Friday, August 10, 2007

Problem with Democracy

We believe that democracy is the best political system in the world.  However, it has some faults that should be corrected.

One of the reasons that democracy works, is also its fault.  Democracy enables the population to choose the country's leader.  However, the majority of population do not care about politics or do not know how to choose.

When democracy was invented over 2,000 years ago by Greece, life and government were far simpler.  Villages barely traded with each other, let alone trade globally with multitudes of countries.  There was no such thing as Monetary Policy or Inter-Generational Transfer.  There was essentially no Economies of Scale.  Most voters can understand the simple issues, the candidates' simple qualifications and what is needed to solve the problems.  Most people were farmers and society only had a handful of different occupations. Most voters can understand all of the occupations.

2,000 years later, there is an extremely complicated global economy and financial markets.  There are hundreds of thousands of different types of occupations, specialties and skill sets. No one person can understand all of these.  Most voters can only understand one.  The issues/problems and what it takes to solve them, have become vastly more complicated and beyond the scope of the average voter.  Therefore, even though democracy is still the best political system, some aspects of it have become obsolete.

When voters are polled, voters usually say that the most important issue to them is "jobs", "unemployment", "cost of living", "taxes" or "economy".  Ultimately, it's related to money.  Personal wealth is more important to them than abortion, education and even healthcare.  Personal wealth and Jobs are dependent on a healthy economy.  Furthermore, a healthy economy pays for everything in society through salaries and taxes.  Without a healthy economy, a society wouldn't have much in the way of healthcare, education, welfare, etc.  One can easily argue that the economy is the most important thing in any society because it pays for everything else.

Therefore, the best leader is somebody who knows how to manage the economy.  However, most voters do not understand economics.  This is not an indictment on the population.  It is normal for the majority to not understand economics.  Similarly, the majority do not know how to tune up a car, program a computer, fix a laundry machine, prescribe medicine or wire a house.  The majority do not understand the majority of skills in a society.  People are usually skilled in only one field.  This is normal for any country.

With economics, the majority do not understand the difference between debt and deficit, the difference between monetary and fiscal policy, economies of scale and comparative advantage which is the logic behind free trade.  Most people do not know what the Demand and Supply curves look like or how they can move.  In fact, it takes years to understand economics and decades to master.  Yet, we ask the population to vote for the best manager of the economy.

Politicians work for us.  They are our employees.  Essentially voters are the hiring managers who are responsible for hiring the best job applicant (politician) to manage the economy.  However, most voters are ill-qualified to be hiring manager.  If a hiring manager was going to hire a sales rep, the hiring manager should understand sales.  If a hiring manager was going to hire an engineer, the hiring manager should understand engineering.  However, most voters do not understand economics.  Consequently, we usually do not get the best economy managers.

Bob Rae, ex-premier of Ontario, had a finance minister who was a school teacher.  This finance minister was completely under-qualified to manage a multi-billion dollar budget.  Thousands of accountants, business-people and economists in Ontario were multiple times more qualified.  Consequently, the Bob Rae government drove Ontario into serious debt that we are still trying to get out of to this day.

Based on voters' priority, John McCain, Barak Obama, Sarah Palin and Joe Biden are the wrong leaders.  If voters' top priority is winning the war in Iraq, then McCain is the right leader.  If voters' top priority is healthcare, then Clinton is the right leader.  If voters' top priority is anti-war, then Obama is the right leader.  However, the voters' top priority is the economy.  None of these candidates are the best to manage an economy.  They've never run or managed a business before.  They weren't schooled in economics or business. Clinton and Obama are more educated than McCain, but they are lawyers.  Like most politicians, they have never even sold lemonade at the street corner.  Most lawyer-politicians do not understand Supply and Demand curves, Comparative Advantage, Economies of Scale, risk taking, the difficulty of starting a business, raising capital, going bankrupt, Sales, Marketing, Finance, hiring, EBITDA, how to create jobs, ramifications of debt and deficit, etc., etc., etc., etc.  Economics and Business take 1-2 decades to learn and master.

The most qualified candidate is Mitt Romney.  Other better qualified candidates include Ron Paul and Dennis Kucinich, but they will never get elected because they aren't charismatic enough and they cannot give great speeches like Obama.  (Unfortunately, speech-giving skills is more important than knowing how to manage an economy.)  There are thousands of successful business leaders who are thousands of times more qualified than lawyer-politicians.  You probably know, personally, people who are more qualified, who are executives, business-owners, sales/marketing managers, accountants, economists, entrepreneurs, etc.

Since the majority do not understand economics, candidates' qualifications or the different party platforms, we should not urge people to vote, which is one of the common mistakes during every election.  At every election, there are numerous TV messages urging everybody to vote.  When we urge people to vote, we are potentially getting un-informed voters who are uninterested in politics to nullify informed voters.  If an informed voter chooses candidate A, the uninformed voter can nullify the informed vote by choosing candidate B.   Many un-informed voters tend to base their vote on the candidate's speaking skills, charm, good-looks, religion, race or last-name, rather than the qualifications.

Informed voters usually do not need urging to vote.  They want to vote.

We are urging people to do the wrong thing.  Instead of urging people to vote, we should urge people to get informed and to learn economics.  Once that person is informed and educated, he/she will want to vote.

If you need surgery, would you ask the population to choose the best surgeon for you, if the majority of the population is uninformed or uninterested in surgery?  Or, would you ask medical professionals to choose the best surgeon?

If there was an election for the best Pharmacologist, should we urge everybody in the country to vote?  Or, should we urge everybody to understand Pharmacology first?

Some argue that our political leaders have economic advisers.  Would you prefer to have a lawyer perform surgery on you with surgeons advising him?  Why not have a surgeon perform surgery on you?  Why not have a business leader who knows how to manage an economy, with lawyers advising him about legal issues?  Why not have a business leader who has a proven track record on managing and growing a business (which is a micro-economy)?  Even with this scenario with a Business/Economic professional as the leader, one can easily argue that Educators advising on Education issues and Medical professionals advising on Healthcare issues will be much more valuable than Legal advisors.  (More info on why lawyers are the wrong candidates.)

Therefore, we do not believe that it is necessarily a bad thing when a smaller percentage of the population votes.  In the example of the surgeon, the smaller percentage will likely lead to a better outcome.

This should not be confused with taking away the right to vote, which we are not advocating.   We believe that the right should be there for everybody.  We just believe that pushing people to do something that they are not interested in or don't know anything about, will lead to undesired results.

The other problem with democracy is that it is easier for a politician to get votes by buying them, than to manage the country responsibly.  If a politician does a good job of managing the economy, most voters won't know that it was a good job or what he/she did.  An example of this is when Brian Mulroney introduced the GST and signed the Free Trade Agreement (FTA).   Both of these benefited the country tremendously, but most voters do not know this.  Most voters do not know how much the trade surplus/deficit has changed since Mulroney signed the FTA.  Most voters were against the FTA when Mulroney was signing it.  Most voters think that the GST was put in to reduce the debt, which it wasn't.  Most voters do not know the real purpose of the GST.

There are two types of people:
  1. those who pay to the government (through taxes)
  2. those who receive from the government
Since the most important issue for most voters is economy/jobs (ultimately it is money), it is far easier for a politician to get votes by offering lower taxes to #1 and more payments (welfare, subsidies, free programs, etc.) to #2.  If you pay taxes and I said to you "vote for me and I'll lower your taxes by 10%", you'll likely vote for me.  If you collect welfare and I said to you "vote for me and I'll increase your monthly payments by $300", you'll likely vote for me.  Consequently, most governments run deficits because they are buying votes.  This is why most democratic countries accumulate huge debts, and have fake wealth.


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