The Bear’s Lair: Triumph of the bureaucrats

The typical form of human government moved from absolute monarchy, to oligarchy, to democracy, but it did not stop there. As government grew, popular control over it declined, while its own bureaucracy became the principal factor determining its direction. We have now reached the stage where to term the result a “democracy” is laughably in error. We have entered the era of the Bureaucrat State, and the mechanisms for restoring popular control are very limited indeed.

Two centuries ago, governments had almost no bureaucracy. Under Lord Palmerston in the 1830s, the foreign policy of the world’s greatest power was managed by a total of about 30 clerks, with Palmerston himself reading and signing, and in many cases writing by hand, every dispatch that went out. Such a system required an energetic Minister at the top – under some lazy early 19th Century occupants of Ministerial offices, official business clogged up completely and the department descended into complete stasis.

That system also provided excellent links between the government and the electorate’s wishes. While an individual minister might be in the House of Lords, or MP for Old Sarum, where the electorate consisted largely of sheep, he was also a member of a small Cabinet, generally no more than 12 people, who were collectively responsible for justifying government policy to the electorate. That justification took two forms: elections every few years and defending individual policies and actions to a rowdy House of Commons and a powerful and intelligent House of Lords, both almost unbound by party discipline and with members taking close account of what was said in debate.

The electorate itself was wildly mixed between constituencies, with some being democratic while others were either tight oligarchies or “nomination boroughs” subject to the whim of the local landowner. Thus, electoral opinion was not always completely matched to mass opinion; in particular the electorate was more suspicious of welfare schemes than the overall populace. Still, popular control over government’s activities was strong, and popular support for the government was also strong except in periods of exceptional economic difficulty.

In the United States at that time, the direct connection between ministers and the public was less direct, because the ministers were appointed by the President, and so responsible to him on policy, and maverick Presidents like Thomas Jefferson and Andrew Jackson governed quite differently than they had campaigned. Still, legislation was drafted by Congress, and Congress was exceptionally responsive to its constituents, more so than in Britain, with Congressional districts small enough in population that they generally represented closely the predominant economic activity in the area.

The problem arose with the rise of the Progressives in the United States and the Keynesians in Britain. Neither Progressives nor Keynesians were remotely democratic in outlook; they believed in rule by experts, which by definition did not include the general public. Even Progressive inventions like the Presidential primary were designed to take politics away from “smoke filled room” politicians who did deals, rather than deciding matters “objectively” as Progressives preferred to do.

In continental Europe, the Progressive urge for control was expressed as socialism or Communism, which were mostly intellectual movements put in place through worker votes, industrial activity, or revolutionary agitation. It is interesting that this tactic, of using workers’ strong-arm tactics to force the adoption of middle class intellectuals’ schemes, dates back to the Reform Bill agitation of 1831-32. The 1832 Reform Act was notable for enfranchising no additional workers at all, because of the high property qualification for voting, while disfranchising numerous workers who had voting rights under the old haphazard system. But the workers fell for it, and rioted when told to do so – poor saps; their only reward was the institution of Workhouses two years later by the 1834 Poor Law.

In the United States, the Progressives were never allowed a long run at power until the failure had become clear even to them of Soviet Communism, the ultimate rule-by-experts, where all resources are allocated by an expert-operated Gosplan. In Britain, a Gosplan approach complete with rationing that lasted until 1954, was tried during the 1940s, but the electorate had the sense to vote it out and return to something a little more sensible.

Rather than direct price controls, the Progressives of today attempt to achieve their ends through a morass of regulations. This tendency first became obvious in the Great Society years, as those in power attempted to build a better society through government programs and regulations. The regulatory zeal then intensified under President Nixon, when the Progressives, out of Presidential power but utterly in control of Congress, took the opportunity to create agency after agency while they could not be blamed for the resulting economic malaise.

Monetary policy is now another area of bureaucrat control. Under the Gold Standard, money was controlled by the markets; if banks overextended themselves or the government ran too large a budget deficit, gold flowed out of the country, forcing the central bank to raise interest rates and draw it back in. Today, the fetish is for central banks that are independent of political control, which means they are run by the bureaucrat class. We have seen the folly of this in the last decade; various cuckoo monetary experiments have been tried, entirely at the whim of the bureaucrats and entirely without the participation of markets or electorates.

Bureaucrats fight back when their power is threatened, and do not allow it to slip out of their hands easily. One recent example of this is the shenanigans at the U.S. Consumer Financial Protection Bureau, which was deliberately set up to protect bureaucrats, and where they have attempted to prevent the current non-bureaucrat administration from taking over. Mess things up badly enough for four years, make sure a bureaucrat-friendly President (either a Democrat or a Bushite, Never-Trump Republican) is elected in 2020 and their tenure will be secure, probably forever.

The Brexit vote last year was a magnificent fight-back against the EU’s Bureaucrat State, but the bureaucrats are now doing their damnedest to negate it. They have allowed the EU to escalate its demands for British money on exit to a ridiculous 100 billion euros, and they are spreading scare stories about how a “no-deal” exit from the EU in March 2019 would be an unmitigated disaster. Bank of England Governor Mark Carney is doing their work for them also, not only by propagandizing but also by holding real interest rates at a ludicrous minus 3%, wrecking British productivity by distorting capital allocation, in the hope that Britain’s budget will be so hopelessly out of kilter by March 2019 that Brexit seems impossible. Make no mistake about it, the EU and British bureaucracies are desperate to negate Britain’s last remaining hope for freedom, and will stop at nothing to do so.

The EU itself is the world’s first fully bureaucrat-controlled government with constitutional quasi-democratic forms. It may thus represent the future to which we are trending, as the free oligarchy of 18th Century Britain and Federalist America is replaced by the near-true democracy of 19th Century America and early 20th Century Britain, to be replaced again by the 21st century norm of the Bureaucrat State.

In the EU Bureaucrat State, everything is regulated, while the rubber-stamp Parliament is organized so that a majority political coalition can never be formed. Thereby government is completely run by pro-bureaucrat forces, and any anti-bureaucrat legislators elected are relegated to the fringes of left or right. Bureaucrats, ratified by a compliant Parliament and bureaucrat-friendly courts, lay down complex and draconian rules of speech and action, so dissent is suppressed. Economic activity at any but the smallest level is not only regulated but completely subject to arbitrary decrees by the bureaucrat elite – thus ensuring that companies toe the bureaucrat line and spend money on further pro-bureaucrat propaganda, to ensure their survival against a state that can turn vengeful. It is the vision of George Orwell’s “1984” – initially richer, but soon descending into abject poverty as the economy is wrecked by bureaucrat economic policies – Keynesianism, without Keynes’ residual if limited feel for the market.

As for China, that rapidly rising economic power; it has transformed itself from Communism, but only by rotating about 30 degrees to a bureaucrat run state “capitalism.” Unlike the EU, it lacks the democratic fig-leaf of the European Parliament, and it has a few more political prisoners, but the two governments are sisters in spirit. Eastern Europeans who think they may escape the control of Brussels by cosying up to Beijing are in for a very nasty shock.

Finally, there are the international institutions, all of them populated by bureaucrats, entirely beyond any democratic control and all dedicated to the rise of that ultimate nightmare, the global Bureaucrat State, from which there is no escape. They were set up at Bretton Woods in 1944 by the proto-bureaucrat Maynard Keynes and the Communist Harry Dexter White, and they have remained true to the vision of both men. As far as possible, they should be starved of resources; that blessed moment in 2005-06 when the IMF appeared to have nothing to do, and could have been shuttered entirely, was yet another massive opportunity missed by the feeble governments of those years.

Apart from a Brexit Britain if against the odds it can be obtained, the only forces standing up against the Bureaucrat state are Donald Trump and Vladimir Putin. Both have an instinctive hatred of bureaucrats, Putin’s from having grown up in a Communist country and Trump’s from having grown up in a free one. That is why, at global gatherings of the great and the good, they instinctively gravitate towards each other. Putin has not interest in freedom of course; his preference is a tightly-run kleptocracy. But in the struggle against the Bureaucrat State, my enemy’s enemy is my friend. We shall be much worse off when Putin goes, and his successor cosies up to the EU.

Mock this column’s pessimism all you like it. But don’t expect to read another like it in 20 years’ time. The Bureaucrat State, by then in full control, will not allow the publication of such sedition.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)