Big business is an extension of the state.
Governments control companies and their customers, and their weapon of choice is legislation. The resulting regulations are so broad and arbitrary that the government can harass businesses into compliance like a mob protection racket. And given the abundant meanness of bureaucrats, the rules can be as pointless as a reality TV show.
Rather than dealing with harassment, most companies have entire departments that focus on regulatory compliance. Compliance costs aren’t negligible, but it’s a lot better than having no business at all, so businesses pay for it. They are essentially ministries intended to satisfy bureaucrats. The crowd at least has the courtesy to be upfront about what they want, regulators are often adversarial, and compliance is more of 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 all businesses.
Originally created to enforce civil rights legislation, they currently have the power to destroy any business they wish. How? Through what is called “disparate impact” legislation. Like all legislation, the intention is quite noble. The idea is to ensure that employers do not discriminate against minorities. In practice, however, the rule makes every business a violator.
The norm is that if a particular job within a company does not have the exact percentage of minorities compared to the local population, the EEOC can find companies in violation. This is, of course, statistically impossible to do for every job in any company. Since every company is in violation, the job of compliance departments everywhere is to read the tea leaves and try not to piss off the EEOC as much as possible.
Legislation is a tyranny
The fact that companies can’t obey all the rules means regulators are free to take legal action against companies they don’t like. Every company is in violation, so enforcing the rules essentially means death. When all corporations can be put to death by the government without any recourse, that is tyranny. The arbitrary application of legislation gives power to bureaucrats and that power is a blank check to enforce bureaucrats’ preferences.
Businesses don’t usually fight bureaucracy but instead appease it. The emerging dynamic is one where corporations become tentacles of the state, pushing whatever agenda they are asked to push forward. See how enthusiastically corporations are embracing woke ideology and mask mandates. Instead of serving customers, companies serve the government because of rule enforcement power.
Twitter and many other companies delete accounts they don’t like. They also learned the power of regulation. Virtually all accounts are in violation if you look closely. Companies learn abusive behavior from their masters and perpetuate it among their users.
At the heart of all these dysfunctional relationships is power, and more rules mean more power for those in authority. The people who enforce the rules become more powerful and as power becomes centralized, tyranny is the inevitable result. In other words, rule-making is the weapon available to those in authority to exercise power over those they govern. Like an abusive and emotionally unstable parent, people under such authority have to walk on eggshells hoping they can get through the day.
The consequences of legislative tyranny are devastating. People, not just companies, are becoming rule followers. Instead of evaluating a situation based on principles, they evaluate according to who holds the power. Morality becomes sociopathic, where it only matters if it pisses off those responsible. People are incentivized to curry favor with rulers rather than build useful things. The will of leaders becomes more important than customers, civilization, or even what is right or wrong.
Leaders then use this change in behavior to remake social norms. They force society to reform according to their ideals, which inevitably have flaws and court complete disaster. The many experiences of Marxism over the past century bear witness to how deadly such an overhaul can be.
The humble alternative
More legislation and rules only centralize power and create a system that becomes more tyrannical over time. Even the United States, which was founded on principles of limited government, now has an organization like the EEOC that can find any company it wants illegal in some way and punish it unfairly. The tendency to authoritarianism finds its origin in the proliferation of legislation. In retrospect, legislation centralized power, the same way sweet desserts increase body mass index.
So what is the alternative? How does a society prevent the 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 accepted and it is by this that we can determine the fairness of an action. A good example of a system based on natural law is the English common law. The English common law was not enacted by statute, but was slowly defining and discovering one case at a time. Judges ruled on the basis of social norms and that is what common law is. To date, where there is no explicit legislation, judges simply use the social norm to make decisions. It sounds a lot more heady and esoteric than it actually is. Natural law is literally common sense, as is common to most people.
Natural law is a fairer standard, based on standards from everyone, not just the ruling elites. It is decentralized law rather than centralized legislation. Social norms, after all, develop through many interactions and emerge from below rather than being transmitted.
Much of what the legislation does is trying to do fetch. Regardless of legislation, natural law or common sense will always be there and it is the violation of natural law that we generally recognize as evil. Authoritarianism fails because natural law is violated one rule at a time.
Stability and prosperity
Social norms are much more difficult to change than the rules established by an authority and therein lies its power. Social norms are much more stable and not subject to sudden legislative changes. This is a good thing because people can plan with much more certainty in the future. If this sounds familiar, it should be. This is why a stable currency is a good thing for a society and an unstable currency is terrible.
Rules based on social norms and a collective sense of justice provide fertile ground from which civilization springs. Instead of being subject to the tyrannical forces of the rulers, it is certain that acting within the framework of social norms will provide some protection against sudden destruction. In a society based on natural law, changes in social norms are slow, which means they are won by those who would change them, not granted. This is a good thing because any potential change must win the hearts and minds of society as a whole and not just a few decision makers.
The instability of social norms is characteristic of authoritarian structures. Just witness all the changes in social norms in the last two years alone compared to the previous ten.
By contrast, in common law, social norms are outcomes of stable, low-time-preference behaviors, which build civilization. Longer term projects can be realized and the capital invested instead of wasted. There is also a noticeable lack of rent seeking as there is no central bureaucracy to feed.
It is no coincidence that English common law venues tend to thrive. Hong Kong, Dubai, Australia and many other places have thrived on a norm of decentralized law. The absence of tyranny has been a boon in these countries and allows for long term planning.
Legislation is a tax
We need to rethink the law. Politically, new legislation is seen as a way for people to get what they want, but ignore the cost to everyone else. The zero-sum game of legislation ultimately puts people in a bind and under the control of those who make the rules. Instead of freedom, we get armies of rent seekers who are focused on compliance with authorities and that hurts real builders.
Humanity can flourish under a decentralized law, a law that does not change all the time. This is the argument behind Bitcoin and the argument against fiat currency and altcoins. Fiat currency and altcoins depend on rule-making from above and limit freedom due to increased control by central authorities. More rules means more control. A decentralized system naturally means more freedom and more certainty, which results in better planning. Look at how many public companies plan to mine bitcoin versus ether over the next decade.
Bitcoin will win due to its decentralized nature. Society can win if it passes a decentralized law.
This is a guest post by Jimmy Song. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.