A Democratic Economic System
                                                                   Designing a System to Support Democracy

       We are in need of an economic system that supports democracy. Although capitalism is a bi-product of democracy, it is free choice in a consumer-driven economy that is the underlying value-based principle of democracy (See True Free Enterprise). Without Free Enterprise, capitalism is a vacuous economic concept that is doomed to fail. The vision of our founding fathers was all about protecting the rights and free choice of citizens. So, they designed a government with a system of checks and balances to protect citizens from the unwise use of power and the domination of their own government. However, the economy of the late eighteenth century was quite different than it is today. If they had envisioned the same kind of domination and monopolies of private business enterprise, they would have designed a similar system of checks and balances for business to protect citizens and consumers from the unwise use of power and money in the private sector. As a result, there was never really an economic system developed to support democracy in the formative years of American business.

       In the early days, Wall Street was just a wall, there was no mass production, and most enterprises were run by small business people. Larger businesses were mostly run by farmers and plantation owners who tended to be some of the wealthiest Americans. So, as the years went by and businesses grew with mass production and increasing international trade, regulations were developed by Congress and local government to protect citizens from unscrupulous business practices. However, no real economic system was ever developed to support democracy and protect the free choice of citizens in a consumer-driven economy. We need to rethink our economy based upon our fundamental democratic values and develop the same kind of checks and balances in business that our founding fathers developed for government. Otherwise, we will continue to have capitalism run amuck and out of control abuses for profit and self-interest that threaten to bring down the entire economy. It was far too easy for Congress to repeal the Glass-Steagall Act during the Clinton Administration and pass legislation that opened the door to the derivative market and shadow banking system on Wall Street. We must find a better way to protect our free choice in a consumer-driven economy and support democracy with a system of checks and balances that limits the influence of lobbyists, oversees the work of the Securities and Exchange Commission (SEC) and the Fed (Federal Reserve System) and protects consumers from unscrupulous business practices.

       Our economic system and business practices must support democracy and not the other way around. Our founding fathers had the vision to protect the citizens from the unwise abuses of power in government. We must have the same vision to extend this system to protect our citizens from the abuses of power in the private sector in the same spirit of Teddy Roosevelt who worked hard to eliminate business monopolies during the days of the Industrial Revolution. Where are the “Trust Busters” like Roosevelt today as businesses are allowed to grow so large that they become “too big to fail?” In the recent case of our banking system, certain financial institutions such as AIG were determined to be too large to let fail when they became insolvent during the economic crisis that was caused by the toxic assets of an out of control derivative market on Wall Street. As the solvency of our great and once trusted banks was threatened, some were considered “too large to fail” and were bailed out with billions of dollars of taxpayer money. 

       This catastrophe in our banking industry could have been prevented with a system of checks and balances and regulators who were allowed to do there jobs in a business environment that supports our most cherished democratic principle of free choice in a consumer-driven economy. If we do not find better ways to protect our free enterprise system, we will be doomed to repeat the recent disaster on Wall Street that threatened to destroy the entire global economy. Consumer choice is the great equalizer that levels the playing field for all business. We must begin with the model of our founding fathers and apply the democratic values that they used to support our democracy and protect the principle of free choice in a consumer-driven economy.

 Copyright 2009, Global Leadership Resources: For teaching or classroom use only.

                                                                                    Discussion Questions

  1. Discuss the relation of capitalism to democracy. Why is free enterprise necessary for the success of capitalism?
  2. Why is it necessary for capitalism to support democracy and not the other way around? What are the most important democratic principles in a Free Enterprise System?
  3. Why is Free Choice in a Consumer-Driven Economy so important for maintaining a healthy marketplace? What kind of system is necessary to protect Free Choice?
  4. Why have consumer protections for Free Enterprise been ignored in recent years by the government? What was the result of the lack of proper oversight and regulation in our competitive marketplace? How could it have been prevented?
  5. Compare and contrast the economy of the eighteenth century with the economic environment today? What are the most important differences?
  6. What are the most important elements in developing an economic system that supports democracy? What steps do we need to take to make this happen?
  7. What was the great contribution of Teddy Roosevelt in keeping a level playing field for all business? Why is consumer choice the “great equalizer” in a healthy marketplace and a vibrant economy?
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