Bill Bonner

More on our new theory of government.

You’ll recall that this series began by pointing out how worthless most “theories of government” really are. They’re not theories at all. They don’t explain anything. Instead, they are just wishful thinking…flattery…and apologia for the elite who use government for their own ends.

The “social contract,” for example, is a fraud. You can’t have a contract unless you have two willing and able parties. They must come together in a meeting of the minds — a real agreement about what they are going to do together.

But what is the ‘social contract’ with government? There was never a meeting of the minds. The deal was forced on the public. And now, imagine that you want out. Can you simply “break the contract?” You refuse to pay your taxes and refuse to be bossed around by TSA agents and other government employees. How long would it be before you got put in jail?

What kind of contract is it that you don’t agree to and can’t get out of? They can dress it up…print out a piece of paper…have a solemn ceremony in which everyone pretends it is a real contract. But it’s not worth the paper it’s not written on.

Also, what kind of a contract allows for one party to unilaterally change the terms of the deal? Congress passes new laws almost every day. The bureaucracy issues new edicts. The tax system is changed. The pound of flesh they got already wasn’t enough; now they want a pound and a half!

Every theory of government we’ve come across is a scam. So we offer a better theory: government is just a way for the insiders to take advantage of the outsiders.

Until the Industrial Revolution, the apologists relied on God to justify government. If one man bossed around another, it was God’s doing they said. The Almighty got the blame. Which was neat and clean as long as you accepted the major and minor premises of it.

But the system came apart for two reasons.

First, it made God look like a fool. Monarchs governed in ways that must have been inexplicable to the “divine right of kings” theorists. Kings were frequently incompetent, murderous and venal. Finally, the theorists gave the theory and the kings the heave-ho at the same time.

Second, the rising wealth and power of the productive classes required a new idea.

Insiders always use government to transfer power and money from the outsiders to themselves. When wealth was easy to identify and easy to control — that is, when it was mostly land — a few insiders could do a fairly good job of keeping it for themselves. The feudal hierarchy gave everybody a place in the system, with the insiders at the top of the heap.

But come the industrial revolution and suddenly wealth was accumulating outside the feudal structure. Populations were growing too…and growing restless. The old regime tried to tax this new money, but the new ‘bourgeoisie’ resisted. It wanted to be an insider too.

“No taxation without representation,” was a popular slogan of the time. The outsiders wanted in.

There never is one fixed group of people who are always insiders. Instead, the insider group has a porous membrane separating it from the rest of the population. Some people enter. Some are expelled. The group swells. And shrinks. Sometimes, a military defeat brings a whole new group of insiders sweeping into power. Elections change the make-up of the core group.

But the genius of modern representative government is that it cons the masses into believing that they are insiders too. They are encouraged to vote…and to believe that their vote really matters. Of course, it matters not at all. Generally, the voters have no idea what or whom they are voting for. Often, they get the opposite of what they thought they had voted for anyway.

But the common man likes the humbug that he is running things. And he pays dearly for it. After the insiders brought him into the voting booth, his taxes soared. In America, with taxation without representation, before the war of independence, the average tax rate was as little as 3% or so Now, with representation, government spends about a third of national income. And if you live in a high-tax jurisdiction, such as Baltimore or New York, you will find your state, local and federal tax bill will run to nearly 45% of your income.

In short, the insiders pulled a fast one. They allowed the rubes to feel that they had a solemn responsibility to set the course of government. And while the fellow was dazzled by his own power…they picked his pocket!

It didn’t stop there. Under the kings and emperors, a soldier was a paid fighter. If he was lucky, his side would win and he’d get to loot and rape in a captured town for three days. Relatively few people were soldiers, however, because societies were not rich enough to afford large, standing armies.

The industrial revolution changed that too. By the 20th century, developed countries could afford the cost of maintaining expensive military preparedness, even when there was not really very much to be prepared for. But the common man was skinned again. Not only was he expected to pay for it, still under the delusion that he was in charge, he also believed he had a patriotic duty to defend the homeland insiders! That is the real reason that the modern democratic system has spread all over the world. It allows the insiders to mobilize more of the resources of the country on their behalf. Nothing can compete with it.

But now the insiders are in trouble. The typical citizen is beginning to realize that he’s been had. As long as the insiders could plausibly promise him more and more benefits, he was willing to go along. But now, growth has stalled. They can’t deliver. The insiders keep borrowing — more than $10 trillion this year alone. Soon, they’ll be out of credit…out of time…and out of luck.

Regards,

Bill Bonner
for The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success in numerous industries. His unique writing style, philanthropic undertakings and preservationist activities have been recognized by some of America's most respected authorities. With his friend and colleague Addison Wiggin, he co-founded The Daily Reckoning in 1999, and together they co-wrote the New York Times best-selling books Financial Reckoning Day and Empire of Debt. His other works include Mobs, Messiahs and Markets (with Lila Rajiva), Dice Have No Memory, and most recently, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. His most recent project is The Bill Bonner Letter.

Recent Articles

One Metal to Watch in the Current Commodity Crash

Greg Guenthner

Commodities have been in freefall lately. Everything from corn to soy beans to precious metals is headed lower right now. But is this just a brief downturn, or is this the beginning of a long-term trend? Greg Guenthner explains, with a closer look at one specific precious metal that could snap back violently before heading lower. Read on...


Addison Wiggin
The Central Bank Experiment that’s Destroying the Economy

Addison Wiggin

When it comes to central bankers and the global economy, you might say the inmates are running the asylum. Today, Addison Wiggin sits down with Jim Rickards to discuss the ever-changing world of finance, the likelihood of hyperinflation hitting the U.S., and the massive economic experiment being conducted by the world's central bankers. Read on...


Laissez Faire
The Real Reason ISIS Wants You Dead

Chris Campbell

ISIS is a radical terrorist organization wreaking havoc across Northern Iraq. But its members come from all over the world - including many from Western Countries. The question no one's asking is why... Why are foreigners flocking to the Middle East to fight alongside ISIS? And how far does Obama really want to go? Chris Campbell explores...


What the Reboot of the US Budget Means for Your Money

Byron King

Big government doesn't come cheap. And right now the U.S. government is one of the biggest in history. So far the budget writers have been able to move money around to keep the machine moving. But as Byron King points out, that will soon become much more difficult. Read on for the full story...


Invest Like a Shark in the “New” Stock Market

Wayne Mulligan

In the late '90s, financial TV personalities like Jim Cramer became mega stars - often drawing more ratings the ESPN. But that was over 15 years ago... That couldn't happen again, could it? Today, Wayne Mulligan details the new flock of personalities that are set to cash-in on a different kind of investment boom. Read on...


How to Trade October Volatility

Greg Guenthner

When it comes to the stock market, October gets a bad rap. It's true, there have been some major crashes in October (ahem... Black Monday, Black Tuesday, etc.) but on a shorter timeline this month hasn't been nearly as bad as you might think. Today, Greg Guenthner offers an optimistic look at the month investors love to hate. Read on...