Formalists vs. Libertarians II

Devin and Foseti have (as usual) been mounting a strong defense of the formalist position in the comments, and something Foseti said made me (again) question whether I have the core of the disagreement in 1 phrase:


Foseti said:

the root of the problem is democracy.

I disagree.

The root of the problem is:
Because the interests of the elite do not match the interests of the whole of society, the natural flow of governance is for elites to aggregate ever more power, and the populace to become ever more immiserated.  Mandarin China, Louis XIV France, and Tsarist or Communist Russia is the rest-state for relations between government and subject.  Government extracts as much as it can, subject lives in soul-crushing poverty.

The depressingly elegant thing about this is that the game theory is stable.  Take the folks who make decisions, build as small a stable coalition as you can, and divide the spoils among the small coalition.  It's as inexorable a solution as gravity, given power politics.

This is what governments do when they can.  The core challenge of government is how to prevent that.  Democracy is merely the latest unsuccessful solution.  On the other hand, it hasn't failed as badly as about 90% of prior civilizations, in that the population keeps a significant portion of the surplus they produce.

As far as I'm aware, the Corporation, the Cathedral and the Military have ALWAYS provided solutions to governments, be they democratic, imperial, autocratic, or otherwise.  And the solutions have always primarily benefited the small group of elites providing the solutions.

One of the smartest things Moldbug pointed out is that one has to align the LONG term interests of the government with the long term interests of the population.  Democratic politics fails substantially in ways analagous to a quarterly-earnings focus in business...If you're worried about the next election, you pursue short-term policies that make you look good now, potentially at cost later.

Moldbug half-jokes about Monarchy being preferable.  In hereditary monarchies, the rulers are at least worried about their children's well-being, and so want what's good for the country.  Elective monarchies...less so, because the individual's fate is less tied up with the well-being of the country.

Devin's Board of Directors is good...but it models the unofficial pre-democratic system really well...Elites have most of the power...and so they will (according to game theoretic calculations) make a 51% power-block majority of elites, and proceed to loot to the extent of their power.  That's what has always happened in the past, and what we should expect to always happen in the future.

So is that where the disagreement comes from?  I (and the libertarians) claim that the problem comes from the power-differential itself.  So long as there is power over individuals to be distributed, it will tend to drift towards the Chinese peasants model, steadily ratcheting towards more power and less accountability.  AFAIK, there has never been a case where this didn't happen...even if temporary solutions, led by wise, temperate rulers have occasionally slowed the slide.  

Do the formalists claim the problem lies elsewhere?