What Happens When The Money Runs Out?

How democracy leads to financial ruin

Giving people what they want. Image credit: Freepik

A friend of mine, when she was a very young girl, was in a shop with her mother one day and wanted her mother to buy a particular item. “We can’t afford it,” the mother said, to which my friend replied, “But you can just write one of your cheques!” The young girl had observed that her mother, when needing to pay for various items, would take out her cheque-book and with a few brief movements of a pen take care of the issue. The idea that this form of financial magic could have limitations was, to a four-year-old, impossible to imagine.

We like to believe that as the years pass, people grow up. In reality, people simply grow older. The two conditions are by not equivalent.

At its heart, qualification-free representative democracy is a market. Aspiring politicians are in the business of buying votes while citizens are in the business of selling their votes. Unlike with markets for physical goods and services, however, all the major constraints are absent. There are few input costs, because nothing physical is being fabricated and personnel costs (PR agencies, spin doctors, etc.) are close to zero. Thus the price of a vote is not in part determined by raw materials or manufacturing costs. There is little in the way of product differentiation. A buyer may be willing to…