In the case of Egypt, people listened and obeyed — at least, as much as they did — because Pharaoh was, in theory, a god. In the case of Rome — with the exception of Caligula’s claims — and the Mongol empires, the theory was similarly simple, though different. Tamerlane made no claim to divinity. He merely made it clear what he would do to you if you resisted him. Towns that submitted were generally governed passably, according to the standards of the day…and taxed, but not razed to the ground. Those that contested his authority were destroyed, often with all the inhabitants killed.
In Rome and out on the steppes, those who controlled the ‘government’ were in the favored position. They could reach out and impose their will on those who were not favored. Which is exactly what they did. As long as they were able, the insiders took from the outsiders. In both cases, the outsiders were literally outside the ruling group and its homeland.
This is perhaps a good place to point out that government is a phenomenon, not a system. It is best understood as a fight between the outsiders and the insiders. The insiders always control the government…and use it to conquer and control the outsiders. Why do they want to do so? The usual reasons. Wealth. Power. Status.
Everybody — or everyone who isn’t either feebleminded or a saint — wants wealth, power and status. And the easiest, fastest way to get it usually is to take it away from someone. That is government’s role. Only government can take something away from someone else lawfully. Why? Because governments make the laws.
We’ve already seen how a small group of Romans were able to reach beyond their home town, for nearly 1,000 years, taking wealth from people on the outside. One tribe fell under their control. Then another. Then, one town. And another. And always the power, prestige and wealth flowed back to Rome.
But not all Romans benefited in the same way. Rome itself was divided. During the Republican period, the insiders were the leading families who controlled the Senate. Then came the dictators, the emperors, and the scalawags who were able to get control of the government. Often, they were military men, popular or cunning generals who rose through the ranks, murdered their rivals, and took the reins of power for themselves. Each brought in new insiders…and kicked out some of the old ones. Rome sizzled with intrigue…and sometimes erupted into open warfare, with one group of insiders battling it out with another.
After Rome fell, barbarian tribes swept over Europe. Local strongmen were able to set up their own governments. There was little theory or justification involved. They used brute force to take what they wanted. Then they settled down to govern. One local lord provided protection from other local lords. All demanded payment, tribute, wealth and power. In the largely un-moneyed economies of the Dark Ages, taxes were in the form of a share of output…and/or days of labor. A serf typically worked one day in 10 for his lord and master.
The local warlord and his entourage were the insiders. They took from the outsiders as much as they could get away with. Or as much as they thought it prudent to demand. Some even asserted a droit du seigneur, known in France by the more carnal expression “the right to the thigh.” The local chief demanded the right to deflower the brides of his peasants. Even as recently as the beginning of the last century, Kurdish chieftains claimed the right to bed Armenian brides on their wedding night.
As the Dark Ages progressed, government became less locally peculiar. Across Europe, serfs, lords, and vassals knit themselves together into the feudal system. One governed a small area and was in turn governed by another, who governed a bigger one. At the top was the king, who owed his allegiance to God himself.
Justifying and explaining the phenomenon of government also evolved. How to make sense of it? Why was one man powerful and rich and another weak and poor? Europe was Christianized by then. All men were supposed to be equal in God’s eyes. How come they were so different in the eyes of each other?
Reaching back into antiquity, the doctrine of the “Divine Right of Kings” was developed to explain it. Scholars did not maintain that kings were divine, because that would undermine the foundations of Judeo-Christian monotheism. Instead, they claimed that kings had a special role to play, that they were appointed…and anointed, by God (through his ministers in the church of St. Peter)…to rule. Some people thought the kings were descended directly from the line of Jesus Christ. Others thought that God gave kings a “divine” right to govern in His name.
In the fixed order of the world, each person had a job to do. One was a hewer of wood. Another was a drawer of water. A third was a king. Each man did his duty.
Scholars in the middle ages spent a lot of time on the issue. As a theory of government it seemed coherent and logical. But there were traps and dead ends in it. If the right to rule were given by God, man could not contradict Him. But men did. One divinely-appointed ruler met another divinely-appointed ruler on the field of battle. Only one could win. What kind of game was God playing?
And if God granted a man the right to rule other men, did that mean that every order he gave must be obeyed, just as though it had come from the mouth of God himself? And what if the king seemed not to be doing God’s work at all? Adultery was clearly a no-no. God disapproved of it. But kings often made it a habit and a sport. Did not the king defile his body and betray his Lord? In an effort to explain away the problem, scholars put forth the idea that the king actually had two bodies. One sacred. One profane.
But which was which?
“The Divine Right of Kings” was a theory of government that held water. But you had to put the water in the right container. You had to believe in God. You had to believe that He gave out job assignments. You also had to believe that He didn’t mind when His employees and agents made a mess of things…or even when they contradicted His own orders. Looking at the history of the monarchs who were thought to have been given this divine authority, you would have to conclude that God was either a very tolerant task-master, or a very negligent one. Adultery, murder, thieving, lying — there was hardly one of God’s commandments they obeyed.
As a theory of government, the ‘divine right of kings’ would have been okay had it not been for the kings themselves. Some were reasonable men. Others were tyrants. Many were incompetent, largely irrelevant and silly. Taken all together, it was very difficult to believe that they had been selected by God, without also believing that God was just choosing His most important managers at random. Kings were not especially smart. Not especially bold or especially timid. Not especially wise or stupid. For all intents and purposes, they were just like everyone else. Sometimes smart. Sometimes dumb. Sometimes good. Sometimes evil. And always subject to influence.
Towards the end of the 18th century, the ‘divine right of kings’ lost its following. The church, the monarch and the feudal system all seemed to lose market share. The Enlightenment had made people begin to wonder. Then, the beginning of the “Industrial Revolution” made them stir.
In 1776, Adam Smith published his “Wealth of Nations,” arguing that commerce and production were the source of wealth. Government began to seem like an obstruction and a largely unnecessary cost. Its beneficial role was limited, said Smith, to enforcing contracts and protecting property.
The school of laissez-faire economics maintained that government was a “necessary evil,” to be restrained as much as possible. The “government that governs best,” as Jefferson put it, “is the one that governs least.” This is, of course, another way of saying that government — like every other natural phenomenon — is subject to the law of declining marginal utility. A little government is probably a good thing. The energy put into a system of public order, dispute resolution, and certain minimal public services may give a positive return on investment. But the point of diminishing returns is reached quickly. For reference, here is the ‘take’ by modern governments today.
Government — according the Liberal philosophers of the 18th and 19th century was supposed to get out of the way so that the ‘invisible hand’ would guide men to productive, fruitful lives. Smith thought the arm attached to the invisible hand was the arm of God. Others believed that not even God was necessary. Men, without central planning or God to guide them, would create a ‘spontaneous order,’ which would be a lot nicer than the one created by kings, dictators or popular assemblies.
This idea of government, such as it is, leads to what we know of today as “libertarianism.” Libertarians argue about how much authority the government should have. They scrap among themselves over what the government should do and how big it should be allowed to get. But all libertarians agree with Jefferson. And all agree that the governments in the world circa 2011 are much too big.
The libertarians are concerned about their loss of freedom. But what we’re concerned about is the downside. When the point of diminishing returns is passed, the payoff from further investment of resources in policing and wealth re-distribution declines. Then what happens? We’ve already seen what happened to Germany in the ’30s and ’40s. Hitler was elected. But then, the Reichstag burned and he suspended democratic institutions. Perhaps more robust, modern democracies can adapt more readily and thereby avoid the downside?
We’ll see…in the next section.
Bill Bonnerfor The Daily Reckoning
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010.
Isn’t the downside and loss of freedom equal, or at the very least, bound together in this game. If the gov has diminishing returns, then loss of property and freedom has to increase their returns, which is all they care about. The return for the commoner is of no interest to our rulers, which are the bankers and their lapdog pols.
I say WWIII is on close at hand. The downside is coming fast and the only for govs to increase their return is to eliminate those feeding at the trough. WWIII will also lead to your Jubilee idea, but only for the govs of the world so they don’t lose their power and go about business as usual.
Good read as usual Bill.
A lot of libertarians are anarchists. I think turning the functions of government over to the private sector is a good idea, but there are not enough people who agree to actually make this happen. You guys have it right. Just sit back and watch.
I never cease to be amazed and thankful for Bill Bonner’s knowledge of history and his ability to share this with others through his writing. It would not be a lie to say that he has probably expanded my vocabulary and set me about researching and reading more than any other writer in my 60 years of living. Thank you, Bill. I have no way to repay such a debt but with my thanks.
The purpose of government is to allow those that control it to plunder those that don’t.
I agree with you. On the one hand, we’re told that monopolies are bad yet we are forced to have a very inefficient monopoly provide us with basic services at astronomical costs. For example, I would much rather hire a private police department for my community that has to compete for my business by being efficient and respectful of the citizens of our community. Instead, we have local government forcing us to accept union backed goons that rampage through our communities with impunity.
Local government will be the first to fail as it can not pay the promised lifetime benefits to all the public sector union workers. It is already happening.
Here’s a second. Thanks Bill. I’d be so lucky to shine your shoes! (are you hiring???) “…government is a phenomenon, not a system.”
When you've got a room full of 200 oil insiders scratching their heads at current high prices, something's gotta give.
For most investors, it’s weird to think of stocks as their go-to investing option.
The petropoly has bills to pay and setting the price of oil was a simple way to balance their budgets.
Investors don’t seem to care that what's propping up their investments is what will ultimately destroy them: government monetary policy.
For the next decade the energy revolution will be likely confined to the US, displaying the robustness of American entrepreneurship.
Why the Sage of Baltimore’s commentary persists through America’s changing times.
After attending Platt’s oil conference in London I want to relay two important themes you need to know.