The STEEL-cameralist Manifesto Part 9B: Posner, Power and Profit: Judge Posner on the Federal Government as a Modern Corporation – a Critical Analysis.

Contents

1: Questions for Neoreactionaries.

2: Richard Posner: Has the United States, by Virtue of Its Size and Complexity, Become Ungovernable? 

 

(Part 9A can be read here.)

1: Questions for Neoreactionaries.

Can USG be restructured?

That is, can its archaic, proto-progressive constitutional design be re-designed so that Imperium in Imperio is removed and that the federal government resembles any other healthy and normal organisation such as a modern corporation?

The task is not physically or logically impossible, only practically very difficult.

If neoreactionaries are to come even close to achieving their objectives, then they will need to answer the following questions:

1: What is your single, most important, goal or goals?

2: Are the goals practically realisable?

3: How are these goals to be realised?

4: How many men do you need? How much money? What materials do you need, how many and how much will it cost?

5: Who do you proximately and ultimately need to convince/ persuade in order to obtain the goals?

6: What obstacles are in the way? What obstacles could exist in the future?

7: What is plan A? What is plan B? What is plan C?

8: Who is or who could be the “receiver”?

9: What are the possible ways that the system could be “rebooted”?

10: Is the new design – the New Structure – likely to be permanent? What potential problems could affect the stability and transition of power from the first generation to the second?

11: If you need to build a “machine” in order to achieve the reboot, how do you turn off this “machine” once a re-structuring has been accomplished?

12: How might the machine be corrupted or taken over by actors with goals contrary to the formal purpose?

Every single one of those questions demands an answer. However, the most important one to answer and get right, though far from the only question, is what the structure of the state and the nature of the state’s constitution will be.

 

2: Richard Posner: Has the United States, by Virtue of Its Size and Complexity, Become Ungovernable? 

In this post, we examine an essay from Richard Posner, judge and jurist and public intellectual, on what the federal government would look like if it was structured and operated like a modern corporation.

Overview:

Part A: Posner on Form, Reality and “basic structure”.

Part B: Posner on Corporations, Competition and Cost.

Part C: The Corporation V the Federal Government.

Part D: Additional Ideas.

Part E: Conclusion.

 

 

Part A: Posner on Form, Reality and “basic structure”.

Posner’s essay is motivated by the possibility that the United States of America, by virtue of its size and complexity, has become ungovernable:

The United States is the third largest country by land mass (after Russia and Canada) and population (after India and China), the wealthiest, the militarily most powerful, and generally regarded as the leading nation in the world—its geopolitical center. But all these are negatives from the standpoint of governance, as are the nation’s ethnic and cultural diversity, political divisiveness, high crime rates, and highly unequal distribution of income. Another major negative is the difficulty of changing the U.S. Constitution. Although there have been a number of amendments, the basic structure, set by the original Constitution of 1789, has not been changed significantly.

What’s interesting here is that Posner, after mentioning “governance”, notes that the ethnic and cultural diversity, political divisiveness and high crime and inequality are all negatives. Posner, however, does not explore the hypothesis that these “negatives” result from USG’s “basic structure”.

As to the issue of “basic structure” itself, Posner overlooks the profound – formal and informal – changes that have occurred in the years since 1789 which run counter to the letter and spirit of the constitution and the intent of the framers. For example:

1: The Electoral College system which went off the rails almost immediately, to the chagrin of Alexander Hamilton and others.

2: There was not supposed to be any political parties.

3: The complete end to Negro slavery and the assimilation of Negros into the republic.

4: The transition from a republic of laws to a democracy and expanding the franchise to the poor, the blacks and, finally, women. Illegal aliens already vote (illegally, contra Obama) but soon, no doubt, they will be able to vote legally as well.

5: The end of Federalism (the conclusion of the Civil War).

6: Wilson and later Roosevelt’s installation of a permanent bureaucracy. In addition to the creation of a permanent and unaccountable bureaucracy, Wilson oversaw the creation of the Federal Reserve Bank (central banking).

7: The emergence of the military-industrial system with the Joint Chiefs of Staff, Combatant Commanders and a sprawling military bureaucracy.

8: The emergence of the various intelligence agencies and the establishment of the “deep state.”

9: The emergence of numerous Federal law enforcement agencies and other investigative and security agencies (FBI, DEA, ATF, DHS and ICE etc., etc.).

10: The emergence of the “Imperial Presidency”.

11: The transition from a republic in 1945 to global Empire.

12: The emergence of globe spanning, for profit corporations.

13: The emergence of the mass media.

14: The rise of judicial tyranny.

All in all, if the constitutional form of power does not match the reality of power, then what we have is “corruption”. USG is thus a very corrupt state; one that barely functions according to the “basic structure” and intention of the framers of the constitution.

 

Part B: Posner on Corporations, Competition and Cost.

Next, Posner provides what we can assume is his explanation of why USG governance is so poor. His explanation for USG’s “inefficiency” is that it is too “big” and thus the tension between the formal goals of the organisation and the personal goals of its personnel are magnified sufficiently to explain the inefficiency and poor governance he complains about. Secondly, Posner argues that governments do not face the same competitive pressure from countries that corporations do. Thus, they become wasteful and inefficient for they have no reason or pressure to reform. Posner:

A serious problem of governance, or management, that all but the smallest organizations, whether private or governmental, encounter is the tension between the goals of the organization and the personal goals, which typically differ, of the individuals who comprise the organization. Stated differently, the individuals have personal utility functions that differ from the organization’s utility function. The larger the organization, the greater the divergence is likely to be and the more difficult to minimize. The organization that is the federal government of the United States has more than 4 million employees. 

Competition between organizations is an important control on the divergence (which economists refer to as “agency costs”—the costs created by the fact that the employees of an organization have their own goals that often conflict with those of their employer). But nations do not feel the same competitive pressures as corporations. Even a small, miserable, effectively bankrupt nation like Greece does not disappear, as large corporations not infrequently do, because of its inefficiency. Because corporations are simpler and smaller and also more constrained by competition than nations, we can expect them to be managed more efficiently, and specifically to adopt an organizational structure that minimizes agency costs. 

Posner’s explanation, however, does not follow from his premises. Firstly, there are two very different kinds of competition that Posner fails to distinguish (Nick Land also fails to make this distinction with his Techno-Commercialism – as do many, perhaps most, economists).

Corporations face economic competition; nations primarily face political competition (power competition) of which economics (geoeconomics rather) is a part. Political competition, meanwhile, often results in violence – organised mass violence (war) – which is more serious and existential than the consequences of any kind of economic competition. Thus, why would states not structure themselves like corporations?

Well, they do. For a start, all states have militaries that are structured in typical “corporate” structures. Which is to say, they are hierarchically arranged. Furthermore, law enforcement, intelligence agencies and the judicial systems are all arranged in a hierarchical fashion in which authority and control is (fairly) clear and consistent. More telling still is the fact that Putin’s Russia and modern China (while not structured exactly like corporations) are also highly centralised and hierarchical.

Thus, rather than suppose that nations (like America and Western Europe) are inefficient because of a lack of competition and as a result have poor structures, why not assume that they are inefficient because they have poor structures.

In other words, competition is an inadequate and unnecessary explanation of America’s poor governance, though it must play some role.

Posner’s entire explanation is refuted by the fact that the framers of the constitution designed the government they did because of the specific political ideas they had at the time. It was not because of a lack of political competition, which is a fact that Posner later, unwittingly, admits to.

 

Part C: The Corporation V the Federal Government.   

Next, Posner comes to directly compare and contrast the federal government with the modern corporation:

So let’s glance at the structure of the typical large corporation and compare it to our federal government structure.

There will be a board of directors to exercise a general but loose supervision over the corporation (and in turn subject to very loose control by the shareholders), intervening decisively only in crisis situations or where there is vacancy in the office of the Chief Executive Officer.

(See our earlier post here for what this “general but loose supervision” might amount to, especially in “crisis situations”.)

Posner:

 The CEO will be the dominant figure in the corporation, exercising something close to dictatorial power, assisted by a small personal staff.

Well, there it is. The CEO will have near absolute power over policy, personnel and pay. This is what Moldbug meant by “neoroyalism” (formalism, neocameralism and neoroyalism are three different, though interlocking, components of Moldbug’s system).

Posner:

Often he will overshadow the chairman of the board of directors—he may even double as chairman and CEO.

There will be a Chief Operating Officer, exercising day to day management, while the CEO, as the public face of the corporation, will formulate policy, provide overall guidance, inspiration, and “vision,” appoint the major subordinate corporate officials (general counsel, chief information officer, chief financial officer, etc.), and maintain personal relations with important investors, customers, competitors, and regulatory officials.

(Again, see our earlier post, where we explore the nature and function of the CEO and the role of the Sovereign in more detail.)

Posner:

The corporation will have several or many operating divisions, reporting to the COO or CEO, each headed by a vice president or equivalent. The employees in each division will serve at the pleasure of their superiors; no one will have fixed tenure. 

In other words, every single employee will be subject to the principle of “hire and fire”.

Next, Posner compares the federal government:

Compare the federal government. The closest to a board of directors is the Congress, but it differs mainly in having a good deal of policy responsibility, and, since it does not appoint and is not appointed by the President (corresponding to a corporate CEO), there is no presumption that its policy preferences will coincide with the President’s. The President’s exercise of his own policymaking powers will often work at cross-purposes with Congress’s exercise of its powers; nor can he appoint senior officials without the concurrence of a division of the Congress, namely the Senate.

There is one other major difference. Firstly, Congress has far more members than any board of directors. This makes agreement more difficult – never-mind the fact that there exist two permanent parties or factions within Congress which further hamper coherence.

Nevertheless, one could argue that the closest thing to a board of directors that USG has is not Congress but the Supreme Court. The Supreme Court, which is a nine member body, has the widest scope of all the branches of government, though it exercises this power in an indirect, reactive way.

Here is what Posner says about the Supreme Court:

A further dilution of presidential power results form the existence of an independent federal judiciary, headed by the Supreme Court. Federal judges and Justices have lifetime tenure, can invalidate legislative and executive action both federal and state, and rarely (because of that tenure) will a President be able to appoint a majority of the Supreme Court Justices or other federal judges. 

Directors do not have lifetime tenure and are confirmed and re-confirmed via elections from among the shareholders; however, they can not only “invalidate” executive policy and practice but remove the CEO as well. The Supreme Court, however, has no power to remove the president.

Posner on the differences between the role of executives in government and corporations:

The President has a personal staff (officially the “Executive Office of the President”) that numbers more than 2000. The staff assists him in overseeing the large number of “divisions” (executive departments, such as State and Defense and free-standing agencies such as the Environmental Protection Agency) into which the federal government is divided. The heads of these divisions, however, do not have hiring or firing authority, as a practical matter, over most of the employees, who are tenured civil servants. The heads serve short terms, and often are appointed for political reasons unrelated to experience or competence. The brevity of their terms and frequent lack of relevant skills or knowledge create tense relations with the tenured bureaucrats. As a result, the President’s control over the more than 4 million federal employees (of whom about 40 percent are military) is as a practical matter quite limited. 

A CEO, by contrast, would have (near) absolute power of hiring and firing, as the presidents once had before the Progressive and New Deal eras. In addition, large corporations frequently undergo periods of “downsizing” and “restructuring” which could see large numbers of employees being made unemployed and entire departments and subsidiaries sold off or closed down.  There is no reason why the president should not have this power again and this, or some other similar reform, is possible and desirable.

Posner:

A further division of government is brought about by federalism: the division of the nation into 50 states, each with quasi-sovereign powers. The federal government has considerable power over the states, but far less than a CEO or COO would have over the operating divisions of their corporation. 

Imperium in Imperio, in other words. If the federal government resembled a true corporation, then the president would have the power to not only hire and fire governors but mayors, police chiefs, school principals and so on all the way down to the village rat-catcher.

Posner:

The structure of the federal government reflects the state of the nation in the eighteenth century. The population was roughly 1 percent of what it is today, there were only 13 states and as a result the Congress was small, and the federal government was tiny. It is doubtful that starting over in today’s circumstances a constitutional convention would create a similar system. 

Indeed. Thus, the structure of USG has nothing to do with “competition” and everything to do with the design the framers adopted in the 18^th century. Also, note that Posner brings up the procedure known as the “constitutional convention”. If USG is to be restructured – legally – then this is how it would probably have to be done.

Interestingly, Posner sees the “limited authority” of the president as the “most glaring deficiency”:

The most glaring deficiency is the limited authority of the President and the absence of an official corresponding to the Chief Operating Officer of a private corporation. From an efficiency standpoint the President should be able to promulgate laws (not just regulations), subject to override by supermajorities of Congress; appoint subordinate officials without the concurrence of the Senate; and create a position analogous to that of a COO; this would result in a structure analogous to that of France, which has both a President and a prime minister, the latter being in charge of day to day governmental operations (though France is not an example of a well-governed country). The President should also be authorized to control the finances of the states, alter their boundaries, appoint their principal officials, and veto their laws. And no civil servants should have tenure. The result of all these changes would be to conform American government to the “government” of a large private corporation. 

Posner on how the “CEO” and “COO” could operate:

Maybe the President would become the “outside” partner and his Chief Operating Officer the “inside” partner, the former dealing with relations with foreign countries (in the broadest sense, comprehending not only foreign relations in the conventional sense, but also immigration, trade, and military assistance and intervention), the latter with the formulation and implementation of domestic policies. 

This idea would see the President/CEO taking on more of the duties that the Secretary of State currently undertakes.

All in all, the key take away from Posner’s essay is the need to strengthen the power of the president, while weakening the power of the other branches and drastically reducing the power of the civil service.

 

Part D: Additional Ideas.

Abolish the State Department and the office of the Secretary of State and amalgamate the remnants into the Office of the Presidency and the Department of Defence respectively. Then, create two or more vice presidents.

For example, one vice president could assume the role of the COO as Posner suggests, while the second could carry out many of the duties that the current Secretary of State is responsible for. Indeed, one could increase the number of VPs to four, with two “external” and two “internal” VPs. The external VPs have two distinct regions of responsibility: East Asia or “Pacific” and “Atlantic” or Europe, Africa and the Middle East respectively.  As for the two “internal” VPs, one could be responsible for the two coastal regions (Blue regions), while the other is responsible for the internal, “heartland” region (Red region).

A different idea to make the federal government conform to a corporate structure would be to have Senate seats either filled by people who have simply paid for them (via a public bidding process) or allocated via shareholder election (Senators, or their proxies, are the main shareholders). This idea cuts-out the “middle-man” of corporate and special interest lobbying.

The House of Representatives, meanwhile, could operate more or less as it does already but with a few changes.

Firstly, political parties are banned.

Secondly, ordinary people with some relevant experience and knowledge (from doctors to engineers, to businessmen to ex-military officers could be encouraged to “run for office” by increasing the pay that they would receive (say a million dollars a year).

Thirdly, Representatives are subject to one term limits; thus, turnover is high and responsiveness is quicker.

Fourthly, Representatives and Senators do not pass or make legislation; their principal role is oversight of the rest of the government and consultation with the public and with the Executive.

Finally, Posner does not touch upon the election of the CEO/president, which, of course, would be carried out by the board of directors in a corporation.

Perhaps one way to resolve this issue is to reform the Electoral College. Firstly, the Electoral College electors could be selected by the Senate and the House, who then deliberate and elect a board of directors who then select the president. Alternatively, one could just abolish the Electoral College entirely and have the president elected by the Senate and House respectively.

Clearly, this would mean no more presidential elections. Realistically, it would be hard to convince the public to give this up (it has become the political version of the “superbowl”).

One possibility, however, is that the president is still selected in the old way, though this time there are no parties or primaries; in addition, the president is, actually, the “chairman of the board”.

The popularly elected, chairman/president, and the rest of the directors are selected by both houses of Congress, which comprise shareholders (Senators) and elected representatives respectively. Then, the board select the CEO whose role is that of president/prime minister.

A further change would be to hold popular presidential (chairman of the board) elections once every eight years instead of four.

In practical terms, the chairman/president is still “head of state” and has various ceremonial and public relations functions and has the power of the “bully pulpit” and some influence over the directors (which could built out of the currently existing executive cabinet structure). This means that the chairman/president, along with the directors, select and supervise the CEO (president) and replace him if necessary.

Finally, there are, however, two things to note. There is still a democratic element present; secondly, the role of the Supreme Court has not been addressed.

Taking the Supreme Court first, the simplest method would be to simply abolish the Court and have the function taken over by the CEO and a board of directors – perhaps a sub-board could be set up to address and answer whatever specific constitutional questions arise.

As for the democratic element, our above modifications still see a role for elections: for the House of Representatives and, in one version of the idea, the president. It should be noted again, that political parties would no longer exist.

The fact that one still sees no (realistic) way to completely abandon “democracy”, shows the power it has, both as part of the system and as part (we assume) of what the vast majority of people accept as politically basic.

Finally, here is one more idea: outsource the running of America’s Empire to a for profit corporation. Merge Defence, State, and the military with private military corporations like Blackwater and have them take care of foreign policy, subject to control and oversight of the president/board and shareholders. Ironically, this is a kind of “state outside a state” solution.

In conjunction with this idea, return as much power back to state and local governments as possible, along with corporations, churches, and charities and, finally, the American people.

 

Part E: Conclusion.

Posner is rightly sceptical that changes such as this are possible. The only way such changes are possible – peacefully anyway – are via constitutional conventions, which would only occur in exceptionally abnormal times. It should be noted that, despite many efforts, there has never been a convention since the time of the Founding Fathers.

All in all, the above ideas are the most “likely” and most “reasonable” changes that one could make in order for the current structure to be modified so that it conforms to the structure of a modern corporation.

Does this remove Imperium in Imperio? Not completely. There would be tension, at least, in the following areas:

1: Federal V State and local governments. (How does this problem get solved?)

2: Senators/shareholders v popularly elected House of Representatives.

3: A popularly elected chairman/president v the Senators (shareholders).

4: The People v the shareholders.

Not a perfect design, for sure. However, one assumption we have had in this post is to think about a new structure that is created from the old one that – specifically – contains flaws and imperfections. This is a good exercise in general, for it forces one to think about “red lines”, compromises and trade-offs if a negotiation were undertaken for restructuring the state.

 

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