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Additional Commentary and References


Should we incentivize public servants with the perquisites of expanded government, or be more concerned that they will abuse these things?
  A strong centralization.viewpoint:  

A strong decentralization.viewpoint:
Government accomplishes great good  
We must never ignore fact that there are
with size, negatives are unimportant    
very few things government can do well
It can listen to public complaints and  
It is more dangerous than private sector
correct as easily as small government  
as the territorial monopolist on violence
Size means more staff experts who  
It also creates special privileges which
  self-police and advise wise policies.    
foments crony capitalism and corruption

Sample argument (caretakership-early life cycle protection) viewpoint: Government size should correspond with the wealth, prestige, and power of a people. Talking about "too much government" is like saying someone is too rich, drives too nice a car, and lives in too big a mansion. How many people do you know want to give up having lots of money? Similarly, government monuments and ceremonies provide a sense of grandeur. How can one have too much magnificence any more than one can say a symphony sounds too beautiful? How do you criticize people for being powerful enough to get a lot more good things accomplished than the average citizen? In addition, a large government can develop special feedback channels and acquire extra staff to respond to grass roots complaints just like small government. The bigger issue here may be whether a sense of caretakership exists among those at the top. In Democracy: The God That Failed, author Dr. Hans Herman-Hoppe argues that a monarch who is incentivized to have a sense of caretakership from privately owning government may be more responsible in the long run than most elected officials in a social democracy. Officials who serve limited terms may feel incentivized to recklessly spend taxpayer's money to make names for themselves while they are in office. They may not care if they run up the public debt, because this becomes someone else's problem after they leave office. In contrast, under a more autocratic system with longer tenure in office, the leaders might feel more secure, have the luxury of taking a broader perspective, and become less likely to play corrupt political games just to survive. This reasoning has similarities to the concept of providing tenure to professors so that they can feel more secure about staying focused on their work and saying what they really believe. Sometimes you require a certain level of size, structure, and stability within organizations before various good things can begin to mature and become sustainable. In contrast, it can be counterproductive to make things too competitive and starve people for resources to the point that they become desperate. What good is it if on the one hand you tell people to be visionary patriotic public servants, and then on the other you throw them to the wolves like they are running a hot dog stand?
. . .

Sample argument (distrustful libertarian) view: We should never ignore the fact that there are very few things government can do better or more efficiently than the private sector. It may be true that on an idealistic level, as the size and perks of government grow, government leaders should feel appreciative and incentivized to work that much harder to serve the people. More staff resources should theoretically provide greater wisdom. Unfortunately, there is a huge disconnect between the ability of a government to raise revenue and its performance that is easily exploited by opportunistic people. Government forces people to permanently "subscribe" to its general services at the point of a gun through its police power. Often when government programs fail, it responds by raising taxes and creating even more programs to overcome the failures. This rarely happens in the private sector where companies with bad products usually go out of business. In contrast, left on their own, even bad government bureaucracies tend to steadily grow if left unchecked. Particularly unprincipled government operators create false crises as excuses to aggrandize their own departments. Furthermore, once officials get used to certain perks and government size, they tend to create unnecessary projects to prevent cut-backs. This is particularly true when they can get kick backs by extending special privileges to cronies in the private sector. It may be true that enhancing a sense of grandeur and caretakership among government officials might incentivize them to work harder and be more responsible to the people, but these things can also backfire. There is a much greater danger that unscrupulous officials can shield themselves from legitimate criticism behind a wall of phony patriotism (jingoism). Once bureaucracies become infested with scoundrels, they are very hard to root out. Why take that risk? It is much better to keep government relatively small and on a tight leash before the general public. Conversely, once government grows beyond a certain point, the very nature of it invites parasitic infestation. Lastly, people should be responsible on their own for finding jobs where they do not become so desperate that it degrades their ability to act honestly and responsibly.


Americans have got into a very bad habit of pampering their official leaders in both the corporate world and government. Bill Bonner wrote an article "Hollow Dummies" in which he describes the incredibly imperial flavor of Presidential perks:

Many years ago, when the country was still a modest republic, American presidents were available to almost anyone who wanted to shoot them. Thomas Jefferson went for a walk down Pennsylvania Avenue, alone, and spoke to anyone who came up to him. John Adams used to swim naked in the Potomac. A woman reporter got him to talk to her by sitting on his clothes and refusing to budge.

But now anyone who wants to see the president must have his background checked and pass through a metal detector. The White House staff must approve a reporter before he is allowed into press conferences. And when he travels, America's head of state does so in imperial style; that is, he moves around protected by hundreds of praetorian guards, sharpshooters on rooftops, and thousands of local centurions. When President Clinton went to China in 1998, he took with him his family, plus "5 Cabinet secretaries, 6 members of Congress, 86 senior aides, 150 civilian staff (doctors, lawyers, secretaries, valets, hairdressers, and so on), 150 military staff (drivers, baggage handlers, snipers, and so on), 150 security personnel, several bomb-sniffing dogs, and many tons of equipment, including 10 armored limousines and the 'blue goose,' Clinton's bulletproof lectern.

"To get the presidential entourage and its vast array of equipment to China and back, the Air Force flew 36 airlift missions using Boeing 747, C-141, and C-5 (the largest transport, with a capacity of 145 tons of cargo) aircraft. The cost to DOD of the China trip was $14 million. Indeed, operating Air Force One alone costs over $34,000 an hour.

"While traveling, the President is able to conduct all the functions of the office aboard several specially-built Boeing 747s, which take the call sign Air Force One when the President is aboard. The President travels around Washington in an armored Cadillac limousine, equipped with bullet-proof windows and tires and a self-contained ventilation system in the event of a biological or chemical attack.

"The Secret Service has over 5,000 employees: 2,100 special agents, 1,200 Uniformed Division employees, and 1,700 technical and administrative employees...Everywhere Bush travels, his security is handled with the usual American overkill – thousands of guards and aides, walled-off compounds, tightly scripted movements from one bubble to another. Security was so tight during the visit [Ottawa, Canada in 2004] that some Members of Parliament were refused entry into the building for lack of a special one-time security pass, an act which actually is against the laws of Canada. Americans never hear of the grotesque measures taken when Bush travels abroad. After Bush's stay at Buckingham Palace in London, the Queen was horrified by the damage done to the Palace grounds. They were left looking like the parking lot at a Walmart two-for-one sale.

President Bush's trip to London caused considerable wrangling, after the Bush team demanded the right to "shoot to kill" while maintaining diplomatic Immunity to prosecution under British law. The Brits refused.

I recall once seeing a political science study about how legislatures in the State of California were awarded substantial pay packages in the early 1960's compared to the relatively paltry sums they had received earlier. Up until that time, many legislators had tended to their duties part time while holding down full time career jobs in the private sector. The legislators had complained that they needed more pay to be able to devote themselves full time to government. The result of the study, however, is that once California legislators received the pay to become full politicians, rather than necessarily devote themselves towards bringing a higher quality to California government, they simply gave the state a lot more government. The size and costs of government grew exponentially.

American Values in Decline documents on page 259 a disturbing trend where increasing compensate packages are completely decoupled from performance in America for CEO's.

Unwarranted Compensation: Many U.S. corporate leaders face a growing credibility problem. They have garnered unbelievable compensation packages through the creation of rubber-stamp boards of directors, rather than through personal, bottom-line contributions to their organizations and this has been documented. Shawn Tully looked at the compensation of 200 chief-executive officers and found that at least 43 had received increases in 1990, in the face of reduced profits for their companies.¹² And other studies show that it is more the exception than the rule that CEO pay is related to corporate performance.¹³


They Cried All The Way To The Bank

"During Gilbert Amelio's 17-month tenure as head of Apple Computer Inc., the company racked up losses totaling nearly $2 billion. But when the board ousted him last summer, Mr. Amelio walked away with severance pay of $6.7 million, in addition to his $2 million in salary and bonus for the year ended Sept. 26."

Source: Joann Lublin, "Pay For No Performance," The Wall Street Journal, April 9, 1998, page Rl.

Matthew Benjamin reports that Kenneth Chenault, CEO of American Express, enjoyed a doubling of his compensation to $14.5 million in 2001, as the company's net income dropped by half, its stock fell 33 percent, and huge layoffs were announced.

Source: "Suite Deals," U.S. News and World Report, April 29, 2002, page 32.

Carol Hymowitz reports that, though Electronic Data Systems's share price had fallen 75 percent and the SEC was investigating its financial dealings, ousted president Richard Brown received severance pay totaling more than $32 million in cash and stock.

Source: "Directors Should End Extravagant Packages For Departing CEO's," The Wall Street Journal, April 8, 2003, page B1.

And Gary Strauss reports that Linda Wachner, chairman of the Warnaco Group, received a salary of $2.7 million in 1998 ― plus a $6 million bonus and $358,000 for sundry expenses ― despite the fact that the average total return on the organization's stock that year (10.4 percent) was about half the return (21 percent) on Standard and Poor's 500 stocks. In addition, the compensation committee granted her [261] $6.5 million in free Warnaco shares, and she reaped $76 million by exercising preexisting options.

Source: "Study: Some CEO Salaries Don't Compute," USA Today, September 29, 1999

Arianna Huffington asks: "How can there be talk of a shared destiny in a nation where, between 1990 and 2000, average CEO pay rose 571 percent while average worker pay rose 37 percent? . . . Where, since 1980, real income for the bottom fifth of families fell by $800 while for the top fifth, it rose $56,800?”

And this wasn't the last increase. According to a pay survey by the Corporate Library in 2004, the median compensation for CEOs of S&P 500 companies rose 11.4 percent in 2002, and another 27 percent in 2003. In 1982, the typical CEO made 42 times what the typical employee got ― by 2004, it had increased to 301 times!

As if this were not enough, consider the scandalous way in which stock options are often used. They are supposed to motivate the executive toward higher performance and help tie him or her to the fortunes of the company. However, what frequently happens is quite different. Roger Lowenstein gives us the example of Jeffrey Immelt, who became CEO of General Electric in 2002. In July, he was given options to buy 800,000 shares at $43.75. Then, in September, after the market had plunged, he was given 400,000 more shares at $35.48. What was the justification? A company spokesman said that Immelt needed "additional incentive."

After providing other examples, Lowenstein observes that "If a Marxist critic of capitalism were writing about, executive compensation in the U.S., he'd say the bosses hire some consultant and director flunkies to justify whatever outrageous amount they want to pinch from the shareholders. And you know what? He'd be right.”¹⁶ Susan Lee provides supporting information for this view. She reports that researchers have found no relationship between options granted last year and the stock's price at the end of the following year; that studies have shown that managers arrange to obtain their options just before their release of good news, and after the stock price falls due to their release of bad news.

Not only are many CEOs overpaid on the job ― the average pay for our top 100 CEOs had reached $37 million by 1999 ― many are grossly overpaid in retirement. A dramatic example is provided by the largess bestowed upon Jack Welch when he left GE in 2001. David Johnston tells us that, in addition to leaving with stock options worth one-fourth of a billion dollars, he was granted a pension of $9 million a year and some rather generous perks: maintenance of a luxurious Manhattan apartment, including laundry and maid service (valued at $80,000 per month); memberships at 11 country clubs; box seats on the Grand Tier level of the Metropolitan Opera at Lincoln Center; luxury seats for a long list of professional sports teams and high-profile events; communications equipment and landscaping services for five homes (valued at $7.5 million); and car rentals, plus use of GE limousines, helicopters, and the corporate jet.

Here we see clear instances in which rising compensation is inversely related to underlying performance. It seems to reward greed and gamesmanship rather than management excellence and productivity.

Another way to approach this topic is to look at the centralization vs. decentralization debate and ask if there are rational reasons for the steady trend in government growth and centralization throughout the 20th century. If there are not rational reasons, then maybe our darkest fears will be confirmed. Maybe Americans are regressing to a more primitive, barbaric state of society where might-makes-right. Perhaps now the name of the game is to lick the feet of those in power to encourage them to act like benevolent redistributor chiefs or "big men" and shower you with goodies, just like the way it is done in most savage societies.

Speaking of the dark side, most human societies around the world have not found the rational processes entailed in republican government to be intuitively obvious. Republicanism has been mostly a European phenomenon, particularly among the Nordic and Celtic peoples, reflectively many of their unique chivalrous and individualistic temperamental traits.

Most racial groups tend to become very pyramidal in their social structure as they grow in size. Most societies place domination and subordination in their human relationships as a priority over rational process and truth. Many value intrigue over chivalrous, truthful behavior. (Please see my Preface to Ways That Are Dark). Most people tend to function more like primitive animals, where they feel that if they show submissive behavior to a stronger animal, they expect the stronger animal to then leave them alone or even protect them.

In my centralization vs. decentralization I point out that there are pros and cons to both centralization and decentralization. The appropriate level of either for an organization is heavily tied to the specific situation and mission that it faces. I provide some sample arguments that apply to private businesses in a free enterprise system to show how the arguments can go both ways (let me emphasize here that I am mainly talking about private businesses in a free enterprise market, not government itself, although I comment upon many government analogies).

As a former full time stock broker, let me share with you some sample phone-sale pitches for the "centralization" story, and then try to make a national political analogy. For the sake of intellectual completeness, I have also added some sleazy reasons that are quite significant, but are typically not discussed, or at least not over the phone with strangers.

Achieve greater economies of scale: When several companies combine, they can eliminate redundancies in headquarters staff and systems and cut costs. They can combine product lines and manufacturing resources to achieve longer production runs, reduce relative set-up time, and achieve other cost efficiencies. Large companies can also take proven methods and implement them cookie-cooker fashion on a broad scale.

On a national political level, when a country grows in terms of population size and territory, it can usually become more self-sufficient in terms of enjoying a vast internal market as well as hosting integrated industries less dependent on foreign trade. This makes a country less vulnerable to foreign boycotts and other intimidation measures.

Significantly, achieving economies of scale should be an argument for a reduction in government relative to GDP as a country grows. For example, as America grew in the early 1800's, government remained under 5% of GDP right up until the "King Lincoln" dictatorship.

Despite efforts in the late 1800's to roll back a big jump in Fed size during the War for Southern Independence, the Federal fungus resumed an irrevocable growth trend following the creation of the Federal Reserve Banking System in 1913 and America's entry into World War I in 1917. Today total Federal and State government stand at over 40% of GDP.

In looking back over the 20th century, it is more accurate to talk about "negative" economies of scale with government growth. I might also observe that one frequently sees negative economies of scale (ie. reduced efficiency) among large corporations once their management teams achieve certain levels of corruption and cronyism. I talk more about corrupt "imperial conglomerates" in Part Four of my "I, Robot Entrepreneur" series, where greater size serves as a smokescreen for more self-dealing rather than as a tool for greater efficiency. Quite often big corporate cultures become more concerned with milking their product lines and manipulating appearances rather than remaining focused on continually innovating and manufacturing useful things for consumers, and in this kind of climate crooked people start rising to the top.

Increase the absolute top and bottom line: A bigger company tends to have greater revenues and profits. Greater financial strength can be used to attract the best talent, acquire the best plant and equipment, and access other important resources. It can also give a few highly competent leaders the ability to decisively mobilize massive resources more quickly that the competition. They may also have the financial strength to decisively undercut certain competitors.

On a national political level, a bigger country can generally afford a bigger army to bully or gobble up smaller rivals. It can afford to create more monuments and infrastructure to add to its legitimacy.

However, as Dr. Elmer Pendell observes in Why Civilizations Self-Destruct, the underlying quality of the population may be deteriorating as the physical manifestations of a civilization are reaching their height.

"Synergy:" Merged companies can spread brand name recognition and marketing expertise from its core company products over the product lines of newly acquired companies, thereby leveraging its distribution channels.

On a national political level, an empire can leverage itself by absorbing lower quality peoples than its founding stock to gain access to greater manpower and cheaper labor. An empire usually tries to hide the fact that it may be diluting itself while it is growing. One technique to divert attention is to create public displays of imperial strength.

Risk reduction: A bigger company can reduce its overall risk of going bankrupt by having many different product lines spread across different industry segments. If one area fails, cash flow from healthier areas can serve as a cash cow to sustain overall operations elsewhere.

National political level: Smaller countries often try to reduce their vulnerability to attack by forming military alliances with neighbors. Their ruling elite may also try to diversify economically by forming partnerships with foreign companies.

Enhance prestige: By becoming bigger, a company can appear more "world class" to attract more favorable financial terms and negotiate from a greater position of strength. The fact that that a company is growing rapidly by making acquisitions can give it the appearance of being a "star," and hence cause the public to be more likely to treat it like a star, even if the "excellence" of the underlying company has more to do with public affairs trickery than reality.

National political level: America's self-anointed leaders have been playing a desperate game to preserve global dollar hegemony and bolster American prestige as our manufacturing base and corresponding economy have been deteriorating out from under us over the last few decades (see my Critical Issues section). One example of smoke and mirrors games include the rapid growth in the use of dangerous derivatives to cover for the delinkage of the dollar from gold following a massive loss in the U.S. gold supply in the 1960's. Two other examples include the use of 9-11 to deflect attention from domestic problems while seizing oil fields in the Middle East and hobbling enemies of Israel, and the national media censorship of the social strife created by massive illegal Third World immigration that undermine the long term cohesion, tone, and innovative capabilities of America's declining white majority.

Another good example of a political prestige game played on a military level took place during World War II. Adolf Hitler lost an entire army at Stalingrad for fear that if he allowed it to retreat to save itself from encirclement, this would irreparably damage an image of inevitable victory for his armed forces.

Increase psychic sensations of power, structure, and control: Many leaders are addicted to power accumulation regardless of the social consequences to others. Many thrive on intrigue. Quite a few corporate chieftains have authoritarian personalities and love to lord it over others. Conversely, on the "follower" side of the equation, quite a few people have a strong emotional need for the "security blanket" of organizations that offer structure, a steady paycheck, and symbols of authority and control.

The perpetual quest to make big companies ever bigger gratifies all of these types of people as an end in itself, regardless of whether or not growth makes sense from the viewpoint of shareholder interests, organizational efficiency, or maintaining innovativeness.

National political analogy: The True Believer by Eric Hoffer describes personalities with a strong emotional need to fanatically lose themselves in ideological quests. Many of these kinds of people also have fetishes for the power symbols of state authority ("statism").

And to imagine, were it not for some hanging chads in 2000, and 2004 election irregularities (dare we even say "skullduggery?") we might have been deprived of our Messianic Boy Emperor.

Because of America's republican traditions, our fascist symbols are usually not quite as obvious as the opulent palaces and triumphant arches in Europe. However, I would nominate as one candidate the imperial entourage of Our Leader that was so vast, paranoid, and overbearing that it greatly overtaxed Londoners and thoroughly angered the Queen of England at Buckingham Palace in November 2003.

Exploring a deeper dark side to centralization

Please be aware that in the real world, the merger story is actually much weaker than it generally appears to the public. "When to Ally and When to Acquire" by Jeffrey H. Dyer, Prashant Kale, and Harbir Singh in the July-August 2004 Harvard Business Review explains the problem:

At the core of your company’s strategy lies a dilemma, wrapped in a problem, inside a challenge. As companies find it increasingly tougher to achieve and sustain growth, they have placed their faith in acquisitions and alliances to boost sales, profits, and, importantly, stock prices. That’s most evident in developed countries. American companies, for instance, created a titanic acquisitions and alliances wave by announcing 74,000 acquisitions and 57,000 alliances from 1996 through 2001. During those six years, CEOs signed, roughly, an acquisition and a partnership every hour each day and drove up the acquisitions’ combined value to $12 trillion...

There’s a problem, however, and it refuses to go away. Most acquisitions and alliances fail. A few may succeed, but acquisitions, on average, either destroy or don’t add shareholder value, and alliances typically create very little wealth for shareholders. Companies’ share prices fall by between 0.34% and 1% in the ten days after they announce acquisitions, according to three recent studies in the Strategic Management Journal. (The target companies’ stock prices rise by 30%, on average, implying that their shareholders take home most of the value.) Unlike wines, acquisitions don’t get better over time. Acquiring firms experience a wealth loss of 10% over five years after the merger completion, according to a study in the Journal of Finance. To add to CEOs’ woes, research suggests that 40% to 55% of alliances break down prematurely and inflict financial damage on both partners. When we analyzed 1,592 alliances that 200 U.S. companies had formed between 1993 and 1997, we too found that 48% ended in failure in less than 24 months. There’s plenty of evidence: Be it the DaimlerChrysler merger or the Disney and Pixar alliance, collaborations often make headlines for the wrong reasons. Clearly, companies still don’t cope very well with either acquisitions or alliances.

There is an interesting lesson here in regard to centralization vs. decentralization issues. I believe that most mergers fail because they are driven by "top down" greed factors that emphasize financial engineering. Relatively little attention is paid to "bottom up" factors such as developing better products and creating a climate of mutual trust and a shared sense of ownership and purpose among co-workers.

In the long run we seem to always return to character issues. As an example, in Part Four of my series about the mobile robot industry I talk about the unique success that Cisco Systems CEO John Chambers has had in building his company through acquisitions:

Howard Charney, who founded 3Com before it was acquired by Cisco, commented “There are lots of people working here who could be running their own companies — who were running their own companies. John treats us like peers. If he treated us like employees we'd be out of here.” According to Chambers, “A large part of our business is based upon trust and working together. Nothing changes behavior like survival.” It’s no longer the big that beats the small, but the fast that beats the slow.” “You want to beat your competition, but you want everyone to win.” Chambers insists on staying extremely close to the market. He said, “At IBM and Wang [where Chambers worked before taking over Cisco], we fell in love with technologies and paid a terrible price.”

Jim Clark, who has founded three Silicon Valley companies with market caps over $1 billion, has echoed John Chambers, “A leader must always strive to get the very, very best people — people who threaten you because they’re smarter than you. You also have to make sure you don’t have high turnover. I have a rule: Never lose the first good person.”

This approach is all well and good, but it typically requires leadership skills, emotional maturity, a long term time horizon, and a sense of caretakership towards American society.

I then cover the decentralization side of the story, once again taking the view that there is good and evil to be found everywhere.

The decentralization story

After the Wall Street merger story gets milked to death, now it is time to reverse gears and pitch the decentralization story. Here are some key sales points, combined once again with some national political analogies:

Entrepreneurial companies tend to be much more innovative: Small companies are more likely to attract self-motivated people with visionary, flexible, innovative, decisive, and entrepreneurial personalities. In contrast, big corporations tend to become grazing grounds for risk-averse, politically-sensitive, bureaucratic personalities who prefer highly structured environments. In fact, it is very common for large natural resource companies to buy their mining discoveries and other natural resource properties from junior companies. One also frequently sees large technology companies buy most of their innovative new product lines from small entrepreneurial companies.

Recognizing that smaller companies tend to grow faster and be more innovative, sometimes big companies will deliberately spin-off pieces of themselves to form new companies centered around certain product lines. Officers of the parent companies often obtain shares in the new spin-off companies as an incentive to carry out the divestitures. The Thermo Electron companies, Tektronix, and Hewlett Packard are examples of companies that have been major sources of spin-offs. In the case of Thermo-Electron, systematically creating spin-offs has been a conscious feature of the business plan.

On a national political level, the innovative output per capita of the tiny Greek City states of the heroic and classical periods dwarfed the accomplishments the Greek Empire of Alexander's Ptolemaic successors or the Roman Empire at its height. The small northern Italian states of the Renaissance dwarfed the innovative output of the united Italy that came later. Tiny quasi-Odinist Iceland as a medieval offshoot of Norway dwarfed the literary and intellectual output of the rest of Christianized and consolidated Scandinavia. A few renegade colonies at the time of Thomas Jefferson and Benjamin Franklin dwarfed the innovative output per capita of the rest of the British Empire. Similarly the young American, Roman, Grecian, Swiss, Renaissance Italian, and Dutch republics seemed to foster a vastly greater level of innovative social and political thinking than their mature forms a couple of centuries later.

Some political spin off examples include the way Great Britain peacefully divested Canada, New Zealand, and Australia beginning in the late 19th century. Despite their greater autonomy, these "children" paid back dividends through favorable trade relations. They also provided troops during the World Wars.

Spin-offs and secessionism are by no means irrevocable; for example, Scotland has been both united and disunited back and forth with England many times. Norway has been both united and disunited with Denmark. Neither unification nor secessionism are necessarily things that are worth fighting bloody wars over one way or the other.

I personally believe that among whites, Nordic and Celtic peoples in particular have strong innate libertarian tendencies and function better in smaller countries than in big empires. Later in my libertarian racial nationalist discussion I delve into the idea that the U.S. Constitution should have have contained pre-programmed spin-off provisions similar to the Thermo Electron business plan. That way we would have avoided the War Between the States and numerous incredibly wasteful overseas imperial adventures. We would have also avoided a one-size-fits all monetary policy under the sinister Federal Reserve Banking System and the growth of the high taxation, Zionist-dominated, open borders, big Federal Government police state.

Let us be very generous. Let us imagine for the sake of argument that the U.S. Government today could be characterized as a fair, noble, wise, efficient, and benevolent entity. Let us also try to imagine that it actually does more good than harm. Even in view of all of this, on basic principle, I would still advocate seriously exploring the idea of peacefully divesting portions of America with separate currencies, military forces, border control, and other instruments of local sovereignty. On balance, increasing political decentralization is a good thing.

Simple Form, Lean Staff (this phrase courtesy of In Search of Excellence): Small companies tend to have fewer layers of management to slow down decision-making. They tend to be less encumbered by rank, formalities, and protocols. They also tend to have smaller staffs, whose members tend to know each other better and work more cohesively. Corporate leaders are more likely to take responsibility and show initiative than engage in bureaucratic blame and responsibility-shifting games. In short, small companies tend to be vastly more flexible, efficient, and responsive compared to large companies.

On a national political level, the start-up U.S. government back in the early 1800's was more likely to leave citizens alone and not tax them, and that in itself says a lot. It showed greater concern for its "product quality" as a "service business" by keeping itself much better constrained within its charter, namely the Articles of Confederation, Constitution, and Bill of Rights.

Better focus: Small companies tend to have fewer product lines, which can mean better management focus in areas of core competency. This can also imply greater closeness to the customer.

On a national political level, smaller countries tend to have fewer layers of government and tend to be more responsive to local needs. They tend to be less interested in changing the world with imperial adventures and are more focused on internal affairs.

Although the aggressiveness of Israel today would seem to comprise a major exception to this observation, actually it is not. AIPAC and other Jewish organizations control the U.S. Government. Jewish interests exert imperial power elsewhere in international finance. The state of Israel is merely the tip of a uniquely international iceberg.

Greater Transparency: Small companies tend to be less complex than large corporations, and easier to monitor. With fewer product lines and layers of management, it is easier to connect management performance with business results.

In contrast, CEO's of large companies often like to increase the size and complexity of their organizations to hide their incompetence. In his 15 Oct 2001 Forbes column, Kenneth L. Fisher provided a classic example: "So what does [the new Hewlett Packard CEO Carly] Fiorina do two days after the [HP] stock hits a five-year low? Announce that HP is acquiring Compaq Computer for $25 billion. For Fiorina's career this deal is a time-buying smokescreen. Now no one ever will be able to see if she accomplished anything fundamental for at least several more years. The time and energy spent integrating Compaq will take center stage and obscure her past mistakes at HP."

National political example: In terms of the level of integrity, accountability, and efficiency in government, the best experiences Americans ever had was during the colonial period and the first decades of the young republic. Never has government done so much with so little in term of serving the direct interests of its constituents. In terms of helping to increase their land base, defending liberty, and dealing with their direct enemies (hostile Indians and French and British imperialists), it is hard to beat a track record that includes throwing off the yoke of the greatest maritime empire on the planet and extending the land base available for setttlement all the way from the eastern seaboard to the Pacific.

Conversely the worst governments Americans have ever had has been in the last one hundred years. The era of big government has been characterized by obnoxiously invasive social reengineering programs at home, continual destruction of the value of the currency, and incredibly wasteful, pointless, and destructive adventures overseas.

Greater stakeholdership: Small company managers tend tend to have proportionately large share positions in their companies. They also tend to have more pride and ego invested in the success of their companies, particularly when they are inventor-entrepreneurs. In contrast, the professional managements of big companies are more likely game the system to carve out perks for themselves regardless of underlying corporate performance.

National political example: In his excellent book Democracy: The God that Failed., Dr. Hans-Hermann Hoppe describes how it is critically important that a nation's leaders have a sense of long term caretakership. Unfortunately certain types of social democracy can incentivize politicians to focus on creating regulations and spending public money to make names for themselves in the short term, even though all of this may grow disastrously out of control over the long run. As countries become ever larger and filled with increasingly disparate factions, this irresponsible behavior tends to only grow worse. I discuss his anarcho-libertarian perspective in greater detail later in this article.

From the libertarian racial nationalist perspective, small countries imply more homogeneous populations whose leaders tend to identify more with the common citizenry. This helps to provide a greater sense of stakeholdership and longer term perspective towards serving their interests.

Small companies help keep big companies honest. In addition to providing product competition, they can threaten to hire talented people away from large firms. Dr. Murray Rothbard observed in one of his Mises Institute lectures that the most practical threat to achieve real wage increases is not a union strike, but the ability of employees to jump ship to higher paying jobs elsewhere. (The political analog is what libertarian professor Dr. Ralph Raico calls "preserving the right of exit" in defense of liberty). In fact, small businesses create most of the new jobs in America. In the real world, it is impossible to have a fair contractual negotiation if neither party is free to pick up its marbles and go elsewhere.

National political example: In his Mises Institute lectures, Dr. Ralph Raico claims that the break up of Europe following the collapse of the Roman Empire aided the cause of liberty. With the existence of more competing states and principalities, if rulers became abusive, it was much easier for their most productive people to pick up and move elsewhere. One of the best deterrents to tyranny is the ability of people to split from the program as either individual separatists or as national secessionists. In fact, this was a belief explicitly stated by Thomas Jefferson in his Kentucky Resolutions of 1798.

The deeper dark side here too

Unfortunately, in the last few decades America has shifted towards a much more short-term focused, immediate gratification society. This sad trend, described in American Values Decline (carried by America First Books) has infected all strata of our society and all regions of the country. From my own personal experience in the business world, I have observed how quite a few small business leaders suffer from the same generalized greed disease as their big corporate counterparts. The games they play may be a little different, but the end results in terms of defrauding the general public are very much the same.

While it is true that small companies create most of the new jobs and innovation in America, it is also true that one of the easiest and most lucrative forms of robbery in America involves posturing as a small start up company entrepreneur and selling investment stories to the public that consist of promises without intent to deliver. After raking in tens of millions of dollars in cold cash with public offerings, the wily small business operator can start paying big chunks of all that to himself with a high salary. He can also cash in on ample stock options given to himself that exploit his company's market capitalization. There are millions of ways he can artfully word his Red Herrings, form 10-Ks, and other public disclosure statements so that disgruntled investors several years down the line will never able to get back at him in court for lying through his teeth.

The best defense against this behavior is "buyer beware." While working as a stock broker, my best defense was to personally attend trade shows and corporate offices. This enabled me to meet corporate leaders face-to-face to find out important information frequently omitted from public documents. It was particularly helpful to speak directly with competitors and other peers within an industry sector of interest, and then perform my own analyses of company disclosure documents.


While there are obviously many good arguments for both centralization and decentralization, I agree with libertarians that government has some peculiar characteristics that make it vastly more dangerous once it becomes centralized than private businesses in a free market. Therefore it seems prudent to err on the side of decentralization rather than centralization.

For all the bad things you can say about excessive perks, centralization, and abuse of power and privilege in the private sector, with government everything seems to be at least one quantum level worse. Whereas a large corporation can play games with stockholders and accountants to somewhat decouple management performance from compensation, the government has many more intimidation tactics at its disposal. Government has an amazing ability to continually make a horrible mess with its programs --yet keep on growing and adding new failed programs. In my centralization vs. decentralization article, I describe how unrestrained government tends to morph from initially good government to ponzi government and then finally evil government, where government actually creates false conflicts to justify the use of strong arm methods to maintain its grip on power.

The late libertarian party Presidential candidate Harry Browne summed the underlying nature of government very well in his article "The 7 Never-to-be-Forgotten Principles of Government:"

It's easy to think sometimes that a new government program, law, or regulation could cure a pressing social problem.

Whether it's a desire to end abortions, keep the wrong people out of the country, make your city drug-free, stop corporate frauds, crack down on criminals, or make health care more accessible and less expensive, you can imagine how the right new law could make everything okay.

But when you get that kind of thought, I hope you'll remember the seven principles that apply to all government programs — not just the ones you oppose.

The Principles

1. Government is force. Every government program, law, or regulation is a demand that someone do what he doesn't want to do, refrain from doing what he does want to do, or pay for something he doesn't want to pay for. And those demands are backed up by police with guns.

You expect that force to be used only against the guilty. But we can see how the Drug War, the foreign wars, asset forfeiture, the Patriot Act, and other government activities have used force just as often against the innocent — people who have not intruded on anyone else's person or property.

In fact, government force is used more often against the innocent than the guilty, because the guilty make it their business to understand the laws that apply to them and stay clear of them. Meanwhile, the innocent, thinking they've nothing to fear, suddenly find that they've innocently violated laws they never heard of.

2. Government is politics. Whenever you turn over to the government a financial, social, medical, military, or commercial matter, it's automatically transformed into a political issue — to be decided by those with the most political influence. And that will never be you or I.

Politicians don't weigh their votes on the basis of ideology or social good. They think in terms of political power.

3. You don't control government. It's easy to think of the perfect law that will stop the bad guys while leaving the good guys unhindered. But no law will be written the way you have in mind, it won't be administered the way you have in mind, and it won't be adjudicated the way you have in mind.

Your ideal law will be written by politicians for political purposes, administered by bureaucrats for political purposes, and adjudicated by judges appointed for political purposes. So don't be surprised if the new law turns out to do exactly the opposite of what you thought you were supporting.

4. Every government program will be more expensive and more expansive than anything you had in mind when you proposed it. It will be applied in all sorts of ways you never dreamed of.

When Medicare was initially passed in 1965, the politicians projected its cost in 1992 to be $3 billion — which is equivalent to $12 billion when adjusted for inflation to 1992 dollars. The actual cost in 1992 was $110 billion — nine times as much.

And when Medicare was enacted, Section 1801 of the original law specifically prohibited any bureaucratic interference with the practice of medicine. Today not one word of that protection still applies. The federal government owns the health-care industry lock, stock, and barrel.

The new program you support will eventually include all sorts of powers and privileges you can't even imagine right now.

5. Power will always be misused. Give good people the power to do good and that power eventually will be in the hands of bad people to do bad.

As Michael Cloud has pointed out, "The problem isn't the abuse of power; it's the power to abuse." Give politicians power and it certainly will be abused eventually — if not by today's politicians, then by their successors.

As P.J. O'Rourke said, "Giving money and power to politicians is like giving whiskey and car keys to teenage boys."

6. Government doesn't work. Because government is force, because government programs are designed to enrich the politically powerful, because you can't control government and make it do what's right, because every new government program soon wanders from its original purpose, and because politicians eventually misuse the power you give them, it is inevitable that no government program will deliver on the promises the politicians make for it.

For years, I've asked listeners during radio interviews to name a government program that has actually delivered on its promises, and no one has been able to do so.

If you think there's a successful government program, you probably don't know how much it actually costs, aren't aware of all its destructive side-effects, have no idea how easily and inexpensively such a thing could be done outside of government, and/or are basing your view of its success on political propaganda.

It doesn't matter whether a program is supposed to do something you want or something you don't want, whether the program is something you consider a proper function of government or something beyond its limits. It won't work. Government programs always wind up disappointing you.

7. Government must be subject to absolute limits. Because politicians have every incentive to expand government, and with it their power, there must be absolute limits on government.

The Constitution provides the obvious limits we must reimpose upon the federal government. Until the Constitution is enforced, we have no hope of containing the federal government.

The present system of unlimited power is like giving a drunken stranger a set of signed, blank checks on your bank account. You are reduced to relying on the honesty and integrity of people you don't even know — and they abuse that trust again and again.

Whether you think government should be bigger or smaller than the limits specified in the Constitution, the first step is to restore absolute limits, and then — if you like — work to change those limits to ones that would be more to your liking.


So the next time you're tempted to think that some government program is just what this country needs, ask yourself these questions:

1. Do I really want to use force to make this happen? Do I have any idea how many families may be destroyed by giving the government another tool to be enforced with fines and prison terms?

2. Do I really believe that George Bush, Teddy Kennedy, Hillary Clinton, and Trent Lott will have my best interests at heart when they fashion this new program or law?

3. Why should I believe supporting this program will lead to exactly the solution I believe is right — when I have no way to control the outcome?

4. Do I really think the politicians won't expand the scope and cost of this program far beyond what they're talking about today?

5. Do I really want to give politicians this kind of power — knowing that some day the politicians and party I don't like will have it at their disposal?

6. Why in the world should I think this government program will work any better than any government program of the past?

7. How can I hope to bring about small, limited government when I'm suggesting a new government program that will take us further away from the Constitution?


If you really want to cure a pressing social problem, take steps outside the realm of government. If you don't see how you can convince people to help you succeed in a non-governmental endeavor, how can you expect to control politicians who care nothing for your desires?

And if you really want to make a noticeable difference, if you really want to improve life, do something for yourself or your family today. That's where you have real control, that's where you don't need to rely on politicians — or anyone else — and you can make sure the results are as you intend.

Harry Browne had a gift for expressing himself clearly and succinctly. Getting back to the original question: "Should we incentivize public servants with the perquisites of expanded government, or be more concerned that they will abuse these things?," I think that Mr. Browne would have responded that unless there is a very clear and compelling reason for a government job, if anything public servants should be incentivized to get out of government completely and get a real job in the private sector. When in doubt, less government is usually always better than expanded government.

Return to question 21

Proceed to commentary for question 22


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