America’s Other Democracy

• Political democracy imposes the will of the “winners” onto the “losers”
• “Market democracy” involves voluntary, mutually beneficial relationships
• The market democracy involves billions of votes being cast every day – but the “losers” can still pursue their own choices, regardless of the majority

In America, political democracy is cherished, taught to young and old alike as a sacrosanct system reflecting the “will of the people.” Election seasons are celebrated as an opportunity for millions to cast their vote to elect “leaders” who will shape the future of our nation.

But what if there was another form of democracy right under our noses that allowed voting 24 hours a day, seven days a week – and not just every two or four years?

As the late economist Dr. William Peterson put it: “This democracy is the common—if unrealized and unappreciated—marketplace. Indeed, it’s the whole private sector.”

Peterson was a highly accomplished economist, whose career included time as the Lundy Emeritus Professor of Business Philosophy at Campbell University, as an economics professor at the Graduate School of Business Administration at New York University, in several other university positions, and as a senior economic advisor to the U.S. Commerce Department. He wrote passionately to describe America’s “other democracy.”

“What is more,” Peterson noted, “this second democracy, while hardly perfection, is strictly voluntary, self-regulating, and a lot more moral than the first democracy. On the critical matters of consent and participation, this second democracy also wins hands down.”

Note the contrast between this “other” democracy versus the political democracy, which is rife with patronage peddling, pork barrel spending, taxes, corruption and waste. In the democracy of the marketplace, individuals strive to serve the needs of others in order to foster their own success. Compare that to political democracy, which tends “to give way to the tyranny of the statist quo that gets to exploit the exploitable — you and your fellow citizens,” as Peterson wrote.

A story told to him by a friend helps to underscore the contrast between the voluntary marketplace and political democracy.

“Leonard Read used to tell the story of a shopper in a crowded department store during the Christmas rush. After buying some gifts, she forges her way to the gift-wrap counter, telling the clerk how jammed the store is. ‘Yes,’ says the clerk, ‘it’s our best day so far.’ Then the shopper walks over to the post office to mail her gift packages, again remarking to a clerk on the crowd in the post office. ‘Yes,’ muttered the clerk, ‘it’s our worst day so far.’” Long lines in the free market are welcome signs that producers are successfully catering to the desires of their fellow man, while lines at government offices are treated as unwelcome burdens.

Moreover, instead of elections every two or four years, in which turnout rates over fifty percent are celebrated, this other democracy is “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.” Turnout is 100 percent because everyone participates.

In America’s political democracy, just under 130 million votes were cast in last fall’s presidential election, but in the market democracy, “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 office, country club, corner bar, and now interactive TV or the modernized PC,” wrote Peterson.

In this second democracy, every day is election day, and dollars serve as our ballots. We know that each of these votes we cast will directly impact us via the goods and services we consume, whereas on political election days, our vote makes little to no difference in the grand scheme of things.

Ever notice how it seems a relatively small group of special interests and lobbyists really calls the shots in the political democracy? Not so in the market democracy – there everyone’s consumer preferences call the shots. In a free market, even the mightiest of corporations must serve the whims and desires of the masses if they are to retain their hold over productive resources. The many dictate to the few.

In political democracy, however, the few in the ruling class dictate to the many. And as Peterson noted: “As political democracy swells, the individual shrinks.”

Finally, as last fall’s exercise of political democracy revealed beyond any naïve remaining doubt, political democracies are polarizing and force the “losers” to live under the imposed will of the “winners.” Peterson described this as the “winner-takes-all majoritarianism” of the political democracy.

In the market democracy, however, even if our preference isn’t in line with the majority of others, we are still free to satisfy our desires as we see fit. The majority may prefer Coke, but you remain free to buy a Pepsi.

Furthermore, a market democracy involves voluntary exchanges that necessarily mean both parties to transactions end up better off. Complete strangers with little in common will nevertheless peacefully cooperate with each other in mutually beneficial exchanges that can span the globe.

“So sip your tea from Sri Lanka, drive your car with gasoline refined from oil from Kuwait, eat a banana from Ecuador, enjoy your wine from France, your camera from Japan, your furniture from Finland, your cocoa from the Ivory Coast. Millions 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?” mused Peterson.

So next time you hear politicians, pundits or activists touting the importance of preserving “democracy,” be sure to remind them of “America’s other democracy” and challenge them to preserve what’s left of that as well.