Timothy Kline: Thoughts and Reflections

The Rising Fall of Democracy

As the 2008 race for the presidency of the United States of America enters its final days before the actual election on November 4, the media covering the events have picked up on various catchwords such as “socialism” and “class warfare” from one campaign, and an appeal to appreciate the need to shoulder some of the financial burden when one has the means to do so. If anything, we are seeing a revisiting of the dilemma brought on by the Great Depression. During that stretch in American history, Franklin Delano Roosevelt instituted several governmental programs to try to salvage the economy and the social system of the country, and was accused by many as trying to introduce socialism into the American democracy.

Whatever it will be classified under by the historians, the result was that the people of the United States were pulled through a difficult time. Capitalism once again flourished, the economy rebounded nicely, as did patriotism and the drive for “the American dream.”

Now, some 70 years later, everyone is talking again. About a failing economy, about the signs of the reemergence of a worldwide Great Depression, of falling stocks and diminishing monetary systems. And, once again, one of the two aspiring presidential nominees is drawing attention to their solution to the contemporary issues facing the American people. Once again, opponents are crying “Socialism” and “class warfare” in response.

I’ve always marvelled at the theory of democracy, I admit. It’s probably because of the theory upon which it’s founded: a government by the people for the people. In theory, it sounds good. On paper, it sounds good. But there is an underlying problem which keeps getting overlooked by everyone, it seems. And so, the gospel of Democracy continues to be spread around the globe, oblivious to the reality.

Democracy has been promoted as the ideal form of government, because it is a consensual rule rather than an imposed one. Decisions are made by the majority, and they decide for their own selves which laws and regulations which they will be governed by. Leaders are elected to office to represent their constituents in the higher echelons of government and speak in behalf of those who elected them into office, and to work hard to defend the rights of the people.

But the reality is that Democracy is far less than we hoped it would be, far less than the theory would lead us to believe. It is the highest form of government, for a certainty, the ideal to which we as humans aspire precisely because it promotes freedom from government by allowing ourselves to be ruled only to the extent that we choose to be ruled.

But that’s the underlying issue, isn’t it? No matter how hard we try, we cannot escape the core problem that we were never meant to rule ourselves, just as we were never meant to rule and dominate one another. In that sense, Democracy, while the clearcut winner in the pool of human governments, is paradoxically also the epitome of failure in humankind’s ability to govern himself apart from his Creator. In that sense, I have every reason to believe that it is truly the final form of human government that we will see.

That’s not to say that we won’t see reversions back to earlier forms of governments and associated tyrannies. In fact, one school of thought is that there will be a new emergence of a fascist or dictatorial form of government that will bring with it a newfound Great Tribulation unlike the world has ever seen. Some have indicated that it is already emerging on the world scene, and that the latest financial catastrophe may in some way be connected with it. I, of course, have my own speculation on the matter and may address it in a future entry.

But come what may, one thing needs to be reiterated here: Democracy is not the answer. It never was, no matter how much we want to believe it is. No matter who wins the election here in the United States. It is doomed to failure because humankind simply does not have within itself the capacity to truly know the difference between good and evil with no regard to the Creator.

It is, after all, our answer to the suggestion which God put forth to Adam and Eve, who took it upon themselves to decide between what would be good and what would be bad. It was in the Garden of Eden that Democracy was born. It hasn’t really held up under actual practice, however.

When a people, such as the United States of America, agrees to pay $700 billion dollars in order to shore up corporations, banks, and big businesses rather than suffer through the inevitable consequences of fast living based on credit and consumerism, it reveals an ugly truth about ourselves. It reveals that in spite of what we claim and hide behind under the guise of Democracy, we are self-absorbed in our own self-interests, with little to no regard for others unless and until it infringes upon our comfort.

We could have tightened up our belts and strapped on our boots and pulled together with determination as we went through the fallout from our excessiveness and indulgences if we really believed in the dream of Democracy. But we didn’t. We bought into the fear instilled by politicians and financial experts and the media. We bought into the fear instilled by plummeting numbers on the Stock Market. We bought into the lies in order to continue to lie to ourselves that Democracy will work, and it won’t cost us anything–if we throw enough money at it. Once we do that, we’ll be able to go on feeding our indulgences, living on credit, consuming the goods, enjoying entertainment…

But it doesn’t appear to be working. Stocks continue to stagger in uncertainties, politicians continue to plead their case with us that they have the solutions which will save the lifestyles that we have become accustomed to, and all the while unemployment numbers are up, home foreclosures are up, and national morale is nearing an all-time low.

Yet we continue to hope that somehow, Democracy will pull through… if not for us, then for our children. If not for our children, then surely for their children.

Yes, we will continue to lie to ourselves and deny the truth. We will continue to refuse to become “our brother’s keeper.”

I mentioned earlier how we were oh so willing to pay out $700 billion in order to stave off the threats of another Great Depression, rather than admitting that we’ve lived far too long “high on the hog” and that for that there are consequences. We failed to accept our accountability as a people who like to go around promoting Democracy as the best form of government ever to exist, because we as a people would much rather take the good than the bad.

If ever someone was going to make a case for the validity of Democracy as a form of human government, it would have been when Wall Street was crying out for a bailout. We could have said, “No. This is the result of conscious decisions. There are consequences for those decisions, like it or not.” But we didn’t, because we were afraid of what it might cost us. It might have caused us to lose our creature comforts, our lifestyles.

We could have, experts have said, for the same amount of money that we gave to the profiteering conglomerates on Wall Street, stamped out hunger, poverty, and malnutrition worldwide. One such expert, Devinder Sharma, wrote:

The additional US $900 billion that the US has spent in the past one year could have pulled out the world’s estimated 2 billion poor from perpetual poverty and that too on a long-term sustainable basis. The US $700 billion bailout package that George Bush is promising could have wiped out the last traces of poverty, hunger, malnutrition and squalor from the face of the Earth. [Global Priority: Feeding Markets, Starving Hungry]

Clearly, we’re more interested in self-preservation than in living up to such a humble premise as demonstrating to the entire world that “I am my brother’s keeper. I will share what I have, that nobody might have to go without.” And to justify our indifference, we will continue to hail Democracy as the ideal, all the while proudly proclaiming the gospel of Democracy to the rest of the world, inviting them to be just like us.

Last night, like millions of others, I watched the carefully-scripted speech from George Bush as he did little more than repeat information that the rest of us have already been hearing. I may not be a financial expert, but I do know that I can think and reason through things. Because of that, I’d like to go over what President George Bush said to us last night, with a fine-toothed comb.

Transcript: President Bush Address to the Nation on Economic Crisis.
White House, September 24, 2008

Good evening. This is an extraordinary period for America’s economy.

This was, at best, an overstatement of the obvious.

Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration.

Somehow, I seriously doubt that this president really understands our worries and frustrations. For one thing–and this will become more obvious as we continue to plod our way through this speech, George Bush never includes himself in those affected by the growing financial calamity. For example, he speaks of “their worry” and “their frustration.”

We’ve seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending, credit markets have frozen, and families and businesses have found it harder to borrow money.

This is a natural occurrence, but George Bush doesn’t go into that. Instead, he shows a preference to generate more fear and more uncertainty, and he does this throughout his speech. I say it’s natural because we naturally react to the loss of money by holding more tightly onto the money that we still have. Only gambling addicts keep going. For example, if you are a normal person going to the casino with a hundred dollars, hoping to make that hundred dollars into more money than when you started–at some point during the time that you are losing that hundred dollars, you decide it’s time to cut your losses and you don’t give any more of your hundred dollars to the casino. On the other hand, a person who is willing to go the distance on the slim chance that he’ll make it all back (and more), who then loses the entire hundred dollars, and then goes to his family and cries for money so he can go back and try to get his hundred dollars back has a problem–but it is not the problem of the persons he wants to get money from. It is his problem.

If banks have restricted lending, why are we being told that that is a problem? The fact is, we, as individuals and families, restrict our lending based on the principle of whether we can afford to lend money or not. If we don’t have it, we don’t lend it. We should expect a bank to restrict lending in order to protect the funds that they hold for their clientele. Bottom line: that bank is acting responsibly when it does that.

He also told is that “credit markets have frozen.” Again, why is this a problem? It’s a simple matter of fiscal responsibility: if you can’t afford to extend credit–then, don’t! And a rule of thumb that I learned in my life is to never loan what you can’t afford to lose. In other words, if you loan money to a friend or family member, you do so with the presumption that you may not get that money back. If you do get it back, great. In fact, you may have even made some money in the process, if you charged interest. But the reality is that you don’t loan someone money that you cannot afford to lose or not have. It doesn’t make sense to do otherwise.

Bush went on by saying, “families and businesses have found it harder to borrow money.” Again, this is a natural occurrence. In tough financial times, there is less money available, and it’s harder to justify one’s being able to lose the money that we do have. It’s called fiscal belt-tightening. It doesn’t make sense to, in the face of a tightening financial market, go out and get a loan to buy a new car. Yet that is what we’re supposed to do, according to the pundits. We should be able to buy that new home, even if the one that we have right now is sufficient until things pick up again in the economy. We should be able to get that new big-screen television, even though we don’t have the money to pay for it because our work hours have been reduced.

This whole idea of encouraging us to live beyond our means through an addiction to credit has been going on for a long time; but more so in the past decade. I’m not talking about those instances where you have an unexpected emergency and need to take out a loan against the equity in your home to pay for a home repair or medical emergency. And I’m fairly certain that this is not the type of borrowing that is being talked about by Bush. I suspect that it’s in reference to starting up new businesses, buying new homes, new cars, new personal loans, etc. In fact, Bush touches on that further on in his “speech.”

We’re in the midst of a serious financial crisis, and the federal government is responding with decisive action.

Again, he’s stating the obvious. In fact, he’s saying what he said at the beginning of his speech, but changed up the words a bit. Unfortunately, it then gives him an opportunity to speak in generalities. For example, he says “the federal government is responding with decisive action,” but then doesn’t really specify what that action is.

What makes this even more interesting is that all of this is made to sound as though it’s a sudden emergence, a surprise development that must be met with hasty response. But isn’t this the same president that told us not very long ago that the financial system is “fundamentally sound”? In what way is it sound, Mr. President? In theory? And if it’s “fundamentally sound,” then why are you calling for an emergency injection of $700 billion dollars into the sustention of Wall Street? Clearly, things are not as sound as you would’ve had us believe. Worse still, experts are in full agreement that this situation has been some two years in the making, so it came as no surprise to anyone except you, Mr. President.

We boosted confidence in money market mutual funds and acted to prevent major investors from intentionally driving down stocks for their own personal gain.

“We” boosted confidence? The last time I checked, it was Congress that took that extraordinary action. What most Americans don’t seem to realize that is that once the door was opened by the government, everyone on Wall Street was going to try to walk through the door for a handout.

Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets.

Everyone already knows what the “root cause” is. It was greed. Simple, uninhibited greed. In an attempt to generate cash flows for board members and stockholders, someone came up with the brainchild of the ARM scheme: make buying a home so easy that even the poorest of Americans could own a home–the American dream fulfilled. And when the enticing 2-year fixed rate was up, the new homeowner could simply refinance their mortgage. Or so they were told. But those who signed on the dotted line for what we call “subprime” mortgages suddenly found themselves without the ability to refinance into another mortgage. Suddenly, their fixed-rate mortgage became an ARM which could increase every six months. And suddenly, rather than paying what they were when they started, they had to come up with $200-$500 more every month, with the potential to see even that increase again in six months when the ARM was reconfigured.

It was greed that kept the mortgage companies from working with the homeowners to come up with an extension on the fixed-rate mortgage until things got better. It was greed that made the mortgage holder think that throwing the homeowner out into the street and reclaiming the house rather than settle for what they had been getting up until the ARM kicked in.

But it didn’t end there. The mortgage holder thought that they could simply resell the repossessed home to someone else for its original value, and thus continue their tidy sum of monthly earnings. The reality was, however, that other mortgage holders were going into the same mindset, and the realty market became glutted with vacant homes with nobody either interested in going into a new mortgage, or unable to because “subprime” mortgages were no longer the latest fad for Wall Street. Now, these mortgage companies were sitting on empty houses and unpaid mortgages.

Financial assets related to home mortgages have lost value during the house decline, and the banks holding these assets have restricted credit. As a result, our entire economy is in danger.

Bush confirms what we already knew. And having already covered the details above, I won’t go back over it here.

So I propose that the federal government reduce the risk posed by these troubled assets and supply urgently needed money so banks and other financial institutions can avoid collapse and resume lending.

This is where thinking Americans get a little miffed. They get angry because when they lost their homes, nobody came forward to help them. It was just the “free market” at work, and apparently it was okay, as immoral as it was. And yet now that the mortgage holders are on the verge of losing their collective “homes,” the U.S. government is falling over itself to help them. And to add insult to injury, American taxpayers who are already struggling to make ends meet, including their mortgages, are expected to also foot the bill of their mortgage companies, in effect, paying twice. Bush and his administration has tried to sweeten the bitterness by saying that it comes down approximately $1000-2000 per person. Doesn’t sound so bad, does it? Except that we thinking common folk know that not every person pays taxes. Our children, for example. So, for the single mother, working two jobs at minimum wage, with three children, will not only have to pay her mortgage, insurances, utilities, personal expenses, transportation costs, income tax, food expenses, but she will also have to shell out the theoretical $4000-8000 that will cover her family’s “fair share” of this Bush solution.

And she wouldn’t be the only one.

This rescue effort is not aimed at preserving any individual company or industry. It is aimed at preserving America’s overall economy.

Should I be comforted in being told that this is not aimed at preserving any individual company or industry? What about us, the citizens? I mean, I’m thrilled that you are wanting to preserve companies and industries and the economy, but it’s just too obvious that we don’t fit into the big plan here.

It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America’s financial system is back on track.

Again with the generalities. How will it help? And since when did it become necessary to have credit in order to meet daily needs? Isn’t credit something that we need in unforeseen situations and unexpected expenses that are outside of the ordinary daily expenses? We take out a home improvement loan when we need to repair our roof, for example. That makes sense, because we don’t typically include in our housing budget “roof repair” since we can pay for that from the equity we’ve built up in our home itself. But needing credit to meet our daily needs?

Bush also touches on businesses that apparently need to get credit in order to create jobs. I would hope that in tough economic times, businesses aren’t interested in seeking out credit in order to expand. They need to operate by the same principle that we, the common man, operate under: if you can’t afford to, don’t. If the only way that a business can create jobs is to get credit and spend funding that they didn’t have to begin with–in the hopes that they’ll make that money back along with a profit, then they’re fundamentally wrong. A business should create jobs when its current workforce is insufficient to meet the demand. And if the demand is that high, then they are already generating the income anyhow–they just need the workers to fill the orders–regardless of whether they invoice clients or ask for the funding upfront.

Apparently, this putting every American–man, woman, and infant–individually under a further debt of $1000-2000 will convince the rest of the world that “America’s financial system is back on track.” That is such an unbelievable claim, that I’m not even going to bother responding here. You can think that one through, right?

I’ll address more in my next entry.