The gatekeepers have always used control over information and money as their primary means of control. In our era, for the first time in recorded history, the self-screened gatekeepers have lost control over both the flow of information and the flow of money. They can try to influence both, but influence is not control.
by Gary North
I rarely discuss national politics in this newsletter, because I think presidential elections are a half-billion dollar Punch and Judy show whose practical outcome is orchestrated well in advance. The presidential campaign is held for tradition’s sake and for its entertainment’s value, the better to shill the voters. Let’s face reality: when the outcome of the 2004 presidential race had to be the election of a member of Skull and Bones, a Yale undergraduate secret society that initiates 15 students a year, the available two choices were not the result of the system we read about in our high school civics textbooks.
Ever since 1932, the presidential campaigns have been conducted between Council on Foreign Relations Team A vs. Council on Foreign Relations Team B. In 2004, the range of choices narrowed: Skull and Bones Team A vs. Skull and Bones Team B. Phyllis Schafly complained in print back in 1964 about the orchestrated party primary system’s never allowing voters a choice rather than an echo. Her complaint is still valid.
These days, the choice is mainly between which Yale
graduates you want: the two Clintons vs. the two Bushes, with
Kerry thrown in for amusement value. It’s like one of those TV
reality shows. “Which Yale graduate will be eliminated this
time?” You might respond by saying that Gore was an exception.
Good point! He graduated from Harvard. Then there was Dukakis,
who graduated from the Harvard Law School. George W. Bush has
been the most broadly based candidate we have had since 1984. He
graduated from Yale and also the Harvard Business School. Do you
feel reassured? Democracy marches on!
So, I have not written much about presidential campaigns
since the fall of 1980, when Reagan accepted George H. W. Bush as
his Vice Presidential candidate. He had promised his supporters
that he would not do this. I wrote an issue of “Remnant Review”
titled “The Fix Is In.” It was. Bush’s right-hand man, James
Baker, took over running the White House staff. All of the
Reaganites at the White House — there were very few — departed
within a year. If conservatives had been honest, their slogan
would have been: “Let Reagan be Reagan . . . he’s the only
Reaganite still there.”
But I have decided to change my policy, briefly. Something
happened this week that deserves comment, for it points to a
change that is unprecedented.
GUY FAWKES DAY, 2007
On November 5, Guy Fawkes Day, a privately run Web site took
in over $4 million for Ron Paul’s presidential campaign. In one
day. Dr. Paul had not organized this. This was 100% word of
mouse.
The Establishment news media were stunned — almost
speechless. This was impossible, as far as they were concerned.
This was completely unprecedented in American political history.
They do not understand what is going on.
A revolution is going on.
The word “revolution” is used all the time. Occasionally,
it is accurately applied. This time, it is. The Internet really
does constitute a revolution.
This revolution is based on two factors: a new technology
and unprecedented price competition. There has never been price
competition like this in the field of communication. Digits that
can be viewed as images — words, pictures, and videos, with
audio files thrown in for good measure — are delivered
instantaneously on demand (or even without it: spam) without
paper, printing costs, or postage costs. The primary limit on
communication today is the time cost of reading.
This technological reality is creating nightmares for
Establishments in every nation. Why? Because the cost of access
to voters is now limited to time and marketing creativity. It is
not limited by either space or mass.
This has never happened before in recorded history. For
over four centuries, the structure of Establishment rule has
rested on one assumption above all others: the high cost of
delivering images to large numbers of people. This assumption
has become increasingly ludicrous ever since 1996.
THE ESTABLISHMENTS
A series of seemingly competitive Establishments are
interlocked domestically and also internationally, despite
competition at the margins among them. There is basic agreement
on competitive rules and strategies. The Bilderberger
organization conducts closed meetings where representatives of
these Establishments get together to discuss in private the range
of outcomes acceptable for the various international Punch and
Judy shows.
These Establishments are an institutional mixture of long-
term senior advisors to this year’s crop of presidents and prime
ministers, multinational bankers, foreign policy specialists, oil
industry decision-makers, university educators, mainstream media
representatives and their well-paid and completely housebroken
salaried intellectuals, plus hundreds of low-level candidates who
dream of entry into the inner ring. (Read C. S. Lewis’ wonderful
essay, “The Inner Ring.” It is on the Web.) Entry into any of
these Establishments is screened by senior members. The system
is self-policed.
The key to this policing is control over the barriers to
entry.
Officially and legally, these various organizations are
private and voluntary. Their carefully crafted barriers to entry
are not mentioned in the United States Constitution. These
barriers are not mentioned in the foundational judicial documents
of any nation. This means that, legally speaking, non-
Establishment interlopers can breach these barriers and take over
the society. The ideology of democracy guarantees this.
Democracy is the reigning religion of our era.
But, as Forest Gump’s mother would say, “Democracy is as
democracy does.” In every democratic nation, non-democratic
barriers to entry into the various controlling Establishments
have kept democracy on a very tight leash.
Here, I am speaking of politics. But society is far more
than politics. Politics is only one aspect of society. The
Establishments’ system of controls is not limited to politics.
Nevertheless, they maintain their control primarily through
politics. This is their supreme institutional weakness. They
are holed up inside a castle that has been built in terms of
political control over the social order.
The social question is: How can the public get off the
existing leash?
As economists would put it, at what price can the public get
off the leash?
If the cost of maintaining the leash increases, the public
is more likely to get off the leash.
The cost of maintaining the leash is now rising
exponentially. Why? Because the cost of individuals’ operating
off the leash is collapsing.
THE CRUCIAL BARRIER TO ENTRY
Today’s Establishments are an unofficial confederation of
multiple interlocking directorates. These are self-policed
directorates. The designers of this almost 500-year-old
piecemeal system have based their control on a single highly
specific barrier to entry: the cost of delivering pieces of
paper. This barrier is now collapsing.
The last major communications-based revolution in the West
began on October 31, 1517, when Martin Luther nailed his 95
proposed debate topics onto the door of the church in Wittenberg.
He thought he was launching a serious academic debate in Latin.
He was in fact launching a social revolution: a change in law,
attitudes, and religion.
Luther could not have launched the Protestant Reformation
had Gutenberg not invented movable type two generations earlier.
The nameless printers who translated Luther’s 95 theses into
German and then mass marketed them were the key to this
revolution. By never paying Luther royalties for his writings
and pocketing all the profits, they made him the most important
person of the sixteenth century. Most historians would put him
in the top five or ten men over the last 500 years. But
Gutenberg is higher on the list: no Gutenberg = no Luther.
It was impossible for the existing Establishment to stop
Luther and his followers at a price they were willing to pay: the
systematic destruction of all unregulated printing. Subsequent
political rulers recognized the threat and tried to control
printers, but, political revolution by revolution, they failed.
The cost-effectiveness of printing was too great. The lure of
profit for printers was too great. Printers cheated. They broke
the law.
The European Establishments in 1517 had been built on the
older, pre-Gutenberg image-communications system. By 1517, the
cost of delivering pieces of paper had fallen too far for the
Establishments to adjust to the new pricing conditions. They had
not recognized the enormous threat to their power for two
generations. Luther spotted his opportunity by the end of 1517.
The printers had made it visible to him within a matter of weeks.
He took advantage of it. He became the greatest master of the
pamphlet in the history of the world. He retains the title.
Peter Drucker years ago wrote that when a new technology
reduces costs by 90%, it cannot be stopped. It will take over
any market that has been maintained by an existing technology.
The Internet has reduced communications costs — not counting our
time — by far more than 90%. It cannot be stopped.
Any Establishment that fails to adjust to this new pricing
structure for communications will not survive. This means that
the single most important foundation of the present reigning
Establishments is in its final stages unless the Establishments
adjust. So far, they haven’t.
The information gatekeepers in every field except one are
losing market share: newspapers, FCC-regulated television
networks, K-12 public education, and movies. Radio long ago fell
to the right-wing talk shows. All that the Establishment has
left in radio are the news shows on National Public Radio:
narcoleptic radio. (“The surgeon general has warned: Do not
drive while listening to NPR.”)
In only one area do they still maintain almost complete
control: higher education. This control is maintained by means
of a system of state-enforced accreditation. But there is a
monster inside the gates of the halls of ivy: the for-profit
University of Phoenix. It has at least 250,000 students enrolled
today. It is mainly Web-based. It takes in over $2 billion in
tuition each year. It is the harbinger of the future.
Drucker’s rule is about to manifest itself in higher
education. He saw it coming. Distance learning cuts costs by
90%. “Universities won’t survive. The future is outside the
traditional campus, outside the traditional classroom. Distance
learning is coming on fast.”
http://www.mises.org/story/2013
I have shown how a student can earn a distance learning B.A.
degree from an accredited university for about $15,000 in three
years — maybe two.
http://www.LowestCostColleges.com
The Establishments are losing control. They hold the leash,
but it is wearing thin. Ron Paul’s $4 million day is indicative
of how voters have begun to slip the Establishment’s leash.
The time cost of reading is an inescapable cost. Time is
our only truly irreplaceable resource. Here, the Establishments
have no insurmountable cost advantage over anyone else. If
anything, they is on the defensive. They are not digital media
savvy. This is why they are losing ground.
Through the dual technologies of Web addresses and graphics-
based browsers, the Internet in just one decade, 1996 to 2006,
stripped the cost of communicating ideas to the bedrock limit:
the time cost of reading. I am sure there will be many more
innovations, but the main one is now behind us: delivery costs.
This outcome was not foreseen by anyone in the U.S. military who
designed the original Internet back in 1969. The outcome just
happened.
Assuming that the Internet stays up, the revolution was.
The fallout has begun.
ADAPTING
Decentralization is now the wave of the future. No single
plan of social transformation will dominate the Internet. There
are too many players. The cost of entry is too low. Google will
be a big part of successful plans. That is about all I feel
confident in saying.
This will be a trial-and-error procedure, which is weighted
in favor of error. Most plans fail. This is good for liberty
and bad for tyranny. Tyranny is limited to one plan per power
unit: whatever the central planners agree to. Liberty is based
on open entry: “Come one, come all!” The fact that most plans
fail is the Achilles heel of central planning. Consumers
determine who succeeds or fails — mostly fails — in the free
market. Never has there been a market with entry costs lower
than the Internet’s. The number of ways for private decision-
makers to succeed is enormous and growing, due to low entry
costs. The number of ways for central planners to fail is
growing just as fast.
Innovation is a characteristic feature of decentralization.
Stagnation is a characteristic feature of civil government. This
is because of rival systems of funding, as Ludwig von Mises
showed in his 1944 book, “Bureaucracy.” Funding for voluntary,
decentralized agencies is dependent on creative promoters in the
agencies or supportive of the agencies. Success is based on
whatever pleases consumers or donors.
In contrast, funding for civil government is based on taxes,
unamortized debt, and monetary inflation. All three produce
losses for most consumers and therefore growing resistance.
Thus, my motto:
“Nothing is sure except death and taxes and people’s
attempt to cheat both.”
The inability of large, tax-funded, centralized government
agencies to respond rapidly to innovative pathways around
government controls is universal. The lower the costs of entry,
the more overwhelmed the state and its licensed institutions
become. Every Establishment therefore relies on the state to
create barriers to entry. These barriers are being undermined
daily by the Internet. This has happened so rapidly, under the
radar of bureaucrats, that all of the various Establishments have
been caught flat-footed.
If there was a single event that illustrates this tipping
point, it was Matt Drudge’s 1998 story on President Clinton and
the unnamed intern. Within hours, the attempted weekend
suppression of the story by “Newsweek” ended in howls of derisive
laughter. To “Newsweek,” the world said: “Close, but no cigar.”
The breach in the gatekeepers’ wall became visible to tens of
millions of people within days.
This breach has gotten wider ever since.
The gatekeepers are frantic. The mainstream news media
immediately branded Drudge an amateur. He was not credentialed
in any way. He was just a high school graduate operating out of
a room in an apartment. This attack had no effect. Today, his
site is ranked in the top 1,300 by Alexa. It has a higher
ranking than the “Los Angeles Times” or CBS. As for MSNBC, it’s
about 16,000 — lower than LewRockwell.com, the Ron Paul
information site.
WHAT ARE THE STAKES?
The stakes are enormous. The stakes are these: control over
the flow of information, money, and power — in that order in
importance. This issue can be encapsulated by one question:
“Will semi-public monopolistic agencies that are
licensed by the central governments of the world be
able to control the flow of information to individual
decision-makers who have both money and brains?”
If you want it in percentages, it is this:
“Will the 1% on top be able to protect today’s semi-
monopolistic positions of the 4% who shape the thinking
of the 20% who decide on behalf of the 80% who
officially have the votes, but who rarely show up on
election day?”
There are three primary trends that suggest that the answer
is “no.” First is the Internet. Second is the inability of most
civil governments to protect the broad mass of the population
from rising crime. Third are the promises by politicians
regarding long-term retirement income — promises not funded by
the accumulation of income-generating assets.
Consider the Internet. The denizens of the World Wide Web
have more money than the typical voter. They have more formal
education. They also have skills in navigating the Web. They
have Google. They have e-mail. They are international.
These people are on the cutting edge of social change. In
the way that literate people were on the cutting edge in 1517, so
are people who use the Internet as their primary source of
information.
In effect, the world’s Establishments have based their
control on their ability to control the flow of information to
illiterates — digital illiterates. They are in the condition
that the Catholic Church was in back in 1517. The Church
controlled the preachers, more or less, through a system of
compulsory accreditation and licensing. The state backed up the
Church. Most people in Western Europe got their information from
preachers in 1517. Then one of the preachers, Drudge-like, got
his hands on a lot of printing presses — not directly, but
indirectly. The printers built his audience for him. They kept
the money; he kept the audience.
Power after 1517 spread to local units of civil government
in what we today call Germany. Protestant princes challenged the
Catholic Emperor. The Church relied on the Emperor to enforce
its system of accreditation and licensing. It rested on a weak
reed. The process of decentralization, informed by low-cost
pieces of paper, could not be reversed.
Today, the same process has accelerated. Digits have
replaced pieces of paper. Electrons have replaced atoms.
It is very expensive for governments to control digits,
which recognize no borders or jurisdictions. Yet without such
control, the Establishments’ jointly held leash gets frayed.
Digits can cross borders. This means that two things are
now beyond low-cost control by any national government:
information and money. Information and money are conveyed in
digital form.
The gatekeepers have always used control over information
and money as their primary means of control. In our era, for the
first time in recorded history, the self-screened gatekeepers
have lost control over both the flow of information and the flow
of money. They can try to influence both, but influence is not
control.
Ron Paul’s campaign indicates that Establishment influence
is waning where it counts most in the long run: the flow of
information. The evidence for this is the flow of money: $4
million in one day. That got the attention of the gatekeepers.
Money talks. In their world, it talks louder than anything
except votes.
WHEN DIGITAL MONEY FAILS
Karl Marx called this the cash nexus. It’s the digital
nexus today. Central banks control the creation of digital
money. They cannot control the response of speculators to
monetary policy. At most, they can influence speculators at the
margin.
The key political fact in every Western nation is this: the
supply of political promises has exceeded the supply of capital
to fulfill these promises. The system of political promises is
unamortized.
This will produce a crisis of faith. Today, there is
society-wide faith in democracy and faith in civil government.
Both faiths are waning. The evidence of this decline in faith is
seen in rising prices and rising crime rates. This process seems
to be irreversible throughout the West. This is the conclusion
of Jacques Barzun in the final section of “From Dawn to
Decadence” (2000). It is also the conclusion of Martin van
Creveld in the final section of “The Rise and Decline of the
State” (1999).
The politicians dare not openly repudiate their promises of
retirement safety nets. To do so would be political suicide.
Yet these nets cannot be funded for even one more generation.
Their repudiation will therefore be papered over, not with paper
money but with digital money.
When the flow of digital money from the world’s capital
cities ceases to maintain the flow of economic goods and services
to those with bank accounts filled with digits, the world will
change dramatically, just as it changed in the generation after
Luther nailed his debate topics on the church door.
What matters most now is the flow of information, not the
flow of funds. The flow of funds is pretty much set. Neither
the government nor the public has much discretionary income. The
budget next month will look pretty much like the budget this
month and last month.
What is changing is the budget for time. People are re-
allocating their precious time in terms of the new cost
conditions. Here, price competition has created a new world
order.
Most denizens of the Web already have their favorite sites
and e-letters. To get them to change is costly. Their attention
cannot be bought with money alone, any more than the attention of
pamphlet readers in Northern Europe could be bought with money
alone after 1517.
Today’s political Establishment cannot respond effectively
on the Web. It can respond in the traditional media, but these
are shrinking in influence.
The handwriting is on the screen: “Thou hast been weighed in
the balance and found wanting.”
CONCLUSION
Ron Paul’s success on November 5 has sent new information to
the political Establishment: a small but Internet-savvy hard
corps — a vanguard, to use Lenin’s term — is putting its money
where its mouse is.
He is now in a position to begin to mobilize this vanguard
for a 20-year political battle that will reach into every local
community — to train people in the techniques of political
mobilization through digital communication, and to provide them
with the materials to challenge the existing political
Establishment.
Why 20 years? Because we are in an early phase of a war
whose outcome will be decided when digital money no longer buys
what aging voters have been led to expect. The revolution of
rising expectations will be thwarted by rapidly depreciating
digital money. Thwarted expectations are the equivalent of
century-old dry underbrush in a large political forest. One
lightning bolt will set it ablaze.
Lightning bolts in general are predictable. Specific bolts
are not. We know what is going to happen. We just don’t know
when.
I close with this ancient rule of politics: “You can’t beat
something with nothing.” It applies to every area of life. It
is not enough for today’s Establishments to lose. We must
replace them with something better — something decentralized,
privately funded, and unlicensed.