Home Market & Economy: Q&A: 'the more corrupt the state, the more numerous the laws.'
Q&A: 'the more corrupt the state, the more numerous the laws.'
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Friday, 18 February 2011 06:19

In a recent interview with LOUIS JAMES, Editor 'International Speculator,' investment advisor DOUG CASEY gives insights into corruption. Excerpts...

LJ: Doug, one of the complaints the Egyptians have of the rulers they are showing the door is corruption. It's the same in Tunisia. It seems that – more than the lack of freedom, or even the secret police – it's government corruption that bothers citizens the most. This fits with your concern that ousting the old bosses will just lead to new bosses who will be every bit as bad...  I've heard you speak of making corruption your friend. Can you tell us what you mean by that?
DC: Sure. As always, the place to start is with a definition. This is critical, because people use terms like corruption in nebulous ways that enable sloppy thinking. Unless you can define precisely what a word means, you literally can't know what you're talking about...

QUESTION: Webster's says corruption is: a). Impairment of integrity, virtue, or moral principle. Depravity. b). Decay, decomposition. c).  Inducement to wrong by improper or unlawful means (bribery); and, d). A departure from the original or from what is pure or correct.
ANSWER: Yes. But they don't get to the heart of corruption: its essence, and why people hate it – even while it is often a necessary thing! A more meaningful definition – certainly when it comes to political corruption – is: a betrayal of a trust for personal gain.

Q: Hm… Corruption is not just bribery of officials, although that's the context we started with. It's a bigger idea, and the 'personal gain' angle is important.
A: Sure. One can find corruption within corporations, as when directors betray their duty to the shareholders for personal gain. Or churches – as when priests, for pleasure, betray the trust of the young people under their guidance. Even a parent can be corrupt, if he fritters money away on high living that's intended for his kids. But those types of corruption stem from personal weakness and  vices. They're horrible... But, corruption in Government is much worse. Only Government can impose its will on you by law – and back it up with a gun!
With other sources of corruption you can – theoretically at least – go to the Government for redress. But, when the Government is corrupt, it's hard to get the state's right hand to cut off its left! Not only that, but Government – partly because its essence is force – concentrates corruption, and incubates it. If a company or church is corrupt, one can quit them. But citizens are stuck with their Government – and they'll probably keep paying taxes to it regardless of their feelings toward it. A discussion about corruption is necessarily a discussion about Government as an institution.

Q: Because Government officials have power that can make or break fortunes. And that creates incentives among those on the receiving end of state power to try to sway it to their advantage.
A: As Tacitus said in the second century AD, 'the more corrupt the state, the more numerous the laws.' As Governments around the world respond to ongoing crises with an ever-accelerating onslaught of new laws, there will be more and more corruption – and frustration with that corruption!
Tacitus was right. But he could just as accurately have said, "The more numerous the laws, the more corrupt the state," because lots of laws engender lots of corruption. In other words, corruption isn't the problem. The state and its laws are the problem, to which corruption is an unsavory and unaesthetic – but necessary – solution. Laws create corruption; and corruption engenders laws!
Every time a legislature convenes, they pass more and more laws. That's all they do, all day long. So the body of laws and the accompanying volumes of administrative regulations and procedures to implement them is constantly growing – the whole world over.
Laws and regulations are like barnacles on a ship. They keep growing and growing, weighing the ship down, slowing it down. If they aren't scraped off from time to time, they will threaten the ship's structural integrity!

Q: The reason corruption results from the proliferation of laws may not be clear to all our readers. Consider the Internet: it interprets censorship as damage and automatically routes around. The market interprets Government regulation as a hindrance, and seeks ways around it... The proliferation of laws increases the incentive to circumvent the law, and circumventing the law, in this context, is corruption.
A: Exactly. A law is passed because it seems like a good idea at the time, at least for some group of people who approves of it. The people whose preferred choices just got made illegal aren't going to change their views because the Government passed a law. So they find ways to work around it.
Consumers then become small-time outlaws; and providers become 'organized crime.' What does organized crime do? Generally, they try to bribe the people at the cutting edge of applying the law: the police, prosecutors, judges, inspectors, politicians, etc. It's one reason why vice cops, along with drug cops, are notoriously the most corrupt among police!

Q: What about anti-corruption laws?
Q: They're stupid – in the literal sense of the word, meaning unwittingly self-destructive. Those laws necessarily have the opposite effect of what's intended. By raising the stakes, they just raise the level of bribery required, resulting in even more severe corruption. Like everything Governments do, it' not just the wrong thing to do, but the exact opposite of the right thing to do!

Q: Which is… to reduce the number of laws and regulations...
A: Exactly. The only way to fight official corruption is to reduce the amount of legal control of officials, particularly their regulatory power over the economy. If there were no Government regulators, inspectors, assessors, auditors, and so forth ad nauseam, there'd be no reason for businesses and consumers to bribe them to get the hell out of the way!

Q: I can hear some people now, crying in horror, 'but that would be anarchy!' But, let's remind people that Government regulation is not the only kind of regulation there is; and, of all forces interacting in the marketplace, it is almost certainly the least efficient and most likely to produce unintended consequences.
A: Yes. There are many market forces that regulate business activity – and more broadly, cultural forces that regulate interactions between people. In the marketplace, reputation is a very powerful force. So is competition. And so is liability – it's a powerful negative incentive. More broadly, culture is a very powerful regulatory force... Peer pressure, moral opprobrium, and social approbation restrain people from being naughty far more than fear of police does! There are also private institutions that have powerful regulatory influences, such as churches, Rotary, Lions Clubs, and the like. [CaseyResearch.com].

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