1. Introduction — Why We Criticize Democracy
This text is not a manifesto for any specific political faction. It is a cold indictment of how democracy and statism crush the dreams of the Producer.
When the Left takes power, they use “welfare, equality, and human rights” as moral camouflage for the legalized looting of other people’s pockets. When the Right takes power, they invoke “national interest and industrial protection” to bleed the economy dry, funneling subsidies and tariffs into unproductive “zombie” corporations. Both are predatory systems that exploit the name of democracy to distort the market and slaughter the producer. Admittedly, the Progressive Left is often more insidious, wielding the “invincible shield” of morality and the binary of good versus evil.
A small, open economy cannot simply print wealth into existence. It must rely on a vibrant Commercial Capitalism. To achieve this, Producer Sovereignty must be restored. The only path forward is to revive the primal spirit of American Republicanism—the ethos of “Own it yourself, be responsible for yourself”—to check the tyranny of the masses. We must shrink the state. We must abolish the web of welfare, taxes, regulations, and minimum wages to create a society where it is more profitable to be a producer than a laborer. Demanding that the state guarantee the basic rights of democratic citizens or take responsibility for one’s life amounts to nothing more than asking it to plunder other people’s property. This is because, fundamentally, the state does not create added value. One must take responsibility for one’s own life.
The market is a system that rewards those who create value. We must strip away the shells of ideology, religion, and morality. The best governance is that which simply allows those who silently create value to survive. As Laozi suggested, the finest politics is that which is invisible to the people. Because the state can never redistribute resources more efficiently than the market, the harder the government “works,” the more capital is wasted, and the more economic dynamism vanishes.
Joseph Schumpeter foresaw that as capitalism matures, a class of “intellectuals”—those who produce nothing but demand morality and human rights—would manipulate public opinion to steer society toward socialism through democratic means. Friedrich Hayek, in The Road to Serfdom, warned that any nation deciding to abandon property rights and free markets through democratic procedures inevitably centralizes power into a totalitarian core. (See: Money Dysmorphia: Part 8 — Who is Looting the Wealth?)
This is the reality of South Korea today. Because the President lacks the power to dissolve the legislature, the National Assembly runs rampant with legislative tyranny, and no one can check it. We are witnessing anti-market regulations that border on madness: the world’s highest inheritance taxes, land transaction permits, price caps on new housing, and the forced restitution of excessive redevelopment profits. Violating these market interventions is no longer a civil matter—they send you to prison under criminal law.
A free market processes the decentralized information of millions to direct resources to their most efficient use. Beyond Hayek’s decentralized price mechanism, the ultimate strength of a free market lies in the fact that individuals, driven by ‘Skin in the Game,’ make the most rational decisions precisely because they are risking their own lifeblood and capital. This is because individuals always maximize capital efficiency while shouldering their own risks. In a state that refuses to protect property rights or tolerate wealth inequality, the optimal strategy for the individual is to work lethargically, suck up minimum wage and welfare benefits or emigrate once they’ve accumulated enough Bitcoin or intellectual property.
Conversely, the moment a government steps in to redistribute wealth under the banner of “welfare and equality,” all information and power concentrate in the hands of lawmakers and their subordinate elite bureaucrats. A massive bureaucracy is not, by nature, a value-creating entity. It is a parasitic organization that consumes and redistributes the blood and sweat of others. If I intend to feed myself by my own strength, why must welfare bureaucrats take my taxes?
The result is two separate worlds. For the silent taxpayer, there is only agony without reward: Yes Pain, No Gain. For the bureaucrats and welfare dependents who feast on the state, there are only rights without sacrifice: No Pain, Yes Gain. Hayek saw that a bureaucratic state practicing this brand of democracy leads inevitably to “Democratic Totalitarianism”—the same destination as Nazism and Fascism.
Just as the path to hell is paved with good intentions, the road paved with “welfare” ends in a Hell where production leaves you with nothing.
2. Manufacturing Surrendered Sovereignty to Workers and Consumers—And Sowed the Seeds of Its Own Ruin
(1) The Birth of the Mass Proletariat and the Dissolution of Community
The golden age of democracy was the era of Fordist mass production from the 1950s to the 1980s. A single auto plant supported the livelihoods of 50,000 to 100,000 people. Manufacturing required a stable, large-scale workforce, and the state built a mass education system to funnel industrial soldiers into the factories.
At this juncture, driven by the power of numbers, workers experience a contradictory desire to plunder the very companies they are employed by. Workers suffer from jealousy, fear, and anxiety for the sole reason that they do not own the means of production. Why is that? Working in a factory—whether in a white-collar or blue-collar role—rarely gives one the sense that they are building true expertise.
The Austrian School of economics tends to think: “You enjoy high wages thanks to the productivity of the machinery, so isn’t that good for you workers? Why are you striking? If you don’t like it, quit. That too is your freedom.” However, looking at it solely through this lens makes it difficult to understand why workers act so predatorily toward their own companies, or why they go as far as setting themselves on fire just to wrench away profits.
In reality, working in a factory for just a few weeks reveals that the wages you receive have little to do with your own personal productivity. As time passes, your body and mind deteriorate. Meanwhile, the fact that you earn money only because of the company’s productivity deepens your acute awareness of your lack of the means of production. Workers come to keenly realize that they can never possess such magnificent means of production through their bare hands or personal savings alone. Even if they were to eventually open a small shop through savings, the sheer presence of the machinery makes them realize they could never enjoy their current level of income. Consequently, rather than planning for the future, they radically raise their time preference, focusing entirely on maximizing present gains. Consequently, you are seized by a threat: “I can never give up this sweet deal, because there is no way I could make a living better than this anywhere else.” This is a fear for survival that transcends the alienation spoken of by Marx. Therefore, the more magnificent the machinery is, the more it breeds a sense of inferiority regarding one’s empty hands, jealousy toward those who own and manage the means of production, and resentment toward individuals of superior ability.
At this moment, if a single demagogue appears and begins to agitate, these workers are instantly swept up in a crowd mentality, experiencing a sense of omnipotence—the feeling that “We can bring this factory to a grinding halt.” By following this exact trap designed by the Demiurge (Awareness of scarcity → Anger, jealousy, fear → Infinite dependence on the Demiurge), they abandon self-reliance and demand that corporations and the state take responsibility for their lives. The god known as Democracy accepts their demands in order to be worshipped and to maintain the status quo of the world.
Contrary to what is reported in the news, instances of police crackdowns on illegal labor movements to defend private property rights are rare in reality. In practice, the police and bureaucrats hide behind the label of the “principle of labor-management autonomy.” They stand by and watch the unauthorized occupation and destruction of production facilities, forcing companies to endure losses from halted production and asset depreciation while they simply observe the situation. The more democratic and paternalistic a government is, the more it takes the lead in violating and plundering producers under the guise of upholding the public will.
If so, and if plunder is the ultimate goal anyway, why not just mobilize the military to destroy workplaces and confiscate everything outright to satisfy the public’s high time preference? Why stop short of that? In truth, the masses crave employment in giant manufacturing plants to secure high wages, and thus they enthusiastically welcome state policies that nurture the manufacturing sector. This is not contradictory to their desire to plunder the companies they work for. Both stem from the exact same desire to hitch a free ride.
Therefore, the state has every incentive to pour subsidies and tariffs into fostering manufacturing, increasing asset specificity through state-corporate collusion. The larger the manufacturing sector, the more added value it creates at the plant level, maximizing tax collection efficiency. This makes it easier for the state to implement welfare-oriented, patronizing policies through plunder. Producers, likewise, easily succumb to the government’s sweeteners rather than accumulating reinvestment profits through savings and firmly establishing a roundabout system of production. They fall into a pattern of complying with state demands and accepting protection, relying on foreign exchange gains and subsidies rather than true product competitiveness. Since it is entirely natural for even producers to have a higher time preference for the present over the future, why would they willingly exercise patience if they can earn the same amount of money while investing fewer capital goods?
In conclusion, mass democracy and giant manufacturing were a match made in heaven.
This expansion bore a fatal side effect: it homogenized the majority of voters into wage-dependent “workers” and “consumers.” As small business owners and independent farmers abandoned their livelihoods to chase high factory wages in the cities, self-reliant local communities and markets were decimated. In their wake, massive interest groups rushed in to fill the void. Individuals who once defined themselves as “the son of the local butcher” or “a third-generation carpenter” rebranded their identities as “a union member of the GM Korea branch.” This shift corrupted democracy into a field for legalized looting and shook the very foundations of Republicanism. In South Korea, where the state led the growth of manufacturing conglomerates, the entire citizenry was rapidly converted into employees, causing the labor movement to devolve into a toxic populism that began to devour the producers themselves.
(2) The Evaporation of Skin in the Game
In a local community, you live face-to-face with the neighborhood butcher and baker. Reputation and accountability are the absolute conditions for survival. If you take 100 dollars but fail to prove 120 dollars of value, you lose your reputation and are purged from the market. This is a world where ‘Skin in the Game’—the classic craftsmanship of putting one’s name on the product—is alive and well.
But the moment an individual steps into a giant factory, they hide behind the massive anonymity of the union and the corporation. If I tighten a screw half-heartedly, the company doesn’t collapse today. If a strike causes consumer harm, it feels irrelevant to me personally. Responsibility is diluted to 1/30,000th, but rights are claimed with 100% certainty. It becomes the superior strategy to take zero final responsibility while demanding maximum entitlement.
(3) The Expansion of the Great Bureaucracy—From Spontaneous Order to Leviathan
In a local community, residents have Ownership over their town. They invest with a long-term vision and accept current sacrifices for future gain. When a problem arises, they gather to compromise and resolve it themselves. The state has no pretext to intervene. This was the essence of the “Lodge Practice”—the private mutual aid systems in the US prior to the Social Security Act of 1935. The local wealthy took responsibility for regional employment and reinvested in the very soil they stood upon. These were the sturdy shields of Republicanism.
Interest groups are different. They do not solve problems. Lacking ownership of any specific place, they use their sheer numbers as a weapon to lobby and extort the central government. They cry, “Regulate that industry! Give us subsidies! Raise the minimum wage!” The bureaucracy seizes this conflict as an opportunity, expanding its budget and power by promising, “We will fix it for you.” When the producers eventually flee and the city collapses, these groups simply move on to another city to start the looting anew. This is precisely why South Korea’s provincial industrial cities are dying. It began with mining towns, moved to tourism, and has now reached the manufacturing hubs. As of 2024, more than 50% of South Korea’s 228 municipal districts have officially entered the ‘extinction risk’ zone, with some former industrial powerhouses now seeing one in every five houses standing completely empty.
(4) Identity—From Production to Consumption
In a place without a democratic welfare state, where local communities are alive, The core of one’s identity should lie in Production. For instance, saying “I am a third-generation carpenter” proves what value-add you provide to the world. Because such individuals take 100% responsibility for the final product, their political demands naturally converge toward liberalism: “Protect my property rights and leave me alone to forge my own path.”
Interest groups are the polar opposite. The identity of “I am a union member of the XX branch” is focused not on what I produce, but on what I am entitled to extract. They contribute nothing to the expansion of production, yet perceive themselves as “creditors of the system.” Because it is a “democratic welfare state,” their claims are validated. Consequently, they view seizing the largest possible slice of someone else’s pie as rational behavior.
(5) The Tragedy of the Commons and the 1990s Death Blow
Robert Dahl famously praised interest groups as the “flower of democracy.” But that sentiment only holds true when interest groups engage in healthy debate and mutual checks. The grim reality today—where elite bureaucrats from the Ministry of Oceans and Fisheries stand paralyzed by the threats of fisherman cartels demanding subsidies—proves his theory was a romantic delusion.
Instead, the insight of Nobel laureate Elinor Ostrom hits the mark. Common resources like forests or tax pools are inevitably looted by selfish actors. However, Ostrom observed that in communities below a certain scale—where mutual monitoring is possible—these resources are managed without free-riders. This aligns with Nassim Taleb’s argument that decentralized, less anonymous autonomous organizations are inherently Antifragile. Without a rule stating that “if you want to claim a right, you must put your own life on the line,” the Tragedy of the Commons is unavoidable.
For the spontaneous order of a local community to survive, the market must be centered on small-scale economic agents who are mutually dependent and 100% responsible for their final output. This is only possible in nations where massive manufacturing not fully developed (Singapore, Georgia, Dubai) or where the constitution strictly forbids the looting of property rights (Switzerland, Singapore). Conversely, in nations where giant manufacturing dragged the economy forward by the collar, mass-producing an anonymous proletariat (South Korea, France, UK, US, Germany), this Republican shield has collapsed. The expansion of welfare, the rent-seeking of interest groups, and the bloating of a paternalistic bureaucracy have converged to make looting the state’s tax pool the superior strategy.
This system managed to limp along until the 1980s, fueled by explosive manufacturing growth. The true catastrophe began in the 1990s. Non-democratic nations from the former Soviet bloc and China joined the WTO, emerging as a global “manufacturing black hole” with young, cheap labor. Capital and manufacturing began to quietly slip across borders to escape regulation and high labor costs. As the economist Mises pointed out, if the mobility of capital and labor is guaranteed, the most productive strategy is not to cling to comparative advantage at a disadvantage, but to flee to where an absolute advantage exists. Yet, democratic states burdened with bloated welfare systems and bureaucracies still required massive funding. With the giant value-creators fleeing, who did the state and the bureaucracy turn their blades toward? The producers who couldn’t run.
3. Producers Who Cannot Escape — Small Business Owners and Local Manufacturers
From the perspective of a rational producer, if they are neither guaranteed a monopoly status nor allowed to fix prices to a degree that compensates for the plunder by the masses and the democratic state, then embracing the status of a democratic citizen and worker—which offers zero risk and free-riding capabilities—is a far superior option to needlessly bearing the risk of bankruptcy. Nevertheless, why do they still insist on running their own businesses? Is it because they value freedom that much? While that may play a part, it is ultimately more accurate to conclude that they simply failed to escape. Those who failed to escape are the small business owners and regional mid-sized manufacturers tethered to the domestic soil. Why did they remain instead of exiting for better environments? (Monopolistic conglomerates often keep some domestic facilities as a ransom to guarantee their monopoly status; I will cover this in detail in a future article.)
According to Albert O. Hirschman, when an organization fails, individuals choose between Exit (leaving) or Voice (protesting). The most rational strategy is to exit without looking back. Those who remain usually fall into one of three categories: they have fierce loyalty, a sense of public responsibility (believing the system will collapse if they leave), or they simply have no alternative.
Small business owners and regional manufacturers didn’t stay out of loyalty or responsibility. They simply had no alternatives. Nor did they form powerful interest groups like giant unions to “Voice” their protest to the state. They sat in silence, neither exiting nor speaking, slowly drying up. Why did they remain so paralyzed?
To understand this dilemma, one must grasp the concept of Asset Specificity. This refers to the degree to which an asset or skill is tied to a specific location or transaction—such that moving it elsewhere renders its value worthless. When the government and bureaucracy threatened them with taxes and regulations, saying, “If you have a problem with it, close shop,” the fates of economic agents were split down the middle by this very specificity.
(1) The Comparison of Asset Specificity
| Category | Low Asset Specificity (The Flyers) | High Asset Specificity (The Hostages) |
| Main Actors | IT Developers, Digital Nomads, Global Professionals, Dropshippers | Small Shop Owners, Regional Factory Owners, Local Service Providers |
| Sunk Cost | Near Zero | Extremely High (Machinery, Land, Local Goodwill) |
| Mobility | Borderless; can move with a laptop | Physically bound to a specific territory |
| State Interaction | The state “invites” them with tax exemptions | The state “loots” them through regulations and taxes |
| Outcome | Exit within seconds of predatory action | Remain as hostages; slowly consumed by the system |
In fact, on a global scale, from the 19th century to the early 20th century, the asset specificity of local small business owners served as a mechanism that guaranteed them monopolistic profits. These individuals monopolized local logistics and information networks, exerting strong political influence over the state. The state coexisted with these independent farmers and peddlers, tolerating certain price controls to maintain social stability.
At this juncture, asset specificity is divided into tangible asset specificity and intangible asset specificity. The former refers to a phenomenon where physical assets—such as machinery, land, real estate, premiums (key money), and goodwill—command a premium within the local network due to their scarcity in that specific region. This grants them monopolistic power over local commodities. The latter refers to human asset and procedural specificity that holds meaning exclusively within the locality, such as closed local subcontracting networks, transaction practices, and labor supply and management networks. This grants them monopolistic power over local information.
The reason these producers could not leave, as the shadow of the centralizing state began to grow, was that stepping outside their region would instantly liquidate the value of everything they had built down to zero. Had the decline of local commercial districts and production networks not been excessively rapid, producers might have evolved to lower their local asset specificity through the transition of capital and labor.
However, unlike the United States, which left everything to the private sector, the United Kingdom, Japan, and South Korea saw their core infrastructure—such as railways, roads, and telecommunication networks—driven by state-owned enterprises. Consequently, these states completed these facilities in an excessively short period, unfazed by the threat of deficits. Because they maintained public utility rates at prices far below the break-even point, capital and labor piggybacked on this free infrastructure and drained into major metropolitan areas. Had these infrastructures been left to the private sector, the gradual, market-driven expansion would have bought local producers precious time to lower their asset specificity and adapt. Instead, the state-driven compression of time instantly rendered their lifelong assets obsolete.
Conversely, as commodities from mega-cities flooded into the local markets in an instant, local producers simultaneously experienced three catastrophic blows:
- A surge in production costs caused by an acute drought of physical capital, such as capital and labor.
- Fierce price competition with cheap, mass-produced goods from mega-cities.
- The collapse of the domestic market driven by regional depopulation.
While the UK and Japan eventually privatized these sectors due to unsustainable deficits, South Korea has maintained state ownership. As a result, South Korea’s local communities disintegrated at a much faster and more destructive pace than those in the UK and Japan. Leveraging a dense administrative network, the state began to plunder producers without hesitation, imposing social security taxes of 30 to 40 percent or value-added taxes of 10 to 20 percent on profits.
Consequently, the fates of local producers diverged into two distinct paths: those who relied solely on tangible asset specificity were reduced to economic vassals, whereas those who relied on intangible asset specificity survived by colluding with local governance networks to engage in rent-seeking.
(2) Two Categories With High Asset Specificity
① The Blind Sunk-Cost Hostages — Bound by Machines and Signboards
These are the pure self-employed: small restaurant owners, neighborhood cafe owners, and sub-contracting factory bosses. Their assets are physically shackled to equipment (interiors, kitchen appliances, industrial machinery) and specific locations (key money/goodwill). In the past, they held the keys to local commerce, provided jobs, maintained security, and served as information hubs. Today, all that authority has been stripped away.
The state, no longer needing to fear them, has criminalized their collective action. Any attempt by small business owners to set price floors, agree on business hours, or divide market territories is branded as a violation of Fair Trade laws. Their right to a “Voice” has been legally amputated.
The irony is staggering: when auto factory workers gather to demand a 10% wage hike, lead strikes, and block new labor from entering the market, it is celebrated as a Constitutional Right. Two identical collective actions, yet the producer’s demand for a price increase is a crime, while the laborer’s demand for a wage hike is a “human right.”
These producers cannot even afford to quit due to massive sunk costs. They have become ambiguous slaves—neither true entrepreneurs nor protected laborers. Even as the state mandates 52-hour work weeks, hikes minimum wages, and distribution platforms bleed them with fees, they survive by carving out their own flesh. They are the untouchables at the bottom of the democratic caste system.
② The Rent-Seeking Hegemons — Parasites of Regulation and Bureaucracy
When the government seized the monopoly on information and logistics, some “clever” actors chose to collude with the bureaucracy to build new networks of exclusion. Their assets are not machinery; they are Relational Assets—ties to local officials and politicians—and the very permits issued by the state. This group includes regional construction firms, waste management cartels, local transport companies, and nursing home operators. They do not survive through market innovation, but by inserting a straw into state subsidies, sole-source contracts, and administrative networks.
The most extreme manifestation of this is a region in Korea called Sinan. Here, local hegemons who own the means of production—the salt farms—engage in forced labor that is banned in every civilized nation on Earth. They lure disabled or homeless individuals, confine them, and subject them to modern-day slavery.
The U.S. State Department’s Trafficking in Persons (TIP) Report has repeatedly pointed out the salt farm slavery issue in Korea. The report explicitly states that the police, the courts, and the local governors are all entangled through regional ties or marriages, effectively shielding these crimes. These people mobilize local votes and break bread together.
Even as I write this, the slavery issue remains unresolved. These predatory “small business owners” have formed a unholy alliance with the bureaucracy. They produce salt at near-zero labor cost, distorting market order to monopolize profits—all while vocally supporting the “Democratic” party. Is it not ironic? A government that preaches democracy, human rights, and equality turns a blind eye to this. When democracy erodes the rule of law, the bureaucracy ceases to serve the public interest and functions instead as a privatized force.
The Gwangju High Court released these salt farm owners en masse, citing “local custom.” Furthermore, the administration provides large-scale solar energy subsidies to these regions, allowing the slave-owners to now embezzle energy subsidies on top of their illicit profits.
4. Conclusion: Why Have They Become Grains of Sand?
In the Millstone Mechanism of Democracy + Bureaucracy + Welfare, power is defined solely by the “sheer numbers of a unified interest group.”
Small business owners and regional producers have been crushed by the weight of a bureaucracy that uses “the will of the people” as an absolute moral shield. Laborers and consumers shout, “If you don’t like it, close your shop!” But for those forcibly kept in the system by asset specificity, the strategies of survival have diverged:
- The Smart Ones: Those with low asset specificity (Digital Nomads, etc.) have already exited the country.
- The Silent Ones: Those whose political “Voice”—price-fixing, limiting supply, or dividing markets—has been criminalized, are merely breathing in silence. Many have closed their independent shops only to become vassals under franchise headquarters.
- The Corrupt Ones: Those who colluded with the bureaucracy as local hegemons now fatten themselves by embezzling subsidies while enjoying legal immunity for forced labor.
In the next article, we will examine why the democratic welfare state favors massive conglomerates, “zombie” small firms, and small-scale corporations, while looting the ambitious individual who strives for true growth.
5. Related Articles
- Democracy Plunders the Productive Class (The Collapse of American Republicanism)
- A Geopolitical Autopsy of the Welfare State (U.S, U.K, France, Korea)
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