One thing I keep seeing all over the place during this government shutdown is how America’s “democracy” is at risk. Thomas Friedman penned a piece the other day claiming this. Now, I don’t know if Friedman’s overall argument is right. It’s certainly alarming that our political parties can’t seem to agree on much. But one thing that is definitely wrong is this constant reference to the USA as a “democracy”. The USA is not a democracy. This is a point that I see all the time so let me explain why it’s important.
When the founding fathers considered the various forms of government they were extremely fearful of tyranny of the minority AND tyranny of the majority. They viewed government as something that could both serve the people and protect it from its own people. This was a simple, but brilliant perspective. They specifically designed the government so that it protected “we the people” from ourselves and also from its own powers. So they created a Constitution that specified the precise checks and balances that should be in place to ensure that no branch of the government could grow too powerful. But they also ensured that the country was a republic, which meant that the power rests with the people who can choose their representatives and alter the course of future legislation. These representatives don’t only serve their constituents, but they also adhere to the guidelines of the Constitution. This was important because it created a government that decentralized the powers in such a way that the majority couldn’t have all the control, but also so that the minority could not become too powerful.
Some people in the USA seem to think the government is the answer to all of our problems while others seem to think that government is the cause of all of our problems. Both sides seem to forget that the entire premise of the United States was founded on the principle of creating a balance where power is always checked by a minority or a majority. I think the government shutdown is a sign of how extremely far away from this balance the USA has grown over time.
Anyhow, I don’t want to ignite a political war of words here on the site, but this point has always annoyed me so I figured I’d get it off my chest. And if you understand my view of the monetary system you can probably see why I think this stuff matters to the way the institutional design of the system works so gold stars go to uber nerds who see the connection….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
no.1
would it be more accurate to say that america is a Democratic constitutional republic