Withdrawing Political Legitimacy
We hear these words today: tipping point. We hear a similar phrase: inflection point. These are two names for the same process.
There are two versions of this process. One points to a lift-off. The other points to a crash.
The lift-off version relies on the image of the exponential curve. At some point, it shoots upward. That is a tipping point. I find the most compelling one these days is this Ray Kurzweil's discussion of Moore's law and the law of accelerating returns.
The crash version relies on the image of two trend lines crossing. One or both of these must end. An example: the unfunded liabilities of the U.S. government (rising fast) and the expected revenues of the U.S. government (not rising fast). This outlook is best expressed by Stein's law: "When something cannot go on, it has a tendency to stop." That is a tipping point, in the way that a train wreck is a tipping point.
I think both trends are in operation today. One has to do with compound economic growth. In the long run, it prevails. The other has to do with the expansion of the state. It has to do with the short run. The model is the train wreck.
THE GODS OF THE COPYBOOK HEADINGS
My favorite poem is Kipling's The Gods of the Copybook Headings. It is about the permanent war between permanent truth -- original sin and scarcity -- and the latest fad, which he called the gods of the market place. He meant the market place of public opinion.
AS I PASS through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.
You get the idea. This is the idea: there are no free lunches.
With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.
Then comes the stanza that applies to today's little lesson.
When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: "Stick to the Devil you know."
Stick to the devil you know. Then work steadily to replace the gods of the market place -- public opinion -- with the gods of the copybook headings.
THE DEVILS WE KNOW
There are two ideological outlooks today that officially hold to this. In politics, conservatism. In economics, rational expectations. The rat-ex people are not laissez-faire: "Leave us alone." They are realists: "Leave it alone." Don't mess with the system's laws. The market will respond. Stop futzing with it. But economists just cannot quit recommending reforms. The rat-ex movement is doomed. Economists are tinkerers. So are political reformers. So are power-seekers.
So are we all.
No one is a zero-change conservative. The old rule of conservatism is this: "If it is not necessary to change, it is necessary not to change." But this admits the possibility that it is sometimes necessary to change.
Problem: you can't change just one thing.
My advice: change things marginally. Change them steadily. Marginal changes add up. They are cumulative. If they are positive, they produce enormous benefits over time. The slow rate of American economic growth, 1800 to today, with only 16 years of reversal (1930-46), has created a world that would have been inconceivable in 1800. The world has imitated Great Britain and the United States. The world is incomparably rich, and it is getting richer.
I am no fan of revolution. I understand Engels' point: nothing is more centralizing than a revolution.
But the anti-authoritarians demand that the political state be abolished at one stroke, even before the social conditions that gave birth to it have been destroyed. They demand that the first act of the social revolution shall be the abolition of authority. Have these gentlemen ever seen a revolution? A revolution is certainly the most authoritarian thing there is; it is the act whereby one part of the population imposes its will upon the other part by means of rifles, bayonets and cannon -- authoritarian means, if such there be at all; and if the victorious party does not want to have fought in vain, it must maintain this rule by means of the terror which its arms inspire in the reactionists. Would the Paris Commune have lasted a single day if it had not made use of this authority of the armed people against the bourgeois? Should we not, on the contrary, reproach it for not having used it freely enough?Therefore, either one of two things: either the anti-authoritarians don't know what they're talking about, in which case they are creating nothing but confusion; or they do know, and in that case they are betraying the movement of the proletariat. In either case they serve the reaction.
You want bumper sticker slogans? I've got them. "Reform, not revolution." "De-fund, don't capture." "Withdraw Washington's legitimacy."
Decentralization favors marginal changes. Decentralization favors competition. Decentralization undermines revolution. We are in the midst of a worldwide process of decentralization. It has to do with technology. It has to do with networks of communications. It has to do with an aspect of Moore's law: the steady reduction in the cost of information.
This is why we are not headed for a revolution. We are headed toward secession.
The heart of this decentralized, unorganized secession movement is this: the withdrawal of political legitimacy, voter by voter.
BAD NEWS AND GOOD NEWS
First, the bad news. Gallup on July 1 reported this: 79% of Americans are satisfied with the degree of liberty in the United States. Any time that 79% of a randomly polled group believes in anything, it is a statistical anomaly. The belief is rock-solid.
Or is it?
Second, the good news. The report began as follows:
Fewer Americans are satisfied with the freedom to choose what they do with their lives compared with seven years ago -- dropping 12 percentage points from 91% in 2006 to 79% in 2013. In that same period, the percentage of Americans dissatisfied with the freedom to choose what they do with their lives more than doubled, from 9% to 21%.
So, public opinion on the degree of freedom is not rock-solid. It is melting away, but slowly. Give this another twenty years, and we will see significant loss of political faith.
This is crucial: loss of political faith. Why is this crucial? Because of its companion idea, loss of political legitimacy. Legitimacy is imputed by citizens. It is not innate. Whenever legitimacy fades, voluntary cooperation also fades. It therefore gets more expensive to enforce compliance.
The Gallup poll also revealed that the United States is number 36 internationally. This means that a larger percentage of residents in 35 nations are more satisfied with their degree of freedom than Americans are. This includes Uzbekistan, at 92%. I sense that residents of Uzbekistan have a different concept of freedom than Americans do.
Here is the important point: nation by nation, people get used to the state. They adjust their thinking to these familiar limits. To quote Kipling, they stick with the devils they know. This is a good thing, on average. Not forever. On average.
If they change their views too fast, they could get a revolution. Then liberty will contract. Engels had it right.
There is a useful site, End of the American Dream. From time to time it posts brief lists of evidence of decline, each containing a live link to documentation. It follows a similar approach of the Economic Collapse blog.
It recently ran a report on the Gallup poll. It offers good news: increasing distrust of the federal government.
It also ran two dozen examples of complacence regarding specific invasions of our privacy by the federal government.
So, which is it? Are we headed in the right direction? What is the right direction? I think it is this: loss of faith/legitimacy.
The government is a bureaucracy. The inherent assumption and motivation of bureaucracies are to grow. More staff means more management; more management means promotions. This is the central fact of Parkinson's law, not this: "Work expands so as to fill the time allotted for its completion." Parkinson was talking about the desire for promotion, which in a bureaucracy requires more underlings.
There are limits to growth. The primary limit to the growth of the state is budgetary.
I now return to one of my optimistic theses: the limit placed on the ratio of federal tax receipts to GDP. It never goes above 20%. This is a political ceiling that the U.S. government has broken only once, in 1944. That year -- the last full year of World War II -- it hit 21%. The chart is here.
The key now is the growth of entitlements, most notably Medicare. The unfunded liabilities are in the $200 trillion range, according to Prof. Lawrence Kotlikoff of Boston University. This is the Achilles heel of the federal government. This is why the expenditures required by existing law will hit the limit of available credit. At that point, the politicians will have to re-write the law. They will have to default through re-defining legitimate entitlements.
When they re-define legitimate retirements, millions of voters who are on the losing side of this re-definition will revoke legitimacy to the federal government.
The process has already begun. The Gallup polls reveal this process.
Then there will be a tipping point. There would be one even if Malcolm Gladwell had not written The Tipping Point: How Little Things Can Make a Big Difference. But this will not be a little thing. It is at the very heart of modern faith in the healing power of the federal government. Medicare is the heart of the beast -- the budgetary proof of its messianic status. What constitutes its belly? These four factors: taxation, debt, regulation, and fiat money. Institutionally, these are the IRS, the Treasury, the alphabet agencies, and the Federal Reserve System.
What is the central factor? This: the rise of administrative law. I agree with Harvard's great legal historian, Harold Berman. His Introduction to his magisterial book, Law and Revolution (1983), spells it out. The rise of administrative law threatens the Western legal tradition. Administrative law invests executive agencies with the power to write the law, judge the law, and enforce the law. This is the foundation of tyranny. If it continues, we really will see out liberties removed, one at a time.
It will not continue. It cannot continue. It has already reduced American economic growth. It is using the deficit to maintain the process. It is using the Federal Reserve, which creates sufficient fiat money to buy federal debt equal to the annual federal deficit: $500 billion a year.
TWO PROCESSES
There are two social processes at work: (1) the expansion of administrative law; (2) the loss of faith in the state. These are rival worldviews. They are rival confessions of faith. They both cannot continue. The public will have to choose.
These process are international.
Bureaucracy is symbiotic with administrative law. Bureaucracy is inherently anti-political. It is the outlook of Civil Service. It is the outlook of the tenured professors. It is the outlook of the state-certified, guild-certified expert. It is the outlook of the educated elite against the uncertified masses. It is inherently anti-democratic. It is also anti-market, for the same reason. The free market enables the consumers to direct the structure of production.
The voters have put their faith in the messianic state. Medicare is the heart of the matter. Social Security is, too. But Medicare is the greater threat to the federal budget. This is why the defenders of the messianic state focus on the supposed solvency of Social Security. Medicare is clearly doomed, statistically speaking. Its defenders do not discuss these statistics in public.
The gods of the copybook headings are waiting in the shadows of Medicare, confident that they will once again make their presence known.
As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;
But will the final stanza prove correct?
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!
Fear, yes. Terror, maybe. Slaughter, maybe not. This tipping point can yet be avoided. How? By smuggling.
SMUGGLING
Free markets are never eliminated, only suppressed. In every system of state controls, there are smugglers.
Smuggling always eases transitions, for good and evil. Smuggling is always marginal. Smuggling creates unofficial but profitable institutional arrangements that reduce the effects of both political revolutions and economic contraction. Smuggling allows the flow of contraband.
The key product to be smuggled in every era is ideas. As my friend Percy Greaves used to say, the state cannot shoot ideas.
The World Wide Web is the greatest idea-smuggling network in history. The question is: Which smuggling operations will put the Web to its most productive uses?
My statement of faith is this: not the state.
Smuggling can lead to secession. It can lead to a withdrawal of faith and hope in the messianic state. It can lead to institutional alternatives to the messianic state. Example: online education as a substitute for tax-funded education. This is technically possible today. At some point, community by community, there will be a tipping point.
The mark of this tipping point will be this: the inability of local governments to get bond issues passed, despite the threatened loss of federal matching funds.
Impossible, you say? Repeat this mantra: "When Washington's checks bounce."
That will be the day of reckoning. That will be the tipping point.
When things cannot go on, they have a tendency to stop.
CONCLUSION
Can this really happen? Will the Keynesian system simply shut down at the top? Yes.
Is there any precedent for this? Yes. Two. China and the USSR. I have described the history of their inevitable demise here: //www.garynorth.com/public/12642.cfm
I return to my platform. Reform, not revolution. De-fund, don't capture. Withdraw Washington's legitimacy.