How America Lost Its Way

It is getting ever harder to do business in the United States, argues Niall Ferguson,
and more stimulus won’t help: Our institutions need fixing.

by Niall Ferguson June 7, 2013

The decline of America’s institutions, and the related rise in red tape that hinders business, may spell the nation’s economic doom. Harvard’s Niall Ferguson talks to WSJ’s Charles Forelle about the theory outlined in his new book “The Great Degeneration.”

Not everyone is an entrepreneur. Still, everyone should try—if only once—to start a business. After all, it is small and medium enterprises that are the key to job creation. There is also something uniquely educational about sitting at the desk where the buck stops, in a dreary office you’ve just rented, working day and night with a handful of employees just to break even.

As an academic, I’m just an amateur capitalist. Still, over the past 15 years I’ve started small ventures in both the U.S. and the U.K. In the process I’ve learned something surprising: It’s much easier to do in the U.K. There seemed to be much more regulation in the U.S., not least the headache of sorting out health insurance for my few employees. And there were certainly more billable hours from lawyers.
By the Numbers

433: Total number of days it takes in the U.S. to start a business, register a property, pay taxes, get an import and export license and enforce a contract
368: Total number of days it took to do the same in 2006
7: U.S. ranking, out of 144 countries, on the World Economic Forum’s 2012-2013 Global Competitiveness Index
1: U.S. ranking on the 2008-2009 Global Competitiveness Index
33: U.S. ranking for its legal system and property rights in 2010 on the Fraser Institute’s Economic Freedom index, out of 144 countries
9: U.S. ranking for its legal system and property rights in 2000

Sources: ‘Doing Business’; World Economic Forum; Fraser Institute

This set me thinking. We are assured by vociferous economists that economic growth would be higher in the U.S. and unemployment lower if only the government would run even bigger deficits and/or the Fed would print even more money. But what if the difficulty lies elsewhere, in problems that no amount of fiscal or monetary stimulus can overcome?

Nearly all development economists agree that good institutions—legislatures, courts, administrative agencies—are crucial. When poor countries improve their institutions, economic growth soon accelerates. But what about rich countries? If poor countries can get rich by improving their institutions, is it not possible that rich countries can get poor by allowing their institutions to degenerate? I want to suggest that it is.

Consider the evidence from the annual “Doing Business” reports from the World Bank and International Finance Corporation. Since 2006 the report has published data for most of the world’s countries on the total number of days it takes to start a business, get a construction permit, register a property, pay taxes, get an export or import license and enforce a contract. If one simply adds together the total number of days it would take to carry out all seven of these procedures sequentially, it is possible to construct a simple measure of how slowly—or fast—a country’s bureaucracy moves.

Seven years of data suggest that most of the world’s countries are successfully making it easier to do business: The total number of days it takes to carry out the seven procedures has come down, in some cases very substantially. In only around 20 countries has the total duration of dealing with “red tape” gone up. The sixth-worst case is none other than the U.S., where the total number of days has increased by 18% to 433. Other members of the bottom 10, using this metric, are Zimbabwe, Burundi and Yemen (though their absolute numbers are of course much higher).

Why is it getting harder to do business in America? Part of the answer is excessively complex legislation. A prime example is the 848-page Wall Street Reform and Consumer Protection Act of July 2010 (otherwise known as the Dodd-Frank Act), which, among other things, required that regulators create 243 rules, conduct 67 studies and issue 22 periodic reports. Comparable in its complexity is the Patient Protection and Affordable Care Act (906 pages), which is also in the process of spawning thousands of pages of regulation.

You don’t have to be opposed to tighter financial regulation or universal health care to recognize that something is wrong with laws so elaborate that almost no one affected has the time or the will to read them.

Who benefits from the growth of complex and cumbersome regulation? The answer is: lawyers, not forgetting lobbyists and compliance departments. For complexity is not the friend of the little man. It is the friend of the deep pocket. It is the friend of cronyism.

We used to have the rule of law. Now it is tempting to say we have the rule of lawyers, which is something different. For the lawyers can also make money even in the absence of complex legislation.

It has long been recognized that the U.S. tort system is exceptionally expensive. Indeed, tort reform is something few people will openly argue against. Yet the plague of class-action lawsuits continues unabated. Regular customers of Southwest Airlines LUV +0.36% recently received this email: “Did you receive a Southwest Airlines drink coupon through the purchase of a Business Select ticket prior to August 1, 2010, and never redeem it? If yes, a legal Settlement provides a Replacement Drink Voucher, entitling you to a free drink aboard a Southwest flight, for every such drink coupon you did not redeem.”

This is not the product of the imagination of some modern-day Charles Dickens. It is a document arising from the class-action case, In re Southwest Airlines Voucher Litigation, No. 11-cv-8176, which came before Judge Matthew F. Kennelly of the District Court for the Northern District of Illinois. As the circular explains: “This Action arose out of Southwest’s decision, effective August 1, 2010, to only accept drink coupons received by Business Select customers with the purchase of a Business Select ticket on the date of the ticketed travel. The Plaintiffs in this case allege Southwest, in making that decision, breached its contract with Class Members who previously received drink coupons,” etc.

As often happens in such cases, Southwest decided to settle out of court. Recipients of the email will have been nonplused to learn that the settlement “will provide Replacement Drink Vouchers to Class Members who submit timely and valid Claim Forms.” One wonders how many have bothered.

Cui bono? The answer is, of course, the lawyers representing the plaintiffs. Having initially pitched for “up to $7 million in fees, costs and expenses,” these ingenious jurists settled for fees of $3 million “plus costs not to exceed $30,000” from Southwest.

Canada’s Fraser Institute has been compiling an “Economic Freedom” index since 1980, one component of which is a measure of the quality of a country’s legal system and property rights. In the light of a case like the one described above, there is nothing surprising about the recent decline in U.S. performance. In 2000 U.S. law scored 9.23 out of 10. The most recent score (for 2010) was 7.12.

Such indexes must be used with caution, but the Fraser index is not the only piece of evidence suggesting that the rule of law in the U.S. is not what it was. The World Justice Project uses a completely separate methodology to assess countries’ legal systems. The latest WJP report ranks the U.S. 17th out of 97 countries for the extent to which the law limits the power of government, 18th for the absence of corruption, 19th for regulatory enforcement, 22nd for access to civil justice and the maintenance of order and security, 25th for fundamental rights, and 26th for the effectiveness of criminal justice. Of all the former British colonies in the report, the U.S. ranks behind New Zealand, Australia, Singapore, Canada, Hong Kong and the United Kingdom—though it does beat Botswana.

The decline of American institutions is no secret. Yet it is one of those strange “unknown knowns” that is well documented but largely ignored. Each year, the World Economic Forum publishes its Global Competitiveness Index. Since it introduced its current methodology in 2004, the U.S. score has declined by 6%. (In the same period China’s score has improved by 12%.) An important component of the index is provided by 22 different measures of institutional quality, based on the WEF’s Executive Opinion Survey. Typical questions are “How would you characterize corporate governance by investors and boards of directors in your country?” and “In your country, how common is diversion of public funds to companies, individuals, or groups due to corruption?” The startling thing about this exercise is how poorly the U.S. fares.

In only one category out of 22 is the U.S. ranked in the global top 20 (the strength of investor protection). In seven categories it does not even make the top 50. For example, the WEF ranks the U.S. 87th in terms of the costs imposed on business by “organized crime (mafia-oriented racketeering, extortion).” In every single category, Hong Kong does better.

At the same time, the U.S. has seen a marked deterioration in its World Governance Indicators. In terms of “voice and accountability,” “government effectiveness,” “regulatory quality” and especially “control of corruption,” the U.S. scores have all gone down since the WGI project began in the mid-1990s. It would be tempting to say that America is turning Latin, were it not for the fact that a number of Latin American countries have been improving their governance scores over the same period.

What is the process at work here? Perhaps this is a victory from beyond the grave for classical Western political theory. Republics, after all, were regarded by most ancient political philosophers as condemned to decadence, or to imperial corruption. This was the lesson of Rome. Democracy was always likely to give way to oligarchy or tyranny. This was the lesson of the French Revolution.
The late Mancur Olson had a modern version of such cyclical models, arguing that all political systems were bound to become the captives, over time, of special interests. The advantage enjoyed by West Germany and Japan after World War II, he suggested, was that all the rent-seeking elites of the pre-1945 period had been swept away by defeat. This was why Britain won the war but lost the peace.

Whatever the root causes of the deterioration of American institutions, smart people are starting to notice it. Last year Michael Porter of Harvard Business School published a report based on a large-scale survey of HBS alumni. Among the questions he asked was where the U.S. was “falling behind” relative to other countries. The top three lagging indicators named were: the effectiveness of the political system, the K-12 education system and the complexity of the tax code. Regulation came sixth, efficiency of the legal framework eighth.

Asked to name “the most problematic factors for doing business” in the U.S., respondents to the WEF’s most recent Executive Opinion Survey put “inefficient government bureaucracy” at the top, followed by tax rates and tax regulations.

All this should not be interpreted as yet another prophecy of the imminent decline and fall of the U.S., however. There is some light in the gloom. According to the most recent United Nations projections, the share of the U.S. population that is over 65 will reach 25% only at the very end of this century. Japan has already passed that milestone; Germany will be next. By midcentury, both countries will have around a third of their population age 65 or older.

More imminently, a revolution in the extraction of shale gas and tight oil, via hydraulic fracking, is transforming the U.S. from energy dependence to independence. Not only could the U.S., at least for a time, re-emerge as the world’s biggest oil producer; the lower electricity costs resulting from the fossil-fuel boom are already triggering a revival of U.S. manufacturing in the Southeast and elsewhere.

In a functioning federal system, the pace of institutional degeneration is not uniform. America’s four “growth corridors”—the Great Plains, the Gulf Coast, the Intermountain West and the Southeast—are growing not just because they have natural resources but also because state governments in those regions are significantly more friendly to business. There are already heartening signs of a great regeneration in states like Texas and North Dakota.

“In America you have a right to be stupid—if you want to be.” Secretary of State John Kerry made that remark off the cuff in February, speaking to a group of students in Berlin. It is not a right the founding fathers felt they needed explicitly to enshrine. But it has always been there, and America’s leaders have frequently been willing to exercise it.

Yes, we Americans have the right to be stupid if we want to be. We can carry on pretending that our economic problems can be solved with the help of yet more fiscal stimulus or quantitative easing. Or we can face up to the institutional impediments to growth I have described here.

Not many economists talk about them, it’s true. But that’s because not many economists run businesses.

Adapted from Mr. Ferguson’s new book, “The Great Degeneration: How Institutions Decay and Economies Die,” to be published by Penguin Press on Thursday.

Ed Burns Wrote:

The article does an interesting job of describing the problem, but not its causes or potential solutions.

The writer starts with the hypothesis that regulations and bureaucracy are the main reasons why it’s hard to start a business here. Yet the only specific policies he sites are “stimulus and quantitative easing,” ACA, and Dodd-Frank. As for stimulus and quantitative easing, it’s hard to see how short-term policies are the cause of the long-term difficulties described here. As for ACA and Dodd-Frank, the majority of regulations from both these laws have yet to go into effect. How exactly did they impede institutional efficiency in 2010?

Last example of the shoddy thinking behind this article: The writer notes that its easier to start a business in the UK than the U.S., then says that dealing with healthcare regulations in the U.S. is one of the main reasons. Oh really? UK has a single-payer system. I’m sure that does make things much easier for businesses – just let the government handle everything. But I’m guessing we won’t see the writer advocate for such a system in the U.S. any time soon.

Barnes Moore Wrote:

The only way this country is going to get back on track is to replace the current tax code with a flat/fair tax, impose term limits, and pass a balanced budget amendment. Flat tax virtually eliminates the power of lobbyists, term limits help diminish the accumulation of power by elected officials, and a balanced budget amendment would force government to reign in spending. These three changes alone will not fix government, but without them, virtually all other changes are simply rearranging the deck chairs.

john pearson Wrote:

Deterioration? It’s not showing up in the official statistics. Our GDP just reached the $16 trillion level per the Department of Commerce. We are growing at 2.5%. Private wealth has reached 70 trillion per the Federal Reserve. Europe and Japan are stagnating. As the CIA World Factbook puts it: “The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $49,800.” Think of what this very high GDP means for us. We have the best military in the world and we spend less than 4% of income on it. We have over 40 million “poor” people. Would President Roosevelt even recognize them as poor people? Seventy years ago, he referred to 1/3 of the country as ill-housed, ill-clad, and ill-nourished. Today’s poor people in the US aren’t like that. If for some reason growth in the U.S. stopped (and it hasn’t), we have achieved unimaginable prosperity compared to past generations.

Raymond Klett Replied:

Your comment seems illusory at best. You quote statistics from the federal government that does have a “dog in the hunt”.
The same group of number people that insist on low to no inflation. But any one shopping in a grocery store will gladly acknowledge they pay more for the same items than in the past and their disposable income is shrinking. By any econ 101 judgement that loosely defines inflation.
With all due respect your optimism appears to be a simple liberal diversion attempting to convince the persuadable that the economy is fine.
Simply put, figures don’t lie but liars figure.

George Leef Replied:

GDP is a lousy measure of economic well-being. It would go up merely due to rampant inflation. Actual production of goods and services consumers buy has been quite stagnant for years.

Ferguson is right that the US is strangling itself in regulation, taxation and litigation, all of which make it increasingly difficult to start and maintain a business.
Comparing conditions today with those of 80 years ago to prove how well Obama is doing is absurd.

Anne McGuire Replied:

This increase in private wealth has directly fueled vast income / wealth disparities. And “inflation” as a government measure is absurd. If it doesn’t take into account costs for food, fuel, college tuitions, and insurance, it’s a meaningless number, especially for the middle-classes.

Fitim Hajrizaj Wrote:

If you have a 30 year war organized against the idea that government and government institution are somehow intrinsically damaging to the future of the country, you may get what you ask for. That would be a government (and as democracy is a form of government by default you get democracy=government), that with institution weakened to such an extent that it’s not possible to provide services they were first designed to do. An unbiased way to analyse a problem is basically a form of follow the money and who would benefit from the decline of choice. The clear answer is the people and organizations already entrenched in doing business. As explained in the article, there’s an increase in red tape (thus strengthening the barrier to entry) at a time when really less and less services are available that government provides. Government services will mainly service the middle class (which exists more and more as a definition but in reality in covers everybody that has a roof over their head) and the poor, whereas the rich will buy whatever they don’t get from the government, the rest of us that depend on those will bear the pain.

Prior to 1930s the world mainly lived in feudal societies, where even if a person works has hard as possible, all the benefits go to the owner, of the land first, and with industrial revolution the businesses and industrial complexes as well. The 1930s thought regular people, that their contribution should be taken into account, and if people work together they can achieve great things. So the idea that changed the way government operated, mainly had to do with realization that the economy is dependent on all of us, and real change and prosperity can happen if and only if we attach a counter weight to the advantages that accumulated money provides. If you’re rich (most of the very rich echelon got there just by being born to families that had lots, or lately you could get rich just by being involved the selling of the industrial wealth of all Americans, and through it destruction of the prospects of a bright future), then you have a huge advantage, because
1) you get a great education. Public schools in rich areas, get a superb quality education. If the gutted budgets that has caused institutional havoc, cause problems, the rich will be able to contribute into their schools fund, that will benefit only them. Virtually nobody from poor schools get to college and let alone Ivy League Schools, and to reach levels of influence (such as the office of the president) you have to attend these schools.

2) All levels of government, have been infiltrated by groups that virtually control the decisions of elected officials. The documentary “Hot Coffee,” explains how US Chamber Of Commerce (a lobby group for some of the biggest corporations in the world, with a name deliberately designed to give people an impression of a governmental organization) , used over a $1 billion dollars, in making sure candidates of it’s choosing for state supreem courts got elected. If a nominee is incorruptible, they made sure they didn’t get elected, going as far as fabricating evidence, and prosecuting an elected supreme court judge multiple times sometimes not being allowed a day of work the judge got elected to, until the next election. Even though, being declared innocent every single time, he lost the next election, by the sheer fact that local news for time he was dragged to courts, was slowly make people believe the news. You say a thing a thousand times and and lie becomes a truth, in this case Judge Oliver Diaz, people believed the propaganda paid by big money, because he was going to be a barrier to legislation the business’ wanted to pass for caps on lawsuits, arbitration clause (a requirement that any lawsuits against businesses, go through a judge selected by the employer). How often times judge ruled with employer; 96%. This true story was even the story in John Grisham’s book “The Appeal.”

Marc Sargen Replied:

You said to look to those groups that benefit from a decline in choice. Why did you not ask what groups would benefit from an increase in regulations, oversight, legal costs, & taxes. Those would be the government employees, regulators, & legislators.

I do not see a grand conspiracy by the rich to stamp their control on the world through red tape. While governmental action is a tool that they use to create barriers to entry, they have much better tools to spread their power.
I see a slow steady encroachment & strangulation by a million hand on bureaucrats each focused on their individual area. Many are focused on their narrow field & see it as oversized in importance so they place great weight in what they do & expect major reactions to their moves. So great is the importance of their areas, that they need grow their power to better handle their tasks & needs. As such, they require an ever bigger budget, more staff, & a greater level of respect & compliance since what they do is so important & critical.
This is a bias of government. When it encounter a problem or issue there is a bias to “to do something” . Many government worker believe they are “doing something” to solve problems or issues so they “know” that their actions are on the right side. Unfortunately, there is no follow up when to “stop doing something”. There is rarely a review to see if the something is effective or creates other issues. There is a significant bias against closing a bureau, program, or regulation that “might” be doing some good.
Small Business are being stifle by an ever increasing compost of people badly implement good intentions & the ever increasing need of government workers to justify what they do as important & in the right.
To give you an glimpse in my opinion, I, a small business owner, have just spend the last few hours dealing with the small business friendly options of the Federal Government GSA -Genera Service Administration to try to update my on-line price list. In part, I was searching through the non-indexed help pages, to find an Acronym not related to my business so I could determine why my update what denied again, all for the goal of preventing the from being unjustly priced.

As the Author has stated in has stated in his first paragraph. I think that more people should start a small business so they can become aware of how overwhelming the level of benevolent government regulation & oversight has become. We would then return to having a government that focuses on more on having a few good needed program that protect people that regulations that protect government jobs the try to protect people.

Fitim Hajrizaj Wrote:

One way to achieve this influence in elections was the Citizens United (created and financed by the Koch Brothers) through litigation removed any barrier to using their extra money Uncle Reagan delivered, to buy all the influence they need. It might help to have a Supreme Court Judge on their side, and it’s so surprizing that some of the supreeme court judges (Judge Scalia had attended few meetings for Citizen’s United), and no conventional media has communicated this.

What Professor Ferguson is implying is that red tape just appears willy-nilly, without context, and is a symptom of regulations that the state imposes. And as a professor saying this, is either incompetence, which I don’t think so, or a biased view.

One last thing, Citizens United, is the group that organized, trained, and financed the “Tea Party Movement,” the same way Nazis used their propaganda machine. Have you ever wondered, how come this movement has been organized so fast, and interestingly why would a anti-tax groups first campaigns had to be to limit the rose of EPA. Well the EPA was the first irritation the owners had to step over.

Now, “Tea Party” members are moving in for a move to have the American People lose their trust over their Government thus giving the killing blow to Democracy in the US. They’re doing this by blocking the work of the institutions of state, and that’s should be shouted for what it is Treason. Treason, by corrupt politicians, to destroy the system, that was working fine, when there was taxation of %90 to make the excess profit, that is wasted on yachts, or palaces to be redistributed to the people who in the first case where the ones, who provided for the well beings of these leaches. I am a businessman myself, and opened my own business, when for an extra bonus, I was being pushed to replace some of the employees I have had pleasures working, with minimum wage workers, and with less hours so do not get medical benefits. If you tax those bonuses at 90% would they have sold their soul for that. No.

The evidence is all over the world. Germany still has a thriving Manufacturing sector, as well as France, Denmark, Sweeden. The GDP in all those countries is lower then US, but average family wage is around twice that of US. Over there one parent working can still provide for the family of four. All that with 36 hours a week, compared to US workers working over 47. Esentially all these countries have one thing in common; It was based on the US system set as part of the Marshall Plan, that they had to abide by if they were to get any US Aid. There has been an assault against the greatest wealth a nation can have, the cohision and an understanding that we’re all in this together, and when you have a destruction of all the wealth created for the last 50 years, transferred, means that somebody is not contributing. We haven’t seen this because we’ve been fed the idea of individualism, that the only person who is important is yourself. The idea planted went on, that “If you work hard enough, you can be whoever you want to be” (if you suddenly become a 16yo orphan, the only way to ensure you have food is to enroll in the military). If you’re Romney’s kid you might be able to open business’ left right and center.

Romney’s, Koch Brothers, Wall-Mart Family (Combined wealth, more than the bottom 30% of the US) have created state like resources, by taking them away from the people. But the People started worrying more about how not to help anybody, and being as selfish as possible, that even today while deliberate efforts to destroy the institution that defines the US, and the only tool to help everybody achieve their goals.

Donovan Hinds Replied:

I agree. We have too much freedom.

Our government should decide who can speak and what they can say. Those darn Koch brothers just don’t know when to keep their mouths shut.

Fitim Hajrizaj Wrote:

The evidence is all over the world. Germany still has a thriving Manufacturing sector, as well as France, Denmark, Sweeden. The GDP in all those countries is lower then US, but average family wage is around twice that of US. Over there one parent working can still provide for the family of four. All that with 36 hours a week, compared to US workers working over 47. Essentially all these countries have one thing in common; It was based on the US system set as part of the Marshall Plan, that they had to abide by if they were to get any US Aid. There has been an assault against the greatest wealth a nation can have, the cohesion and an understanding that we’re all in this together, and when you have a destruction of all the wealth created for the last 50 years, transferred, means that somebody is not contributing. We haven’t seen this because we’ve been fed the idea of individualism, that the only person who is important is yourself.

The idea planted went on, that “If you work hard enough, you can be whoever you want to be” (if you suddenly become a 16yo orphan, the only way to ensure you have food is to enroll in the military). If you’re Romney’s kid you might be able to open business’ left right and center.

Romney’s, Koch Brothers, Wall-Mart Family (Combined wealth, more than the bottom 30% of the US) have created state like resources, by taking them away from the people. But the People started worrying more about how not to help anybody, and being as selfish as possible, that even today while deliberate efforts to destroy the institution that defines the US, and the only tool to help everybody achieve their goals.

The success of the post WWII era that has occurred in US and is still thriving in so many places, happened not because of entrepreneurial spirit (if that was the case then the 18 & 19 century England would have been a pinnacle of success, but it was a sad place of injustice). When people understood, that the only way forward is not through cut-throat competition, but that where the whole point is for everybody to treat everybody like they would like to be treated themselves. Today High-Level Corporate position employ people with Sociopathic traits, that don’t care if 10,000 or a million are thrown into the street; they might celebrate even. Empathy is not a weak trait, but the only thing that will show our way back.

The perfect case that illustrates the root’s of the problems, that are easily fixable, but have to be embraced by everyone, I saw just last week. On a night out a fight broke out. One person was completely helpless and there were cheers that pushed the other guy inflict pain and might had killed him. Did anybody try to stop it? No!!! The apathy, was disgusting and palpable. Saw that the source of the ills lie in the values our society was brainwashed w.

Those who blocked the political system, need to investigated for treason. Their goal is destruction of liberty and democracy. People, start demanding your rights, that democracy entitles you. Key for politicans is protect overlords, whose job is essentialy preventing restoration of fairness through the proven method Taxation. Tax greed at 90%, and “Death Tax” is really “Estate Tax” after a few washes in th

Douglas Moran Wrote:

Prof Ferguson (and the WSJ) should look to the Conservative movement as the driving force behind these problems. The Conservative movement views business as essentially a criminal enterprise (and that it should be). The Chamber of Commerce and other conservative groups routinely oppose enforcement of laws against consumer fraud, calling them “job killers” and such. Conservatives routinely defend financial fraud using a “blame the victim” approach. When a business takes illegal shortcuts, ignoring basic and well-known safety measures, and kills workers, customers and/or bystanders, conservatives routinely not only defend the business, but praise it for its entrepreneurship. In the Microsoft anti-trust case, conservatives didn’t reject that Microsoft had engaged in widespread illegal behavior, but argued that since it was such a successful company, it shouldn’t be punished for such. When I listen to Conservatives, I hear a strong desire for a return to predatory Capitalism, if not Feudalism.

The Republican Party has rejected key elements of republicanism, especially the Rule of Law. Activist Republican judges go through contortions and contradictions and absurdities to protect the powerful from accountability for their crimes against the powerless (eg Ledbetter v. Goodyear Tire & Rubber Co).

We have a Republican Party whose blueprint for achieving power owes much to Communist and Fascist movements: Obstruct the ability of the government to function, treat all groups that differ as illegitimate, if not evil, don’t let facts get in the way of your ideology, don’t let ideology get in the way of achieving power.

The problems that Prof Ferguson notes are the entirely predictable result of a government responding to those who are working to undermine it. As he notes, democratic societies have substantial disadvantages when under attack from inside by criminal and subversive elements. Based on Ferguson’s history, I suspect that he will advocate appeasement of those elements.

Note: Please don’t accuse me of being a Democrat or a Liberal/leftist — I am not. Just because I am not part of the Modern Conservative “tribe” doesn’t mean I belong to that other “tribe”.

Fitim Hajrizaj Replied:

Don’t appologize because it’s all a ploy to keep people divided. Eg. While nobody was looking there’s been changes to bankruptcy law where the first entity to be paid would be derivatives. The same ones that almost brought the world to it’s knees. Traitors were diverting attention to the possible problems deficit might cause at least 20 years down the road. Japan with a deficit of 180% today, or Italy and it’s 130%, is able to work just fine, and no inflation, but US with it’s 67% was forced to fire, millions of state employees, with untold unnecessary damage to the Average Americans, and lying at the same time there’s massive increase in spending. Whenever somebody uses deficit to scare the american public, look at what else might be going on, since it’s not legitimate. First we need to be able to analyse facts on our own and don’t rely on other people to infect us with prejudice filled lies. The real story, an average american makes today the same wage he got in 1967 but now the low income get’s taxesed at a higher rate. you have only to be a human being to feel pain, by treason, where money, and understanding of people’s psychology has been used to manipulate the masses to hate you own reflection and then imposing punishment to yourself.

Donovan Hinds Replied:

I view the Democrat Party as essentially a criminal enterprise.

The Chicago Way has now become entrenched at the federal level. If we do not work to remove this pernicious way of governance we are doomed.

Douglas Moran Replied:

This is a classic example of the attitude that is destroying the Republican Party and has been the dominant meme since at least 2008: “The Democrats are bad” is taken both as proof that “Republicans are good” and as a license for the Republicans to not only refuse to address their own faults and deficiencies, but to become increasingly worse than the Democrats. During the 2008, 2010 and 2012 elections (and the intervening periods), I have been astounded by the number of Republicans who refuse to comprehend that many voters are choosing the “lesser evil”, leading those Republicans to be clueless about why so many people are voting for the Democrats.

That said, I suspect that many Republicans are in fact aware of this problem at some lower level of consciousness because they have abandoned the battle of ideas and focus on trying to win elections via Gerrymandering and voter suppression (including measures that I regard as crossing the line into fraud).

Paul Brady Replied:

Yes, the Chicago way bypasses the constitution and the rule of law. And it has now nearly destroyed Chicago’s education system and other public services. This is the way Obama follows, and it has so politicalized and corrupted federal agencies such as the IRS – the Internal Re-election Service – it became! If you take from Paul and give to Peter, you will get Peter’s vote. This is the strategy of the Democratic party, and it will likely succeed, and if it does America will indeed lose its way!


Secretary Kerry is correct in saying Americans have “the right to be stupid”, but that’s not what caused America’s decline. What got us in this mess are Liberals, who victimized responsible citizens and net taxpayers by allowing stupid people to have the right to be PAID to be irresponsible, refuse to work even when jobs are available, use illegal drugs bought with OPM, and have kids that they can’t afford on our dime. Our founders were acutely aware of stupid people, but they largely limited the consequences of stupidity and imprudence to the stupid, themselves. The literacy tests, poll taxes, and the constitutional republic which largely kept the stupid from making others pay for their stupidy have now been replaced by an egalitarian, socialistic democracy – which has now brought us the most inept, corrupt, and arrogant presidential administration in U.S. history. As the 1960s cartoon strip character, ‘Pogo’, used to say, “we’ve met the enemy, and it is US.”

Donovan Hinds Replied:

It’s a good thing that we have the right to be stupid. How else would someone like John Kerry have risen to influence?

Barrie Harrop Wrote:

America lost its way when George w took the helm,all the way to the deepest recession in 75 years.

Donovan Hinds Wrote:

Neither Dodd Frank or the ACA are legal or Constitutional. Any bill over 1000 pages is prima facie unconstitutional.

Ed Madden Wrote:

As a “recovering adult child & grandchild of lawyers!” I agree with Niall. Here are two other examples I’ve seen. We all want to learn and most all want to work. Pretty simple concepts, learning and working.

Toss in a dose of politics & bureaucracy to create Departments; learning is “Education” and working is “Labor”. The self-proclaimed experts of busybodies arrive and co-opt the language; Education means “college” while Labor means “unions”. Demand transparency & accountability but allow “plausible deniability”.

So here we are; everybody’s in charge, but nobody’s responsible; enter the lawyers.

Nels Mattson Wrote:

Are there any institutions other than lawyers and lobbyists that disagree with this article?

Before you say “hard-left fanatics” I’m pretty sure most of them agree that frivolous lawsuits and red-tape aren’t a good thing either.

The article doesn’t really attack the heart of the problem, that lobbyists, lawyers, and big money hold too much power in Washington, which keeps things in the status quo. If we took big money out of campaigns and governance, this would probably be less of a problem.

Adam Baum Replied:

The left has never seen an expansion of state interference it didn’t like. When ever the Congress passes a noble law these days, you can be sure its thousands of pages that contain the phrase “the Secretary shall prescribe regulations, because Congress wants credit for laws with fancy titles, but devoid of substance. The more regulations, the more regulators, the more analysts, the more lobbyists all with knowledge of, and dependent upon a contrived system.

Now, Washington is a black hole, so massive it distorts the money-power spacetime around it, and when you get close enough, nothing can escape it’s relentless pull.

Brian Seel Wrote:

If you go back and read “Road to Serfdom” and see what things like “rule of law” really mean, you realize that not only do we not know how our system is supposed to function, we quit educating young people about our system decades ago.

I graduated HS in the mid-1990s and I was NEVER taught in the public schools about democracy or capitalism beyond your basic history class (for democracy). How can we participate and protect a system if we don’t understand how it works? If you were going to try and undermine this country, wouldn’t step one be, stop teaching capitalism?

The rule of law is supposed to be about setting the rules for ALL participants for a particular playing field, ensuring a level playing field, and not trying to get to a specific outcome. It does not mean, “the law rules” as it has come to mean because logically then, whoever has the power to make law, is ruling. But that is what we have come to. A kind of Darwinian society whereby power means you can make rules to favor your cohort.

As power becomes more and more important (regulation has diminished the free market so the only sure path to profit is crony capitalism) the players will increasingly do more and more to obtain power (see any recent Obama scandal).

Only two endings here, the American people put their foot down and we start stuffing the genie back in the bottle or things will end badly.

Adam Baum Replied:

Right, because you are so infringed if my comode uses too much water, or I prefer to have an incandescent light that lights immediately and doesn’t require a haz-mat team if I drop it.

Good grief man, it’s time to move beyond the naive and superficial understanding of government that’s presented to seventh-graders taking what used to be called “civics”.

There’s a difference between “the rule of law” and issuance of diktats by corrupt, inept and arrogant rulers, who pursue private agendas under the banner of “the public good”.
When the state has lost track of the number of its edicts, it’s time to rethink that state.

Jeffrey Allen Miller Wrote:

I agree, everyone should have a chance to start their own firm. I started a small services business in 1987, sold it in ’91 to fund my MBA. But recently, I investigated starting a business and it was out of reach.

What is, perhaps, somewhat remarkable to me, however, is that those political candidates who run for office on the platform of eliminating govt., so that starting a business ”is in reach” again in the 2000s as it was in the 1970s/80s for nobodies such as myself, never gain voter traction. Even on the WSJ boards.

At this stage in life, I’ve come to the conclusion that: 1) nothing is going to change in the U.S. for the duration of my lifetime of about 10-20 years, and 2) the powers that be (lawyers, politicians and shareholders) will do everything in their power to keep that status quo. It is a collective approach to keep the competition at bay.

Norma Montes Wrote:

Monied interests in Washington have built up an impenetrable wall of bureaucracy and complexity DESIGNED to repel casual voters like hordes of peasants attacking the castle.

Washington has figured out that we voters lack the time, energy and will (not to mention the attention span) to parse a bill like Dodd-Frank to see if it even makes sense. It’s 1,000 pages long so we WONT read it. Because if we read it we’d see that all it does is employ more impotent regulators but excludes all but smallest community banks from any real regulation. This in turn drives up their costs and advantage accrues to the largest banks with the deepest pockets. Again.

Instead, we’re content to sling mud at our leaders and be endlessly distracted by trivial b_ll sh_t like “Well where is his birth certificate?” We’re like a re tarded a kid who can’t figure out how to ride a bicycle so instead we just throw rocks at it.
In the past tyrants have taken over through totalitarian brute force. The US is the first nation to willingly hand over the keys of our self-determination and self-rule because real democracy is just too messay and inconvenient and would mean missing CSI:Miami.

Tom Dee Wrote:

If law and regulation and the bureaucracy it creates is written by lawyers it must be managed by them as well? Perhaps. I think the impact of more lawyers coming into the job market has changed the business landscape dramatically in the last 20 years. The writer should have explored this issue in more detail. Has the increasing amount of lawyers coming into the market place changed the dynamics of politics, business, and governance? What is the relationship between law professions, public servants, civil servants, and crony capitalist? What is driving the demand for complexity?

Warren Stephens Wrote:

> A report has published data… on the total number of days it takes to start a business, get a construction permit, register a property, pay taxes, get an export or import license and enforce a contract.

I am almost absolutely sure that a REALITY SHOW on tv with contests competing to completely adhere to every regulation at all times while starting common businesses would be more effective than any report or book by any person or any group — no matter how completely clear that data might be.

The general population does not read reports, or these kinds of books.

Daniel Sharp Wrote:

Nice article. I little too much lawyer bashing, as it’s a diversion from the real problem: accretion of special interests. The author touches on this in the section quoting Mancur Olson, (“. . . all political systems were bound to become the captives, over time, of special interests . . .”), but he otherwise ignores the fact that just about every broad economic interest in the US has made itself utterly dependent on the US government, either for the payment of money (e.g., farm subsidies), the provision of tax relief (e.g., the film industry), or the receipt of direct government support (e.g., the banking industry). All of these special favors cost money and can only exist in deep complexity, which provides cover from a general public diverted by “America’s Got Talent” and professional sports (which also receive government subsidies/tax breaks, usually via the construction of stadiums, or via local tax incentives, etc.).

Another huge contributor to the US’s problem: uncertainty. Everything from the enactment of the “Affordable Care Act” (What does it require? What will I have to do? Will it be repealed?) to the tax code, to the way affirmative action is enforced, invites uncertainty. One thing I’ve seen over the years: if you have a reasonable idea how much things will cost, you can make a decision on how to proceed, even if it’s just a “go/no go” decision. If you don’t know what things will cost, you have no idea how to proceed, so you try to wait until things clear up. In the meantime, things seize, opportunity passes, jobs become scarce.

“We have met the enemy and he is us.” Pogo.

Giovanni Galtiago Wrote:

The situation was once that we were free to pursue our business but the government had some influence on our operation and profitability.

Now, the government is free to constrain our business and we have some level of influence on our operation and its profitability.

The US government method is not the bold method of the communists where they overtly impose their state will. Our method is the aggregated incremental-ism of the progressives which, like a cancer, methodically sucks the life out of its host.

Either way, you are a serf who works to ensure the the lord of the manor gets the lion-share of your efforts and you are left eking out savings during your productive usefulness and then draining the savings in your final few years.

The gap between the haves and the have-nots will continue to be etched in stone as the middle-class evaporates.

Well, we have voted for this mind-set over the last 100 yrs. It is our fault.

Will Olschewski Wrote:

Excellent piece! The most comprehensive analysis, I have seen so far.

Our culture has changed drastically from the 60’tees when i arrived from Germany. Then business men and especially entrepreneurs were admired. Now there is envy and disdain. In fact our economic culture has become quite similar to the German culture – envy and disdain for the rich. This of course is because we are doing the same as the Germans: Crony Capitalism , Regulate, Control and Punish on one hand and reward idleness (unintended consequence of the entitlement culture).

In the 80’tees, the Germans were wondering why we had far more startups here in the US. A German Journalist came to interview my Inc.500 company and they wrote an article about the different culture in the US of A, but of course just like here, nothing changed.

When Morality is jettisoned in the name of freedom and right and wrong are redefined misery is the result.
Ravi Outlines the decline of America in 1992



About arnash

“When you find yourself on the side of the majority, it’s time to pause and reflect.” - Mark Twain - Politicians and diapers - change 'em often, for the same reason. "Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other." Ronald Reagan "Liberals claim to want to give a hearing to other views, but then are shocked and offended to discover that there are other views." William F. Buckley, Jr. “The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.” - Bertrand Russell The people are the masters of both Congress and the courts, not to overthrow the Constitution, but to overthrow the men who pervert it. Abraham Lincoln “Good people sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.” - George Orwell “Satan will use a lake of truth to hide a pint of poison”.
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