By Richard M. Ebeling

For most of the last three centuries, the ideas of liberty and democracy have been intertwined in the minds of both friends and foes of a free society. The substitution of absolute monarchies with governments representative of the voting choices of a nation’s population has been considered part and parcel with the advancement of freedom of speech and the press, the right of voluntary and peaceful association for political and numerous social, economic and cultural reasons, and the guarding of the individual from arbitrary and unrestrained power. But what happens when an appeal to democracy becomes a smokescreen for majoritarian tyranny and coalition politicking by special interest groups pursuing privilege and plunder?

Friends of freedom, including many of those who strongly believed in and fought for representative and democratically elected government in the eighteenth and nineteenth centuries, often expressed fearful concerns that “democracy” could itself become a threat to the liberty of many of the very people that democratic government was supposed to protect.

The Tyrannies of Minorities and Majorities

In his famous essay “On Liberty” (1859), the British social philosopher John Stuart Mill warned that tyranny could take three forms: the tyranny of the minority, the tyranny of the majority, and the tyranny of custom and tradition. The tyranny of the minority was represented by absolute monarchy (a tyranny of the one) or an oligarchy (a tyranny of the few). The tyranny of custom and tradition could take the form of social and psychological pressures on individuals or small groups of individuals to conform to the prejudices and narrow-mindedness of wider communities who intimidate and stifle individual thought, creativity, or (peaceful) behavioral eccentricity.

Mill also was insistent that while democracy historically was part of the great movement for human liberty, majorities potentially could be as dictatorial and dangerous as the most ruthless and oppressive kings and princes of the past. At moments of great collective passions and prejudices, individual freedoms of speech, the press, religion, of association, and of private property could be voted away, reducing the isolated person to the coerced pawn and prisoner of the political system due to sheer numbers in an electoral process. (See my articles, “John Stuart Mill and the Three Dangers to Liberty” and “John Stuart Mill and the Dangers of Unrestrained Government”.)

For this reason, many of the great social philosophers and reformers of the 1700s and 1800s were often strongly insistent that because of democracy’s double-edged sword of liberty or tyranny, it was necessary to restrain the powers and reach of governments through written and unwritten constitutions that limited what majorities could do through their elected representatives. Hence, the role and importance, in the American case, of the Bill of Rights, the first ten amendments to the U.S. Constitution.

The First Amendment states clearly and categorically, “Congress shall make no law” that might abridge some of an individual’s freedoms, including speech, the press, religion, peaceful assembly, and submission of grievances against the actions of government. Indeed, every one of those first ten amendments was designed to place some restriction on the use of political power to infringe upon or deny different aspects of an individual’s rights to his life, liberty, and honestly acquired property.

Ambiguities of language, nuances of interpretation, and changing attitudes have often resulted in debates and disagreements as to what and how such personal freedoms were to be understood and secured. But the underlying meaning and message should be considered beyond any doubt: there are aspects to the life and rights of the individual human being that government, even majoritarian government, should not and could not abridge, violate, or deny.

Both monarchs of the past and dictators more in the present have denied such limits on their power to command and coerce those under their control, including prohibiting words and deeds by those over whom they have asserted their rule. They have rationalized their claim to unrestrained authority by appeal to a “divine right of kings” or a higher meaning of “freedom” that expresses the “will of the people” as a whole through the tyrant’s supreme power.

“Negative” Freedom = Liberty, “Positive” Freedom = Coercion

One of the great linguistic tricks of the communists and many of the socialists of the twentieth century was to try to distinguish between false, or “bourgeois” freedoms in contrast to real, or “social,” freedoms. The former were those individual freedoms expressed in the Bill of Rights, which were labeled “negative” freedoms in that they “merely” protected a person against the aggression and coercion of others. “Positive,” or “social” freedoms required government planning, regulation, and redistributive control to assure that “need” rather than “profit” guided production and that the shares of income and wealth among the members of society were more equalized according to a prior notion of “distributive justice.”

Individual freedom only requires that each person respect the life, liberty and honestly acquired property of others and that he follows the rule of peaceful and voluntary association in all human interactions. Beyond this “negative” restraint on each of us, we are all at liberty to live our individual lives as we choose, guided by our own personal conceptions of value, meaning, and purpose in ordering and following our private affairs and dealings with others.

The notion of “positive” or “social” freedom requires the active and constant intervention of the political authority into the individual and voluntary interpersonal affairs of a country’s citizens precisely to command or prohibit how, when, where, and for what people may act and interact with others so as to direct and dictate certain results that those in government consider “good,” “just,” and “fair.” The individual and his actions are made subservient to and confined within the collective or community or national “interests” of the society as a whole as defined and enforced by the government.

Joseph Stiglitz’s Charge that “Democracy” is Under Attack

In our day and age, one of the political tricks played by the “social justice” proponents and the redistributive advocates is to insist that what they call for and demand in terms of government economic and social policy is really the “democratic” will of the majority, and any opposition or resistance to it is a demonstration of that person being an opponent of “democracy,” therefore, an enemy of freedom and the free society.

An example of this is a recent article, “American Democracy on the Brink,” by noted economist and Nobel Prize winner Joseph E. Stiglitz, a professor of economics at Columbia University in New York. According to Stiglitz, a series of recent Supreme Court decisions demonstrate that “democracy” is in peril in America.

He repeats the now thread-worn charge that we do not live in a democracy today because the current occupant of the White House won three million fewer votes than his opponent in the 2016 presidential election. That Donald Trump won the election according to the presidential electoral rules specified in the U.S. Constitution in terms of winning an Electoral College majority is shoved aside and made into an implicit accusation that the Constitution itself is a rigged anti-democratic institution. One wonders, however, whether Joseph Stiglitz would be wearing sackcloth and ashes with his head bowed low if the 2016 outcome had put Hillary Clinton in the White House with an Electoral College majority but with Trump having won a majority of the popular vote. Somehow I doubt it.

American Express and Market Competition

Stiglitz’s first charge against “undemocratic” capitalism is the recent Supreme Court decision in favor of American Express concerning the company’s requirement that retail and other stores where customers purchase goods with the use of credit cards not offer special discounts to buyers to use cards with lower transaction fees than their own. Stiglitz sees this court decision as corporate anti-competitiveness at the expense of the retailer and the consumer—the few exploiting the many.

But as the high court reasoned, not all credit cards are equal, and therefore, it does not imply or require all companies issuing credit cards to charge the same transaction fees to stores. The bulk of American Express’ business involves “non-revolving” credit, that is, the large majority of American Express cardholders pay the full balance owed each month. Thus, American Express does not earn extended interest income from most of its customers through installment payments.

American Express customers who hold different types of the company’s cards with differing levels of services, perks, and discounts, tend to be, on average, in higher income brackets and spend more on various goods and services on, say, an annual basis. Thus, those shoppers paying with their American Express cards are likely to spend more, and on more expensive goods, thus more than making up the higher transaction fees American Express charges retailers. Furthermore, the attractiveness of many of American Express’ cardholder perks has competitively worked to prod other credit card companies into introducing their own versions of “points” for dollars spent, “cash back” incentives, and various other consumer services.

Implicitly, Stiglitz seems to have in the back of his mind the artificial economics textbook notion of “perfect competition,” one of the unrealistic and arbitrary assumptions of which is that each seller in a market sells a product interchangeably exactly like his rivals in that market—and that to differentiate your product from those of your competitors is, somehow, acting “anti-competitively.” Yet the very notion of “competition” understood as a rivalrous process is to constantly attempt to improve and distinguish your product from others. This includes offering what consumers may consider a better product that might sell for more than its competitors’ precisely because it’s not viewed as the same as theirs. (See my article, “Capitalism and the Misunderstanding of Monopoly.”)

Finally, no retailer is compelled to accept the American Express card as a form of payment in their place of business. And, indeed, some stores only take Visa or MasterCard precisely to avoid the higher transaction fees from American Express.

The Undemocratic Nature of Compulsory Unions

Stiglitz’s second criticism falls upon another recent Supreme Court decision that state and municipal employees will no longer be compelled to pay mandatory dues to public employee and teachers’ unions when they might not want union representation or oppose the political uses to which those funds are applied for political lobbying and campaigning. He raises a number of criticisms against the Court’s decision, including that “selfish” workers will choose to not pay dues and be “free riders” on the efforts of employee unions that improve the pay and work conditions of all in government jobs. He also charges that to deny unions the “right” to demand dues payments, whether individual public employees want union representation and political activism or not, is supposedly “undemocratic.”

In the tradition of George Orwell’s “newspeak,” Stiglitz twists the meaning of words to assert that union compulsion is freedom and that individual freedom of choice is employer exploitation. For a good part of the last one hundred years, labor unions, especially beginning in the 1930s, were given a relatively free hand to force workers into union membership to have access to certain types of employment and to restrict the number of people who could look for and find gainful employment in various sectors of the economy.

In their heyday in the middle decades of the twentieth century, labor unions could shut down entire industries through strikes, threaten or use violence to prevent non-union workers from taking jobs their members had walked away from, and use their financial clout to influence labor legislation.

Compulsory unionism has been a tyranny of a minority of workers manipulating wages and work accessibility at the expense of the majority of the labor force as a whole. Changing market dynamics have reduced union membership in the private sector from more than 20 percent of the labor force in 1983 to less than 7 percent as of 2017. On the other hand, today union membership in the government sector is more than 35 percent. Their political and financial power is heavily dependent on their ability to compel mandatory dues from public employees, many of whom are denied the freedom to express whether they, in fact, want to pay dues and have union representation.