The People and the Elite

Some people believe that we are all equal; that everyone is equally important, and that everyone's contribution to society should be counted as equal. People who believe this also tend to believe that whatever success one achieves in life is not primarily due to work, sweat or talent, but rather through luck; and that, therefore, people who have achieved something (= have been very lucky) should part with their spoils in favor of people who haven't achieved much (= haven't had luck). A large proportion of people in Europe subscribe to these or similar beliefs.

I am not one of these people. While I agree that partly an ingredient of a person's financial success is luck, I think that the luck factor has mostly contributed its share by the time one is born. One is either granted an intelligence or other traits through which one will achieve success; or else one is born into a family which inculcates in the person constructive values that will help this person succeed; or one is born mentally disadvantaged, and to parents who cannot help compensate for that, and is condemned to a life of personal financial struggle and failure. But this - the body and the situation one was born to - is the primary extent to which luck influences one's future. The rest is up to the person and what he or she decides to do.

In my opinion, not everyone contributes to society in equal measure. The contributions of different people certainly cannot be easily ranked; however, if one evaluates people's whole lives, there are some people who contributed massively; who invented new things and ideas that brought much new well-being to others; then there is the majority of people whose contributions were individually modest, but whose contributions helped everything be sustained to an extent; and then there is the minority, criminals and worse, who destroyed much more than they created. For the purposes of this article, let us call these people the Creators (the contributing few), the Sustainers (who form the majority) and the Destroyers (the really damaging few).

Within the large class of Sustainers, we could additionally assign names for Contributors (contributing overall, but on a small scale: they do their work well; are fair to their coworkers, neighbors and strangers; have constructive values which they pass to their children and others), the Averages (people who don't help anyone much, but mind their own business, and don't really damage others) and the Disruptives (small-time exploiters, laggards, protected people who enjoy privileges that are not really paid for by their overall life contributions, alcoholics, people who propagate harmful values, perpetuators of policies that hinder the well-being of society).

It is much fairer and helpful to consider these categories as referring to people's roles, rather then to people as such. One person could be an important Creator in her work life, but a Disruptive in private, or the reverse. It is not easy to classify everyone fairly and correctly, and I don't think this should even be attempted naively or on a massive scale. However, it is useful to assume the general existence of these categories.

Independent of the foregoing, people could also be divided into two other categories. There are those who, to a larger or smaller degree, determine the rules of how a society functions; these people we will call the Leading Elite; and there are those who must play by those rules, who we will call simply the People. If in a society there exist groups of people who receive more benefits than others, and/or have more sway with the Leading Elite, let us call these the Privileged. In communist countries, Party executives were the Leading Elite, and Party members were the Privileged. In mature democracies, politicians, corporate chiefs and big shareholders and investors are the Leading Elite; inheritors of wealth are Privileged in one way; holders of protected jobs who are difficult to fire are Privileged in another. Other people, such as those who were born to poor parents and were unable to get a protected job, are unprivileged.

I contend that the health of a society, and its future, is determined by the rules controlling entry to, and exit from, the Leading Elite and Privileged classes. The most successful societies are those where the requirement for becoming a Leading Elite is to be a Creator - someone who is capable of massive contribution to the society - and where it is not difficult for Sustainers to become part of the Privileged class. Societies where the share of Creators within the Leading Elite is too small, or where the Leading Elite is populated by mere Sustainers, or worse yet by Destroyers, are on their way to failure. On its way to failure, a society will have a Privileged class, but deny entry to it to an ever larger share of Sustainers.

Capitalism rewards people who are intelligent, daring and willing to commit. In other words, capitalism favors Creators. It allows Creators to become part of the Leading Elite, in the sense that successful business people provide jobs for a large number of Sustainers, and they make the economy tick. Capitalism works to the extent that leadership responsibilities are given to people who really understand what they're doing and who have proven this in the past through a successful business career. Capitalism fails to the extent that it grants leadership responsibilities to incompetent, crooked and undeserving people: people who achieve success by gaming the system instead of playing in the spirit of the rules; people who inherit vast fortunes and use them for no good, while potential Creators are born to poor parents and not given support and opportunity.

Democracy, unfortunately, seems to raise to Leading Elite-status Sustainers as well as Destroyers and Creators. This may be because most voters are Sustainers and vote for people whose policies they somehow identify with and understand. Most voters lack the education and depth to understand the true political opinions of Creators. Therefore, people who get elected are either Sustainers themselves, or people who fake their appearance sufficiently well to appeal to Sustainers. The results are mediocre - the few true Creators in politics battle it out with the many who are in it just for themselves and/or don't really understand what they're doing; most of the time, the victory goes to mediocrity and special interests.

Communism fails by denying that there is any difference in people's contribution capacity. As the most perverted form of governance, it purges Creators, deprivileges Contributors, installs Disruptives and Destroyers as the Leading Elite and privileges the Averages and Disruptives. In the process, the negative-neutral majority can be made happy for a while until the system collapses under its own inefficiency and incompetence.

A monarchy - much like a business dynasty - rises through an initial wise leader who is a Creator; it stagnates through descendants that are mere Sustainers; and it fails in time if no new leader arises that is a Creator, or if there's worse.

A healthy society is one where the People understand and appreciate that there is, and that there must be, a Leading Elite; because without a healthy Leading Elite, a society soon will have nothing. A healthy society is one where Sustainers understand that not everyone is equal, and that the Leading Elite should be composed of Creators. A healthy society does not discourage new Creators from entering the Leading Elite; it does not restrict entry to leadership positions by making them hereditary; it does not discourage bright stars from moving upward, e.g. by a bureaucracy and high taxes for anyone who is successful. A successful society encourages bright and capable people to become part of the Leading Elite through a flexible, performance-based, non-arbitrary system of reward.

A healthy society is also one where the Leading Elite understand that they are responsible to the People. The Leading Elite direct and control the society, and they must do so in a way that makes life generally good for Sustainers. As long as Creators are in charge of the Leading Elite, popular well-being is likely to be a natural side-effect of their actions. However, unfortunately, since the Leading Elite is in control of society's institutions, its health must be maintained or lost from within. If the Leading Elite makes a suicidal mistake such as allowing entry to incompetents and Destroyers; or by attempting to close itself to new entrants, thus losing the next generation of Creators; then the Leading Elite will fail in its purpose of making life good for Sustainers; the society will suffer in turn; and a minor or major revolution is likely to occur. But revolutions are the work of Sustainers and an opportunity for Destroyers. Any new Leading Elite after a revolution will consist of misled Sustainers as well as opportunity-seeking Destroyers, so this usually hardly improves the situation at all.

This is why long-term stability and prosperity of states is so rare. It can only occur when the Leading Elite consists mostly of Creators. However, Creators are few, are not obviosly recognizable, and there is a wide range of factors which can conspire to damage the health of the Leading Elite. Once the Leading Elite is damaged and the control of society passes into hands of non-Creators, it is only a matter of time until the economy fails and a revolution occurs. And then - all bets are off.


The postal system needs a DNS-like layer

The whole postal system lacks the equivalent of a DNS layer. You don't manually type in, you go to www.google.com. Likewise, you shouldn't have to jot down the complete, current physical address of anyone. Instead, people and companies should have unique "mail names"; you would simply put down the mail name of the person you want to send something to, and the postal service would look up their current address and send it to them.

All it takes is some rudimentary insight on behalf of the Postal Service to put this into action, and it would greatly improve the reliability of mail for everyone.


U.S. banking history: free banking era

I yesterday ran across an interesting speech by Greenspan illuminating the history of U.S. banking. From 1837 to 1863, the United States did not have a central bank, and it was relatively easy to register as a bank and issue money.

I found the following part of his speech remarkable:
While free banking was not actually as free as commonly perceived, it also was not nearly as unstable. The perception of the free banking era as an era of "wildcat" banking marked by financial instability and, in particular, by widespread significant losses to noteholders also turns out to be exaggerated. Recent scholarship has demonstrated that free bank failures were not as common and resulting losses to noteholders were not as severe as earlier historians had claimed.
The American Currency Exhibit at the Federal Reserve Bank of San Francisco states a few interesting factoids about the free banking period, mostly about the negative but funny aspects that are unimaginable today. However, Greenspan says:
During the Civil War, today's bank structure was created by the Congress. It seems clear that a major, if not the major, motivation of the National Bank Act of 1863 was to assist in the financing of the Civil War. But the provisions of the act that incorporated key elements of free banking provide compelling evidence that contemporary observers did not regard free banking as a failure. These provisions included free entry and collateralized bank notes.

David Brin: The Transparent Society

Wei Dai has just informed me that David Brin has already written a book about issues very close to those I raised in my earlier blog post about The questionable value of anonymity. I haven't read his book, but this excerpt from the Amazon synopsis looks promising:
Fearing technology-aided crime, governments seek to restrict online anonymity; fearing technology-aided tyranny, citizens call for encrypting all data. Brin shows how, contrary to both approaches, windows offer us much better protection than walls; after all, the strongest deterrent against snooping has always been the fear of being spotted. Furthermore, Brin argues, Western culture now encourages eccentricity-were programmed to rebel! That gives our society a natural protection against error and wrong-doing, like a bodys immune system. But social T-cells need openness to spot trouble and get the word out. The Transparent Society is full of such provocative and far-reaching analysis.The inescapable rush of technology is forcing us to make new choices about how we want to live. This daring book reminds us that an open society is more robust and flexible than one where secrecy reigns. In an era of gnat-sized cameras, universal databases, and clothes-penetrating radar, it will be more vital than ever for us to be able to watch the watchers.