How Democracies Fail

In this video, I am going to look at how Democracies fail, and believe it or not, it has a lot to do with business.

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Washington Post – Ford and GM involvement in Germany

Red Terror

Night of the Long Knives


This is one of the big questions that people try to answer. How do Democracies fail? When you look at history, there are a number of example where governments collapsed into tyranny. This is a big fear. Could our democracy fail? Why did people choose to give up their freedoms? If it happened before, will it happen again? How can we stop it from happening again? I am going to look at two examples to show you what went wrong, and how it relates to what is going on in the world right now.

The first example is the Bolshevik revolution. This was the moment Russia turned into the Soviet Union. Russia used to be ruled by a monarchy. The monarchy was overthrown are replaced by a democracy. So, Russia was actually a democracy for a short time. Then the democracy was overthrown by the Communists in the Bolshevik revolution, and Russia became the Soviet Union. Lenin took power and ruled the country as a dictator.

This had catastrophic consequences for the Russian people. Specifically, Lenin tried to kill all the rich people in Russia. This was known as the Red Terror, and it is estimated that Lenin killed 100,000 of his own people. Russia has never recovered.

The second example is Nazi Germany during WWII. A lot of people wonder, how did Hitler rise to power, and why didn’t anyone stop him? Germany was a democracy. But Hitler seized power and ruled Germany like a dictator. In 1934, Hitler ordered what became known as the Night of the Long Knives. His troops went house to house, killing anyone who opposed him. Ever since those murders, people were afraid to speak up, and Hitler ruled as a dictator, killing millions of his own people in concentration camps during WWII.

So, we have the Bolshevik Revolution and Nazi Germany. What is in common between these two examples? Inflation. Both Russia and Germany were suffering through extreme inflation. Inflation destabilizes society and can lead to a collapse of the government.

What else is in common? Both Lenin and Hitler were poor. They didn’t have any money. They were regular people. At one point, Hitler was living in homeless shelters. This is important to understand, because if they were not wealthy, how did they pay for their political campaigns to take over the government? They were funded.

Something I always say is to “Follow the money.” The Bolshevik revolution was well-funded by bankers around the world. Since this happened so long ago, the evidence is unclear exactly how the funding happened. But it included people like Olof Aschberg from Sweden and Jacob Schiff from New York. Wherever the money came from, it is clear that Lenin was well-funded when he rose to power. What followed was Communism, and the government killed millions of Russia’s own people to remain in power.

Here is the sequence of events. Inflation. Rich people fund political campaigns seeking greater government control. A dictator seizes power. Millions die.

Now I honestly do not think the bankers knew that Lenin was going to become a dictator. When Lenin overthrew the democracy, Jacob Schiff was furious and asked to get his money back. The question is why would rich people lobby for more government control in the first place? Isn’t that anti-free markets? It is because of greed. They think that a stronger government will pay them back by giving their business favoritism in the country. In great irony, after Lenin took control, he tried to kill all the rich people in Russia by ordering “The Red Terror.” Once Lenin killed the rich people, and seized their money, there was no one left to challenge him.

Just to give you an idea of what the Red Terror was like, here is a description from a newspaper at the time:

“We are not fighting against single individuals. We are exterminating the bourgeoisie as a class. Do not look in the file of incriminating evidence to see whether or not the accused rose up against the Soviets with arms or words. These are the questions that will determine the fate of the accused. That is the meaning and essence of the Red Terror.”

So, it did not matter if you did anything wrong, you were killed just for being rich.

A very similar pattern exists with the rise of Nazi Germany. Inflation. Rich people fund political campaigns seeking greater government control. A dictator seizes power. Millions die.

So, who funded Hitler? This may be shocking to hear, but a number of Americans funded the Nazi party. This is something they don’t teach you about in business school, but it is well-documented. In 1998, The Washington Post published a detailed expose on the participation of Ford and General Motors in WWII. Here is a photo of Henry Ford receiving one of Germany’s highest awards, the Grand Cross of the German Eagle in 1938. Hitler said that he kept a photo of Henry Ford on his desk. People do not realize, but Ford and GM accounted for 70 percent of the German car market at the outbreak of WWII. Germany was big business, and if the government took control, it would guarantee more business for American car companies.

Now Ford and GM deny that they had any knowledge of what was happening in their plants in Germany. You can believe that if you want. But we do know a couple of things for sure: The American companies received dividends from their German subsidiaries. The German based plants were retooled to make German military equipment. And the plants were staffed with forced labor from prisoners of war.

The Night of the Long Knives happened in 1934. Henry Ford accepted the medal from Hitler in 1938. Why would these wealthy people support such a publicly brutal dictator who murders his opponents? They are being greedy. Now, again, I do not think that Henry Ford knew that Hitler was going to kill millions of his own people. But it is clear that a lot of wealthy people funded the rise of the Nazi party.

When we look at the pattern of the Bolshevik Revolution and Nazi Germany together, we can see what the problem is. There is one moment where everything goes wrong. It is wealthy business people advocating to give the government more control. That is the mistake. We should not be giving government more control. We should be giving government less control. Government is who created the problem of inflation in the first place. More government is not the solution. Free markets are the solution, and free markets require freedom.

Why is this relevant to today? Because we are in the exact same situation with skyrocketing inflation. Just weeks, there was a lot of wealthy people at the World Economic Forum advocating for more government control. A lot of those same American businesses support tyrannical government crackdowns in China. I just hope that we have learned our lesson and do not repeat the mistakes from history. What happens next is up to us. We should be working together to give our government less control over our lives, not more.

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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.