The perils of democracy

From Stansberry & Associates Digest

Assuring future shortages, India has banned the export of wheat in an effort to fight inflation. Never mind the central bank's money printing... it's those greedy farmers trying to get the best price for their crops that are the real problem. We are always amazed at how many crimes against their economies politicians are willing to commit... and how willingly the crowd goes along with them.

We wonder if this is a good idea... Aflac will become the first leading U.S. company to allow shareholders to vote on executive compensation. Shareholders will be given a vote on annual compensation starting in 2009. Our bet is that compensation abuse by corporate executives gets worse under these arrangements.

India and Aflac raise a philosophical question… Why people think democracy is a good idea is one of life's real mysteries. Have you been to the driver's license office lately? Next time you go, look around. That's a real cross-section, a true sample of the American people.

Are those the folks you want voting on the laws that you'll have to obey? Are those the folks you want voting on the future of your investments? The people I see at the DMV have to get lucky to tie their shoes correctly.

Manipulating them to vote for whatever's popular at the moment or what some political group in Washington needs isn't half as difficult as getting them to buy cigarettes, which are addictive, dangerous, and smelly. I am aware that criticizing democracy is seen as slightly more evil than beating baby seals. That's ironic because the things we all cherish about America – our liberty, our security, our wealth, our technological dominance - have nothing to do with democracy.

Most people don't even know that our founding fathers feared democracy. They deliberated and settled on a republican government with very limited suffrage and indirect elections.

Vestiges of the Republic remain – like the Electoral College – and they sometimes still influence modern elections. But the architecture of the Republic was rendered a shadow of its former self in 1913, when two of the most important constitutional tenets of the Republic (the indirect election of Senators and the prohibition of income taxes) were torn down by democratic amendments.

Since then, the power of the state has been in ascendance, along with the inflation, militarism, and statism that typically grow along side democracy. Ironcially, despite these problems, democracy – glorified mob rule – is seen as the solution to every governance problem in the world, from Iraq to American's board rooms.