The paradox of democracy in Wisconsin and elsewhere

Winston Churchill said in a 1947 speech that democracy is the worst form of government except for all the others. As though to prove his statement we today see tumultuous demonstrations throughout the Middle East and North Africa demanding democracy. And at the same time, in democratic Greece, the birthplace of democracy, and in many other places where democracy actually does prevail, we see tumultuous demonstrations denouncing democratically elected governments.

President Obama has repeatedly had to call for more “civil discourse” in the United States, so far without any apparent effect. In the U.S. we continue to see political opponents denounce each other as Nazis and traitors who are deliberately trying to weaken the nation and undermine democracy and human rights.

The most recent demonstrations of un-civil discourse are occurring now in Wisconsin, Indiana, and the capitals of other states, where union members and supporters denounce their own democratically elected leaders for proposing to modify previously enacted labor rights. The state governors and other sponsors of such legislation are now routinely vilified as prostitutes and whores and worse. In order to prevent elected governments in Wisconsin and Indiana from voting on legislation, minority state legislators have fled their states to try to prevent sufficient quorums for votes.

Democratically elected governments in Western Europe and the United States teeter on the edge of bankruptcy, while their populations denounce in the most extreme language any efforts to reduce any existing benefits or raise any taxes.

So the paradox of democracy is this: If people are allowed to choose the policies under which they are to be governed, it seems to be human nature for them to choose policies providing lots of benefits without having to pay for them. And politicians have been able to win election by promising just that.

Government spending in excess of revenues, and the making of unfunded future commitments, have driven democratically elected governments in Western Europe and the U.S. into such deep insolvency that their ability to ever recover is increasingly called into question.

At the root of the immediate crisis in the states is the idea popularized in the 1950’s and 1960’s that if people worked for a normal working life, they should enjoy a secure and carefree retirement insulated from any market risk through defined-benefit, and often inflation-protected, pension plans. That was indeed a nice idea, but beginning in the 1970’s, more and more companies concluded that this arrangement was financially untenable, and defined-benefit pension plans were replaced by defined-contribution plans in which retirement benefits depended on actual contributions and market performance. Workers in effect were forced to assume responsibility for their own retirement.

In the private sector, only about one generation of Americans was able to retire with defined-benefit plans that actually paid the benefits promised. Most private companies, and eventually the federal government, switched to defined-contribution plans to provide for employee retirement.

The one major holdout in the conversion to defined-contribution retirement plans has been state and local governments, most of which adhered to the concept of unfunded defined-benefit retirement plans for employees, which now threaten to bankrupt many states and localities.

The efforts of states and localities to extricate themselves from such plans, and the response of organized labor to those efforts, is at the root of the conflicts in Wisconsin, Indiana, Ohio, and other states.

In the democracies of Europe and America struggling against rising deficits and debt, but unable to either reduce spending or increase taxes, we are like the obese patient who recognizes the seriousness of his obesity and swears to his doctor, “I will do anything to address this problem except exercise or diet. Anything.”