At The Library of Law and Liberty blog, Michael S. Greve has an intriguing post on "The German Connection". After the collapse of the Third Reich, there was a thorough rejuvenation of the rule of law (Rechtsstaatlichkeit) in Germany, the substantive notion of the rule of law being strongly committed to liberal (European meaning) principles. At a time when progressives continued in renewed waves to turn over the liberal conception of the rule of law in the US, German courts would stubbornly and successfully defend the newly regained liberal legal regime in Germany.
In the late 1960s, courts and then Congress institutionalized so-called “citizen suits” against government agencies. Unlike regulated parties, citizen plaintiffs don’t have at stake anything you’d recognize as a right; they represent broad, widely shared values. (Environmental groups are the prototype.) The idea was that agencies were routinely “captured” by regulated industries, so there had to be a counterweight—parties with legal entitlements to make executive branch agencies obey the purposes of Congress, as embodied in statutory law. To that end, statutory citizen-suit provisions typically authorize “any citizen” to sue the administrator for failure to perform a non-discretionary duty. So when the statute says that the Environmental Protection Agency “shall” regulate and the agency falls short, environmental groups have a cause of action. They’re equal participants in the agency rulemaking process and in court.
At that time, what was then West Germany was also discovering the issue of protecting the environment. People were apoplectic about pollution. Nuclear reactor sites had to be protected with paramilitary force. A Green Party was beginning to form. And, some lefty law profs trooped to Harvard, learned about citizen suits, and tried to import them into their own country. They penned learned articles about the “enforcement deficit” in environmental law, wrote model statutes, and proclaimed that even Amerika has citizen suits, the better to promote law and democratic participation. Why can’t we have that?
Because you can’t, the West German legal establishment responded. The key argument against citizen suits was not that they would disrupt orderly administration, or invite abuse, or overload the courts. It was: what you people are advocating is Nazi jurisprudence. We’ve thought and worked for decades to get rid of that garbage, and you’re not going to undo our accomplishments just because people get upset about—well, garbage. The citizen-suit trial balloon soon shared the Hindenburg’s fate. There’s no trace of the debate in administrative law to this day.
To be absolutely clear, I am not calling U.S. public interest groups and citizen-suit advocates Nazis. My point is that a legal instrument that well nigh everyone stateside accepted, often with great enthusiasm, went down in flames over there, as an intolerable assault on a liberal legal order. To rehearse the German professoriate’s key argument against citizen suits:
The point of law and especially administrative law (they said) is to protect rights against coercive state interference. To that end, we have independent courts that will perform de novo review on law and facts. If we want to keep that up, we must limit the courts to rights protection. They can’t review the legality of governmental conduct outside that context. A plaintiff who sues for that purpose is asking the court to command the performance of his private idea of how public authority ought to be exercised, and that’s not a right he has or courts can enforce. Likewise, it’s not the business of courts to make government and law more “democratic.” There are institutions, such as political parties and parliaments, to safeguard democracy and participation. Courts, in contrast, guard rights—if need be, guard them against democratic demands.
If you want to mobilize courts as engines of law-enforcement and democracy (the argument continues), they can’t be independent. If you want them to do the will of the people, go make them instruments of that will—and stop the pretenses about individuals’ rights.
Germany took that path once: in 1934, the Reichstag authorized a version of the allgemeine Buergerklage—the general citizen suit. It did so for obvious reasons. The inherited Weimar bureaucracy might not always enforce the new authorities’ race laws with the requisite speed or resolve. What was needed were actions by private informers or Citizens United for the Separation of Jews and State to enhance public participation and ensure obedience to law. That meant, however—and alongside the enormities recorded by history—the end of an independent judiciary. You cannot surrender the exercise of law to “democracy,” nor can you surrender the Staat to a “movement.” Not if you want to have a liberal Rechtsstaat and a judiciary that is institutionally disposed to protect rights.
Again, let me emphasise that participation in political competition, political engagement, and hence the work of politicians are of the essence in defending the system of liberty that underlies our civilization.
Just ponder these words of a politician:
…However, I leave the post with great misgivings about the power and irresponsibility of - to coin a phrase - the Green Blob. By this I mean the mutually supportive network of environmental pressure groups, renewable energy companies and some public officials who keep each other well supplied with lavish funds, scare stories and green tape. This tangled triangle of unelected busybodies claims to have the interests of the planet and the countryside at heart, but it is increasingly clear that it is focusing on the wrong issues and doing real harm while profiting handsomely. Local conservationists on the ground do wonderful work to protect and improve wild landscapes, as do farmers, rural businesses and ordinary people. They are a world away from the highly paid globe-trotters of the Green Blob who besieged me with their self-serving demands, many of which would have harmed the natural environment. I soon realised that the greens and their industrial and bureaucratic allies are used to getting things their own way. I received more death threats in a few months at Defra than I ever did as secretary of state for Northern Ireland…
Chris Berg of Australia's Institute of Public Affairs discusses "Too Big To Fail", and comes to a different conclusion than I do. He argues that the problem cannot be solved because it is an inherent concern of politicians to protect certain companies or institutions from terminal collapse.
I would argue, that only politics can change the present state of affairs. However, if libertarians are unwilling to participate in politics, eschewing the competition for political dominance of the state, matters are indeed bound to linger on in their unsatisfactory condition.
"Too big to fail" describes financial institutions, mostly banks, which have become so large and so deeply integrated into the financial system that if we let them collapse they would take everything else with them.
If a corporation is too big to fail, then, it follows, taxpayers have to bail them out.
It's quite a problem. A market economy is supposed to be dynamic, full of entries and exits. Firms that add economic value thrive. Those that do not go broke.
So bailing out failed companies makes the economy less efficient. More gallingly, it redistributes money from the poor to the rich. And it creates "moral hazard" - a belief by management that ultimately they won't have to pay for their mistakes.
Moral hazard is a particularly severe problem for banks. Banks trade on risk. A bank's basic job is to transform short-term highly liquid deposits into long-term extremely illiquid loans. Too much of the latter will prevent redemption of the former.
Too big to fail encourages banks to make riskier loans. Why wouldn't they? They're not the ones bearing the cost of failure. Taxpayers are.
So it would be great to get rid of too-big-to-fail. Or at least limit it somehow. The Murray Inquiry has a few ideas: higher capital requirements for bigger institutions, for instance, or new procedures for when banks do fail.
But the question isn't what should we do about too-big-to-fail but what can we do about it.
And the answer to that question is almost certainly nothing.
One of the problems with freedom is that her child civil society works so well, we can afford - that is without all hell breaking lose at once - to despise and antagonise both.
Arnold Kling advises:
If those of you who are graduating today go on to attend a liberal arts college, you will hear constantly from people who equate moral character with political expressions of approval for non-profits and disapproval of business. They judge you not be [sic] the content of your character but by the conformity of your political expression. I urge you to reject their doctrines.
If you undertake community service, do so quietly, without righteousness. Do not celebrate community service. Do not give a special place of honor to community service. Above all, do not demean those who serve the community by helping to provide ordinary goods and services through profit-making enterprises. Their community service is honored not by wealthy donors or by doctrinaire teachers. Instead, their community service is honored by ordinary people who voluntarily choose to spend money to obtain what the profit-seekers have to offer. These willing consumers are all the evidence that is needed to show that the occupation of those in business has decent moral worth.
Image credit. Hegel’s famous tagline “The Owl of Minerva only takes flight at dusk” explains his theory of how we gain knowledge. We may only gain wisdom of history through hindsight (dusk). ‘Minerva’ is the Greek goddess of wisdom and her ‘Owl’ is the spirit by which the wisdom takes flight.
Everyone knows this type of uncomfortable dream: you need to move quickly to escape from danger but your body hardly responds to the urge. To me, discussing NSA-surveillance issues feels a bit like the dreamer's straight-jacketed impasse. My mind intends swift and decisive action: I urgently wish to make a strong case, but sooner or later I am overcome with a sagging feeling that reminds me of the holes in my knowledge.
Like me, I would guess, most of us do not even know the knowable as fully as is desirable -- another case of rational ignorance. There is a limit to the effort a non-specialist can make to become conversant with an issue.
Comfortingly, unlike Minerva, we may take flight in daylight, if we so choose. Unlike Hegel in his information-starved times, nowadays, once you decide to put serious energy into researching a certain topic you have a good chance of becoming rather knowledgeable, thanks to our open society and its internet.
Every society will have to cope with the irremediable problem of rational ignorance, and hence a certain level of political disagreement will be due to the blind bumping into the blind.
But again, she who gets seriously involved in a theme of heightened interest to her can expect substantial returns of expertise in our free societies.
[T]he information grab is expanding until Big Brother, under the guise of (failed) protection now knows everything about its citizens. Simply said: this is merely government bloat in its most purest - spending ever greater amounts of money to become increasingly more inefficient, in the process destroying the concept of individual privacy.
Health is a struggle for balance between anabolic and catabolic processes. The West is stuck in the catabolic mode of re-slicing and using up substance more than creating it.
It is remarkable that these days Indian minds seem to be more open to the values of liberty than those of Western voters:
The Indian election was a classic confrontation between the proponents of growth and the advocates of redistribution and the welfare state. Growth won across the board in all classes and regions. The young especially voted for growth. The same message brought Ronald Reagan to the presidency for two terms. Like Reagan, Modi urged voters to choose growth and opportunity instead of redistribution, higher tax rates, and envy.
In March, I had plans to follow Krugman's blog for a while to come up with a (number of) critical post(s) on some of his output. In the meantime, the matter has resolved itself. Better and more knowledgeable minds have produced refutations so powerful that Krugman has now effectively barred articulate criticism from his blog at the New York Times.
Writes American Thinker, in a must-read piece:
A marvelous thing happened over on Paul Krugman's blog at the New York Times last week. Krugman effectively conceded defeat on a range of economic debates. Who defeated him? People who posted comments on his New York Times blog. Mere commenters.
For those who do not know, Paul Krugman is one of the few who still claim that Keynesian progressivism is the answer to America's (and Europe's) problems, not their cause. He repeats that claim many times each month. Amid these repeated expressions of his "progressive" faith, he now also repeatedly expresses grim despair because his progressive policy prescriptions are being accepted less and less in the public square, even by the Obama administration.
[Among] the dozen or so points that Krugman makes over and over [... here] are a few: Obama's stimulus was too small. Debt is good. Austerity is bad. Deflation is coming. Ken Rogoff, Greg Mankiw, Alberto Alesina (all at Harvard), and other serious economic scientists do not understand economics as well as he does. Those who do not agree with him are "mass delusional." And perhaps Krugman's favorite line: "I was right, of course."
Befitting his ideology, Krugman has only one policy to propose, regardless of topic: Transfer more resources from the discipline and dynamism of markets to the inefficiency and cronyism of government.
Government-run health care. Government-controlled banks. Government bailouts. High taxes. High spending. Krugman wants it all, just like in Europe (which, in 2008, he called "the comeback continent"). And Krugman has no problems denying economic science and current events to advocate it.