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February 03, 2011

The New Feudalism

The term "feudal" is, I am thinking, fairly commonly used in libertarian circles. I don't read libertarians very often, though, so to me the term is novel. (I hate admitting I'm way behind on knowing something I should have known long ago but that's the truth of it.)

Anyway, Reason magazine drops the f-bomb (feudal, I mean) so casually I have to think this is a common criticism. For me it's a bit of a (embarrassed to say) revelation, because I hadn't conceived of the socialist/corporatist model of Obamanomics as being, among other things, essentially feudal in nature, involving a raft of special privileges for baronial elites (and the reciprocal promise of those barons to support their liege in war).

But it's completely apt. It's spot-on.

reason: Is it politically plausible to expect Congress or the president to actually act that way and say, “Look, the bailout stops here”?

Epstein: It’s very, very hard to do it, to put it mildly. But it’s going to get worse. So what you really want to do is reverse the earlier situation. You want to get Washington Mutual out from underneath Chase and have them as a separate bank with a fairly substantial size. The market depends on having a large number of intermediate-sized players. Something like BB&T bank has about $150 billion of assets. That’s plenty big to do virtually any transaction that you need, but it’s not going to create systemic risk. The real systemic risk that you create is having five major banks which amongst them have $10 trillion worth of assets floating around in their coffers.

What you want to do is to encourage new entry by smaller banks in a specialized niche, so that every time somebody gets big, fat, and happy, there’s some competitor who’s coming in there. To the extent that you make it difficult to charter new banks, you’re going to only increase the dominant position of those banks that are already in effect.

You want to tell the bankruptcy courts to do their jobs, not to pull another stunt like they did with Chrysler and General Motors. If you had some degree of regularity in your political and social institutions, then the environment for private banks to operate will be a bit more wholesome, and without those perturbations the risk of failure starts to go down.

I wrote a book called Simple Rules for a Complex World. When you’re dealing in small families and intimate social arrangements, you can have a special deal for every one of your children, right? But when you’re trying to deal with a nation, the single largest mistake you can make is treating it as one large but rather dysfunctional family. You want to be able to establish ways in which people could act impersonally with strangers and very cooperatively with their intimates. So you don’t want a credit card system to essentially depend on all sorts of personal verifications—I can’t get this money out of the bank until I tell the teller what I’m going to do with it, and so forth.

Take the two markets that matter the most in many ways for long-term stability: real estate and labor. Both of them are overregulated at both the federal and the state level. Every regulation should have to be justified, because the moment it limits gains from trade you have to explain why it’s needed. But Obama’s guys treat these regulations like they’re candy going down the throat of a 2-year-old. “They just taste sweet; we’d better do more of it.” The Republicans are guilty of it in the sense that they don’t fight it very hard. And the Democrats are guilty of it because they think it’s a real panacea.

reason: In shifting from a rule by fiat, where you come and plead your case and get your special single deal, to a government of rules, you shift from a kind of feudal mentality to a republican one. What do you do to spread that and make that more persuasive to people?

Epstein: You show people that all of the ingenuity of gimmicks fails. We have more debt, more unemployment, and less happiness in this country now because hope and change turn out to be discord and confusion. And there’s no way that you can stop that. You cannot stop the blunders of one government program by putting another one on top of it.

That’s what I learned in Yale Law School. You don’t like what the minimum wage does, you create a welfare program. You don’t like what a welfare program does, you have a back-to-work program. If you just got rid of the minimum wage, you’d get rid of three programs and you’d free up lots of economies. Mies van der Rohe was essentially a political theorist when he said “less is more.”

This lens of a new feudalism gives me a new understanding of what is going on with Obama's waivers on health care for all his bestest baronial buddies and Obama's very special waiver for very, very powerful baron GE as regards global warming rules.

Reason puts the feudal system (personal favor-banking and influence peddling) as the opposite of a "republican" system, a system of laws not barons, where everyone stands equal under the law -- everyone subject to the punitive compulsions of law and no afforded special monarchial dispensation from the law.

In that context, I'm wondering at what point a system of waivers becomes actually unconstitutional -- because anyone not granted a waiver is being burdened by a restrictive and possibly punitive law that others aren't. Isn't he?

That is, there is no difference, effectively, between saying "All people are subject to 80% taxation rates, but a special category of Friends of Obama shall be waived from this general rule and only pay 35%" or directly making a law of specific persons (all conservatives) who will have to pay taxes at the 80% rate. The latter would be a clearly illegal, punitive law -- but the former would be allowed (or is being allowed now, at least) while accomplishing the exact same goal, penalizing some while privileging others.

A system of waivers from the basic law is no different than a system of legal burdens being legislated against specific named persons.

It's feudal. It's unconstitutional. It's bad law and bad policy, and it's time for the special Friends of Obama star chamber to be dismantled.

Another Example: Obama is being held in contempt by a judge for defying his ruling that the administration end the moratorium on drilling permits. They are pretending to comply by putting in place a permit process, but then, not actually granting any permits.

That's kind of feudal, the king above the judges and such. But that's not the feudal part I am thinking of.

The feudal part is the Obama Administration's report on the spill. BP caused it and almost every other oil company has been criticizing BP's unsafe practices for a long time. They seem to be a serial offender.

But BP is a major patron of Obama.

So the report blamed the entire industry, and the entire industry is being punished. Baron BP was spared. Everyone suffers for their misdeeds.

Feudalism.


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posted by Ace at 03:03 PM

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