The Crisis

Is it about money and finances, or the Rule of Law?  We’ve asked that question a lot around here.

Now Kenneth Anderson over at Volokh is asking it, in reference to the ongoing debacle in Europe:

In that case law, in the sense of legally binding governance arrangements, is epiphenomenal on political contingency which, in this case, is contingent upon relations with the financial markets, which is to say, upon the willingness of lenders to continue to lend and roll over debt.

“Epiphenomenal” in this context means “secondary”, or of lesser importance.  Anderson may well be describing the hierarchical reality, but I wonder if he realizes just what he is saying:  the law takes a back seat to politics and finance.  No wonder a lot of people have taken to the streets and one of their demands is a return to the “rule of law”, which they – perhaps unlike Anderson – see as being a big problem.

He goes on:

As we marxists like to say, money is never “mere.”  Of course money, banking, credit, etc., are at the heart of the governance project, because they structure the material — and, come to it, the moral and spiritual — conditions of the rest of it.

There aren’t too many self-described “marxists” left, even without the capital ‘M’.  It’s a little surprising to me to find one at Volokh.

The “governance project”?  I studiously avoided political science as an undergrad, thinking it to be an illegitimate subject.  But it was a popular one, even then.  Apparently the term “governance project” is one of the poli-sci academic buzzwords that gets bandied about at wine & cheese conferences at prestigious universities around the world.

I’ll agree that “…money, banking, credit, etc. are at the heart of the governance project”, at least as that project is currently conducted – by one percenters over everyone else.  Professor Anderson is describing, whether intentionally or not, an oligarchy with central banks at its very core, where the ostensibly governing democratic and republican institutions – the legislatures, the courts – fade into insignificance in terms of their influence on the real “governance project”.  In this context, the highly undemocratic installations of Monti in Italy and Papademos in Greece make perfect sense.  The oligarchical nature of our global polity is now very much out in the open.  But will people put up with it?

I like professor Anderson’s candor, though in the particular post a lot of his prose is impenetrable poli-sci speak.  It is a particularly objectionable problem when language seemingly by design obscures rather than illuminates.  I’ve always believed that the thinking of people who habitually use language like that is fundamentally disordered.  Is it?

This does not seem to me a plausible way of looking at the role of legal rules; if it were, it seems unlikely to me that European states would have been lent this amount of money by investors globally.  Why not?  Because investors don’t like to lend into discretionary legal regimes, for obvious reasons.  But leave that aside.

Leave that aside, indeed, because adhering to contradictory ideas simultaneously is cognitive dissonance, and that’s what’s going on here.  Prof. Anderson seems to understand – as “obvious”, no less – that without the rule of law investment dries up, which is to say that the rule of law is more important than, and underlies, economic vitality and prosperity; but then immediately putting the cart before the horse he seems to judge the rule of law situation in Europe based entirely upon the fact that “investors” have lent a large amount of money into it.

If the rule of law is more important than political or economic concerns then its presence or absence ought to be ascertained independently from its effects.  This is what I do on the blog here.  And other bloggers do the same.  And those who are not suffering from cognitive dissonance are pretty much unanimous in concluding that at the very least, the rule of law is in serious trouble in much of the world.  My own conclusion is that in the US, at least, the rule of law has completely broken down.

There’s a man I know well whose behavior was often mysterious to me so long as I assumed in advance that he was a man of good character.  All of the mystery evaporated as soon as I entertained the possibility that he was a man of poor character.  My reluctance and unwillingness to do the latter was the source of a good deal of consternation and bad judgment on my part.

Prof. Anderson would be a lot less puzzled if he would face the fact that the rule of law is broken or absent in the developed and “advanced” nations and go from there.



Filed under financial crisis, Judicial lying/cheating, Striking lawyers, wrongful convictions

2 responses to “The Crisis

  1. The lesson I see in this mess is that no law, even in a constitution, can be relied upon unless the system contains a means for any party harmed by a violation to enforce his/her/its rights.

    The treaty that set up the Euro made it expressly illegal for any member country to bail out another, and backed it up with the “stability pact.” But both these laws turned out to be toothless because the people who stand to lose when they’re violated — bondholders — weren’t given standing to go to court and enforce those laws against the governments that have now broken them.

    If market makers have any brains at all, those governments will not be able to sell another bond of any kind without first remedying this oversight.


    • You raise a good point, but more in the nature of identifying a fundamental problem rather than proposing any sort of solution. I’m not sure there is a solution to a sovereign default, other than to just accept that you’re getting stiffed if you’re on the receiving end.

      You could declare war and demand reparations, I suppose. I don’t think the situation has anything to do with courts at that point, other than maybe an international one. And even then, what would be the practical effect of a judgment of such a court directing a sovereign entity to “pay”?


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