Monday, October 18, 201
Alexander Tytler (1747-1813) was a Scottish-born English lawyer and historian. Reportedly, Tytler was critical of democracies, pointing to the history of democracies such as Athens and its flaws, cycles, and
ultimate failures. Although the authenticity of his following quote is
often disputed, the words have eerie relevance today:
A democracy is always temporary in nature; it simply cannot exist as a permanent form of government.
A democracy will continue to exist up until the time voters discover they can vote themselves generous gifts from the public treasury. From that
moment on, the majority always votes for the candidates who promise the
most benefits from the public treasury, with the result that every
democracy will finally collapse due to loose fiscal policy, which is
always followed by dictatorship.
The average age of the world's greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through
the following 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 to bondage.
Tytler's Cycle and the U.S.
In looking at American history, we can see Tytler's sequence in action. In 1620, the Pilgrims sailed to America to escape the religious bondage
imposed by the Church of England. Their spiritual faith carried them to
the new world.
Because of their deep faith, the Pilgrims left England in spite of the high percentage of deaths incurred by earlier American settlements. For example, when Jamestown, Virginia, was founded
in 1607, 70 of the 108 settlers died in the first year. The following
winter only 60 of 500 new settlers lived. Between 1619 and 1622, the
Virginia Company sent 3,600 more settlers to the colony, and over those
three years 3,000 would die.
In 1776, the Declaration of Independence was signed. From spiritual faith the new Americans were garnering great courage. By crafting the Declaration of Independence,
the colonists knew they were essentially declaring war on the most
powerful country in the world -- England.
With the onset of the Revolutionary War, the colonists were moving from courage to liberty, following Tytler's sequence. By demanding their independence and being
willing to fight for it, a new democracy was born. This new democracy
grew rapidly for nearly 200 years.
Then, in 1933, the U.S. was thrown into the Great Depression and elected Franklin Delano Roosevelt as president. Facing total economic collapse, Roosevelt took the U.S.
dollar off the gold standard. At the same time, Germany, also in
financial crisis, elected Adolf Hitler as its leader. World War II soon
followed.
In 1944, with WWII coming to an end, the Bretton Woods Agreement was signed by the world powers and the U.S. dollar, once again backed by gold, became the reserve currency of the world.
After the war, America passed England, France, and Germany to become the new world power. Having entered the war late, the U.S. emerged as the
creditor nation to the world. Our factories weren't bombed and the world
owed us money. The U.S. grew rich financing the rebuilding of England,
France, Germany, Italy, and Japan. The American democracy was
transitioning from liberty to abundance -- maybe too much abundance.
In 1971 President Nixon violated the Bretton Woods Agreement by taking the U.S. dollar off the gold standard because America was spending more
than it was producing and the U.S. gold reserves were being depleted.
In 1972 Nixon visited China to open the door for trade. What followed was the biggest economic boom in history -- a boom fueled by the U.S.
borrowing money through the sale of bonds to China, one of the world's
poorest countries at that time. The sale of these bonds financed a
growing U.S. trade deficit. China produced low-cost goods, and we paid
for them with money borrowed from the Chinese workers.
American factory production, which had fueled the American boom after WWII, was "shipped" overseas along with high-paying American jobs. America was
shifting from abundance to complacency. Rather than produce, we borrowed
and printed money to maintain our standard of living.
In 1976 America celebrated its 200th anniversary as a democracy. Rather than produce, we kept borrowing to finance social-welfare programs. Over the
next three decades or so, America slid from complacency to apathy.
In 2007 the subprime crisis reared its ugly head. And by 2010, unemployment increased to double-digits, even as the rich got richer.
Once-affluent people walked away from homes they could no longer afford.
The U.S. moved from apathy to dependence.
Today we're dependent upon China to finance our debt as well as fill our stores with cheap products. At the same time, millions of Americans are becoming dependent
upon the government to take care of them. If Tytler is correct, the
American democracy is presently moving from dependence back to bondage.
Filling the Void
History reminds us that dictators and despots arise during times of severe economic crisis. Some of the more infamous despots are Hitler, Stalin,
Mao, and Napoleon. I find it interesting that the U.S. is now dependent
upon Chairman Mao's creation, the People's Republic of China, for the
things that we buy and the money that we borrow.
To me, this is spooky, foreboding, and ominous. While the Chinese people, as a rule, are good people, my business dealings with Communist Chinese officials
have left me disturbed and concerned about the rise of the Chinese
Empire. As you know, China doesn't plan on becoming a democracy. With
money, factories, a billion people to feed, and a massive military,
could they put the free world into bondage?
Although I don't like the way the Chinese do business, I continue to do business in China. I have to. They're the next world power. I cautiously believe that trade,
business, and understanding offer better options for world peace and
prosperity than isolationism.
Now the Western world must seek to grow stronger financially as China continues to gain power. To do this, our schools need to offer more sophisticated financial education to
children of all ages.
This is not the time to be complacent or apathetic. This is the time to think globally. Putting up trade barriers would be disastrous. Instead, it's time our schools train students to
be entrepreneurs who export to the world rather than employees looking
for jobs that are being exported to low-wage countries.
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