Saturday, August 16, 2014

Owners Part 2: The Law And The Profits

[NB: The subtitle to this piece was shamelessly stolen from the late, great Cyril Northcote Parkinson. I hope he won't mind. Anyway, I plan to buy him a drink if we meet in the afterlife.]

[NBB: Subtitles must not become a habit. A late friend of mine proposed to write a monograph titled: Subtitles: The Abuse of the Colon, which is only funny until you realize just how ubiquitous and annoying the practice has become.]

[NBBB: It might be possible to distinguish subtitles from the sort of "series tag" novelists append to their titles, such as: Which Art In Hope: A novel of the Spooner Federation, but it's much too early in the morning for such fine distinctions.]

[NBBBB: Wi not trei a holiday in Sweden this year?]

One of the most insightful of Isabel Paterson's many observations on government and politics was that whereas the usual conception of corruption is that it occurs when business corrupts government, in reality exactly the reverse is the case: persons who wield political power actively seek to sell the use of that power to persons who can enrich them. In point of fact, business cannot corrupt government, because the power to create privileges in the marketplace by an action of the State must exist and be "advertised for sale" before it can be purchased.

The earliest corruptions of business by government are falling stones on a steep, loose mountainside. They trigger an avalanche of efforts by businesspeople to get the government "on their side" -- or at least "off their backs" -- that redounds massively to the fortunes of politicians. The underlying dynamic is irresistible:

Corruption makes State favor into the most important single factor in the marketplace.

It's simple, really: If your competitor manages to enlist the State on his side, just how long do you think you'll manage to remain in business? Thus, the State's favor becomes the paramount consideration in any market segment into which it is introduced.

There is no more pernicious convergence than that of profit with power.

The federal design expressed by the Constitution of the United States was motivated by several factors, not the least of which was the attachment to power of the governors and legislators of the states. Yet the Founding Fathers managed to do something no previous architects of government had ever succeeded in doing: they got the states to agree to a binding compact that expressly forbade them certain actions and exertions of law:

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

No State shall, without the Consent of Congress, lay any duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay. [Article I, Section 10]

It's difficult to get a sense for the magnitude of this achievement without a fairly wide and deep knowledge of the history of political systems. At the time of the Framing it was unprecedented. Yet the fifty-odd men of the Constitutional Convention -- and take it from me, some of them were more than a little odd -- pulled it off, with immense popular support.

Since then, nearly all of the provisions of Article I, Section 10 have been violated. Cui bono? Hint: It wasn't yours.

Ownership of a thing is supposed to confer rights over that thing, including the right to set the terms on which it shall be yielded up to another. For instance, if I own a chair, whether I made it myself or paid for it at the local furniture store, my rights over it are an impassable barrier against your dictating at what price I must sell it to you. I can set any price I like, or declare the item not for sale. Whatever I decide, you have no recourse, for I have merely exercised an owner's rights: the same rights available to you over anything and everything you own or might acquire.

The Framers left a chink in that barrier, unfortunately:

The Congress shall have regulate commerce with foreign Nations, and among the several States, and with the Indian tribes; [Article I, Section 8, third authorizing clause]

...the expansive interpretation of which gave birth to the worst aspects of the federal leviathan: the alphabet agencies of the Regulatory State.

Regulators routinely exercise the power to dictate who may buy and who may sell, and under what conditions, at what prices, and at what times. They do so without legislative authorization, which is bad enough, but is essentially a side issue. Not even Congress could enact such rules without violating the property rights of Americans in business. Such regulatory power -- arbitrary and unreviewable in nearly all cases -- is the gouting fount of 99% of all governmental corruption. Compared to it, federal employees surfing for porn during working hours are a triviality.

Is it any wonder that every corporation in the Fortune 5000 possesses legal and regulatory-compliance departments that are larger than its sales and marketing forces, or that every one of them maintains an office in Washington specifically for swift access to the federal government?

One of the most illustrative historical examples of the lethality of political corruption stems from France during the reign of Louis XIV. The Edict of Nantes, issued by Henry IV in 1598, extended State protection to (and enforced public toleration of) France's Protestant minority, the Huguenots. French Catholic artisans, shopkeepers, and manufacturers, forbidden by the Church to work on Sundays, chafed at this provision, for their Huguenot competitors tended to work seven days per week, which gave them a commercial edge. Over time, pressure mounted upon Louis to revoke the Edict, which he did in 1685. The immediate resumption of bloody hostilities between Catholics and Huguenots, with eventuated in the mass migration of the Huguenots to Belgium, was a major contributor to the economic decline that ultimately produced the French Revolution.

Most monarchs of Louis XIV's time considered their powers unbounded, regardless of any quasi-constitutional mechanisms that might militate to the contrary. In the usual case they were correct de facto to think so, for few were the mechanisms that might succeed in restraining them. Thus, when Louis decided to bestow his royal favor on French Catholics, his altitude, combined with majority support for the revocation, made the consequences inescapable.

Seldom in these United States does blood visibly flow over a corruption of that sort. Yet the consequences are equally inescapable. Regulators empowered to decree who may buy and who may sell, and under what conditions, at what prices, and at what times possess the power of commercial life and death over American businesses, from the greatest to the least. When they exercise those powers, some lose their livelihoods...and often much else besides.

The late Poul Anderson once expressed the core principle of statism as "Do as we say or we'll kill you." Sometimes "doing as they say" will kill you just as dead.

Those familiar with Ayn Rand's blockbuster Atlas Shrugged will remember the backstory about Dagny Taggart's ancestor Nat Taggart, founder of Taggart Transcontinental:

    In his lifetime, the name "Nat Taggart" was not famous, but notorious; it was repeated, not in homage, but in resentful curiosity; and if anyone admired him, it was as one admires a successful bandit. Yet no penny of his wealth had been obtained by force or fraud; he was guilty of nothing, except that he had obtained his own fortune and never forgot that it was his.
    Many stories were whispered about him. It was said that in the wilderness of the Middle West, he murdered a state legislator who attempted to revoke a charter granted to him, to revoke it when his rail was laid halfway across the state; some legislators had planned to make a fortune on Taggart stock -- by selling it short. Nat Taggart was indicted for the murder, but the charge could never be proved. He had no trouble with legislators from then on.

Though I can't prove it beyond a reasonable doubt, this sketch of Nat Taggart might well have been modeled on a quite similar story about Cornelius Vanderbilt, who faced almost exactly the same sort of political ploy from the New York legislature. However, no senator or assemblyman died under mysterious circumstances, though many went broke when Vanderbilt succeeded in countervailing their maneuver. Yet even those who know the Vanderbilt story seldom ask the key question at the base of the whole incident:

By what right does any legislature or other political body claim the power to permit or forbid a peaceful act of commerce?

The long and the short of it is that governmental attempts to decree who may buy and who may sell, and under what conditions, at what prices, and at what times, constitute a usurpation of the rights of ownership. Such a decree is a taking quite as much as the physical seizure of a physical item. If we grudgingly allow that the Constitution does authorize such actions, we must nevertheless demand that they be limited to "public use," and that the dispossessed owners by justly compensated...but despite numerous Supreme Court edicts to his effect, regulatory takings almost never are.

If, as I said in yesterday's tirade, "men must be free because nothing else can be," it behooves us to ask why. The answer is simple: Our interactions with the nonsentient material universe, and with one another through trade, are how we survive and flourish. He who claims the power to "regulate" those interactions implicitly claims the power of life and death over us, for there is no domain of applicability within which such a power can be bounded.

Combine that with the ruthless voracity characteristic of men who view government as an instrument by which to profit, and with the willingness of supposed "public servants" to sell them the use of State power. Given the landscape of coercion and favoritism that results, with all its pockets of privilege and special provisions for politically favored companies and groups, can we really call it a "government of laws, not of men?"

Think it over.


Roy Lofquist said...

Another example of unintended consequences that cause injury to your posterior. The Commerce Clause was put into the Constitution to ban the states' imposition of tariffs under the Articles of Confederation. It was intact and working as intended until the 1930s when the Supreme Court, in essence, declared it unconstitutional.

Tim Turner said...

Heard on the radio within the last two months: An FDA official talking about e cigarettes: "We have to regulate them because we don't know what effects they might have."