Monday, June 27, 2016

Wilson and the Fed, IX: Wilson’s Political Genealogy


We have already noted that, as was manifest from his doctoral thesis, Woodrow Wilson derived his political philosophy from that of Walter Bagehot. What many people may not sufficiently appreciate is the degree to which Bagehot’s philosophy, both political and economic, derived from that of the totalitarian political philosopher Thomas Hobbes.
Thomas Hobbes: the State is a Mortall God
Hobbes has usually been considered as the chief proponent of the divine right of kings. It is, however, more accurate to describe Hobbes’s philosophy as the divine right of the State, with the State itself construed, in Hobbes’s term, as a “Mortall God” (Hobbes’s spelling).
To Hobbes, the specific form of government is ultimately irrelevant. If sovereignty is vested in a king, the king rules by divine right. If power is vested in parliament, then that body rules by the same justification. Presidents, dictators, first citizens, emperors — it does not matter what they are called, as long as they have power; power is self-justifying.
To Hobbes, government must be based not on consent of the governed, but on force. This is because most people understand only coercion. Fear of punishment is what holds society together.[1] The State is held together by the strongest, whose will all others must accept.[2] All other forms of society, including Church and the Family, are subsumed into the State, for there is no meaningful distinction between “the State” and “society.”[3]
Resistance to authority can never be justified; the will of the sovereign is the supreme law of the land.[4] All sovereignty is vested in government, whatever specific form that government takes, not in the people.[5]
From Hobbes to Bagehot
Walter Bagehot: hated the U.S., liked Hobbes.
Wilson, however, was not a student of Hobbes . . . directly. He was, as noted, a disciple of Bagehot, and Bagehot derived his theories in part from Hobbes.
Not surprisingly, then, Wilson was an elitist who had a deep suspicion and mistrust of ordinary people, as well as those he seemed to view as demagogues, such as Bryan and Roosevelt. Bryan was someone to be used to counter Roosevelt, a sort of a backfire, or (perhaps more consistent with Wilson’s attitude) a thief to catch a thief.
This, of course, raises the issue of Bagehot’s political theories.
Bagehot developed his political and economic theories in light of the abandonment of the natural law and the fixed belief that only existing accumulations of savings can be used to finance new capital formation that characterized the 17th and 18th centuries following Hobbes. According to Bagehot’s analysis, published in 1867 in The English Constitution,[6] a relatively small economic elite (not to be confused with the “Upper Ten Thousand” that ruled “society”) were the real power in the country, having gradually usurped political power since the days of the Tudors, and (according to Bagehot) properly so.
Bagehot carefully distinguished leadership in “society” (meaning parties, balls, race meets, and other social events) from leadership in government and the economy. The Queen (a “retired widow”[7]) and the Prince of Wales (“an unemployed youth”[8]) were the leaders of “society” and played an important role in providing the lower classes with the easily understood fallacy that the monarch ruled the country. Bagehot called this the “dignified” aspect of the English Constitution, a social convention to pacify the unintelligent masses.[9]
"We are not amused, Mister Bagehot."
The real power, according to Bagehot, resided in the House of Commons, the House of Lords being another “dignified” aspect of the constitution of the country. The House of Commons was “efficient” as opposed to “dignified,” and, so far as the traditional structures of government allowed, ran the country essentially as a business corporation. The House of Commons, elected by a relatively small number of voters, was, essentially, the board of directors of the country, “a class . . . trained to thought, full of money, and yet trained to business.”[10]
The propertied classes were (in a sense) the shareholders of the national corporation. Common unpropertied people, as well as aristocrats whose wealth and power were in decline as agriculture diminished in relative importance, were to some extent supernumeraries, that is, redundant employees and pensioners of the national corporate State.[11]
Elitist “Democracy”
Contrary to the impression that Bagehot’s claim that ultimate power resided in the House of Commons might give, Bagehot did not support popular sovereignty. The English electorate at the time he wrote, 1867, was extremely small, and composed exclusively of men of property, a financial elite which thereby secured a self-perpetuating political power. The “pocket” or “rotten borough” system was the order of the day.
This was only right as far as Bagehot was concerned. He believed that the masses were too stupid to be able to vote or do anything other than take orders:
 “We have in a great community like England crowds of people scarcely more civilized than the majority of two thousand years ago; we have others, even more numerous, such as the best people were a thousand years since. The lower orders, the middle orders, are still, when tried by what is the standard of the educated ‘ten thousand’, narrow-minded, unintelligent, incurious.”[12]
 “We have whole classes unable to comprehend the idea of a constitution.”[13]
 “A free nation rarely can be — and the English nation is not — quick of apprehension.”[14]
According to Bagehot, “The principle of popular government is that the supreme power, the determining efficacy in matters political, resides in the people — not necessarily or commonly in the whole people, in the numerical majority, but in a chosen people, a picked and selected people.”[15] [Emphasis in original.]
India, 1857: logical result of Bagehot's theories of government.
Not surprisingly, one of the “defects” Bagehot listed in the American system is the impossibility of a dictatorship in times of national emergency.[16] Another problem is that Americans do not accept the opinions of their betters without question: “They have not a public opinion finished and chastened as that of the English has been finished and chastened.”[17]
Natural rights, the judiciary, — such things are irrelevant. They are unimportant because they are not “efficient,” that is, they do not increase the effectiveness of government, the purpose of which is to protect the interests of the propertied classes who run the country. Weaknesses appear in government to the extent that the State administration departs from the principles of business, e.g., lack of efficient structure, unnecessary redundancy,[18] etc.
The fact that many of these structures were at least initially intended to provide accountability of the government to the citizens is also irrelevant.[19] The capitalist of Bagehot’s day — or, more accurately, the non-owning manager — was not accountable to his workforce or to his customers. It followed that the government should not be accountable to the citizens it governed.
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[1] Sabine, A History of Political Theory, op. cit., 468.
[2] Ibid., 469.
[3] Ibid.
[4] Ibid., 470.
[5] Ibid., 471.
[6] Walter Bagehot, The English Constitution. Portland, Oregon: Sussex Academic Press, 1997.
[7] Ibid., 21.
[8] Ibid.
[9] Ibid., 409, 115.
[10] Bagehot, The English Constitution, op. cit., 66.
[11] “Corporate State” can be taken here both as meaning a nation run as a private business enterprise for the benefit of the economic and financial elite, even if ostensibly for the benefit of all citizens — whom Bagehot held in open contempt — or as a proto fascist State, an almost inevitable outcome when the “slavery of past savings” is the basis of the economic order.
[12] Ibid., 6.
[13] Ibid., 23.
[14] Ibid., 74.
[15] Ibid., 17; cf. Knox, Enthusiasm, op. cit., 584.
[16] Ibid., 20.
[17] Ibid., 13.
[18] “Unnecessary redundancy” is not an oxymoron. A well-designed system incorporates redundancy in order to prevent things from slipping through the cracks, so to speak. When redundancy does not serve as a backup, however, it becomes unnecessary. In system terms, then, redundancy is the duplication of key components or functions of a system intended to increase the reliability of the system. This is usually in the form of a backup or “fail-safe.”
[19]We have seen a similar development since the 1980s in the United States with the repeal of systemic, internal control legislation such as Glass-Steagall, “the Banking Act of 1933,” Pub.L. 73−66, 48 Stat. 162, H.R. 5661, in the name of efficiency and increased competitiveness, and its replacement with unenforceable government external regulation. Moulton believed that the current integration of the banking system was a grave danger to the economic and financial health of the country.

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