Sunday, March 10, 2013

The Law is No Excuse

Many pundits say that our government is dysfunctional. They say that from the President and his administration to the Senate and the House of Representatives, partisan politics rule and they cannot get anything done. We hear that they are a bunch of clowns, playing around while the country goes down the drain. does not see it that way. Those who get elected to federal offices have survived a very tough and competitive process, and they represent their constituencies. They are very competent in their way and they are not clowns. The reason they cannot agree on things is that the American people cannot agree. When the nation is divided in half on the issues, it is only natural that half of the elected officials are opposed to the other half, and no permanent satisfactory policies are possible.

If the government is dysfunctional, that is only a reflection of the dysfunction of the electorate.

U.S. voters are divided right down the middle by economics. Half are net lenders (the rich) with their supporters. The other half are net borrowers (the poor) with their supporters. Net lenders want relatively high interest rates, deflation, and "the gold standard." Net borrowers want low interest rates, inflation, and money-printing.

(Those of you who have read previous posts on The Other Side of Capitalism may recognize that the simultaneous desires for these opposed sets of policies in the populace results directly from the single currency. If the U.S. had multiple exclusive currencies, policies could be made differently for each currency. In other words, the single currency causes the policy conflicts.)

Another factor in the policy conflicts is political ambition. The basic political ambition is to raise oneself above others by centralizing power in oneself and one's family as far as possible. Not even the most egalitarian political theory has ever prevented top leaders from seeking control over everything and thereby gain the power to meddle in everything, both within and outside their societies. We have mentioned already the Kim dynasty in North Korea. We feel confident that Hugo Chavez of Venezuela, who passed away recently, was headed in the same direction. We consider this a fundamental fact of the human condition, one that will never change while human beings exist.

Desire for a single currency is a corollary to the desire to centralize power. Currencies make good chains because it is hard for people to make the connection between control of the currency and control of the people. Economic policies are boring. It is hard to inspire collective action against a change in interest rates.

It has been said that one should never waste a good crisis, and we have seen that principle in action frequently in recent years. Fiscal and monetary crises require solutions, but the drive to centralize power means that the solutions always end up ratcheting the economic chains tighter around us. More money yet less wealth. More debt yet high unemployment.

Here is a final additional note about centralization of power in the U.S. Speaker of the House Nancy Pelosi famously said about the healthcare bill ("Obamacare") that Congress would have to pass the bill to find out what was in it, since perhaps none of them had actually read it at the time of the vote. On the surface this seems perfectly ridiculous. How can Congresspersons think of themselves as lawmakers if they do not even know what laws they are making? Perhaps the old saying is outdated: "Ignorance of the law is no excuse." Perhaps we should think outside the law. does not see Congressional ignorance of the law as the main issue. We see it as an admission by the legislative branch that the executive branch is supreme. It is a statement that American society can no longer be managed by legislation, but must be managed by bureaucratic regulation. The healthcare bill was not "law" in the traditional sense, but advice, recommendations, and powers granted to the executive branch regarding health care in the U.S. In that sense, precise wording was not important, and that is why it was acceptable to pass the bill even if no one actually read the text. Congress acted more as an advisory panel and in the future it will act as a group of health care customer service reps, handling complaints and fixing problems as they arise.

In a sense, the Supreme Court did the same thing as Congress with the healthcare bill. Chief Justice John Roberts with his tie-breaking vote struck down the the bill's language. That opinion upheld the traditional role of the Supreme Court. Then he went beyond the traditional role. Like a teacher correcting an errant student's paper, he told the Obama Administration and Congress that they got a passing grade on their work, but not a perfect grade. It was clear what they meant, and their clear intent passed the Constitutional test. Unfortunately their wording in places expressed thinking outside the Constitution. Chief Justice Roberts did not make them re-write it to make it correct, but in the future, in similar situations, they should take his advice and use "tax" wording rather than "penalty" wording.  In other words, bad wording in a bill is no excuse for striking down good policies.

Tax or penalty, so what? The text is not very important, after all, and bills are just text. What is important is to get things done. The U.S. Supreme Court will not stand in the way of the executive branch doing what is right.

Some see this centralization of power in the executive branch and are appalled. They feel insecure. They feel that the balance of power has broken down and that the rule of law is breaking down. They want to restore it. They want to return to some imaginary legal "Golden Age." has only limited sympathy for that viewpoint. There never was a legal Golden Age for everyone, in the U.S. or anywhere else, and we expect that there never will be. For example, ask almost any African-American how impartial the law was during the Segregation period, and how the Constitution was used.  Large segments of the U.S. population come from subcultures for which the law has been a source of insecurity instead of security. These subcultures tend to celebrate lawbreakers.

Note that has already pointed out that legal solutions to the problems of capitalism are not very effective.  While the rich are not necessarily above the law, they have the power to blunt the law and escape it at need.  Law dominates the poor much more than the rich.

So does not recommend legal solutions as such. We are thinking outside the box, too. We want to set up systems that operate more cooperatively. Systems where ambition and competition are limited not by porous legal boundaries, but by more natural boundaries -- that is, by currency boundaries.

If politicians had the policy flexibility that multiple exclusive currencies would give them, then they could cooperate rather than compete. They could do the right thing for both the rich and the poor at the same time.

They could also nurse their most ambitious dreams while still serving their constituents well. The ladder of ever more competitive markets separated by exclusive currencies would also be a political ladder, not just a prosperity ladder. Budding policy makers could prove themselves on less competitive levels and "graduate" to more competitive levels as they gain experience, but the system would not give them enough power to abuse anyone very much at any level.

At, we believe that the base cause of our economic policy differences is the single U.S. currency. With multiple exclusive currencies, the power struggles would not be necessary because policies could be more flexible. Furthermore, there would be fewer crises for the ambitious to take advantage of in the hope of gaining more and more power for themselves. We should give multiple exclusive currencies a try.

Socialism for the socialists and capitalism for the capitalists.
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