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Tuesday, July 5, 2016

Let’s Take Back Our Market Democracy

Our democracy has been stolen by corporate interests and corrupt politicians, and it’s time that We the People stood up to them. The only way to fix our country is to elect leaders who will listen to the public and help us to build a fair and honest society, one in which people are judged based on their contributions to the public good, not on their privileges. Only by encouraging people to get out and vote can we save the democratic process that safeguards our prosperity and even our lives.

I’m not talking about reclaiming “our” government. I’m talking about reclaiming our markets.

The Democracy of the Market

In this system all voters can get what they want.

The free market is a truly democratic process, one in which everyone has a voice. In fact, it’s the only system capable of recognizing the value of each and every peaceful, cooperative effort in society, thereby ensuring all members are rewarded in proportion to their contributions to the lives of others.

The leaders of this democracy are not politicians, but entrepreneurs. Rather than being elected once in a term of years, entrepreneurs are elected minute-to-minute in a never-ending campaign to win support from their patrons. Consumers vote for entrepreneurs by buying and refusing to buy. Every decision is a message to the market about which entrepreneur is most effective at improving people’s welfare.

Consumers’ decisions thus determine whether entrepreneurs become rich or poor, as well as which businesses succeed and fail, and who will make decisions about how to use society’s scarce resources. Yet this popular mandate is fickle: whereas elected politicians can at best be removed after several years, entrepreneurs are removed overnight by unsatisfied customers. Politicians’ disastrous policies persist long after their authors are forgotten, but if entrepreneurs make harmful decisions in the market, they are punished with ruthless efficiency by competitors.

When consumers are in control, markets reflect the values and wants of each member of society; entrepreneurs aren’t captured by special interests, but by customers who urgently need what they have to sell. In this system all voters can get what they want, not just the ones lucky enough to be members of the majority party.

The marketplace is like a democracy where a million political parties can each peacefully go about the business of trying to improve the lives of their members. Whereas politicians gerrymander voting districts to manufacture support from the public, entrepreneurs use the price system to hear directly from consumers how they would like to be treated.

Superior to Political Democracy

People sometimes criticize markets because they value people’s worth only in terms of their wealth. But it’s just the opposite: in the market, people see each other as mutual contributors to the welfare of all. It’s politics that reduces people to sources of revenue, statistical data, and faceless cannon fodder.

Critics also object that market democracy replaces one kind of privilege with another: if it’s true that every penny gives the right to vote, then those with more pennies have more votes, and therefore more influence. Isn’t the market then just another way for the wealthy to rule the poor?

Even simple acts of commerce can transform the world.

No, for two reasons. First, in genuinely free markets, wealth is accumulated and maintained only through repeatedly winning consumers’ votes. It’s not arbitrarily given, as state privileges are.

Second, and more importantly, markets are more truly democratic because being unable or unwilling to “vote” declares a preference, just as buying does: refusing to buy is a vote against the status quo. It’s a declaration that prices are too high, or that quality is too low. Entrepreneurs must improve their offerings or surrender their capital. This is the power of the market in a nutshell: every decision, whether it’s to buy or to abstain from buying, influences the vast structure of prices that governs the economy and “distributes” wealth to every individual based on his or her productivity.

Unfortunately, this democracy is under constant attack. Our representatives have discovered ways to ignore their mandate by serving a different kind of customer: government. Government offers the security that consumers cannot. For example, regulations, trade barriers, and immigration controls mean that entrepreneurs can get by without fear of competition, or, in other words, without fear of consumers’ opinions. Government intervention forcibly limits our choices. It prevents potential entrepreneurs from entering the market, and thereby makes our votes increasingly worthless.

This erosion of choice is not inevitable though. Even simple acts of commerce can transform the world by peacefully improving the lives of those involved, thus making government irrelevant. Don’t fall into the trap of believing that your vote (in the marketplace) doesn’t make a difference. We should all cast our votes every day, not by supporting politicians, but by buying and refusing to buy.

  • Matthew McCaffrey is assistant professor of enterprise at the University of Manchester and editor of Libertarian Papers.