What is Democracy - An Interim Report

After many hours of discussions with friends from all over the world and an astonishing range of backgrounds, I have come to regard "democracy" as an expression of a fundamental ethical or moral idea. Above all, a "democracy" should be perceived and felt as fair.

I have noted elsewhere that our "representative" democracies" are a blunt instrument at best but is important that we see that they are attempting to create a "fair" system. They are usually underpinned by constitutions (again blunt instruments) that try to protect citizens -- especially minorities -- from "mob rule." A much wider view is taken in "A Thousand Small Sanities," which paints a picture of liberal democracy. This is a fond portrait of a society, not a "system." The focus is on the innumerable institutions that work together to make a country more free, fair, and generally comfortable.

Whatever the voting system may be, if a large segment of the population feels that the result is a systemically unfair society, the "system" will be accused of not being a "real" democracy.

One key element that was added in our discussions today was the concept of "empathy." The speaker was asked what the hardest time in her life was and referred to being a waitress. The hard part, she said, was the customers who treated her with contempt. What was missing was "empathy". On a larger scale, it is hard to create a "democratic" society if empathy is lacking. The common barriers to this are class and race.

The most frequently cited barriers to a "fair" society were the banks and the corporations.

More generally, immoral "machines" act in society that powerfully affect our daily lives but have no more empathy than a machine gun.

I have been thinking about banks a lot. I can an imagine "ethical" bank. The problem comes when money becomes like fluid coursing through society, moving from nation to nation, seeking profit and minimizing risk. This is a horror that even Marx did not appreciate. "Capital" is now fluid and moves around by implacable rules. The corporation is bound to maximize return on investment for its shareholders. Otherwise, the shareholders will take their money elsewhere. The implications of this are worked out in the classic "The Corporation". By its very nature, the corporation is a sociopath. There is no place for "empathy" on its balance sheet.

Activists tend to focus on the executives at the head of corporations. I have a close relative that regards Jeff Bezos as an avatar of the devil. But the financial power of the corporation comes from the shareholders, especially the bondholders. These can be very ordinary people (such as me, who has his life savings in shares and government-backed securities). If there is evil to be discovered, it is in the nature of money itself and the soleless machine of international finance.

A perfect example of this came with the recent financial crisis in Greece. Again and again, bondholders (enjoying a 25% return!) refused to take a "haircut" - they had to be paid in full.  This forced Greece into massive drawdowns of social programs. How could they be so heartless? The answer is "leverage." Large institutions held those bonds on their balance sheet. A "haircut" would devalue their assets. Offsetting a loss on the value of assets involves things like calling in loans that (at that time) may turn out to be as poorly capitalized as the bank itself (nobody knew what their financial assets were worth). You wind up with a "domino effect," which was the very essence of the 2008 financial crisis. Everybody was "monetizing" debt and leveraging it into toxic investments. The deadly arithmetic contagion of bad debts threatened everyone. In the case of Greece, the banks were saved, and Greece was thrown to the wolves.

Situations like this resulted in deep skepticism over the Eurozone project and came close to ending the dream of the EU. The EU is an association of "democracies," but each democracy was slugging it out to represent the interests of its own citizens. 

One of the guys in our chat today is a Ph.D. biochemist from Madrid, Spain. He was a student during this crisis (Spain was in the same mess as Greece). Even 14 years later, he showed deep animosity toward the "German" bankers who foolishly lent money to Spain and then demanded repayment. In my view, he should see this as an alien invasion by a mechanical thing that has no more heart than a cuckoo clock. The financial system itself needs to be somehow "humanized." 

The "free market" is another machine loose among us. It's always amazing to me how people like it because it's called "free." It is "free" in the sense that giant rock is free to fall on your head. Participants in the "free" market are free to buy and sell as they wish, except if they have nothing to sell that will allow them to live. Then they are free to die in the street. On the other end of the machine, people (and corporations) are "free" to suck up capital without limit. The end result cannot be regarded as "free" for a very large segment of the population. 

I don't think it's an original observation that the market cannot be let loose to chew up the lives of citizens. A "democracy" must harness the market. 

The financial system is a particularly egregious type of market. In our society, the "market" is so deeply entangled in the financial system that they appear to be more or less the same thing.

People in our discussion generally agreed that education (the lack of it, or the cost of it) was a huge issue. This can be partly traced back to the finance/market machine, which turns over every rock and stone to find ways to create debt and profit. Debt = money. Big universities are for-profit businesses. The "machine" delights in solving the educational issue by lending money rather than "socializing" the University (which is the solution in much of the world). A similar consideration applies to health care. This basic human need can be turned into a debt/profit machine.