Ch. 15. Democratic-Market Society

    According to my definitions, democratic-market “first world” society has only existed since the mid 1960s. It is still an infant, and only thirty countries can be included in this category. At about seventy percent modern and thirty percent traditional, countries move from middle to late-stage modern transformation. At some point above ninety percent modern, they become democratic-market nation states. 1

    We do not yet know how long this new kind of social structure might last, how it will evolve, or how successful it will become. The small amount that we do know is still impressive, and its future looks bright. It is fairly obvious that democratic-market nation states are the end point of the modern transformation. Western Europe, where the modern revolution began, still accounts for a majority of this kind of society, but it is clearly expanding throughout the entire world. 2

    In this taxonomy, there are a number of requirements for graduating from oligarchic to democratic-market society. Most important, all of the major tasks of the modern transformation that tend to be the most violent must be over and done with. There can be no more coups, revolutions, civil wars, identity cleansings, border wars, imperial wars, or attempts at conquest of any kind. All of the various identity groups that live within the borders of the nation must enjoy full rights of citizenship and equal status before the law. Most of the population needs to be educated and capable of participating in the market economy. The democratic government must have already proven that it can regulate the economy successfully enough for a majority of the population to enjoy a comfortable middle-class lifestyle. Countries that have achieved this level of political and economic success are fully-modern democratic-market societies. Countries that have made great progress in moving towards these goals, but have not yet fully accomplished them, are late-stage oligarchic societies. 3

Political Institutions

    The political institutions of fully-modern societies are very similar. They are all nation states with strong governments that enforce the rule of law. There are executive, legislative, and judicial branches. They have bureaucratic departments that oversee the nation’s money, commerce, justice, agriculture, education, health, and other important aspects of modern life. 4

    Fully-modern nations have fair and open democratic elections with educated voters who are responsible for the outcome. All citizens, without exception, are encouraged to vote and participate in political life. This does not mean that first-world countries have governments that are always wise and successful. Voters are not omniscient. They like expensive government services, but they do not like paying taxes. This can cause serious problems. 5

    In democratic-market nation states, a majority of the population is part of the large middle class. The epic struggle between the oligarchic ruling class and the socialist working class is over, and the middle class has won. They are in command of the country’s political and economic institutions and their future development. Modern economies, governments, and populations are extremely complicated. There is a lot that can go wrong. Voters and politicians sometimes divide into competing factions that prefer to bicker and argue rather than work together to solve the nation’s problems. No form of government is perfect, including modern democracy. 6

Economic Regulation

    Democratic-market nation states all have government-regulated market-based economies. The government defines the playing field and establishes the rules. The markets guide the day to day activities of the players and determine the winners and losers. The entire population is encouraged to participate at whatever level they are able to achieve. When there is a problem like inflation, unemployment, shortage of credit, or too much wealth going to too few people—it is up to the government, in coordination with business, to find a solution. (That is easy for me to say. It is a lot harder to accomplish in the real world.) 7

    The political advisor, James Carville, put it very succinctly: “It’s the economy, stupid.”  It is the government’s job to regulate the economy, but that is an extremely complicated task, and no one knows exactly how to accomplish it. Different industries work in different ways and need different rules. The systems needed to oversee Wall Street banks are very different from those needed to regulate deep-sea oil drilling. In each case there is a large amount of work that needs to be done, and it has to be done right or bad things will happen. The regulatory agencies need competent staff with the authority and ability to watch over economic activity, enforce the rules, and not get in the way. This is essentially the same job that umpires and referees are expected to perform on the playing field. 8

    Over time—markets change, people change, and circumstances change. Rules that worked well twenty years ago may be completely out of date today. The regulators are often behind the curve and trying to catch up. If they do a poor job, the entire country will suffer, and the politicians will get the blame. If they do a good job, the country will prosper, and business will take the credit. 9

    I have examined the interface between government and the economy in every society that I could find data for. This interface and interaction is always there. It does not matter whether it is a tribal, aristocrat-peasant, modern transformation, or democratic-market society. When the leaders get together to debate and make decisions, more than half the time, they are talking about economic issues. 10

    The question might be: Is it time to pack up everything and move the flocks to greener pasture, and if so, what direction should we go? Or, the question on the table could be: Since the bankruptcy of Lehman Brothers two days ago, the entire financial system seems to be collapsing; what do we do now? In every society, there is no way to keep the government separate from the economy. In democratic-market nation states, the interface between government and the economy is massively larger and more complicated than ever before. 11

    There would be a much higher likelihood of successful economic regulation if voters understood the subject better and demanded more competence and better results from their regulatory agencies. Markets that are not well regulated will be manipulated. 12

Social Programs

    Social programs are another aspect of the government interface with the economy. Police officers and firefighters are not there just to protect the public. They are also necessary to protect the market economy. Modern nations also fund public education, pensions, and healthcare programs that benefit both the economy and the people. The problem is that such programs can become very expensive, and they have to be paid for with taxes. 13

    In democratic-market society, it is not possible to separate the capitalist market economy from either government regulation or social programs. They all work together to feed the population and allow as much comfort and prosperity as can be achieved. It is up to the voters and the politicians to decide what economic regulations are needed and which social programs should be funded. Bureaucrats are hired to perform the work. Voters and politicians have to remember that there is no free lunch. Social programs have to be paid for by taxes collected from business and the people. 14

Economic Problems

    It has been demonstrated in many different countries that a well-regulated market economy can produce enough wealth to provide a job and a comfortable life for nearly everyone. We are now seeing that even fully-modern countries like the United States and the European Community can also suffer from extended unemployment and poverty. Industrial power centers can turn into “rust belts.” It is not easy running a high-speed modern economy. There will always be problems and some decades will be more prosperous than others. Sometimes businesses are able to revitalize themselves. Sometimes poor government regulation allows distortions to build up and cause problems for the entire economy. 15

    Most people believe that the primary purpose of a democratic nation-state government is security and defense. It may have been true in the chaotic early years when nations were being established and borders were being determined. Today, the violence is mostly over and done with. It is time for politicians and government bureaucrats to realize that their primary job is to develop and maintain the legal and physical infrastructure needed for a successful market economy. If there is a long-term problem with growth and unemployment, it is up to government and business leaders to find a solution. It is the job of economists to help by proposing useful ideas. 16

Family Structure

    There are huge changes to family structure in first-world societies. The problem is that with only two generations of data, we do not know to what extent these changes are real and permanent or possibly just an overreaction that will be moderated in the future. 17

    Life in traditional societies and most of the oligarchic transition period was based around the family. In tribal society, the family was life itself. Without the combined effort of the extended family working together, survival was questionable. In aristocrat-peasant society, individuals usually inherited their rank from their families. Aristocrats could often recite their ancestry going back a dozen generations or more. Most children grew up to perform the same work as their parents. They depended on family connections, cooperation, and solidarity. All of this is much reduced in democratic-market society. 18

    Not so long ago, it physically required at least one man and one woman to run a household. There was just too much work to do. There was a division of labor that was unchanged since the beginning of time. Now, with modern kitchens, store-bought clothes, and labor-saving devices for cleaning and other chores, it is possible for an individual to live alone successfully. It is no longer a necessity that families live together. 19

    The extended family was the first to break up under modern pressures for labor mobility. As people left their hometowns in search of work, promotion, or a sunnier climate—they lost track of aunts, uncles, and cousins. 20

    It turns out that women have just as much talent for modern office work and most other jobs as men. As they began developing their own careers and single life has become possible, even the nuclear family seems to be breaking up. Divorce has become common. Having children without a marriage has become common. Single parent households, step-mothers, step-fathers, and step-siblings have all become common. At this point, we do not even know the full implications of the changes that have already happened. We have no idea what direction the family will go in the future. 21

    One result is that the birthrate has been declining. If the present low level continues, first-world countries will have smaller and older populations. As developing countries complete the modern transformation and turn into democratic-market societies, the population of the entire planet may eventually begin to decrease. How that will work out, or when, is anybody’s guess. 22


    Religion in democratic-market society is highly diverse and fairly flexible. Overall, there is less spirituality than in traditional society, but religion is still important. No one seems to be able to tell first-world populations what to believe. Various religions and preachers display their services, and the people pick and choose between them. There is no longer any such thing as religious coercion or a crime of heresy. 23

    With both the family and religion in decline, it appears that modern society is primarily focused on making money and spending money. That leaves us looking pretty shallow compared to earlier cultures. 24

    When people change from one kind of society to another, it is not just their economic and political behavior that changes. They also develop new ways of thinking about the world. This is a long, slow process that can last for many generations. One of the many such changes in fully-modern society is a new attitude toward life. 25

    It used to be that life was cheap. Half of all infants did not live to maturity. For those that survived childhood, life was often nasty, brutish, and short. Death was all around. Spirits, angels, saints, and deities were everywhere. In traditional society, the transition from physical existence to spiritual existence was not necessarily believed to be a bad thing. In democratic-market society, life is considered to be more precious. Most people want to live well into old age. 26

Conflict and Military Institutions

    Attitudes toward killing have also changed. It used to be that the leaders of most societies were chosen from the best warriors. Aristocrats, by definition, were elite fighters and war leaders. Tribal chieftains were often equally experienced killers. Attacking other people, killing them, enslaving them, taking their wealth and their resources used to be common practice. For the most part, these activities are no longer performed by fully-modern nation states. 27

    Some people believe there will be war when modern countries run out of natural resources and attempt to conquer more. If that happens, my definition of democratic-market society will have to be revised. Nothing is more expensive than modern war. The chosen victims will fight for all they are worth. Unlike aristocratic states, modern nation states, even the smaller and weaker ones, do not accept being conquered. Resistance and guerrilla war would continue indefinitely. Conquering resources would be much more expensive than buying them. It is unlikely to become a major problem. 28

    Most first-world countries have seriously reduced their military capability. They occasionally send small contingents to participate in some war for training purposes, but this is usually controversial and disapproved of by many voters. The United States is an exception to this rule. Americans came out of World War I believing that war was a bad thing. They demobilized their military capability, and 23 years later, they were Pearl Harbored. 29

    After World War II, the entire country was resolved to maintain a strong military for the purpose of policing the world. Americans wanted to make sure that evil dictators would never again be able to rape and pillage innocent populations. War propaganda was turned into history. In the future, dictators were not to be appeased. They were to be stopped. 30

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