Democracy is based on the principle that people have the inherent right to rule themselves, and thus to select the form of government and society best suited to their needs, as long as it respects fundamental human rights. How a specific government or society meets that requirement is up to the people who come together to organize it, and can take many forms, but the substance must remain, or the system is unjust.
The problem is that both the politics and the economics of what we’ve mentioned several times on this blog as the “Currency School” assume concentrated economic and political power that is in direct opposition to a democratic social order. It comes as no surprise, then, that Keynesian economics assumes the authoritarian State as a given.
Walter Bagehot, for instance (who admired Thomas Hobbes), criticized the U.S. Constitution for not providing for a dictator in times of national emergency. At least one prominent 20th century Keynesian included a chapter in his textbook titled, “If I Were Dictator” (John M. Clark, Social Control of Business. New York: McGraw-Hill Book Company, 1939, 520-525). Dr. Harold G. Moulton claimed that Keynesian monetary and fiscal policy forces an economy into a choice between runaway inflation and totalitarian control — with no guarantee of effectiveness to solve economic problems in either case. (Harold G. Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943, 86-90.)
Pope Pius XI described this “dictatorship” in extremely uncomplimentary terms, i.e.,
“105. In the first place, it is obvious that not only is wealth concentrated in our times but an immense power and despotic economic dictatorship is consolidated in the hands of a few, who often are not owners but only the trustees and managing directors of invested funds which they administer according to their own arbitrary will and pleasure.
“106. This dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will.” (Quadragesimo Anno, 1931)
Underlying all of this is that the State is somehow the source of all rights; that human beings have nothing until and unless the State permits it. The conflict with the Just Third Way, of course, is that, since the Just Third Way is founded solidly on principles of personal sovereignty, it is necessarily opposed to any form of elitism.