The article below by President William G. Durden '71 appeared in the Sunday Review and Opinion section of the Harrisburg Patriot-News on April 5, 2009.
Democracy and the free market: the uneasy relationship
by William G. Durden
The recent revelations about the substantial bonuses awarded top AIG executives have raised anew the question of the appropriate relationship between the free market and democracy.
While the public, in classic populist furor -- targeting all for the actions of some -- decries the bonuses as the latest example of the American financial system's willingness to take the highest risk for a maximum return to the point of near total collapse, apologists respond by asserting that any attempt to regulate their actions is an affront to the democratic system and will close down the grand American economic experiment.
They argue that a successful democracy depends on an unrestrained market culture that permits those exposed to risk to make as much money as possible.
When questions about what a democracy should or should not permit arise, it is always instructive to return to the thoughts of our Founding Fathers. One signer of the Declaration of Independence, Dr. Benjamin Rush, a prominent Philadelphia physician and founder of Dickinson College, wrestled throughout his lifetime with the role a free market should play in the young nation's development.
Rush was, in fact, one of the earliest proponents of a free market. Angered by the restraints imposed by British blockades and high tariffs, Rush encouraged America to develop its own commercial and manufacturing economies.
"There is but one expedient left whereby we can save our sinking country," he wrote in 1767, "and that is by encouraging American manufacturers. Unless we do this, we shall be undone forever."
For Rush, a free market was essential as a foundation to a democratic government that would advance the prosperity of all citizens. "America possesses immense resources for national importance, which can only be brought forward by commerce," he opined in 1782. "I do not think wealth acquired by commerce (provided that commerce is not in the souls of men) is necessarily fatal to liberty." For Rush, pursuit of wealth was good for democracy as long as it did not begin to define a man's soul instead of liberty and the integrity that flows from it. Once that delicate line was crossed, democracy itself was endangered.
By the early 19th century, Rush believed this delicate balance had been breached. Writing to John Adams in 1808, he lamented, "I feel pain when I am reminded of my exertion [from 1774 to 1780] in the cause of what we call liberty and sometimes I wish I could erase my name from the Declaration of Independence."
Rush referenced a conversation with an elderly patient who observed that, since the days of the Revolution, Americans "had all become idolaters; they worshipped but one god it is true, but that god was GOD DOLLAR." Rush agreed, asserting that "we are a 'bedollared nation.' Dollars are a standing dish upon which all feed with rapacity and gluttony."
The link between the free market and democracy has served this nation remarkably well. The delicate interplay between these two pillars of American society has created a nation renowned for its relative prosperity, freedom and wealth of opportunity. It also has created remarkably effective leaders who have traversed the worlds of government and finance and who have wisely and philanthropically invested their wealth to create a more just and compassionate democracy.
Following Dr. Rush's early warnings, the productive interaction between the market and democracy is legitimate only when financiers appreciate that their ambition is not limitless but prospers to the extent it serves the democratic imperative.
The constructive balance between the free market and democracy is rent asunder when the pursuit of wealth overtakes the "souls of men." This imbalance jeopardizes the very foundations of our society -- democracy, individual liberty and our faith in the ability of the free market system to serve the general welfare of our nation.
As Rush's lament about the "bedollared nation" indicates, this is not the first time our nation has found it necessary to re-evaluate the interplay between democracy and the free market, nor I fear, will it be the last.
But surely we can find the courage to confront our current plight head-on to restore yet again for some errant leaders in American business and finance the alignment between individual reward and liberty. Surely, we can re-establish those strictures that balance necessary financial incentive, service to democracy and corruption of the soul.