INTRODUCTION

This book describes how the universal, timeless, human urge for freedom, peace, and comfort can be satisfied by the synergistic coupling of democracy and capitalism.

During the twentieth century, hundreds of millions of people were able to live with more freedom and comfort through democracy and capitalism. During the twentieth century over a hundred million people were killed by governments. These human capabilities, both noble attainment and obscene failure, have carried their momentum into the twenty-first century.

History demonstrates how difficult it is for humans to stop the folly and violence. The human future, however, should be better than the past because the capacity of economic freedom to improve lives and unify people has been greatly enhanced by the information-age revolution.

The worldwide opportunity to attain peace, plenty, and unity is promising, but we need an understanding of the reasons for persistent failure. Only when the impediments to social progress are clearly recognized can they be neutralized. Identifying the end and the means for social progress is more complex in an open society than in a totalitarian one because in a democracy, the process itself must be free.

One mission of the universities in a democracy should be to prepare citizens for their responsibilities while unifying and elevating them in the process. As the state cannot influence the curriculum, this places a special responsibility on the university to organize the multi-disciplinary education for students of every age. Civic and religious groups can support this educational mission.

The historical failure to identify and implement a rational and natural order has been shared by political and intellectual leaders. Consequently, both governments and universities need reform to realize the new opportunities. Citizens united by belief in the ideal, and educated with a functional knowledge of the means, can insist that these institutions reform.

The world at the beginning of a new century is poised to move toward the ideal, but the momentum toward more folly and violence has not been arrested.

Consider the following two mistakes that happened a century apart. They were caused by poorly educated intellectual and political leaders, and they led to disastrous social consequences. Both could have been avoided by a rigorous truth-seeking process, and the course of history would have been changed.

• Late-1880s: The world was moving toward economic freedom. It was an imperfect process, but more people were improving their lives and democracy was growing. Reform-minded intellectuals were excited by Marx's legitimate criticism of the excesses of capitalism, but they did not subject his radical theories to rigorous examination, including comparison to the refinement of capitalism presented by John Stuart Mill. Reformers working within a narrow spectrum of knowledge made a tragic error in choosing Marx over Mill. The bloodiest century in history was the result.

• 1990s: Mexico, Indonesia, Malaysia, and many other countries, despite imperfections, were making impressive progress in improving lives by moving to economic freedom. But then, lethal finance imperialism struck! Economic momentum was reversed, social upset was caused at home, and tensions among nations abroad. The mature economies, led by the United States, had failed to provide the stable and patient capital required by definition of capitalism; Adam Smith's universities had failed to educate citizens to a functional knowledge in these economic matters; the media had failed to inform citizens by examining economic causes, and in their lack of comprehension, converted the unnecessary tragedy into a political event.

The common denominator of these mistakes is the inadequate curriculum for citizenship in the universities which results in uninformed citizens and untrained leaders. The intellectual range of Enlightenment thinkers, such as Smith, Condorcet, Jefferson, and later Mill, was not replicated in the universities during the nineteenth and twentieth centuries. Intellectuals should have drawn on a functional knowledge of economics, governance, and understanding of the motivation of people, to identify mistakes and provide corrections. Too many have tried to find answers in political theory alone, and the failure of their theories has forced them to conclude that social progress is an illusion.

I take the opposite view. The goal of peace and plenty in the twenty-first century is uniquely attainable, and the means are identifiable through multi-disciplinary truth-seeking protocols. The theses supportive of this conclusion are organized in the following four categories and are offered to be part of a thesis, antithesis, synthesis process. The result of this synthesis should be a curriculum for citizen education, at all ages, and in all parts of the world.

• Reaffirm Idealism: People unify by believing in a goal and working for it. The elimination through economic freedom of material scarcity and violence, is a universally desirable goal. The ends and means towards this goal need to be presented for examination by students; instead, a denial of idealism is offered by many.

• Refine Capitalism: To reach its full potential, capitalism needs only broader wealth distribution and ample, low-cost, non-volatile, patient capital. With these refinements, global capitalism can eliminate material scarcity, improve the quality of lives, and unify people. Conversely, the capitalism now dominated by speculation, instabilities in the monetary system, treatment of workers as cost commodities, and a feeding frenzy in executive compensation, is provoking a populist revolt against global capitalism that, if continued, will ruin this best -ever opportunity for social progress.

• Restructure Government: Citizens need a functional understanding of fiscal and monetary matters to pressure their representatives to democratize the policies mentioned above and eliminate privileges lobbied by finance capitalism. By combining the principles of participatory democracy with information-age technology, the government can fulfill its missions at dramatically lower cost and eliminate the suffocating micromanagement of the collectivists.

• Reposition Foreign Policy: The global mission of the United States should be to promulgate economic freedom while recognizing that moral economic leadership and warrior-state geopolitics are mutually exclusive. Only a growing sense of worldwide economic common purpose can phase out reciprocal atrocities. All countries have the responsibility to use economic freedom to improve the lives of their people, in ways consistent with their cultures and at their selected pace. By accepting this reality, the United States can concentrate on purging its own imperfections.

Chapter 1, Citizen's Choice.

Special reasons will make the twenty-first century either the best or the worst in human history. The United States, influenced by the universities and educated citizens, will be pivotal in which direction the world goes.

This choice is highlighted by Francis Fukuyama in End of History, and by Samuel Huntington's in Clash of Civilizations. Fukuyama describes the world, after the demise of communism, as moving toward the economic common purpose of free markets; Huntington argues that the end of the bi-polar world will result in more violence from more terrible weapons in the hands of people consumed with hatred from centuries of religious and ethnic atrocities. Fukuyma's argument is rational; Huntington's has historical momentum.

Chapter 2, The Development of a Democratic Capitalist.

Because this book is an integration of my experiences and study, it is appropriate to describe how I discovered democratic capitalism, and the extraordinary potential of people when they are encouraged to become involved, and to cooperate, produce, innovate, and share. In my experiences over many years, in many parts of the world, I discovered and tested the principles that I later confirmed from studying the wisdom of many.

Included is a description of Care and Share, a profit-sharing and ownership plan that I designed and implemented as CEO of ADT, Inc. I believe that such programs are the solution to the maldistribution of wealth that has persistently corrupted capitalism.

At the end of my business career, I was puzzled why these principles were not applied to all aspects of human organization. After studying this question for years, I became even more puzzled that the simple principles of democratic capitalism have yet to become the template for a comfortable and peaceful society.

Chapter 3, The History and Philosophy of Democratic Capitalism.

In 1776 Adam Smith defined the dynamic of a new industrial system that could eliminate material scarcity, but he warned of the threat from speculators. Smith's vision of economic freedom was complemented by the political freedoms in the new American republic. Robert Owen provided early experimental verification that investment in human capital produces superior results, and John Stuart Mill enlarged the definition of democratic capitalism by examining ways to distribute wealth broadly.

Mill's manifesto contained the radical proposal that industrial performance and the worker's quality of life are synergistic. In retrospect, it is clear that Mill's manifesto was the badly needed correction to Marx's Communist Manifesto that appeared at the same time, 1848, in the same city, London.

I also draw on the Marquis de Condorcet's summary of the work of the Enlightenment, and the examination of the American democratic experiment by another Frenchman, Alexis de Tocqueville.

Chapter 4, How Democratic Capitalism Works.

Although democratic capitalism is not taught in business schools as a coherent commercial philosophy and practice, most of the companies designated by Fortune as the "100 Best" practice its principles. These companies have found democratic capitalism, as I did, through trial and error. The common features include a fundamental morality broadly understood, customer loyalty, high levels of productivity, job security, meritocracy, minimum structure, action orientation, and a compensation system that is both fair and is perceived to be fair. The practices of democratic capitalism flow from a commitment to integrity in a coherent and integral pattern.

Democratic capitalism will not be a choice for the twenty-first century, the information-age will make it a competitive necessity. Only in the democratic capitalist environment will the cognitive power of involved, contributing, sharing, people be fully released.

Chapter 5, Governance.

Governance of companies and countries needs to be structured on a synergistic coupling of democracy and capitalism with the goal of individual development within a harmonious whole. I describe the principles requisite to this synergy.

A full list of the functions of government is drawn on the thoughts of Friedrich Hayek, regarded as one of the leading philosophers of laissez-faire, to make the point that arguments about government are about means, not ends.

The workable sequence for governments desiring to move from tyranny to freedom is civic order, then economic freedom, and then political freedoms. These steps can overlap, but political freedoms fail when reformers try to implement them in the absence of civic order and economic momentum. Examples of transitions, both successful and unsuccessful, are provided.

Chapter 6, The Economic Logic of Democratic Capitalism.

Democratic capitalism, I propose, is the superior economic system that offers positive effects on all of the elements on both the supply side and demand side of the economic equation.

I describe a way that the government should control currency and credit for the general welfare, along with describing how historically it has been controlled for the benefit of financial capitalism.

Unfair wealth distribution has been one of the main reasons for class tensions and slow economic growth for hundreds of years. It can now be resolved in America by a few modifications in the tax laws. Wealth broadly distributed is also the key to make free trade a universal benefit.

Growth and productivity are analyzed, including the events in the late 1990s that exploded the axiom of economists that the economy could not grow faster than 2.4%. Their epiphany was a delayed recognition of the productivity and growth in the information-age revolution.

The United States' economic momentum at the beginning of the new century is threatened. The positive influences from information-age industries should make the twenty-first century the best of all times. The question is not whether great world growth is possible, but whether old impediments will destroy the new momentum. The impediments are examined.

Chapter 7, Everyone a Wealthy Capitalist.

In the coupling of democracy and capitalism, wealth distribution is the test as to whether the coupling is one of tension or synergy. Broad wealth distribution motivates the wage-earners to produce and innovate to their full potential. Broad wealth distribution recycles surplus back into the economy to maximize growth, adds spendable income to make free trade work, and provides a sense of unified purpose. Concentrated wealth inverts each of these requirements for economic growth and social cohesion.

Chapter 8, Collectivism.

During the twentieth century, the percentage of the GDP collected in all taxes— local, state, and federal—increased in the United States from 3% to over 30%. Most European countries are over 50%, and one is over 60%. The extreme forms of collectivism that include state ownership of the means of production have failed, but a modified form of collectivism continues, that is, social engineering and micromanagement by an elite through growing taxation and redistribution.

The political system in the United States has been gridlocked by the new power of the collectivists during the twentieth century balancing the traditional power of the financial oligarchy.

The legacy of collectivism is traced back to Plato. Advice from Tocqueville and Mill is included on how to balance the obligation to help people without creating dependency, and how to run an efficient government.

Chapter 9, Financialization of Global Capitalism.

Warnings about the dangers of global finance capitalism are cited, from Pope John Paul II, Kevin Phillips, and George Soros.

Refinements needed to make finance capitalism less lethal include the following: taxes on international speculation, deleveraging of speculation, reinstatement of market disciplines in banking, international banking protocols to prevent over-lending of hot money, and cooperation among countries to eliminate the volatility in currency.

Leveraged speculation is described as the reason for the misunderstood business cycle that has caused great economic and social damage. More a finance capitalism cycle than a business cycle, this destructive pattern is described with the additions now apparent in global finance capitalism. Privileges accorded to finance capitalists by politicians throughout history have regularly impeded economic growth. Now they are reversing economic momentum and doing great social damage in emerging countries, whose fragile political structures are difficult to mend.

Throughout history, countries have undermined their own monetary system. Examples include the Romans who debased the currency by shaving the coins to pay for war, and President Johnson who debased currency by printing more money to pay for the Vietnam War and the Great Society.

Chapter 10, Conflicts in Capitalism.

This fictional dialogue, subtitled An American Tragedy, takes place among executives of a company struggling with the real-world problems caused by the contrary demands of short-term earnings and long-term growth.

Conventional wisdom now holds that the stockholder versus stakeholder debate has been settled on the assumption that the extraordinarily successful American economy has been caused by exclusive concern with stockholder value. This is an erroneous conclusion, as the economy's turn-of-the-century success was a mix of information-age growth, world economic growth, radical productivity improvements in many industries using information-age technology, and—conversely—many companies' sacrifice of long-term growth and even integrity in their report of inflated numbers to maximize short-term earnings and stock price. The extent of the damage that the negatives, including instabilities in the international monetary system, will do to fundamental economic momentum is not clear.

Chapter 11, New Philosophers Needed for a New Age.

The visionary philosophy of Teilhard de Chardin and others is contrasted with the pervasive negativism and relativism of most contemporary philosophers. The presence or absence of idealism is described as crucial in determining whether the twenty-first century will move toward peace and plenty or continue with violence. Social idealism is rarely presented, now, for student examination. Instead, there is a steady erosion of unity and values, a continuation of which could destroy the common ideology that is fundamental to the synergistic coupling of democracy and capitalism.

Besides Teilhard's Convergence, other optimistic philosophers that move us toward the human ideal include Edward Wilson's Consilience, Frederick Turner's Hope, and Pope John Paul II's Faith and Reason. Von Mises' Human Action is employed to emphasize the full range of knowledge requisite to defining how society can progress.

Those who have opposed the concept of a comprehensive plan for social progress include Isaiah Berlin and John Rawls. The epistemological process necessary to find the rational and natural order in human affairs is studied through references to Descartes, the rationalist; Bacon, the naturalist; and Condorcet, the summarizer of the Enlightenment.

Chapter 12, Citizen Education.

A democratic republic depends for its success on educated citizens. This chapter begins with the shocking statement of a retired president of Harvard University who said that in two decades he never heard a single faculty discussion about preparing students to be effective citizens. Too late he lamented, "The results of that neglect are too visible." Another educator asks the question: "Who is going to teach the teachers?"

As broad wealth distribution is essential to socially beneficial capitalism, citizen education is essential to American's rediscovering their common ideology. The best students search for a contributory career and something they can believe in. The scandal is that so many universities fail to fulfill their responsibility to present students with the ideal and the means to focus their desire to make it a better world.

Mill and Dewey are cited to show the way. Robert Owen, whose formal education stopped at age 10, nonetheless knew the need to address at the earliest age every young person's duality: individual development and the capacity to contribute to a harmonious whole.

Public education in the United States can only be reformed from within, that is, an empowerment of principals and teachers in combination with the same radical restructuring, using information-age technology that has dramatically improved performance and reduced cost in industry. The technology now available can be the catalyst that forces a profound reexamination of the mission and supporting functions of American education.

Chapter 13, Institutional Investor Have the Power to Harmonize Capitalism and Democracy.

While social progress unquestionably depends on citizens who are educated in the matters that fit them for their responsibilities, institutional investors, also called money managers, could make changes more quickly that would refine capitalism and restructure government. The major source of capital is now the wage-earner; consequently, the rewards of capitalism should be democratically distributed, and their long-term interests represented. Although there has been an increase in the number of people participating in the stock market, the surplus in capitalism is still not broadly distributed, and there is limited democracy in the voting of shares.

Presently, the institutional investors tend to emphasize short-term earnings and not long-term growth. Institutional investors could, however, change the pattern of wealth distribution by encouraging companies to adopt profit-sharing and stock-ownership plans, while simultaneously lobbying the government to modify tax laws to help spread these plans.

A check list of items recommended to institutional investors for a company evaluation is included.

Chapter 14, Faith and Reason.

The search for the rational and natural order in society has failed because of faulty epistemology. Science and religion, and science and the humanities, have been adversarial, but even if synthesized, they do not span the requisite intellectual range. The next step is to include Economics, Business and Law in the integration of disciplines by which we guide the progress of society. Economic illiteracy, ignorance of governance protocols, motivation of people, and management of change have resulted in reformers who have failed at their mission throughout history.

The reaffirmation of idealism and the repositioning of foreign policy also depend on contributions from Economics, Business and Law. Only from a full understanding of the power of democratic capitalism to improve lives and unify people comes the vision to believe that a world of peace and plenty is attainable, and that economic common purpose can displace policies based on the inevitability of continued violence.

I include a consistent plan for peace and plenty outlined by three wise men spanning 2,500 years: They are the humanist Confucius, the atheist Condorcet, and the religious leader, John Paul II.

These theses in support of the synergistic coupling of democracy and capitalism are offered for inclusion in a multi-disciplinary, long-term learning and teaching process in and among universities, religious and civic groups. I propose that these institutions collaborate in the production of a curriculum for citizen education at all ages and in all places.

Please communicate with me regarding democratic capitalism at web-address: www.democratic-capitalism.com or e-mail: careydcntr@aol.com.