The Rational Argumentator

A Journal for Western Man

Investmentocracy: A System of Buying Votes 

This essay is part of a series of papers by Mr. Stolyarov discussing an improved constitutional blueprint for a free society. Such a constitution is now publicly available and is called the Freecharter. This essay discusses Article III of the Freecharter.

Numerous principles of voting have unnecessarily been considered sacred in contemporary Western societies. One of these is the principle of “one man, one vote.” Another is the inalienability of voting power from the individuals. Yet a third erroneous principle often taken for granted is the inability of individuals to legally pool their votes in favor of a candidate or policy they support. Finally, age and residency limitations on voting necessarily exclude some qualified persons while empowering politically ignorant and undedicated others. These common ideas and policies shall hereafter be referred to as Conventional Democratic Principles (CDPs). The application of these principles virtually always requires a system of compulsory taxation to support the functions of the government.

Here, an alternative system is proposed – a system where individuals and organizations are free to augment their relative voting power in proportion to their voluntary contributions to the government. This system shall hereafter be called investmentocracy – rule by investment in the government. Investmentocracy corrects numerous conventional democratic injustices and inefficiencies and eliminates the need for compulsory taxation.

The principal problem with CDPs is their incompatibility with a liberal economic order that respects individual private property rights. Richard Wagner notes that

it is inconsistent or incongruent to implement a liberal principle by conjoining legal principles of property and contract with a simple republic selected by single-member constituencies operating in accordance with majority rule… Market participants will use the political order as a means of gaining favors through imposing disabilities on others. (58)

Disabilities are politically imposed on individuals by means of compulsory taxation, which takes money from some and redistributes it to others largely through decisions of simple majorities of voting persons. In a pure democracy without checks on majority rule, 51 percent of the people have the power to vote for themselves the property of the other 49 percent.  Even with some checks on majority rule, compulsory taxation amounts to the expropriation of some for the benefit of others.

Ayn Rand emphasizes the incompatibility of compulsory taxation and a completely free society.

In a fully free society, taxation—or, to be exact, payment for governmental services—would be voluntary. Since the proper services of a government—the police, the armed forces, the law courts—are demonstrably needed by individual citizens and affect their interests directly, the citizens would (and should) be willing to pay for such services, as they pay for insurance. (116)

Yet a voting system based on CDPs must rely on compulsory taxation in virtually all cases. CDPs result in an absence of capital markets in ownership of the government, which, according to Wagner, leads to an opportunity “for conflict among owners [here, the citizens at large], because of efforts of winning coalitions of owners to appropriate wealth from other owners” (61). Inalienable votes under CDPs imply the lack of markets for votes. A lack of such markets implies the absence of a way to get the unanimity among owners that a capital market in ownership tends to bring about (Wagner 61). A lack of unanimity among voter-owners leads to the perceived need to use force to get the recalcitrant few to conform to the plans of the many – at least when it comes to funding these plans.

But there is no reason not to have markets for transferrable ownership shares in governments. Wagner notes that many governments today face limitations that private entities, such as hotels and corporations, do not – even though these entities provide services similar in nature to those expected of certain governments – “communal services [such as] police, fire protection, sanitation, recreation, and transportation, in conjunction with the provision of … private services” (60). Wagner focuses on cities, which

are non-proprietary organizations; they are a kind of consumer co-operative. People acquire a non-transferable ownership share by virtue of their residence in a city. This ownership share is inalienable, and it must be relinquished upon moving from the city. There is no market for ownership shares; people must simultaneously serve as owners of the assets the city represents and as consumers of the services the city uses those assets to produce. (60)

Wagner’s analysis can be extended to governments over larger territorial units. Under CDPs, for those governments, too, the “ownership shares” of voting citizens – their votes – are inalienable, and each voting citizen has the same number of voting shares – namely, one. CDPs prevent the kind of share trading that might bring about unanimous political outcomes, thereby precipitating schemes of compulsory taxation.

Nothing necessitates the maintenance of CDPs under any constitutional order. Even John Locke, who explicitly advocates that all decisions pertaining to the purposes for which a government was established be made by majority rule, in fact recognizes an exception to this principle. He writes that  “[w]hosoever… out of a state of nature unite into a community, must be understood to give up all the power, necessary to the ends for which they unite into society, to the majority of the community, unless they expressly agreed in any number greater than the majority [Italics mine]” (Sec. 99). Locke, then, cannot be seen as an unqualified adherent of majority rule by the “one man, one vote” principle. This is presumably the decision-making mechanism Locke would require unless the constitution set up stipulations to the contrary that were agreed upon by individuals entering into a society. Thus, only setting up such constitutional stipulations is necessary for a departure from CDPs that is fully consistent with Locke.   Majority rule has perhaps no less reserved advocate than Jean-Jacques Rousseau, who wrote that “all the qualities of the general will still reside in the majority: when they cease to do so, whatever side a man may take, liberty is no longer possible” (Book IV, Sec. 2). But even Rousseau acknowledged that “the more grave and important the questions discussed, the nearer should the opinion that is to prevail approach unanimity” (Book IV, Sec. 2). If a voting mechanism can be found that approaches or arrives at unanimity in deciding important political questions, then even Rousseau should in theory be able to approve of it. If unanimity can be more closely approached by rejecting CDPs, this is not in principle antithetical to Locke or even Rousseau.

Investmentocracy is indeed a departure from CDPs that assures effective unanimity in making government decisions. In place of CDPs on the local and city levels, Wagner proposes that “[j]ust as the franchise is weighted in stock companies, ownership shares in municipal corporations could be weighted similarly, with weights based on relative tax payments” (62).

Investmentocracy goes a step further by abolishing compulsory taxation altogether and replacing it with voluntary contributions to the government. In exchange for these contributions, the government gives a number of votes to each contributor proportional to the magnitude of his contribution. Decisions submitted to voters are resolved by a majority or plurality of votes, rather than a majority or plurality of voters.
By abolishing required taxes, investmentocracy eliminates the possibility for coercive redistribution of wealth. Those individuals who do not want the government to give away their money can simply choose legally not to give money to the government. Those individuals who do give money receive a proportional amount of votes for it. They are empowered to an extent to direct the use of government funds, but they enter this power with full awareness that, on occasion, the vote will not go their way. This state of affairs is no less consistent with the unanimity principle than membership in a private organization which might occasionally elect officers of whom one disapproves despite one’s vote to the contrary. So long as it is possible for any individual to refuse participation in the political process without incurring any costs or having costs imposed on him by others, a vital meta-unanimity in political decisions can be maintained.  Any non-voting citizen will still have full personal and economic rights under investmentocracy and will be actively protected in these rights. He simply will not have the political voting privilege.

For instance, the government could designate $10,000 as the price of one permanent vote and enshrine this price as a clause in its constitution. No entity able and willing to pay this price will be denied the ability to contribute and receive votes accordingly. Once the principle of “one man, one vote” is rejected, there is no longer any reason to restrict the votes an individual holds to whole-number amounts. For instance, a person who only gives $100 to the government will thereby purchase 0.01 votes. The number of votes an entity currently controls can be officially recorded in a password-protected Internet database that every voter would be able to access.

Once the principle of inalienability of voting power is rejected, vote-holders would be free to transfer their voting shares to others for whatever price such shares will fetch on the free market. The free-market price of voting shares is unlikely to rise above the government price, because one will always be able to purchase a vote from the government for the constitutionally specified price. Moreover, an extensive and well-functioning market in votes is likely to eliminate most opportunities to buy votes at below the constitutionally specified price, because high demand for these votes will tend to lead their free-market prices to be bid up to the constitutionally indicated amount.  If the free-market price of voting shares is ever substantially and sustainably below the constitutionally specified price, this would be a serious sign of trouble for the government. Such a disparity would mean that the government is performing so poorly in the opinion of citizens that there is not even enough demand for its voting shares to bid up their price to the constitutionally specified amount.

Moreover, investmentocracy would permit individuals to pool their money and purchase votes as an organization – with the votes to be cast as internal organizational rules determine. This possibility eliminates the objection that investmentocracy would unduly empower wealthy citizens above all others. Poorer citizens can create voluntary associations to defend their freedoms and amass sizable amounts of votes by making contributions on the behalf of many thousands of members.

Finally, investmentocracy can be accompanied by the abolition of any restrictions on voting power besides the ability to contribute the necessary amount for the purchase of votes. Such contributions will be seen as per se signs of the contributor’s seriousness in engaging in questions of public policy and assuming a personal stake in the government’s affairs. Contributions might be made in the name of children, foreigners, corporations, non-profits, and any other entities that can demonstrate the existence of a clear decision-making mechanism by which they might allocate votes.  Wagner notes that “[p]resently, residents [in a territory subject to a city government] must simultaneously be consumers and owners. Conversion of municipal corporations to stock status would separate those two capacities… People would specialize in ownership, in which case the differences between cities and hotels would disappear” (62). If state and national governments were likewise converted into corporations with transferable ownership shares, no reason would exist to exclude non-residents from being partial owners of the governments – especially since such prospective owners would be willing to put forth their money and their expertise in management and public policy in service to the government.

Investmentocracy overturns CDPs by establishing a system where votes become genuine ownership shares in government. Multiple votes may be owned by any individuals or organizations that make the requisite contributions, and these votes may be transferred at will in private markets. By eliminating the need for coercive taxation, investmentocracy creates a genuine opportunity for achieving unanimity or meta-unanimity in virtually all government decisions performed by voting. Those who are displeased with the decisions made by the government could provide an effective check on future poor decisions by either withdrawing their financial support or buying a greater percentage of the votes and more substantively influencing government policy. As an added bonus, investmentocracy is the epitome of cosmopolitanism and opposition to discrimination based on circumstantial attributes. It is blind to age, gender, race, nationality, religion, and residency.  Its only regard is for the willingness of voters to back their civic participation with money. Investmentocracy leads to a government that is at once respectful of freedoms and well-funded.

Additional research has the possibility of clarifying some of the advantages of investmentocracy and addressing possible objections to this system. One common argument leveled against investmentocracy is that it would generate into plutocracy – rule by the wealthiest few, who are assumed capable of buying a majority of the votes and thereby controlling government policy. The defender of investmentocracy can demonstrate the faults with such an argument by examining the nature of wealth disparities in historical and present circumstances throughout the world. An excellent defense of investmentocracy would entail finding a time and place where the distribution of wealth was much less even than in the United States today and then showing that, if that country’s government converted to an investmentocracy overnight, the wealthiest individuals would still be unable to command anywhere near a majority of the votes.  It is possible to demonstrate this by examining data for the gross domestic products of particular countries at particular times and then examining the net worth of the wealthiest people in those countries at those times, and showing how minuscule a fraction of the country’s GDP even the fortune of a John D. Rockefeller or a Bill Gates would be. It is true that a richer person would be able to afford more shares than a poorer person under an investmentocracy, but his overall fraction of votes would still be minuscule in a society of any significant size. Moreover, a wealthy individual seeking to enjoy a high standard of living would be faced with a tradeoff between personal consumption and voting power, and some politically apathetic wealthy people might even choose to have less voting power than many civically active poorer people, especially if the latter combine into voting blocs of like-minded persons.

Another line of research would involve the integration of investmentocracy with other constitutional protections, especially protections for individual rights. An argument can be made for investmentocracy’s role in strengthening rights enforcement, as investors in the government who see some facet of the government as oppressive can pursue one of two legal avenues. They can refuse to give the government any more of their money, which will impose a direct penalty of those parts of the government engaging in rights violations. Alternatively, they can buy more shares of the government in an effort to alter government policy and abolish the rights-violating behaviors. This course of action can be pursued with especial effectiveness if the oppressed individuals are permitted to form voting blocs and act as a unit in the acquisition of votes and in voting to reverse the oppressive policies. Milton Friedman’s four types of spending, as described in Free to Choose, would be fruitful to examine in this respect. Currently, government officials vote to spend other people’s money on other people – an instance of Friedman’s type IV spending. This gives the officials little incentive to care for either the interests of those from whom they take the money or for the interests of those to whom the money is redistributed. But under investmentocracy, the investors in the government will vote on how to spend their own money on either themselves or other people. These are instances of spending of types I and II, because each investor’s voting power is in direct proportion to his own monetary contribution. When engaging in this kind of spending, investors in the government will have strong incentives to be concerned about its effectiveness in bringing results for themselves and its cost-effectiveness when fulfilling the needs of others. When government spending under investmentocracy is done to enforce individual rights, this will be an instance of type I spending in the minds of the investors and will thus be more likely than any other kind of spending to effectively accomplish its aims.

Find out more about the Freecharter.

Works Cited

Friedman, Milton. (1990) Free to Choose: A Personal Statement. New York: Harvest Books Publisher. ISBN: 0156334607.

Locke, John. (1690). Second Treatise on Civil Government. Constitution.org. Available at http://www.constitution.org/jl/2ndtreat.htm.  Accessed 22 September 2008.

Rand, Ayn. (1964). The Virtue of Selfishness. New York: Signet Publisher. ISBN: 0451163931.

Rousseau, Jean-Jacques. (1762). The Social Contract. Constitution.org. Available at http://www.constitution.org/jjr/socon.htm.  Accessed 22 September 2008.

Wagner, R.E. (1993), Parchment, Guns and Constitutional Order.  Brookfield:  Edward Elgar Publisher.  ISBN: 1852788399.

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