Centralization vs distribution of the political economy

Thomas P Seager, PhD

Dec 28, 2020·9 min read

While you reflect on the year-end essays that summarize the events of 2020, you might struggle to make sense of the disjointed, incoherent, and nonsensical experiences that characterize 2020.

If there is one theme that connects, explains, and makes sense of all of these disconnected and incredible phenomena it is this:

Politics.

The study of politics is about power: who has it, how did they get it, and what will they do with it. What makes the last 4 years so fascinating, and 2020 especially insightful, is the way that the trajectory of power in the United States and the World has begun to change.

And there are good reasons for it.

The 20th century achieved new heights in technological atrocity. Although World War I was supposed to be the “war that ends all wars,” basic questions at the intersection of European geography and industrialization were left unresolved by the Great War.

The problem of geography is the position of Germany. A fragmented Germany is not a threat to the peripheral empires of the European peninsula. However, a unified Germany is a serious problem, because the position of the country in the center of Europe, with ports on both the North and Baltic seas and control of some of the most important navigable rivers on the subcontinent, creates for Germany tremendous advantages and threats.

And the problem of industrialization is, again… Germany. The combination of geographic advantages and threats, with an industrial/technological advantage, creates opportunities for militaristic German expansion that have been almost too tempting for German leaders to ignore. And Germany’s technological leadership has a long history with deep cultural and philosophical foundations.

It was a German (Martin Luther) who led the Protestant reformation, and with that reformation came a belief that everyone should have their own personal relationship with God, and their own understanding and interpretation of the Bible. Thus, the Protestants set out to do several things that proved to lay the groundwork for the Industrial Revolution:

• German Protestants taught ordinary citizens to read.
• They standardized the written alphabet and language, so as to translate the Bible.
• They introduced prohibitions that weakened familial ties in favor of allegiance to the larger and more abstract nation-state.

Political unification, literacy, and the invention of bureaucracy gave the Germans a tremendous technological advantage during the first half of the Industrial Revolution, and created the necessary per-requisite conditions for the two grotesque wars that scarred the first five decades of the 20th century.

Then, for Europe, the Cold War that followed World War 2 brought a quiet period.

It is no accident that Germany was partitioned after the War. Given the global experience with a unified Germany, one way to ensure that Germany could never become strong enough to be tempted by belligerence again was to divide it into pieces.

Until 1990, when collapse of Soviet power permitted German re-unification, and renewed anxieties about German ambitions, and new measures required to preserve the peace.

Enter the European Union.

German Reunification Without World War

In theory, binding the political and economic fortunes of different European nations together is a strategy to prevent new wars. Although Germany might still dominate the continent economically (it does), the exercise of German power no longer requires war. Thus, consolidation of bureaucratic authority in Brussels gives the smaller, less powerful nations some influence in the governance of the larger whole — which is superior to the recent experiences of military occupation.

Since the end of World War 2, there has been a steady consolidation and centralization of political power in the hands of bureaucratic and economic elites — and the payoff has been decades of peaceful co-existence.

However, the generations that remember the World Wars are aged now, and have surrendered the influential political offices within their home countries to younger elites who answer to constituents that do not carry the same trauma. No longer threatened by either the Cold War, or by the World Wars, the increased consolidation of power in the hands of fewer elites no longer seems like a worthwhile trade to these younger leaders.

Brexit in the United Kingdom was the first meaningful push back against the trend toward further centralization of power in Europe. The voters in the UK were essentially saying, “We think the centralization of power has gone too far. We want greater autonomy. We want a more decentralized distribution of political authority.”

And the same sentiment played out in the US at the same time.

Centralization vs Distribution in the US: #NeverTrump

The election of Donald Trump in 2016 is not some brilliant stroke of Russian manipulation. It is an expression of popular political sentiment that the consolidation of political power in the Executive Branch of the Federal Government, and the federal government in general, has gone too far.

Undeclared wars, corporate bailouts, and arbitrary immigration policies all exemplify the popular complaint that the trend towards consolidation of political power in Washington DC is now more damaging than it is protective.

Trump’s Presidency reversed the consolidation trend. His self-proclaimed mission to “drain the swamp” of the unelected bureaucrats that regulate and manage federal largess goes further than his public feuds with the Deep State (e.g., the Central Intelligence Agency and Federal Bureau of Investigation). For example, Michael Lewis’ new book The Fifth Risk (2019) describes the systematic apathy — if not outright disdain — the 2017 Trump transition team exhibited towards the federal agencies they were now charged with leading.

Moreover, the absence of a coordinated national response to COVID-19 exhibits Trump’s commitment to distribution of political power, and explains the enormous variation between states like New York and Florida, or California and Texas, in their response to the perceived public health challenge of contagious respiratory illness. What appears to his critics as non-nonchalance is also a consistent ideological expression of his views on governance.

In short, Trump seeks to weaken the power of the Presidency, not strengthen it, because he believes a broader distribution of political authority is an improvement over further centralization. And tens of millions of American voters agree with him.

In this respect, #NeverTrump is not just a hysterical case of “Trump Derangement Syndrome”, as Dilbert creator Scott Adams describes, but also a rational expression of political ideology that disagrees with Trump’s views of a more decentralized — even fragmented — distribution of political power. No matter which set of political lies the electorate chooses to question or believe, the consistent political direction of the Trump Administration has been to undermine the institutions of federal authority in Washington DC and redistribute them to States and more local levels of government.

The 2020 Presidential Election

Ironically, it is the structure of the Electoral College that guarantees the State’s autonomy in the selection of their Electors that undermines Trump’s efforts to expose fraud and bias in the 2020 US Presidential Election. Because States have extraordinary leeway in writing their own election rules, lawsuits in Federal court must argue that State processes violate the US Constitution.

That’s a high burden of proof.

The Electors in Georgia, Pennsylvania, Wisconsin, Michigan and everywhere will be determined by processes and politics particular to those States.The lawsuit brought by Texas, and joined by several other States, claiming that Pennsylvania’s election violated the US Constitution was unsuccessful largely because States have this right to set their own election rules. Decentralization of the selection of Electors allows States to experiment, to screw up, and to innovate, while the Electors themselves provide the safeguard of human judgment.

Accepting the election results in swing States, dubious as they are, is nevertheless consistent with Trump’s ideological agenda to minimize the interference of the Federal government in local affairs.

The remedy to Executive malfeasance is to respect the Constitutional limits on the powers of the Executive Branch that are intended to minimize the damage that any single President could enact. The problem with that is the powers of the President have been expanded beyond those explicitly granted in the Constitution (e.g., wars undeclared by Congress, spending authorization unapproved by Congress, promulgation of regulations & orders with the effect of law), so risks of Presidential corruption and incompetence have increased.

Business Implications of Decentralization

As political power consolidated, at national and global scales, in the hands of fewer officials, a number of obstacles to increasing scale in markets and corporations have been removed. For example, in the United States the repeal of the Glass-Steagall Act in 1999 permitted consolidation of banking and financial services companies into a few mega-corporations that had previously been prohibited to mitigate against the risk of systemic collapse. Less than two decades later, we discovered that these uber-banks had become “too big to fail,” as the systemic risks were realized.

Free trade, global climate regulation, and the Euro are all additional examples of political movements that either remove barriers to further consolidation of diverse corporate entities into fewer hands via mergers, acquisitions, erection of new barriers to entry, and expansion of existing markets into previously untapped geopolitical areas.

The European Union, the United Nations, the Climate Change Movement, NAFTA, the World Trade Organization, the World Health Organization, and all the institutions that emerged to prevent recurrence of the atrocious wars and abuses of the 20th century have the convenient side effect of facilitating global commerce.

Each of these allows larger corporations with greater economies of scale.

The problem of a weak central government is that increases the cost of large scale business. And increased costs for large corporations means less profit-sharing for corporate executives.

However, the political leaders who orchestrated the consolidation of power into expanding bureaucratic institutions never intended to construct a taller pyramid to prop up the world’s richest corporate capitalists. That was an unintended side effect of their political strategy to prevent World War 3.

Thus, political consolidation has come with increasing antitrust actions against Big Tech in Europe and the United States, in an attempt to decouple political cooperation from economic consolidation.

Enter COVID-19

As a public health crisis, COVID-19 barely registers in mortality statistics. In the United States, CDC data shows increased all-cause mortality — but when the additional deaths from suicide, drug overdose, and medical errors are subtracted out, it’s difficult to find the COVID signal in all the mortality noise.

However, as a political crisis, COVID-19 has been extraordinary.

There is nothing like an abstract, global existential threat to motivate the human instinct for tribal allegiance. The greater the geographic scope of the threat, the larger the tribe.

For example, it should not escape your notice that the Chinese lock-downs were an expedient solution to the problem of Hong Kong separatism. How else might the Chinese government deal with increasingly daring public protests that it seemed powerless to suppress?

The Chinese problem of consolidating political power under Beijing is directly analogous to the EU problem of disrupting a UK exit from the EU. Again, it is no coincidence that the “70% more contagious mutant virus” propaganda should appear in the UK on the same weekend that Brexit negotiations were putting the finishing touches on severing trade ties with the continent. The mutant virus stories were a last-minute attempt to inflate COVID hysteria as an attempt to disrupt the negotiations.

All of which is fine with global corporations, because consolidation of political power under fewer politicians both reduces lobbying costs and helps extend markets across international boundaries, to further capture economies of scale.

The one thing that all Silicon Valley founders agree on is that you have to get to scale, fast.

Anything that increases the cost of scale is an existential threat to a Silicon Valley unicorn. In this respect, COVID-19 is a brilliant opportunity to remove further barriers to trade, consolidate economic power in a smaller number or ever-larger corporate entities, and create larger barriers to new competitors in the increased market paces.

Given that Trump’s decentralization agenda is the biggest threat to Silicon Valley since Steve Ballmer, its no wonder that Big Tech would censor messages that critique lockdowns, question the consolidation of authority, and advocate for a diversification of medical responses.

Where global climate change failed, COVID hysteria has succeeded. By providing a temporary bolus of moralistic centralization, COVID fear-mongering has activated a primal Us Against Them tribalism that was once the exclusive purview of religion.

It won’t last.

In fact, a Brexit deal was struck a few days ago. The United States, the United Kingdom and symbolically important countries like Sweden are pulling away from the rest of the world. The reversal of globalization trends is likely to continue, no matter who is elected President of the United States, because the underlying reason for the consolidation — fear of German aggression — has become stale.