Audio recording of this article here.
Big business is an extension of the state.
Governments control companies and their clients, and their weapon of choice is legislation. The resulting regulations are so broad and arbitrary that the government can harass companies into complying like a mafia protection racket. Given the bureaucrats’ many trifles, rules can be as useless as reality TV shows.
Instead of dealing with harassment, most companies have entire departments that focus on regulatory compliance. Compliance costs aren’t trivial, but they’re much better than no business at all, so companies pay for them. These are basically administrations to keep bureaucrats happy. Mobs at least have the courtesy to be upfront about what they want, regulators are often self-contradictory and compliance is more an art than a science.
And make no mistake, you don’t want to piss off bureaucrats, because they can make life hell. For example, the Equal Employment Opportunity Commission (EEOC) has enormous regulatory power over every company.
Originally created to enforce civil rights legislation, they currently have the power to destroy any business they wish. How do? Through what is known as “differential impact” legislation. Like any legislation, the intent is noble enough. The idea is to ensure that employers do not discriminate against minorities. But in practice, the rule makes every business contravene.
The criterion is that if any particular job within a company does not contain the exact percentage of minorities such as the local population, the EEOC can find infringing companies. This, of course, is statistically impossible to do for every job in any company. Since every company abuses, it is the job of compliance departments everywhere to read the tea leaves and try not to upset the EEOC as much as possible.
Legislation is tyranny
The fact that companies cannot comply with all the rules means that regulators are free to bring lawsuits against companies they do not like. Every action is violated, so enforcing the rules essentially means death. When the government can kill all business without any recourse, that is tyranny. Arbitrary enforcement of legislation gives bureaucrats power and this power is a blank check to enforce bureaucrats’ preferences.
Corporations in general do not fight bureaucracy but rather satisfy it. The dynamic that emerges is the one in which companies become sensors of the state, advancing whatever agenda they are asked to push. Watch how companies woke up by embracing ideology and hiding mandates. Instead of serving customers, companies serve the government due to the power of law enforcement.
Twitter and many other companies are removing accounts they don’t like. They’ve also learned the power of rule-making. Pretty much every account is violated if you look seriously enough. Companies learn abusive behaviors from their masters and perpetuate them for their users.
At the heart of all these dysfunctional relationships lies power, and more rules means more power for those in power. The people who enforce the rules become more powerful and with the centralization of power, authoritarianism is the inevitable result. In other words, rule-making is a weapon for those in power to exercise power over those they govern. Like an abusive and emotionally unstable relative, those who are subject to this authority have to walk on eggshells in the hope that they can get through the day.
The consequences of legislative authoritarianism are devastating. People, not just companies, become rule-followers. Instead of evaluating a situation based on principle, they evaluate based on who has power. Morals become a sociopath, where they only matter if they arouse the wrath of officials. People are motivated to win over rulers rather than build useful things. The will of the rulers becomes more important than customers, civilization, or even what is right or wrong.
Rulers then use this change in behavior to reformulate social norms. They force society to reform based on their ideals, which inevitably have flaws and complete disaster. The many experiments in Marxism over the past century are testament to the lethality of such renewal.
humble alternative
More legislation and rules only centralizes power and creates a system that becomes more authoritarian over time. Even the United States, which was founded on the principles of limited government, now has an organization like the EEOC that can find and unjustly punish any company that wants to be illegal in some way. The trend towards authoritarianism can be traced back to the proliferation of legislation. In the past, legislation centralized power, in the same way that sugary sweets increased BMI.
So what is the alternative? How does society prevent centralization of power?
The answer is social norms, or justice based on natural law. Natural law is the idea that people have an intuitive sense of justice that is generally agreed upon, and by that we can determine the justice of action. A good example of a system based on natural law is English common law. English common law was not something to be enacted by legislation, but it was slowly identified and discovered one case at a time. Judges rule on the basis of social norms and this is common law. To this day, where there is no express legislation, judges simply use the social standard to make decisions. It sounds more exciting and mystical than it actually is. Natural law is literally common sense, as is the case with most people.
Natural law is a more equitable standard, and it is based on standards drawn from all people, not just ruling elites. It is a decentralized law, not centralized legislation. After all, social norms develop through many interactions and emerge from the bottom up rather than being passed on.
Much of what the legislation does is trying to achieve fetch. Regardless of the legislation, natural law or common sense will still exist and it is a violation of natural law that we generally recognize as evil. Authoritarianism fails because natural law violates one rule at a time.
stability and prosperity
Changing social norms is much more difficult than changing the rules set by an authority, and herein lies their strength. Social norms are more stable and not subject to sudden change through legislation. This is great because people can plan with more certainty going forward. If this sounds familiar, it should be. This is why stablecoin is good for society and unstable currency is horrible.
Norms based on social norms and people’s collective sense of justice are fertile ground for civilization. Rather than submit to the tyrannical powers of rulers, there is a certainty that acting within social norms will provide some protection against sudden destruction. In a society based on natural law, changes in social norms are slow, which means that those who change them acquire them, not grant them. This is a good thing because any potential change needs to win the hearts and minds of society as a whole and not just a few rule makers.
The instability of social norms is a feature of authoritarian structures. Simply watch all changes in social norms over the last two years versus just the previous ten.
In contrast, under common law, social norms are stable and low time preference behavior results, which leads to the construction of civilization. Long-term projects can be completed and capital invested rather than squandered. There is also a noticeable lack of rent-seeking as there is no central bureaucracy to be fed.
It is no coincidence that places that live under English common law tend to thrive. Hong Kong, Dubai, Australia and many other places have thrived under the norm of decentralized law. The lack of authoritarianism has been a blessing in these countries and allows for long-term planning.
tax legislation
We need to rethink legislation. Politically, the new legislation is seen as ways for people to get what they want but ignore the cost to others. The zero-sum game of legislation ultimately puts people in a bind and under the control of the people who set the rules. Instead of freedom, we have armies of rent-seekers focused on compliance with the authorities and this detracts from the actual builders.
Humanity can thrive under decentralized law, in law that does not change all the time. This is the argument behind Bitcoin and the argument against fiat money and altcoins. Fiat money and alternative currencies rely on rule-making from above and limit freedom due to increased control from central authorities. More rules means more control. A decentralized system naturally means more freedom and more certainty, which leads to better planning. Look at how many public companies plan to mine bitcoin for ether over the next decade.
Bitcoin will win due to its decentralized nature. Society can win if it adopts decentralization law.
This is another guest post by Jimmy Song. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.