Thursday, February 7, 2008

Great quote on democracy and fiscal policy.

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse (generous gifts) from the public treasury. From that moment on the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy (which is) always followed by a dictatorship."

"The average age of the world's greatest civilization has been two hundred years. These nations have progressed through this sequence. From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance, from abundance to complacency; from complacency to apathy, from apathy to dependence, from dependence back into bondage."

-- Alexander Tyler circa 1787 , from "The fall of the Athenian Republic".

This certainly seems to describe well the recent trajectory of the USA's economical-political concoction. People voted en mass for GWB's tax cuts and it did not bother them one bit that spending was not cut simultaneously. Nor did they care that every serious economist was saying that "trickle-down economy" does not work.

As a result, huge imbalances in the financial system have built up, and they will now have to unwind with a lot of pain for the US and world economies. Perhaps this has already started, and the financial crisis that gripped the country recently is the first step in the great correction. At the end of this correction, the US political and economical position in the world will likely be much weaker than today.

I guess the lesson here is that if country wants to be a workable democracy it has to be mindful of the quote above. Tyler is not necessarily correct - I believe democracy can be stable over a long term. But to achieve that you have to have to work on educating people, and by that I don't just mean teaching them technical skills, but teaching them to think critically about everything and giving them a broad basic knowledge base.

In general, I believe that a better educated population is capable of maintaining a higher order social structure. If more people were able to understand the very basic economic principles related to the proposed tax cuts, we may not have landed ourselves into a financial mess which can only end badly...

P.S. I found that quote on the forums at Calculated Risk - a great blog on housing and broader economy.

UPDATE: 03/11/08
Anonymous reader was kind enough to point out that the quote may have been faked. However, even if the author of the quote is unknown, I still find the observation to be interesting - history has many examples of voters irresponsibly voting in favor of give-aways.


  1. Unfortunately, the Tyler quote is probably fictitious. See this link for a complete analysis.

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