Happy Independence Day!

Today is a good day to remember the founding of the United States.

Suppose that it's 200 years ago and you live in a world full of tyrannies trying to restrict your freedom. The tyrants try to control what you can and cannot do. For doing some actions that are inherently harmless, they will persecute you and burn you at the stake.

The tyrants tax you heavily. They demand that, for every hour you work for yourself, you work another hour for them. If they find you didn't work enough for them, they'll find you and burn you at the stake.

The tyrants go to wars against other tyrants for superficial reasons. In the process, they needlessly kill their own people and the people of the other country. In the name of tyrants, lives are lost; more lives are ruined; people's fortunes are destroyed.

Suppose now that you have a unique opportunity to found a new, independent state in a new territory, to break apart from the oppressors of the past, to create a free country. What do you do? How do you do it?

For one thing, you know that monarchy as a system of government doesn't work. You know that it leads to government excesses and tyranny. So you outlaw monarchy. You make nobility unconstitutional.

But if not monarchy, then what system to use? Remember, it's 200 years ago; democracy is fairly new and has just recently been tried in another country. Ancient democracies existed, but didn't work quite perfectly. A cursory look at history shows that there has been a dearth of experimentation with systems of government. You know that there must be some good system of government, but you don't know what it is. So what do you do?

You do the reasonable thing: create competiton. Instead of creating one country and enshrining a certain system into law, you create dozens of separate states; you say little about the organization of their internal governments; but you pit them to compete against each other to attract citizens.

You enshrine people's rights into a constitution, so that people are free to move from state to state, and so that some most fundamental rights are respected. Now, if a tyranny develops in any of the states, the people will always be free to move to another.

However, you also need to prevent the states from fighting against each other, to prevent individual governments from destroying their citizens' properties and ruining their lives. The most obvious way to do this is to institute a central arbiter with sufficient power to stop the states from fighting; yet, not so much power that the central arbiter could become a tyrant in and of itself. So you create a federal government, and you restrict it with regard to how it can intrude into the lives of citizens. To maintain a competition of governmental systems between states, it is of utmost importance that the government of the federation be kept small, so that it itself doesn't become a system from which people can't escape.

This is how the United States were founded.

You might say this was as good and as enlightened a system as it gets. Even if we could start a brand new system of government today, I don't know how we could improve on these fundamental principles.

However, over the past 200 years, this system has unequivocally and completely failed. The United States today are nothing like the founders 200 years ago envisioned. The United States today are a bastardized perversion of the principles enshrined into the Constitution at their founding.

The United States are now a tyranny. They are the most economically efficient tyranny in the world. They are also the tyranny that has the best PR. Yet, they are nevertheless a tyranny.

The source of this tyranny is the ever increasing power of the U.S. federal government. It has usurped powers it was never supposed to have.


The United States began with no taxation. It used to be that the federal government was minimal and was financed by customs and tariffs. No more - the federal tax system of the United States is now one of the most onerous existing. It is magnitudes worse than the taxes imposed on the British colonies when they rebelled to found the United States.

Going completely against the principles the United States were founded against, the federal government now even tries to punish you for trying to escape their greedy grasp. Even if you now leave the United States, renounce your citizenship and return your passport: if the federal government deems that your departure was for tax reasons, which is generally automatically the case, they will require you to continue paying tax to the United States, wherever in the world you live, for 10 more years after you stop being a U.S. citizen. Not only that, but they also reserve the right to draft you into the army.

That's a charateristic of tyrannies: they try to prevent their people from escaping; or at least, from taking their wealth with them.

Arbitrary punishment

One characteristic of a tyranny is that it exercises arbitrary punishment. It doesn't so much matter what you did: it matters more who are your enemies.

This succinctly describes the United States. People's fortunes are destroyed for falling out of favor with powerful people. The courts are abused to do the bidding of the federal government, and the federal government does the bidding of those with the right political connections.

In the 1980s, Michael Milken facilitated the financing of a wave of corporate takeovers that targeted inefficient corporations. These corporations were run by cozily situated bureaucrats who paid themselves large salaries, flew around in corporate jets, built opulent offices and generally made little value for shareholders. Before Michael Milken and his kind, there was hardly any way for shareholders to do anything about this. The corporate executives were the most powerful people in the country, and nobody had the money to come and buy a corporation, take control and fire those executives. As a result, the stock market was in a sorry state indeed. Because it sucked so much to be a shareholder - having no control and receiving hardly any dividends - the price of all of a corporation's shares was commonly lower than its net assets.

Then, along came Michael Milken and the likes of him. Their main contribution was to structure ways that independent people could raise money to take over corporations. Once this was possible, inefficient executives became fair game: people could come in, buy up a corporation, fire the existing management and rationalize the company's operations. If this meant splitting up the company and selling it off piece by piece, so be it: the stock market grew and everyone made money.

Except, of course, the powerful, and fired, inefficient executives. They were unhappy about this state of the affairs, and they had connections in high places. A dynamic stock market full of takeover activity was making their cozy positions difficult, so they arranged it so that the era of corporate takeovers would end.

At that time, there was this young, ambitious public prosecutor that wanted to make a name for himself. His name was Rudy Giuliani. It is not inconceivable that he is who the disgruntled executives turned to. Perhaps they made a deal; perhaps, in exchange for bringing down the people they wanted to ruin, they promised him their loyal campaign contributions later.

Whatever the connection is, if any, Rudy Giuliani went after people such as Milken, and he want after them hard. With Michael Milken in particular, his only legal leg to stand on were six paper "violations": essentially, among the thousands of transactions and volumes of filings that Milken was involved with as a part of his work, they found a few with which there were some problems. No fraud or cheating were involved, and there was no financial damage. Milken could have probably plead not guilty; if he did, he might have walked off free with his honor and reputation intact.

But Rudy Giuliani played dirty. In essence, the feds threatened Milken that if he does not plead guilty, they will come not only after him, but after his whole family. They will dig deep, they will find something, and they will give everyone decades of legal troubles at best, and at worst, land everyone in jail. So he better plead guilty if he doesn't want his family to go down with him.

He did. He was sentenced to 4 years. He served 22 months, and to this day his name keeps being mentioned in every magazine article written by some boneheaded reporter implying how the government "cleaned up" in previous decades. The government cleaned up, alright - not just Milken, it put several innocent people in jail (and some guilty ones as well). This sent a strong signal to anyone with enough balls to take over a corporation to improve its shareholder value: "Though shalt not threaten the politically connected."

Individual liberties

The federal government feels the need to intrude upon your life and tell you what you can and cannot do.

You cannot, for example, smoke dope. Never mind that it doesn't hurt anyone - certainly no one other than you. The federal government in Washington D.C. feels the need to tell you not to.

Not only that, the federal government locks up ill grandmas who grow dope for medicinal use. They spend billions of tax payers' money in an ill-conceived "war on drugs" that they've been "fighting" for several decades and have yet to show any sign of "winning". Seven decades ago, it was the same thing with prohibition of alcohol. That didn't work out so well.

You cannot gamble online either. You used to be able to - but then, a Las Vegas representative introduced legislation that cracked down on online gambling. And playing poker, too. Ostensible reason? Poor children who gamble online and get their parents into enormous debt. That's what the TV said. Real reason? Las Vegas casinos feeling competition from the online gambling industry. So they lobby the federal government to prohibit you, and everyone else, from doing what you want with your money. And it considerably hurts freedom on the internet, because now, all of a sudden, it becomes more difficult to make online trasactions - there need to be all these checks to make sure none of it goes into gambling. And all of that, for what? The benefit of Las Vegas casinos?


Need anything be mentioned? The United States have been messing around the globe militarily, fighting a war here, overthrowing a regime there, for the better part of the 20th century. If the 9/11 radicals didn't voice their argument by causing the deaths of 3,000 civilians, they might have actually had a point: the United States had been messing with the Middle East and by doing so accumulated deep resentment from the Arab population. When the U.S. federal government acts at home, it knows that at least it needs to sugarcoat its actions so that the American voter will accept them. When the U.S. federal government acts abroad, it doesn't even have to do that: its true colors of self-righteousness and self-interest at anyone else's expense shine through.


The United States have, sadly, deserted the sound principles on which they were founded. They were founded on the principle of limited government; but the federal government is now not limited in any way. They were founded on the principle of competition among states; but the federation is now more powerful than any of the states. The competition among states still exists to an extent, but it does not have the intended impact. There is no way for people to escape the tyranny of the Fed.

I have not confirmed if it is true, but I heard it said that one of the founders of the United States opined that the country was going to need another revolution in a hundred years. In hindsight, that prediction came true. A revolution did not occur, and beginning some 100-plus years after their inception, the United States began turning into a tyranny among other tyrant states.

The images of liberty, of the founding fathers and the founding principles are frequently used to this day to prop up the image of the United States as a free country. In my opinion, the uses of such imagery are illegitimate and in poor taste. Would the founding fathers not be turning in their graves right now, if they knew what the United States became?

And so it is that, at least in my view, and that of many others, the fourth of July is now not so much a celebration, as it is a sad commemoration: a reminder of principles forfeited, freedoms lost, of a hope that once existed; and of a perverted, corrupted system that now exists in their place.

Now, let us see if, after having posted this, I'll ever still be able to fly a U.S. airline. :)


Tomaz said…
You're lucky. Under Clinton this wouldn't have earned you entry into their good books but under Bush your views are (declaratively) politically correct (but then there is that old Jesus saying: "one shall be judged by deeds not words" - which you, well, already described in your article).
Anonymous said…
There's something I don't understand in the 'Arbitrary punishment' paragraph. Wikipedia paints a totally different picture. Why ?
denis bider said…
I read the article as it exists right now, and the meat in it appears to be from two books, one by Jesse Kornbluth (Highly Confident: The Crime and Punishment of Michael Milken) and another by Dan G. Stone (April Fools: An Insider's Account of the Rise and Collapse of Drexel Burnham).

I don't see that the Wikipedia article, as it is right now, is necessarily at odds with what I wrote. Most of the content in that article can be superficially correct, while the gist of my article can still make sense.

For example, the Wikipedia article does state:

At the behest of Attorney General Dick Thornburgh, Giuliani threatened to indict Milken's brother, Lowell (a lawyer for Drexel) for racketeering when Milken initially balked at pleading guilty. As part of the deal, the case against Lowell was dropped. Federal investigators also questioned some of Milken's relatives--including his aging father--about their investments.[2] There may have been a basis for investigating Lowell because of his employment with Drexel and the fact Milken often traded funds into his family's accounts. Nonetheless, this and other tactics employed by the government in the course of the investigation were the cause of much criticism.

If there is a rule "thou shalt not X", and you want to know how well justice is being served, you have to know not just that person A was punished for X. You also have to consider how much sense that particular rule makes in the first place; and you have to know not only that someone was punished, how many weren't.

That's where the scale shifts from "rule of law" to "arbitrary punishment".
Anonymous said…
Ah I understand better now. I was misled by the fact that the way you described him and the story he looked like some kind of 'capitalistic hero fighting for the poor' when the wikipedia article states in the first paragraphs he was the 'epitom of wall street "greed"' and then didn't really stand up for the guy. Though I read it at night so my judgement may have been impaired.

Thank you for the clarification.
denis bider said…
The misunderstanding may run deeper than that.

I would be very reluctant to automatically call a "hero" someone who "fights for the poor", because such fights are usually helpful only to a few in the short run, but damaging to most in the long run.

I would be even more reluctant to call someone bad because they are greedy, because the efforts of people who are greedy are usually good for everyone in the long run.

The well-being of western civilization is built on harnessing people's egoism for constructive purposes. Capitalism works because it harnesses the strength of people the way they are - not the way various deluded ideologies believe they ideally should be (but are not).

I would make a qualified claim that greed is good, whenever it's not coupled with coercion or deceit. Everything done for greed is necessarily good, when it is not coercive or deceitful.

Coercion is the domain of government; in places where there's rule of law, agents other than the government generally can't coerce.

But was Milken being deceitful? He claims he wasn't, while the government claims that he was. Maybe in some cases, indeed, he was. But how does the volume and impact of his deceitful activity compare with the volume and impact of all his activity overall? Should people who do a lot of good be going to jail because a small percentage of what they do fails scrutiny? Can any factory worker or machine produce goods with an error rate of zero?

I don't know how much deceit exactly there was in Milken's activities in all, but I am inclined to believe that the punishment was unwarranted and political.

And as far as Wikipedia's standing up for the guy is concerned: people don't feel pity for those who do good by doing well. In people's minds, you have to be losing money in order to be perceived as contributing to society. In reality, it is the other way around. Those who contribute most, earn the most, too. It is their reward for contributing. They earn so much because the value they create is even more.

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