wouldn’t be at the expense of everyone, taking the entire market down with one toxic financial firm or bank going bankrupt.

US monetary policy as we have explored is a flawed, unreliable, and warped system that unveils the even more flawed, unreliable, and warped foundation it is built on. Implementing a free banking system will be costly in the short run due to the confusion and the market readjusting but it will benefit us in the long run because of the healthier productivity that a free banking system reaps. Jeffery Herbener has an excellent take on this as he wrote about Ludwig von Mises’ view on a healthy monetary system as Mises said “We know the determinants of the value of money, or think we know them. But we are not in a position to bend them to our will.” (Herbener 69). We cannot simply bend the market and therefore something like money to our will simply because we assume we know what the best outcome is for doing so, we must let freedom of choice and entry as well as open competitive markets exist because all these things foster economic growth and allow for individuals to pursue their own interests and goals.

Works Cited

Herbener, Jeffrey M. “Ludwig Von Mises on the Gold Standard and Free Banking.” Quarterly Journal of Austrian Economics, vol. 5, no. 1, Spring 2002, p. 67. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=buh&AN=6992789&site=eds-live&authtype=sso&custid=s8992667.

Kroszner, Randall. “Free Banking: The Scottish Experience as a Model for Emerging Economies.” Policy Research Working Papers, 1995, doi:10.1596/1813-9450-1536.

Uhlig, Harald. “Economics and Reality.” MF Working Paper Series, July 2011, pp. 1–31. No. 2011-006, doi:10.3386/w16416.

White, Lawrence H. “A Gold Standard with Free Banking Would Have Restrained the Boom and Bust.” CATO Journal, vol. 31, no. 3, Fall 2011, pp. 497–504. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=buh&AN=67075492&site=eds-live&authtype=sso&custid=s8992667.

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 [MG1]What are the flaws?

 [MG2]Monopoly, money supply, etc.