The Breaking Point
Page 14
9 Ibid., 7.
10 Turner, Francis, “Money and Exchange Rates in 1632.”
11 Paterson, Isabel, The God of the Machine, quoted in http://www.anoopverma.com/2015/04/in-applied-mathematics-you-must-de.html.
12 David Ricardo to John Wheatley, September 18, 1821, quoted in Hayek, in New Studies in Philosophy, 199.
13 Morrison, James, “Keynessandra No More: JM Keynes, the 1931 Financial Crisis, and the Death of the Gold Standard in Britain,” APSA 2010 Annual Meeting Paper. Available at SSRN: http://ssrn.com/abstract=1641715.
14 Newby, Elisa, “The Suspension of Cash Payments as a Monetary Regime,” Centre for Macroeconomic Analysis Working Paper Series, June 2007, 4.
15 Morrison, “Keynessandra No More,” 6.
16 https://www.globalfinancialdata.com/gfdblog/?p=942#sthash.gh8dSQB0.dpuf.
17 Keohane, Robert O., After Hegemony: Cooperation and Discord in the World Political Economy (Princeton: Princeton University Press, 1984), 208.
18 Hayek, New Studies in Philosophy, 205.
19 Newby, “The Suspension of Cash Payments as a Monetary Regime,” 4.
20 Keohane, After Hegemony.
Chapter Seven
The “Great Degeneration”
From the Rule of Law to the Rule of a Law Professor
The madness of slavery is over, the time of liberty has been granted, English necks are free from the yoke.
—Gerald of Wales, 1215
On June 15, 2015, it had been 800 years since my swashbuckling ancestor Saire de Quincey, the Earl of Winchester, dressed in full battle armor, along with his cousin Baron Robert Fitzwalter and fellow conspirators, confronted King John at Runnymede Meadow and obliged him to sign the Magna Carta or, in Latin, the “Great Charter.” As the saying goes, this was “the start of something big”—namely, the rule of law as exemplified by the Magna Carta’s clause 39, which reads, “No free man shall be taken or imprisoned, or dispossessed or outlawed or exiled or in any way ruined, nor will we go or send against him except by the lawful judgement of his peers or by the law of the land.”1
Clause 39 was inspired by the Magna Carta barons’ outrage over King John’s treatment of the beautiful and celebrated Matilda (Maud) de Braose, wife of the fourth Lord of Bramber. When King John sent officers to take Maud’s son William into custody as hostage for payment of 5,000 marks, she told them she refused to deliver him to a king who had murdered his own nephew. (It was widely believed that John murdered Arthur, Duke of Brittany—son of his older brother, Geoffrey Plantagenet—to rid himself of a rival for the throne.) When King John heard that Maud had openly voiced the widely whispered view that he was a murderer, he dispatched an army to apprehend her. After a two-year pursuit through England, Wales, and Ireland, Maude and her son were captured by John’s troops on the Antrim Coast of what is now Northern Ireland. They were brought back to England where John ordered them imprisoned, first at Windsor Castle, then at Corfe Castle in Dorset, where they were thrown into the dungeon without food. They starved to death.
King John was widely hated for the type of treatment that he imposed on Maud and William de Braose, and the Magna Carta was the barons’ revenge on him. (It was not entirely expressed in clause 39.) Another “yippee moment” for Gerald of Wales was probably occasioned by clause 40, one of many that forbade the king from “selling” justice to the highest bidder or delaying it indefinitely: “To no one will we sell, to no one will we refuse or delay right or justice.”
To follow the sequence a bit further, clause 41 also appeals to me as perhaps the pioneering encoded defense of free trade: “All merchants shall have safe and secure exit from England, and entry to England, with the right to tarry there and to move about as well by land as by water, for buying and selling by the ancient and right customs, quit from all evil tolls.”
It has been a point of false pride that my remote ancestor played a leading role in establishing some principles that served the world well over the ensuing centuries:
• The power of the state is not absolute.
• Those in authority must obey the law.
• Even sovereign bankruptcy does not justify arbitrary taxation and the seizure of property without due process.
As the distinguished English jurist Lord Denning put it, the Magna Carta was “the greatest constitutional document of all times—the foundation of the freedom of the individual against the arbitrary authority of the despot.”2
A number of thoughtful observers argue that the rule of law was crucial to the economic ascendancy of the West. Economic historian Douglas North has attributed the relative success of the United States and Canada to British institutions as being more conducive to growth. To the extent that he is right, much of the success of Australia and New Zealand could also be explained the same way, due to the observance of the rule of law in the former British settlement colonies. That being so, much credit goes to Saire de Quincey, his cousin Robert FitzWalter, and the other Magna Carta barons who forced a bankrupt king to observe the rights of subjects.
They were not unjustly bullying the king—they were otherwise conventional feudal lords motivated by resentment of excessive taxation and despotic governance.
Gigantic Shakedowns Evolve
The nature of predatory rule has evolved considerably in the 800 years since the Magna Carta. Bad actors no longer dispatch armed bailiffs to seize your children and hold them hostage for the payment of a steep ransom. Today, they deploy lobbyists in thousand-dollar suits who procure antimarket regulations backed by the coercive power of the state. As suggested in chapter 1, these departures from the free market cost you a vast amount (recall the credible estimate that puts the annual cost to you and every member of your family at $125,000 each). As pop philosopher Tavis Smiley, the holder of sixteen honorary doctorates, opined, “If you can’t win the game, change the rules.”3 Unlike in the Middle Ages, the gigantic shakedowns of our time are mostly the consequence of efforts by powerful people to win big by changing the rules.
In the early thirteenth century when the Magna Carta was drafted, original thought, per se, was not as highly esteemed as it became in the modern world. In Saire de Quincey’s time, copied ideas were more credible than creative thought—laws were not invented; they were remembered. It is interesting, therefore, that Saire de Quincey and his fellow conspirators had the ingenuity to reinforce custom by introducing a creative new element to the enumeration of customary rights and obligations.
King John seems to have been particularly incensed by the most original and longest clause in the Magna Carta, clause 61, in which the barons asserted the right to “choose any 25 barons of the realm they will, who with all their might are to observe, maintain and cause to be observed that peace and liberties which we have granted and confirmed to them by this our present charter.”
In the event that the liberties were offended by the king’s actions, clause 61 reserved the barons’ right to seize the king’s “castles, lands, and possessions, and in such other ways as they can . . . until in their judgment amends have been made.” Can you imagine a charter for the enforcement of liberty today that gave taxpayers the right to seize Obama’s bank accounts and other property?
The real essence of the Magna Carta, as German historian Max Friedrich Ludwig Hermann (a.k.a. “Fritz” Kern) noted, was not its reliance on the pen but the “sledgehammer.”4 It was this sledgehammer of resistance to the abuse of authority, not just pious words of protest, that informed the institutional developments that culminated in a tradition of the rule of law. Clause 61 was not a provision that was very popular with King John. He did his best to wiggle out of it.
As soon as the Magna Carta barons disbursed from London back to their homes, King John renounced the Magna Carta and persuaded his sometimes ally Pope Innocent III to release the king from his oath on grounds that it was imposed under duress. Saire de Quincey was subsequently excommunicated. He was later captured following a bloody battle with royal forces at Lincol
n, after which he was imprisoned and his estates seized.
His property was only restored and his liberty granted when he agreed to leave England to join the Fifth Crusade, which he duly did. He died on November 3, 1219, aged sixty-four, on the road to Jerusalem, after surviving the Siege of Damietta in Egypt. He was buried in Acre, capital of the Kingdom of Jerusalem, but his heart was returned to England and interred at Garendon Abbey near Loughborough.
Alas, he went to a lot of trouble for nothing where we are concerned. Much of the legacy of the Magna Carta in establishing the rule of law in Anglo-Saxon countries, particularly the United States, has been frittered away and lost during my lifetime. Today, we live in an age of neofeudal debt serfdom, which puts us as much in need of a Magna Carta as Saire de Quincey and the other Magna Carta barons were.
Presidential Corruption Grows
The breakdown of the rule of law has many manifestations, both indirect and overt. Civil libertarians have documented a reversion to pre–Magna Carta authoritarian practices in the United States.
Among other things, Obama has asserted the right to use warrantless surveillance on his own say-so. But that is weak tea compared to Obama’s assertion of the right to kill any US citizen without a charge, let alone a conviction, based on his sole authority. A leaked memo argues that the president has a right to kill a citizen even when he lacks “clear evidence of a specific attack” being planned. Not even the evil King John ever claimed the right to execute people without charge.5
The headlines have been full of details about the Obama administration secretly targeting the phone records of Associated Press reporters. There is evidence that those who dare to criticize the authorities have been smeared and targeted for arrest.
When Pulitzer Prize–winning journalist Chris Hedges sued the government in a challenge to the “indefinite detention of Americans,” the government refused to promise that journalists like Hedges wouldn’t be “thrown in a dungeon for the rest of their lives without any right to talk to a judge.”
As Dana Milbank wrote in his May 2013 piece “Criminalizing Journalism” in the Washington Post, “To treat a reporter as a criminal for doing his job—seeking out information the government doesn’t want made public—deprives Americans of the First Amendment freedom on which all other constitutional rights are based.”6 Note that the notion that freedom of the press is imperiled in the United States is not just Dana Millbank’s eccentric opinion. The “World Press Freedom Index 2014,” published annually by Reporters Without Borders, lists the United States as the country with the forty-sixth greatest amount of press freedom, just below Romania and above Haiti.7
Meanwhile, we have learned that conservative groups were targeted by Obama’s IRS, but when Obama’s brother applied for tax exempt status for the Barack Obama Foundation, he received a retroactive approval within a month—in pluperfect crony capitalist style. The Bush administration also used the IRS to target enemies.
Obama has taken this intrusion into our rights various steps forward. Press reports in April 2013 detailed IRS documents suggesting that the tax agency believes it can read your emails without a warrant. Files released pursuant to a Freedom of Information Act request quoted an internal IRS document claiming that the government did not need a warrant to obtain the contents of electronic communication that has been in storage for more than 180 days. Another file arbitrarily stated that the Fourth Amendment did not protect communications held in electronic storage, such as email messages stored on a server, because Internet users did not have a reasonable expectation of privacy. The IRS claims the right to read your emails without a warrant—a claim that was later modified in the face of a public outcry.8
Former judge and constitutional law professor Andrew Napolitano says that Obama’s claim that he can indefinitely detain prisoners, even after they are acquitted of crimes, is a power that not even Hitler and Stalin ever claimed. So yes, we have strayed far from the rule of law: Americans no longer enjoy many of the rights that Gerald of Wales applauded when he said, “The time of liberty has been granted,” when King John accepted the Magna Carta on June 15, 1215.9
Obama and his all-powerful centralized state have set the cause of civil liberties back 800 years. One expert who has been pointing the way toward understanding the deeper economic consequences of abandoning the rule of law is Niall Ferguson, the Laurence A. Tisch Professor of History at Harvard, senior fellow of the Hoover Institution at Stanford, and senior research fellow at Jesus College, Oxford.
“The Great Degeneration”
Ferguson laments what he calls “The Great Degeneration.” In a 2013 book of that title, Ferguson argues that a great part of the problem facing the United States and other advanced economies is that we have abandoned the rule of law.10
He argues that one of the principal factors that makes nations strong is the guarantee that justice will be done. This is no longer the case. Ferguson sees four symptoms of the “Great Degeneration” of US institutions:
1. The breakdown of the contract between generations. He sees massive national debts and excessive entitlement spending that benefits older generations, at the expense of the young, as a departure from generational balance.
2. Excess regulation. This makes an already complex system more complex, thereby increasing instability. I argue that excess regulation is one of the key informing factors that accounts for the slowdown in economic growth. Despite the doubling of stock prices from 2011 to early 2015 (in conjunction with a debt-fueled outlay of $1.7 trillion by companies buying back their own shares), overall commodity prices were flat in February 2015 since the recovery supposedly began. This is all symptomatic of a system more vulnerable to collapse than it was in 2008. Leverage has gone up, but by many measures, there has been no recovery and the authorities apparently have exhausted every remedy in their bag of tricks.
3. The rule of lawyers has replaced the rule of law. Ferguson points out that the United States has the highest cost of law of any country in the world—an ominous discount on the sustainability of the system. Instead of swift and speedy justice that cannot be sold, per clause 40 of the Magna Carta, we now have a twisted legal system that is gamed for self-serving needs. US universities graduate forty-one times more lawyers than engineers. It seems fitting that the endgame of such a corrupt system would be presided over by Barack Obama, a law professor.
4. The decline of civil society. According to Ferguson, the growing dependency on government to solve social issues has little economic benefit. The willingness to depend on government to solve problems turns every problem into a feeding frenzy for crony capitalists, thus slowing economic growth even further.
Ferguson has made a good start in pinpointing the eclipse of the rule of law as a major culprit contributing to the falling returns that unambiguously characterize so many aspects of American society and the US economy.
Moral Syndromes and “Monstrous Hybrids”
There are other more subtle consequences of the eclipse of the rule of law. A key to understanding some of these was provided by Jane Jacobs in her brilliant 1993 book, Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics.11 Jacobs makes the shrewd point that “two radically different,” even contradictory systems of morals and values—what she terms “moral syndromes”—underpin our two different approaches to making a living. The first of these constellations of moral habits or ethical precepts—Moral Syndrome A, or the “commercial moral syndrome”—involves the following fifteen precepts:
1. Shun force
2. Come to voluntary agreements
3. Be honest
4. Collaborate easily with strangers and aliens
5. Compete
6. Respect contracts
7. Use initiative and enterprise
8. Be open to inventiveness and novelty
9. Be efficient
10. Promote comfort and convenience
11. Dissent for the sake of the task
12. Inve
st for productive purposes
13. Be industrious
14. Be thrifty
15. Be optimistic
Jacobs then lists fifteen additional closely observed but contradictory precepts that compose Moral Syndrome B, or the “guardian moral syndrome,” which prevails in politics and jobs relating to government:
1. Shun trading
2. Exert prowess
3. Be obedient and disciplined
4. Adhere to tradition
5. Respect hierarchy
6. Be loyal
7. Take vengeance
8. Deceive for the sake of the task
9. Make rich use of leisure
10. Be ostentatious
11. Dispense largess
12. Be exclusive
13. Show fortitude
14. Be fatalistic
15. Treasure honor
Jacobs emphasizes that her lists were not conjured arbitrarily, but discovered after extensive research. She pored through biographies; business histories; and summaries of scandals, sociology, history, and cultural anthropology.
If you consider the inventory of the guardian precepts, they fairly comprehensively embrace those of Saire de Quincey, Robert FitzWalter, and the Magna Carta rebels. Apart from William Hardel, a wine merchant and urban property owner who was mayor of London, the authors and sureties of the Magna Carta were all feudal magnates. They exerted prowess, or obedience and discipline; adhered to tradition; respected hierarchy; and were loyal to one another and their cause, if not to King John. John’s authoritarian rule, following similarly odious practices by his father King Henry II and his brother King Richard I, inspired the Magna Carta barons to seek vengeance, as exemplified by clause 39, for the many wrongs they had suffered.