Democracy? It’s Messy. Who Needs It?

Since I first read Gillian Hadfield’s work I’ve been a huge fan. I’ve greatly appreciated and learned much from many of her articles, such as “The Cost of Law: Promoting Access to Justice through the (Un)Corporate Practice of Law,” “Life in the Law-Thick World: The Legal Resource Landscape for Ordinary Americans” (with Jaime Heine), and “Legal Barriers to Innovation: The Growing Economic Cost of Professional Control Over Corporate Legal Markets.” So when I saw that she was publishing a new book, I pre-ordered and waited impatiently.

As soon as the book arrived, I dove in. I found it fascinating. Hadfield weaves gripping stories. Her arguments are presented logically and her style is highly engaging. With my trust in Hadfield from her earlier works, I was effortlessly drawn in.

But once I finished the book and put it down, something started bothering me. It started as niggle but grew to bother me a lot. At first, I couldn’t put my finger on what it was. Then, after some time and distance from the book, the scales began to fall from my eyes.

Rules for a Flat World: Why Humans Invented Law and How to Reinvent It for a Complex Global Economy proposes the privatization of regulation. This proposal could appear to some to be mundane, even innocuous. After all, a number of previously public services have been privatized in the US and in other countries in recent years, and there are plans underway to privatize a great deal more. What’s one more to add to the list?

Before coming to that conclusion, however, let’s go back and re-consider Hadfield’s proposal with attention, and, even better, with very careful attention. Privatize regulation. What does Hadfield mean by that? In her words, she means allowing “markets” (or, private enterprise) to produce what she refers to as “legal infrastructure.” For Hadfield, this includes legal services, but most especially—and by far most importantly—it also includes “legal/regulatory rules and procedures themselves.”

Hadfield argues that our public institutions are woefully inadequate for many kinds of regulation. They are hamstrung by their propensity for high levels of complexity resulting in high costs for businesses. Further, and perhaps worse, they do not have the financial, technical, or human resources needed to develop the new “legal infrastructure” that we need today.  For these reasons, Hadfield argues that much of the power to determine the rules that govern and deeply affect us as a society (such as those relating to contracts, health and safety, employment, data security), and that govern businesses in particular, should be removed from our current public intuitions (executive, legislature and judiciary) and instead be placed in the hands of privately-owned, for-profit companies (or privately operated nonprofits) whose principal “customers” for such rules will be other companies. Once this is done, Hadfield maintains, the role of the public institutions would be limited to regulating these private regulators.

A Rose by Any Other Name

What if Hadfield’s proposal was phrased in another way? What if it was explained as a proposal to move political rule-making and the procedures that follow—that is, moving government itself—to private, for profit enterprises (or to nonprofit organizations seeking to achieve private nonprofit goals). Phrased in this manner, the proposal is not mundane and it’s certainly not innocuous. It’s an unabashed rejection of democracy and democratic processes.

You may or may not be ok with this. Some people are perfectly ok with it. Whether you are or not, we must honestly and openly recognize the proposal for what it is. We must look through the veil of highly engaging rhetoric to the final reality of its profound consequences for democracy and for how our country is governed.

Is Rules for a Flat Worldengrossing?” Definitely. Is it “thought provoking?” Absolutely. Is it “sweeping in scope?” Unquestionably. It’s also neoliberalism par excellence. It is neoliberalism (or, if you prefer, libertarianism) taken to a logical extreme. In that sense, it is by no means “new,” “original,” or “visionary.” Instead, it follows a path already well-trodden by Bob MurphyBruce Benson, Bryan Caplan and Edward Stringham, Bruno LeoniMurray RothbardDavid Friedman and his father Milton FriedmanFriedrich Hayek, Ayn RandLudwig von Mises, Lewis Powell, and James Buchanan, as well as by The Heritage FoundationCATO InstituteAmerican Enterprise InstituteAmerican Legislative Exchange CouncilCitizens for a Sound EconomyThe Heartland Institute, the Independent Institute, Foundation for Economic Education, Competitive Enterprise Institute, and the Mises Institute, to name a few. (See more about these organizations below).

A Framework for Misgivings

Just as I was coming to realize the full implications of Hadfield’s proposal, I came across an article by Anna Yeatman, “Freedom and the Question of Institutional Design.” It was a timely discovery. Her article helped me to organize my many, but jumbled, misgivings about Rules for a Flat World into a coherent framework.

Yeatman explains that in early modern Western political and juristic thought the question of how authority can serve freedom centered on the idea of the state. It is the role of the state to provide a public and lawful ordering of social life, as well as to provide a “jurisdictional container for society organized as a self-determining political community.” This idea of the state has been the foundation of modern democratic constitutionalism. Among other things, Yeatman continues, the exercise of the authority of the state by public agencies and public officials “has to be politically accountable to the individuals whose freedom they serve.”

Neoliberal thinkers reject this concept of “institutional design.” Instead, they posit that freedom already exists naturally. “It is expressed in the spontaneous order (as Hayek put it) of market society.” They are equivocal regarding the need for the state. Yeatman explains that on the one hand, they don’t want the state to interfere with the spontaneous order. On the other hand, they do want the state to impose the institutional design of market society. Yeatman further states: “In making it seem that the state simply recognizes a market society that already exists, neoliberal thinkers deny what it is that they actually do which is to have the state construct (in law and policy) the specific market ordering of relationships that they champion.”

According to the rhetoric of neoliberal thinkers, Yeatman clarifies, a market economy is a natural and spontaneous order that must be placed beyond politics. This justifies the “subjection of the inherently political nature of the state to supposedly impersonal economic forces.” In this manner, neoliberalism privatizes government services and strips the public service of its traditional role. “The idea of public office falls into desuetude in a mode of thought where private interest is said to motivate action. While the formal trappings of democratic institutions are maintained, the citizen public finds itself increasingly locked out of an informal, secret and insider-driven decision-making process.” A new set of rules is used. These rules distribute power to powerful, concentrated units of private capital (the modern corporation), and away from the state, which is thought of as both the public authority and the political community.

These words of Yeatman describe with precision Hadfield’s proposal for privatized regulation: Move power away from public institutions in order to place it in the hands of private ones, and, in particular, the hands of corporations. But, as you are doing so, deny that you are doing anything other than recognizing “natural order.” Although Hadfield’s denial describes the process as “supremely practical” rather than “natural.” As she states in Rules for a Flat World (citing Hayek): “The reason is nonideological and has nothing to do with liberal democracy and the proper role of government in promoting human well-being. It is supremely practical.” (Hadfield also rejects that her proposal is ideological in this video).

Yeatman’s Components of Neoliberal Thought

Yeatman tells us that while neoliberal thought is dynamic, “adaptive to opportunity, and informed by different intellectual strands,” it is also a distinctive worldview that has a number of components. She lists and describes a total of ten components, each highly pertinent in the context of Rules for a Flat World:

1. The importance of re-engineering the state to establish the institutional framework of a market society.” Or, as Hayek put it, of a “competitive order.” In Rules for a Flat World, Hadfield proposes to re-engineer our current regulatory state in order to establish a new form of regulation, based upon markets and competition among private enterprises.

2. The reduction of the role of “government” (favoring that term over the term “state”) to only provide “a lawful order for rules of conduct that are already immanent within a spontaneous market order.” More specifically the function of government is not to produce any particular services or products to be consumed by citizens, but “rather to see that the mechanism which regulates the production of those goods and services is kept in working order.” Hadfield proposes to reduce, if not eliminate, the function of government with respect to providing regulatory services that affect citizens (again, Hadfield proposes that companies be allowed to set rules governing areas such as contracts, health and safety, employment, and data security). She favors, instead, a government whose function is limited to assuring that private regulatory services are kept in working order.

3.The elaboration of economic action to become the prototype for all human action.” Stated another way, it is a singular rather than plural conception of life in society that reduces all human action to economic action. This justifies the adoption of “competition policy” where publicly funded services (Yeatman’s examples are education, health and welfare) are redesigned as market-based services. This requires the service providers to shift to a business model where the paramount goal is efficiency. Further, former citizens are redefined as customers whose “choice” to use the service in question is guided by its price. The assumption, Yeatman explains, is that if the customer does not wish to pay the price of the service, it is because they do not value it sufficiently.

Rules for a Flat World fails to contemplate any kind of human action other than economic action. This is underscored, for instance, in Hadfield’s remarkably restrictive examples of what law “should” be: to “promote trade or investment in new technologies, improve incentives for workplace safety, or design cost-effective taxes.” Conspicuously absent from her examples of what law “should” be are areas like protection of human rights and civil liberties, protection of the environment, equitable rules for marriage, divorce, and child custody, and rules for immigration. Further, Hadfield complains of the high “costs” of governmental regulation, in large part because government regulators have no incentive to be efficient. In contrast, under her model, private regulators would have every incentive to be efficient, else they’ll “get thrashed by competitors.” Finally, she confirms that “users” will (or at least should) have a choice of private regulator, and that private regulators will need to be sure that their high fixed costs are spread across enough “users” (Hadfield does not refer to them as “citizens”), “relative to how much each is willing and able to pay.”

4. The rejection of public planning. Yeatman explains that public planning requires “a sense of history, an ability to live between past and future.” In this context, the public collective “we” has to ask the question of how do we build on past achievements and meet future challenges. The emphasis is on “a public discursive process within which opinion can be voiced, made to take account of contrary or different opinion, and some kind of considered collective judgment arrived at.” In contrast, neoliberal thinking “rejects the political arts, and instead embraces technologies of quantification.” This way of thinking dispenses with a sense of history or place, and is given to a mathematical matrix of living in the now. It does not allow for “prudential consideration of the consequences and implications of conduct for the future wellbeing of individuals, their families and communities.”

Hadfield rejects what she terms “central planning,” which she defines as “rules crafted in bureaucracies, discussed in committees and voted on by elected or appointed officials.” She rejects it because it is incapable of collecting, analyzing, synthesizing, weighing, and choosing the information required for the “best solution,” because information “does not play nice.” For Hadfield, markets are a far better solution for building legal infrastructure, where coordination is accomplished not by “analysis and committee,” but by Adam Smith’s “invisible hand.” Hadfield is clear that the priority should be for “our legal infrastructure to innovate in step with the innovative pace of our economy.” The consequences and implications for the future wellbeing of individuals, their families and communities aren’t mentioned.

5. The reduction of politics to competition between private interests. As Yeatman explains: “The older patriotic conception of a partisan politics that is tempered by consideration of the public interest as this is informed by advice from a disinterested and independent professional public service is jettisoned.” While attentive reading of Rules for a Flat World is necessary in this case, a merely inattentive one would suffice to reveal that Hadfield firmly—if not categorically—rejects the value of political processes in the formulation and application of legal rules and procedures (they are too complex, too costly, too bureaucratic,…). At no point in her 396-page book does Hadfield raise any concern for the public interest. Hadfield’s entire focus, instead, is on the interest of the economy. And the best interest of the economy, Hadfield argues, lies in competitive, private regulation.

That’s five of Yeatman’s ten components of neoliberal thought. I could continue with the remaining five, but this post is already quite long, and I think you get the idea.

“An Organised Takeover of Common Sense”

Yeatman’s conclusion is worth quoting at length:

The doctrine of neoliberalism is a drastic reduction of the modern idea of freedom to a monism of market-oriented action… Neoliberals offer the artifice of market design where the competitive order of market relationships becomes the framework for social life in general. To establish this institutional design, neoliberal doctrine uses the authority and sovereignty of the state against the very nature of the state as a political-legal container for social life.

This approach to how our lives and conduct are framed has assumed the status of common sense at least for the governing elites: [quoting Andrew Dean] “Writing against such powerful and often invisible beliefs is no easy task: there are certain positions that are now fundamental to public debate, most of which rest on the assumption that markets, allowed to operate freely and independently, will in every situation allocate resources more efficiently, and make everyone better off.”

The progressive penetration of neoliberal thought into the mode of thinking of our governing elites has been driven not just by its highly organised promulgation but also by the same eagerness not to defy what are represented as new impersonal historical forces: economic globalization, automation of jobs, market forces. The impersonality of the market mechanism itself creates the ultimate resource for deniability—no one has to assume personal responsibility in a context where decisions are driven by market forces…For an ideology that trumpets freedom of choice, neoliberal doctrine is profoundly committed to representing our collective situation as one where we have no choice to influence the key decisions that affect our lives.

No doubt many members of the governing elites are influenced by neoliberal doctrine in ways that they can hardly account for, and perhaps they would think again if they were invited to consider the assumptions and content of neoliberal doctrine. The difficulty is that when a doctrine has successfully shaped common sense it is difficult to see how it has been formed, promulgated, disseminated, and networked.

In sum, for Yeatman, the development of the neoliberal thought collective is “an organised take-over of common sense.”

Why Insist?

You may be wondering why I’m so insistent with respect to Rules for a Flat World (I also address the book at length but from another angle in my book Modernizing Legal Services in Common Law Countries: Will the US Be Left Behind?, and I mention it here and here). If so, it’s a fair question. There are several reasons:

For many people (those that are paying attention), the suggestion to privatize regulation is, on its face, difficult to take seriously if not outright laughable. Hadfield herself acknowledges that it can sound “crazy.” At the same time, however, suggestions to privatize other public services, such as water, education, policeprisons, and the military have also, at one time, appeared laughable—crazy—to many people (and they still do). This did not stop the privatization of any of those other public services, as well as others, each with disastrous consequences.

Further, in contrast to Hayek, whose book The Road to Serfdom was spurned and widely ridiculed at the time of its publication, Hadfield is highly respected in her field of law and economics, and her publications are widely read and quoted. Many (like me) no doubt eagerly awaited the arrival of her book, many have read it, and many more will surely read it in the future. One commentator has described Hadfield as “one of the most consequential legal scholars doing evidence-based work.” If Hadfield were less respected or less known, I, let alone many others, might not have even noticed a book such as Rules for a Flat World, much less have actually read it. If Hadfield were less respected and less known, it’s unlikely that no fewer than 15 captains of industry together with recognized thought leaders would have agreed to provide marketing blurbs recommending her book. (One commentator referred to them as a “long list of endorsers…with ‘A’ level credentials in the new economy“). If Hadfield were less respected and less known, it’s unlikely that the Financial Times would have allocated column space for her to explain her proposal.

A recent online symposium hosted by Prawfsblawg focused on Rules for a Flat World (together with Richard and Daniel Susskind’s book, The Future of the Professions: How Technology Will Transform the Work of Human Experts). Nine law school professors and other academics contributed to the symposium. Of those nine, just one, Javier de Cendra, expressly raised the question of how Hadfield’s proposal might relate to democracy. (De Cendra did not, however, propose a response to the question, simply writing obliquely “the need for new rules for a flat world forces us to rethink the foundations of our democracies [and] the distribution of power therein”). One contributor went so far as to imply that Hadfield’s proposal would be beneficial to democracy, describing Rules for a Flat World as offering “a blueprint for a more efficient, inclusive, and accessible legal system.” All the other contributors were silent in this regard, instead praising the book and/or Hadfield as “sensible,” “excellent,” having “tremendous scholarly rigor,” and stating that Hadfield “may be right.”

It is for all these reasons that I am so insistent with respect to Rules for a Flat World. It is important to call the book out for what it is. It is important to get past platitudes such as “tour de force,” “amazing accomplishment,” and “widely acclaimed” in order to really understand Hadfield’s proposal, to understand the origin and purpose of its ideology (indeed, to simply recognize that it has an ideology*), and, especially, to understand the full import of the consequences of her proposal, were it to ever be implemented.

I do not want to argue that private organizations should never have any role to play with respect to regulation. They already do, and, indeed, that train left the station long ago, as evidenced in this article by Philip Weiser, for example. I do want to argue that any such role must be carefully constructed. Any private organization acting in a regulatory capacity must be required to act in the public interest, and not in the interest of the private organization or its shareholders. Further, it must be required to act in a manner that is fully transparent to all stakeholders and it must be subject to close oversight by and accountability to at least one democratically controlled public authority.  And that public authority must not be starved of the resources and authority it needs to be effective in its oversight role. Anything less than this careful construction would be disastrous for our already highly fragile democratic institutions.

*Postscript: Underscoring the ideology behind the proposal to privatize regulation, Rules for a Flat World was recommended, albeit hesitantly, in a post on the website of the Competitive Enterprise Institute (CEI). One of the more remarkable elements of the recommendation is its inclusion of Hadfield in a group referred to as “the libertarian legal community.” Also remarkable is the association of Rules for a Flat World with two other books that are described as exposing “politicized science” and that are recommended without any hesitation. One of these books, Scare Pollution: Why and How to Fix the EPA by Steve Milloy, argues that the Environmental Protection Agency is “rogue” and “out-of-control.” The other book, Green Tyranny: Exposing the Totalitarian Roots of the Climate Industrial Complex by Rupert Darwall, is described as showing that “the climate industrial complex has totalitarian roots both in the National Socialist Party (the first green party in power), and in the Frankfurt School of cultural Marxism. [Further, the book discusses] the threats to our freedom of speech and democratic institutions posed by the totalitarian mindset of global warming alarmists.” Libertarian community, indeed.

If you found Yeatman’s article interesting and you’d like to explore further, try these books and articles:

The Strange Non-Death of Neoliberalism and The Knowledge Corrupters: Hidden Consequences of the Financial Takeover of Public Life, both by Colin Crouch: Many books on the topic of neoliberalism are so technical and jargon-filled, they are unreadable. That is definitely not the case with either of these two books. Their clear and straightforward prose sheds valuable light on what neoliberal ideology is, how pervasive it has become, and what its consequences are for economies and democracies.

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown, by Philip Miroswki. This book is a bit too heavy on the jargon, but not so much that the book is inaccessible to the average reader. With a little effort (but not an inordinate amount), this book becomes entirely accessible. And the effort pays off, especially with respect to the book’s discussion of the strong influence if not control that Charles and David Koch have exercised over economics departments at a variety of US universities and its repercussions on the functioning of our democratic institutions.

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right, by Jane Mayer.  This book explains how Charles and David Koch, Richard Mellon Scaife and others have “weaponized philanthropy” by the creation of foundations and think tanks like those mentioned above (that is, The Heritage Foundation, CATO Institute, American Enterprise Institute, American Legislative Exchange Council, Competitive Enterprise Institute, and Citizens for a Sound Economy), and by using them to promote policies of limited government and the privatization of public services (among other policies, such as the denial of  a human factor in climate change and opposition to environmental regulations.). Of particular interest is the book’s discussion of the creation and funding of organizations like the Olin Foundation and the Hoover Institution, and the role those organizations have played in the development of “Law and Economics” programs at US universities, inspired by Hayek’s argument that “to conquer politics, one must first conquer the intellectuals.” (Hadfield is a professor of both law and economics at the University of Southern California. She is the Director of Gould’s Center for Law and Social Science and the former Director of its predecessor, the Center for Law, Economics and Organization, which received significant sponsorship from the Olin Foundation. Hadfield has held four Olin Fellowships and is a past National Fellow of the Hoover Institution. Hadfield credits her “dear friend and coauthor,” Barry Weingast, as helping her to develop the “grounded theory” of Rules for a Flat World. Weingast is a Senior Fellow with the Hoover Institution).

Democracy in Chains: The Deep History of The Radical Right’s Stealth Plan for America, by Nancy MacLean. This book is a timely and highly pertinent complement to Meyer’s. It exposes the historical origins of the policies of limited government and the privatization of public services championed by the Kochs and their myriad of organizations that are described in Meyer’s book. Like Meyer’s, MacLean’s book also references John Olin and the Olin Foundation, describing their role in transforming prestigious (and less so) law schools by funding the methodical training of selected faculty members and judges in principles of “Law and Economics” and by the sponsorship of university “law and economics” programs, such as the one at Gould. Of particular note is this observation by MacLean: “Many [liberals] have tended to miss the strategic use of privatization to enchain democracy.”

Neoliberalism – The Ideology at the Root of All Our Problems,” by George Monbiot. If you don’t have the time or patience for an entire book, then this short article from The Guardian will take you just five minutes (well, maybe ten).

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 2, Part 3 and Part 4

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

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