The Internet: Bureaucracy or Fiefdom?

From the Bayeux Tapestry

Bruce Schneier declares:

It’s a feudal world out there.
Some of us have pledged our allegiance to Google: We have Gmail accounts, we use Google Calendar and Google Docs, and we have Android phones. Others have pledged allegiance to Apple: We have Macintosh laptops, iPhones, and iPads; and we let iCloud automatically synchronize and back up everything. Still others of us let Microsoft do it all. Or we buy our music and e-books from Amazon, which keeps records of what we own and allows downloading to a Kindle, computer, or phone. Some of us have pretty much abandoned e-mail altogether … for Facebook.

These vendors are becoming our feudal lords, and we are becoming their vassals. We might refuse to pledge allegiance to all of them — or to a particular one we don’t like. Or we can spread our allegiance around. But either way, it’s becoming increasingly difficult to not pledge allegiance to at least one of them.

The whole piece is worth reading.  For my part, I’ve often wondered if the Internet doesn’t fit Max Weber’s conception of a bureaucracy.  Weber described six major characteristics of bureaucracy (here‘s a handy summary of his views.)  First and most familiar in the popular use of the word, a bureaucracy has a formal hierarchical structure.  While there is no group of people who are the president and board of directors of the Internet, the machines that make up the Internet do in fact relate to each other according

Max Weber, by ludilozezanje

Max Weber, by ludilozezanje

to set routines.  Weber described bureaucracies staffed by human officials, but parts of his description still apply where, as in the functioning of the Internet, the officials are replaced by machines.

The second characteristic of bureaucracy in Weber’s description is a set of rules that consistently transform particular decisions made in one part of the structure into particular actions taken in other parts of the structure.  In this regard every bureaucracy aspires to the condition of a machine; as a bureaucracy composed of machines, the Internet would in a sense represent the ultimate bureaucracy. Along with these rules comes a heavy emphasis on written documents and permanent records, to ensure that decisions are communicated from one part of the structure to another accurately and that they are converted into action appropriately.  Here again, the Internet’s tendency to preserve data makes it the ideal form of bureaucracy.

Third, Weber says that bureaucracies are organized by functional specialty.   Here we see two levels of organization taking place independently of each other.  Of course, the machines are sorted together by their functions.  At the same time, the people who use the Internet develop specializations in their ways of relating to it.  Those who resist specialization remain on the fringes of the Internet.  So, a general-interest blog like this one toddles along for years with a handful of readers; start a tumblr site devoted entirely to eighteenth-century cocktail recipes, and you might  draw a thousand followers in a week.  Through them, you can learn more about your topic than you had imagined possible.  Because of the efficiency that results from the Internet’s specialization and consistency, users have strong incentives to specialize their own use of the system and to respect its rules.  Thus, the Internet’s human users behave as they would if they were clients of a bureaucracy staffed by human officials.

Fourth, Weber’s bureaucracies have missions.  These missions are not simply tasks for which groups might be established ad hoc, but are the overarching goals that justify the organization’s continued existence.  Because so many people have stakes in the continued existence of large bureaucracies, their missions tend to become rather broad and ill-focused over time; the last thing anyone wants is for the bureaucracy that provides his or her livelihood to have completed its mission.  A phrase like “the distribution of information,” precisely because it is so vague, is therefore a perfectly apt mission statement for a major bureaucracy.

Fifth, bureaucracies are impersonal structures, in which the relationship of one person to another is restricted to the roles that those people are playing.  So, if Alice is a sales agent for her company and Bob is a purchasing agent for his, their business discussions are between vendor and client, not between Alice and Bob.  When Internet cafes first appeared, nearly twenty years ago, a huge percentage of them had Peter Steiner’s cartoon from 5 July 1993 The New Yorker taped to the wall:

Now we’re living in the age of Facebook, and on the Internet everyone knows that you’re a dog, what you had for breakfast, where you like to do your business, etc.  Still, there is an element of impersonality built into online interactions.  So online political discussions, even on Facebook itself, quickly become interactions between supporter of Party X and supporter of Party Y, even when those supporters are close friends in other settings.  Obviously people can turn each other into symbols of opinions they dislike in any social environment, but I don’t think it’s controversial to say that online discussions are particularly prone to this sort of reduction.  Moreover, the most pleasant online relationships tend to be the simplest, those in which participants change their personas least often.  If Alice and Bob meet at a site devoted to eighteenth-century cocktail recipes and interact simply as devotees of those recipes, I suspect they are likelier to look forward to hearing from each other than they will be if they start talking about other topics and expecting other kinds of emotional and intellectual support from each other.  Offline, I would think it would be the opposite, that people who discuss only one topic and present themselves to each other in only one way are unlikely to become close.  I’d be interested to see studies on this hypotheses, a quick Google Scholar search hasn’t shown me any but if you know of such, please enlighten me.

Sixth, employment in a bureaucracy is based on technical qualifications.  Civil service exams, educational requirements, efficiency ratings, and other devices for measuring competence are not necessary if the best person for the job is the person who has inherited it as a matter of right.  They are necessary if the best person is the ablest.  Of course, every human bureaucracy exists within a society where there are laws, institutions, and ethical ideas that predate the rise of bureaucracy and survive independently of it.  So one does not expect a certifying authority to require the person who owns a business to prove that s/he is the ablest person to oversee its operations.  Nor does one expect anyone to require potential parents to demonstrate any particular abilities in order to earn a license authorizing them to produce children, or to raise the children they have produced.  If all social life were subject to the demands of a single bureaucracy, we would expect to see such requirements.  Indeed, as bureaucratization proceeds apace, we see ever more footprints of bureaucracy in areas which were once matters of right.  In many parts of the USA, for example, voters are routinely required to produce identification before they are allowed to take ballots, even though there is no evidence that anyone has ever impersonated a voter, and absolutely no way to affect the outcome of an election by impersonating voters.  These laws are accepted, not because they serve any legitimate purpose, but simply because it seems natural to the residents of a social world dominated by bureaucracy to be called on to produce one’s papers.

As for the Internet, there are technical specifications devices must meet in order to be connected.  This automated bureaucracy rarely sorts its human users by technical qualifications, though they do sort themselves in much the way that the clients of bureaucracies staffed by humans sort themselves.  And, as they do when interacting with bureaucracies staffed by humans, Internet users do tend to see themselves as clients receiving services rather than as citizens asserting their rights.  Zach Weiner expressed that point very effectively in February, with his now-classic cartoon about the so-called “Stop Online Piracy Act” that was then before the US Congress:

Saturday Morning Breakfast Cereal, 2 February 2012

Saturday Morning Breakfast Cereal, 2 February 2012

So you can see why I have thought it made sense to look at the Internet as a bureaucracy in Max Weber’s sense.  Perhaps, though, it makes more sense to follow Mr Schneier and look at it as a feudal realm.  While every element of a bureaucracy is, at least in theory, accountable to some overall authority that regulates that bureaucracy, the elements to which we trust our online security are accountable to no one.  As Mr Schneier writes:

In this new world of computing, we give up a certain amount of control, and in exchange we trust that our lords will both treat us well and protect us from harm. Not only will our software be continually updated with the newest and coolest functionality, but we trust it will happen without our being overtaxed by fees and required upgrades. We trust that our data and devices won’t be exposed to hackers, criminals, and malware. We trust that governments won’t be allowed to illegally spy on us.

Trust is our only option. In this system, we have no control over the security provided by our feudal lords. We don’t know what sort of security methods they’re using, or how they’re configured. We mostly can’t install our own security products on iPhones or Android phones; we certainly can’t install them on Facebook, Gmail, or Twitter. Sometimes we have control over whether or not to accept the automatically flagged updates — iPhone, for example — but we rarely know what they’re about or whether they’ll break anything else. (On the Kindle, we don’t even have that freedom.)

The Good, the Bad, and the Ugly

I’m not saying that feudal security is all bad. For the average user, giving up control is largely a good thing. These software vendors and cloud providers do a lot better job of security than the average computer user would. Automatic cloud backup saves a lot of data; automatic updates prevent a lot of malware. The network security at any of these providers is better than that of most home users.

Feudalism is good for the individual, for small startups, and for medium-sized businesses that can’t afford to hire their own in-house or specialized expertise. Being a vassal has its advantages, after all.

For large organizations, however, it’s more of a mixed bag. These organizations are used to trusting other companies with critical corporate functions: They’ve been outsourcing their payroll, tax preparation, and legal services for decades. But IT regulations often require audits. Our lords don’t allow vassals to audit them, even if those vassals are themselves large and powerful.

In some of my darker moments, I’ve wondered if the USA is undergoing a revival of feudalism.  Mr Schneier makes a strong case that it is, at least in this area.

Ancient Regime

Shortly before the stock markets closed yesterday afternoon, the US Supreme Court announced a ruling on the so-called “Affordable Care Act” (also known as ACA.)  Health care stocks generally rose on the news of the ruling, in some cases sharply, while shares in health insurers showed a mixed reaction.  Today, the trend has been slightly downward across the board.

A majority of the US Supreme Court held that the US government does have the power to compel citizens and other residents of the USA to buy health insurance.  While the court rejected the Obama administration’s argument that this power, the core of the law, was within the scope of the authority the Constitution grants the federal government to regulate interstate commerce, it concluded that, because the law is to be enforced by the Internal Revenue Service in the process of collecting taxes, it is supported by the government’s authority to levy taxes.

In effect, the law establishes a tax that will be paid directly to health insurance companies.  US residents who refuse to pay this tax will be assessed an alternative tax, one paid to the treasury.  As written, the statute did not include the word “tax,” speaking instead of “premiums” and “penalties.”  These words are euphemisms.  This is clear not only from the Supreme Court’s legal reasoning, but also from the most basic economic logic.  A law which directs people to dispose of their wealth in a particular way to advance a particular set of policy objectives is a tax, whatever label marketing-minded politicians may choose to give it.

Many opponents of the ACA have spoken out against the idea of a tax directly payable to private citizens.  For example, today on the Counterpunch website Dr Clark Newhall complains that the bipartisan Supreme majority represents “Corporatists United.”  Dr Newhall denounces the statute and the ruling in strong terms.  I would like to make three quotes from Dr Newhall’s piece abd add my own comments to them:

In an eagerly anticipated opinion on the Patient Protection and Affordable Care Act, colloquially known as “Obamacare’, an unusual alignment of justices upheld the Act nearly entirely.  The crucial part of the decision found the ‘odd bedfellows’ combination of Chief Justice Roberts joining the four ‘liberal’ justices to uphold the ‘individual mandate’, the section of the law requiring all Americans to buy health insurance from private health insurance companies…

Many supporters of the ACA object to the term “Obamacare.”  The law was crafted on the model of a regime of health insurance regulations and subsidies enacted in Massachusetts in 2006.  That regime is widely known as “Romneycare,” in honor of Willard M. Romney (alias “Mitt,”) who, as Massachusetts’ governor at the time, had been its chief advocate.  So calling the federal version “Obamacare” is simply a matter of continuing to follow the Massachusetts model.  Now, of course, Mr Romney is the Republican Party’s choice to oppose Mr Obama in this year’s presidential election.  Therefore Mr Romney and his surrogates are creating much merriment for political observers by trying to attack the president’s most widely-known legislative achievement, which as it so happens is identical to Mr Romney’s most widely-known legislative achievement.

Dr Newhall goes on:

Those who make, interpret and enforce the laws no longer lie on the ‘left-right’ political continuum. Instead, they are in effect at ‘right angles’ to that continuum.  The ideology that drives the Supreme Court, the political administration and the Congress is not Conservative or Liberal but can best be described as “Corporatist.”  This is the ideology that affirms that “corporations are citizens, my friends.”  it is the ideology that drove the Roberts Court to the odious Citizens United decision.  it is the ideology behind a bailout for banks that are ‘too big to fail.’  And it is the ideology that allows Congress to pass a law like the ACA that is essentially written by a favored industry…

It seems to me very clear what Dr Newhall means to evoke in these sentences is the spectre of fascism.  During the 1930’s, fascists in Italy, Britain, Belgium, and several other countries used the words “fascism” and “corporatism” interchangeably, and economic historians still cite Mussolini’s Italy, and to a lesser extent Hitler’s Germany, as examples of corporatist economics in practice.  The American diplomat-turned-economist-turned-journalist-turned-pariah Lawrence Dennis argued in a series of books in the 1930’s that laissez-faire capitalism was doomed, that state ownership of industry was a dead end, and that the economic future of the developed world belonged to a system in which the state coordinated and subsidized the operations of privately-owned corporations.  The most famous of the books in which Dennis endorsed this system was titled The Coming American Fascism.

Not only the word “corporatism,” but also the image of a ruling elite “at right angles” to the old left/right politics might well remind readers of fascism.  The fascists continually claimed to represent a new politics that was neither left nor right; while such anticapitalist fascist tendencies as il fascismo della sinistra or Germany’s Strasserites were not markedly successful in the intra-party politics of fascist movements,* all fascist parties used anticapitalist rhetoric from time to time (think of the “National Socialist German Workers’ Party,” and of Joseph Goebbels’ definition of revolution as a process by which the right adopts the language and tactics of the left.)  Moreover, the image of “left” and “right” suggests that political opinions form a continuum that stretches from one extreme to another, with any number of points in between.  That in turn suggests that people who disagree may have enough in common with each other that their conflicts may be productive.  Fascism, on the other hand, demands a one-party state in which a single ideology is imposed on everyone.  Fascism finds nothing of value in political conflict, and strives to annihilate disagreement.  I think that’s what the late Seymour Martin Lipset was driving at in his book Political Man when he placed most fascist movements, including the Italian fascists and German Nazis, not on the far right, but in the “Radical Center.”

Counterpunch is edited by Alexander Cockburn, who recently declared that the United States of America has completed its transition to fascism.  So it would not be surprising if by these remarks Dr Newhall were insinuating that the ACA is fascist in its substance.  I would demur from such an assessment.  Before I can explain why, permit me to quote one more paragraph from Dr Newhall’s piece:

Why does Corporatism favor Obamacare?  Because Obamacare is nothing more than a huge bailout for another failing industry — the health insurance industry.  No health insurer could continue to raise premiums at the rate of two to three times inflation, as they have done for at least a decade.  No health insurer could continue to pay 200 million dollar plus bonuses to top executives, as they have done repeatedly.  No health insurer could continue to restrict Americans’ access to decent health care, in effect creating slow and silent ‘death panels.’  No health insurer could do those things and survive.  But with the Obamacare act now firmly in place, health insurers will see a HUGE multibillion dollar windfall in the form of 40 million or more new health insurance customers whose premiums are paid largely by government subsidies.  That is the explanation for the numerous expansions and mergers you have seen in the health care industry in the past couple of years.  You will see more of the same, and if you are a stock bettor, you would do well to buy stock in smaller health insurers, because they will be snapped up in a wave of consolidation that dwarfs anything yet seen in this country.

Certainly the health insurance industry was in trouble in 2009, and the ACA is an attempt to enable that industry to continue business more or less as usual.  In that sense, it is a bailout.  Indeed, the health insurance companies are extremely influential in both the Democratic and Republican parties, and there can be little doubt that whichever of those parties won the 2008 elections would have enacted similar legislation.  Had Mr Romney been successful in his 2008 presidential campaign, doubtless he would have signed the same bill that Mr Obama in fact signed.  The loyal  Democrats who today defend the ACA as a great boon to working-class Americans would then be denouncing it in terms like those Dr Newhall employs, while the loyal Republicans who today denounce the ACA as a threat to the “free-enterprise system” that they fondly imagine to characterize American economic life would then defend it on some equally fanciful basis.

In a deeper sense, however, I disagree with Dr Newhall’s assessment quite thoroughly.  A moment ago, I defined taxation as any law that requires people to dispose of their wealth in particular ways to advance particular policy objectives.  If we think about that definition for a moment, we can see that the United States’ entire health insurance industry exists to receive taxes.  In the USA, wages paid to employees are subject to a rather heavy tax called FICA.  Premiums that are paid for employees’ health insurance policies are not subject to FICA, and so employers have an incentive to put a significant fraction of their employees’ compensation packages into health insurance premiums.  Since the health insurers have been collecting taxes all along, it is quite misleading to call the ACA a bailout.  It is, rather, a tax increase.

Now, as to the question of fascism, certainly fascist regimes did blur the line between the public and private sectors.  The most extreme case of this was of course the assignment of concentration camp inmates as slave labor for I. G. Farben and other cartels organized under the supervision of the Nazi state.  So it would not have been much of a stretch for fascists to grant corporations the power to collect taxes.  Even if they had done so, however, fascists could hardly claim to have made an innovation.  Tax farming, the collection of taxes by private-sector groups in pursuit of profit, was the norm in Persia by the sixth century BC, and spread rapidly throughout the ancient world.  In ancient Rome under the later Republic, tax farming proved itself to be a highly efficient means of organizing tax collection. So the fact that tax farming is one of the principal aspects of the US economy is not evidence that the USA is a fascist or a proto-fascist regime.  Indeed, the fact that the Supreme Court seriously considered a case that would have challenged the legitimacy of tax farming is an encouraging sign, however unedifying the opinions that the court issued as a result of that consideration might be.

Of course, in the ancient world tax farmers bid competitively for the right to collect taxes, and the winners put their bids into the public treasury.  In the USA, there is no such bidding, and no such payment.  Instead, wealthy individuals and interest groups buy politicians by financing their campaigns and their retirements.  Perhaps we would be better off to adopt the ancient system.

At any rate, “fascism” seems a misnomer for our economic system, almost as misleading as “free enterprise” or as anachronistic as “capitalism.”  A more accurate term, at least as regards the components that are dominated by tax farming, would be neo-feudalist.  The US political class is increasingly an hereditary class; Mr Obama defeated the wife of a former president to win his party’s nomination to succeed the son of a former president, and now faces the son of a former presidential candidate in his campaign for a second term.  This hereditary nobility will now sit atop a system in which the non-rich are legally obligated to pay tribute or provide service to those in power in the land, who will in turn honor certain obligations to them.

*Fascism being what it was, “not markedly successful in intra-party politics” often meant “shot several times in the head and dismembered,” as happened to Gregor Strasser.