Blurring the distinction between two systems

In America, democracy and capitalism have been intertwined for so long it is easy to think of them as one and the same system.

Political freedom and free market economics would appear to be two manifestations of one concept: free choice. In fact, democracy and capitalism differ in a very fundamental way, that is, how each apportions a given resource, be it power or goods and services.

I think it is our failure to recognize this difference that has made some current problems so contentious and seemingly insoluble.

Democracy is predicated upon equality. The power of the people is divided among the citizens according to the dictum: one person, one vote. The power of a government created by the people is then split equally among the legislative, executive and judicial branches.

Capitalism, on the other hand, is more Darwinian at heart. Goods are distributed not equally but according to the law of supply and demand. The highest bidder takes the day. Market decisions are made, in effect, by people voting with their pocketbooks. It is worth remembering, however, that not all pocketbooks are created equal.

There is no doubt in my mind that, to date, capitalism is the best economic system to come along. And, for the most part, it meshes well with our political process. It does fail, however, to address what economists call "extemalities."

Extemalities are costs or benefits that are external to the system of production. For example, the pollution and the associated health costs a company generates in producing its product is never accounted for economically. Barring anti-pollution laws, a company will seek out the cheapest possible way to produce a product regardless of whether pollution is a by-product. They have no financial incentive to do otherwise. Meanwhile, those health costs (added cases of asthma, emphysema, lung cancer, etc.) are borne by society as a whole.

Universal fire protection and education fall into the same category. Though society as a whole greatly benefits from these services, no one economic entity has a financial incentive to provide them. So without government intervention, these public benefits, or positive extemalities, would fall through the gaps of a free-market system.

It would seem that any resource that is either indivisible (air, water, space) or publicly held (national parks and waterways) should be distributed evenly. But capitalism cannot guarantee that. The free market solution becomes not only unreasonable but absurd in these cases. Imagine a situation where only the wealthy districts provided education, or another where rich countries could comer the market on fresh water.

Which brings up two local issues that seem to generate endless fodder for argument: user fees and affordable housing.

I think part of the reason these problems seem intractable is that we are blurring the distinction between democracy and capitalism and, subsequently, applying the wrong system to each. One is a publicly held resource that is being forced into the free-market system, while the other is an economic imbalance people are trying to solve using democratic principles.

Pay for what you use seems like a reasonable mantra on the surface. But national parks are owned equally by every citizen. Therefore each citizen has a legal and equal right to that property. When access to a national park is forced into a supply-and-demand equation, the less financially able are squeezed out.

In 1986 I went to Grand Canyon National Park for a kayaking trip on the Colorado. Our 18-day permit was free. In 1989 I went again and the permit fee was $25. Last year, under the new user fee system, I calculated all of the fees for the same trip to add up to $1,812.

No doubt the higher cost will knock a lot of people off of the demand curve, something the Forest Service now wants. For years they have maintained, quite rightly I think, that their goal was for more access to these treasures not less.

On the Middle Fork of the Salmon outfitters have always been under threat of losing their permit if they didn't take enough people down river. Now one of the proposals being offered by the Forest Service is to cut the number of user days in half. Logic would hold that outfitters would have to double their prices from $1,300/person to $2,600/person.

We are already restricting this public asset to a tiny population of wealthy people. The current thinking seems to be to restrict it even more. Economic forces will never apportion public assets democratically (as by all rights, specifically the Fifth and 14th Amendments, they should).

Affordable housing, on the other hand, is an economic problem that the market system can and will work out.

It is not specifically a democratic issue, as much as people would like to make it one. No one really has an "inalienable right" to own a house in Ketchum.

Housing is expensive here, so there is a shortage of local workers, in general. Sooner or later supply and demand will kick in; wages will rise. Workers will have more money to spend on housing. As the rental and lower cost housing becomes more lucrative, supply will increase and the problem will mediate itself. The point is that the market continues to adapt to the perturbations.

Right now this struggle between democratic principles and economic forces is being played out locally, but it is happening on a much bigger scale as well.

As the Third World develops, its problems will become ours. Some of the problems will be solved democratically, while others will be solved in the global economic markets.

It would seem right that all global and indivisible resources such as the oceans, air, and space be shared democratically. Unfortunately, there is no global constitution guiding us as to how to divide the spoils.

As it stands now, it looks like it will be a free-for-all.