fbpx

Taking on Leviathan

Thomas Hobbes (1588-1679), the great philosopher of the authoritarian state, in a famous metaphor portrayed the government as a dominating giant or Leviathan, animated by absolute sovereignty, and passing out rewards and punishments as it saw fit. It alone could control the unruly passions of the people and create stability and safety.

Today’s “administrative state”—or government bureaucracy, acting simultaneously as sovereign legislator, executive, and judge—brings Hobbes’ image of the giant vividly to mind.Nowhere is his metaphor more apt than in the government’s attempts at “systemic financial stability.” Hobbes’ 21st century acolytes include former Senator Chris Dodd (D-Conn.) and former Congressman Barney Frank (D-Mass.), whose Dodd-Frank Act sought to prevent financial crises, as Hobbes sought to prevent civil wars, by enlarging the giant. Now, as then, how to control the unruly passions, lust for power, and misguided enthusiasms of the state itself is left unanswered.

However, Congressman Jeb Hensarling (R-Tex.), who chairs the House Financial Services Committee, is now taking on Leviathan in the financial system with the proposed Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs (CHOICE) Act. If it seems unlikely that he could fell the giant altogether, perhaps he could limit and better control and confine it, at least with respect to banking and the people’s money. If he succeeded, the federal government would place more emphasis on competitive markets and less on the diktats of the central bank and regulatory bureaucrats whom Dodd-Frank made sovereign.

Writing his book Leviathan in 1651, in the wake of the English Civil War and the beheading of King Charles I, Hobbes had this to say: “By art is created that great LEVIATHAN called a COMMONWEALTH or STATE (in Latin, CIVITAS), which is but an artificial man, though of much greater stature and strength.”

He went on:

sovereignty is an artificial soul, as giving life and motion to the whole body; the magistrates and other officers of judicature and execution, artificial joints; reward and punishment (by which fastened to the seat of the sovereignty, every joint and member is moved to perform his duty) are the nerves.

Moreover,

Salus Populi (the people’s safety) its business; counsellors, by whom all things needful to know are suggested unto it, are the memory; equity and laws, an artificial reason and will; concord, health; sedition, sickness; and civil war, death.

Writing four decades before the founding of the Bank of England, Hobbes can be forgiven for not mentioning the central bank, which has since become a key element of sovereignty. We need to extend his metaphor to include it. We could say that the central bank is a kind of artificial heart pumping the circulating blood of credit and money, making sure to lend the government as much as it wants. It often pumps this blood of credit to an excessive extent, causing financial markets to inflate, be overly sanguine, then bust, constrict their flows and suffer the heart attacks of financial panics.

Three centuries or so after Hobbes, Leviathan developed a new capability: that of constructing vast shell games guaranteeing huge quantities of other people’s debt and taking vast financial risks, while pretending that it wasn’t doing this, and keeping this debt off the books. I refer to the  invention of government-sponsored enterprises like Fannie Mae and Freddie Mac, and to related schemes such as government-sponsored insurance companies, like the Federal Savings and Loan Insurance Corporation and the Pension Benefit Guaranty Corporation. All serve as Leviathan’s artificial stomach and gluttonous appetite for risk, causing in time obesity, flatulence, indigestion, and finally the heartburn of publicly admitted insolvency.

Although financial panics temporarily render Leviathan stunned and confused, in short order it resumes its energetic activity and ambitious pursuit of greater power. Writing legislation in 2010, in the wake of the financial crisis of 2007 to 2009, Senator Dodd and Representative Frank ordered Leviathan to make deep expansions into the financial sector. The people’s financial safety and concord became defined as a new supreme demand for “compliance” with the orders of government bureaucrats, who were assumed to know the right answers.

The Dodd-Frank Act was passed in 2010 on party line votes at a time of insuperable Democratic majorities in both houses of Congress. Shortly after voting it in, the Democrats suffered stinging losses in that year’s congressional elections. No subsequent Congress would ever have dreamed of passing anything remotely resembling Dodd-Frank, but financial Leviathan had already been put on steroids and unleashed.

Now comes Chairman Hensarling to try to bring financial Leviathan back under control. The CHOICE Act would reform Leviathan’s activity in a wide swath of financial areas. It would:

  • Remove onerous Dodd-Frank burdens on banks that maintain a high tangible capital ratio (defined as 10 percent of total assets), thus creating a simple rule instead of the notoriously complex ones now in force.
  • Force the Financial Stability Oversight Council into greater transparency by cutting back the power of this committee of regulators to make opaque decisions in secret.
  • Correct the egregiously undemocratic governance of another bureaucratic invention, the Consumer Financial Protection Bureau, by giving it a bipartisan board and subjecting it to the congressional oversight and appropriations process that every federal agency should have.
  • Require greater accountability and transparency from Leviathan’s heart, the Federal Reserve.
  • Require cost-benefit analysis for new regulations and a subsequent measurement of whether they achieved their goals—imagine that!
  • Repeal the “Chevron Doctrine” that leads judges to defer to federal agencies. This is essential, as bureaucrats make ever-bolder excursions beyond their legal authority.
  • Take numerous steps to relieve Leviathan’s heavy hand on small businesses and small banks.

The CHOICE Act will likely be taken up by the House Financial Services Committee this fall—and be ready for further consideration if, as is forecast by most people, Republicans retain control of the House of Representatives in the upcoming election. The debates about the bill will be contentious and sharply partisan, with vehement opposition from those who love Leviathan. How far the reform bill can go depends on how other parts of the election turn out.

Will financial Leviathan grow ever fatter, more arrogant, and more intrusive? Or can it be put on a long-term diet by constraining its arrogance, correcting its pretensions, imbuing its artificial soul with behavior befitting a republic, and put in the service of a limited government of checks and balances?

The CHOICE Act is a good start at this daunting and essential project.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on September 13, 2016 at 10:05:37 am

" 'Leviathan' is a masterpiece, and we must understand it according to **our** means." Michael Oakeshott [** supplied]

Thus, the 17th century expressions of Thomas Hobbes in reifying (that is, giving human or organic form to an organization to convey understanding) might be better understood in **our** time in accordance with our own perceptions of human motivations and relationships.

A State can be understood as an embodiment of authority over a grouping of peoples, usually, but not necessarily, having territorial parameters.

Historically that embodiment of authority has been formed by physical or ideological force, or a combination of the two.

In more recent times, particularly in the development of Western Civilization, and conditions of assertive individuality, that embodiment of authority has resulted from the active consent or passive acceptance of those subject to that authority.

Embodiments of authority require *means of exercise* of that authority. The principal means are *mechanisms of government,* which, in turn, require operative forms of “administration” for *implementation of authority* through the mechanism.

That implementation requires the establishment of facilities for the operations of "administration."

Those facilities are comprised of relationships of motivated humans whose actions (and failures to act) now dominate the uses (by the "Administrative State") of the mechanisms of government.

A treatise (perhaps several) could be devoted to how and why those mechanisms of government in practically all cases of public delegation of authority (a.k.a. “Representative Government”) have become, and are popularly accepted as, means to ends; Oakeshott’s “Purposive Government.” This is arguably the case in the U S.

Once purposes, particular objectives or ends are determined for the use of the mechanisms of government, means must be established for the pursuit of those ends; and facilities structured to implement those means. .

Proposals such as those outlined by Mister Pollock are basically changes in the determinations of particular means for particular ends. They do not change "our understanding" of the nature of "Leviathan." They do not change the need for means and facilities (and the ultimate results of their establishment).

Concerns will be raised (from various motives) as to the what relationships may be disrupted, with what results: replacements, voids, destruction of viable facilities, etc. Similar concerns (other motives) are raised as to extending some existing relationships and further entrenching those relationships whose observed effects appear deleterious.

When we observe the multiplicity of facilities (many of which have become the “institutionalized” hierarchies noted by Quigley) that have been “established” in the US over the past 65+ years, with a burst in the mid to late ’60s, seen coupled with the public disquiet with their impacts, perhaps we can understand a willingness to accept, if not desire, disruption, regardless of resultant uncertainties.

What has not yet entered the “sensibilities” of a sufficient portion of the US public (electorate or not) is the recognition that (1)the mechanisms of government can not be used as means to ends (“purposive” government) without the creation of facilities for effecting those means; (2) the operations of those facilities require organizations of relationships of motivated humans; and, (3) the nature of those relationships have by historic experience inevitably led to “institutionalization” [Quigley] in which the internal objectives of those within the “institutions” ultimately determine the means AND the actual ends.

Perhaps we should stop and consider why and to what ends, we have accepted, or sought, being governed; whether we do or do not require the absolute authority of a "Leviathan.".

read full comment
Image of R Richard Schweitzer
R Richard Schweitzer
on September 13, 2016 at 11:37:49 am

A distasteful rule of thumb is that our government only grows, slowly in the 19th century, like weeds in the 20th, like wildfire in the 21st. With it of course come the parasites, thugs, and power mongers. Unhappy times as Mother State discharges its venom.

read full comment
Image of john trainor
john trainor
on September 13, 2016 at 13:00:29 pm

J T:

Are there not clearly identifiable *causes* for the "expansions" and extensions of uses of governmental mechanisms that require the establishment of "administration" and related facilities?

read full comment
Image of R Richard Schweitzer
R Richard Schweitzer
on September 13, 2016 at 15:11:20 pm

Mmmm, sorry. Not buyin' it. The proposal means to control the expansion of government control by adding more government control.

An administrative state itself is not corruption. The government of Hong Kong up until the Chinese took over was pretty decent. It was completely authoritarian and completely administrative, but it was still free and economically healthy. Then the Chinese came in and started introducing democracy. With democracy has come complaints about problems caused by the control of elected politicians and wealthy businessmen.

The difference between Hong Kong and the US is that our elected politicians and wealthy businessmen are well dug in.

The problem of limited government in our case means the problem of limiting democracy itself. Elected representation is absolutely necessary, of course, but too much of our government is direct democracy-by-proxy. That's where so many of our problems originate. Direct democracy doesn't work--proxied or otherwise.

The counter argumentative strawman is that autocracy is the only alternative to democracy, and autocracy is of course bad.

Autocratic Hong Kong (before the Chinese) was not corrupt because it had a chief administrator appointed by an outside party with little interest in political control.

Half of the problem is the uncontrolled lust for power (as inferred by Richard above) that exists with our democracy-by-proxy. The wealthy use money to gain more money. The politically power-hungry use power to gain more power (always with the best of intentions of course). A democracy provides insufficient inhibitors for both of those.

The other half of the problem is the fact that we want to avoid autocracy.

The original US Constitution was meant to address the whole problem by, on the one hand, prescribing representative and redressable government, and on the other hand requiring well-considered appointments of senators and presidents (similar to the appointment of the chief administrator of Hong Kong). But we've fallen away from that and now cupid rules the roost.

Show me a law that intelligently reduces the democratic control and reestablishes well-consider appointments and I will listen. But I have no use for proposals like those in this blog post because they do not address the source of the problems. They only create more fodder for cupidity.

read full comment
Image of Scott Amorian
Scott Amorian
on September 13, 2016 at 15:29:02 pm

Mr.Schweitzer, the problem is two fold, that "causes" may always be found for the expansion of power, a glimpse at history so informs us, and said mechanisms once created expand on a never endless path. I wonder if the Department of Agriculture has more employees today then in the 1930's, or that the VA has better facilities and services for its patients, or the Executive branch with its army of staff, etc. In any case the primary cause for expansions is superfluous, government doesn't need "causes", it just acts, and why not, who will stop it? That for government is its rationale for "causes" and "expansions" and so it has been for now decades.
I assume you have referred to the federal government, the state governments perhaps, just perhaps, may be a notch better. In a word, I have missed the "clearly identifiable" thing, to broad to vague and in the hands of the very people who benefit the most.

read full comment
Image of john trainor
john trainor
on September 13, 2016 at 16:13:01 pm

John:

Here, perhaps, is a (the?) *cause* of which Richard speaks, wherein a Lending Library run by a 9 year old finds itself on the wrong side of the law. all courtesy of some f&*&&^%$% busybody neighbors.

Let us ask "just how "neighborly" have many of us become?

https://pjmedia.com/trending/2016/09/13/big-government-cracks-down-on-people-sharing-books/

These *neighbors* are the types that deserved a good "whuppin" in High School BUT didn't get it. consequently they now feel entitled to "marshal" the polity.

read full comment
Image of gabe
gabe
on September 13, 2016 at 21:48:17 pm

Scott:

" (1) The problem of limited government in our case means the problem of limiting democracy itself.

(2) Elected representation is absolutely necessary, of course, but too much of our government is direct democracy-by-proxy.

That’s where so many of our problems originate.

(3) Direct democracy doesn’t work–proxied or otherwise."

Following through on the rest of your comment, it is not clear whether you view "democracy" as a process or a "condition." In these clauses it seems to be a process. So, you are quite right to assert that to achieve limited functions for government (things to be done, objectives to be sought) by using the mechanisms of government can not prevail where the power (kratia) of the people (demos) is unconstrained, whether the people act directly (in the streets, e.g.) or by delegating their powers to others (called, but not necessarily -or often- representatives of *their* "interests").

While delegation is possible, elected *representation* , absent unanimity, is not.

"Direct" exercise of power by the people can have a function (even as a reaction) in determining (1) the means employed in using the mechanisms of government (2) whether the mechanisms shall be used for purposive ends. That exercise can not assure what those ends shall be.

read full comment
Image of R Richard Schweitzer
R Richard Schweitzer
on September 14, 2016 at 23:00:25 pm

The majority of the American voting population gets the government they desire and thus deserve. Somewhere over the last 100 years or so it was decided,by a majority of the voters,that the proper role and function of government in America was to solve the social/economic problems of the nation. Thus socialized welfare,retirements,education,medicine and all the other collectivist schemes that have come down the road over the past 80 odd years or so have been put into play. This includes the so called government "running of the economy."
With that said, the only way to restore liberty and self responsibility is with the dismantling of the current system and the methods that the system uses to fund itself. This would probably require Constitutional Amendments that separate the Federal Government from what it now does along with the shutting down of the methods to fund itself. Abolish most taxes,especially the Income tax,limit the governments borrowing capacity plus abolishing of the Central Bank and its capacity to counterfeit lawful money(gold & silver).
The chances of this happening in the near future are slim to none and slim just left town. With this scenario the only thing that liberty minded people can do is to keep a low profile until the inevitable happens and like Rome 2000 years ago America collapses into financial bankruptcy. Maybe then things will change for the better. Just don't count on it.

read full comment
Image of libertarian jerry
libertarian jerry
on September 26, 2016 at 16:15:18 pm

There's a solution for all of this: End the weaponization of the federal bureaucracy by Amending the Constitution! If the Supreme Law of the Land permits this, then the law is wrong and it must be changed.

Get informed, get involved: Convention Of States . com

read full comment
Image of MJAlexander
MJAlexander

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

Related

The Debt Trap, Part (3): Cristina Kirchner’s Constitution

There’s been a lot of talk that our federalism might come to look like the EU, with Illinois starring in the role of Greece or Italy. However, the institutional differences are far too great for meaningful comparison. For example, Chancellor Merkel can depose the Italian Prime Minister with a phone call; our Constitution does not give the President, the Congress, or for that matter the National Governors Association any such agency in the affairs of a member-state. For another example, the EU (outside the egregious but fairly small Common Agricultural Policy and a few other slush funds) isn’t a transfer union. Our federalism is or rather has become that sort of union. That doesn’t mean we have a smaller problem than the EU; it just means that we have a different problem. For purposes of comparison and instruction, you want to look at a federal system that shares our problem. Come visit Argentina: you’ll see the future, and it doesn’t work. Read more