The Institutional Forces of Centralization

How Bureaucracy Binds Us and Blinds Us

At the dawn of the twentieth century, the world had been inching towards centralization for four hundred years. The sudden scarcity of labor after the Black Death had broken the back of serfdom and given commoners the ability to move beyond subsistence and build capital through their work. Higher wages meant an unprecedented transfer of wealth down the economic ladder from the gentry to the workers. This new broader distribution of capital had created a need for banking and finance and futures trading, as well as opportunities for arbitrage. It had also created a need for investment opportunities, which—in concert with the relative expense of labor—fueled the Industrial Revolution.

The Industrial Revolution, in turn, had created technologies that didn’t just process raw materials into goods, it processed information into new and exciting forms—whether it was turning holes in a punched card into intricate weave patterns on a loom, or turning raw census data into something which could be re-shuffled and mined with comparatively minimal effort.

Increased industrial productivity meant a greater surplus of wealth and need for investment opportunities. Increased ability to collect and collate information meant opportunities became easier to detect. Trade links grew within areas united by geographical transport (i.e. rivers) and language, gradually building what once had been distinct cultural sub-groups into cultural gradients. The seas opened up to blue-water navigation, creating the incentive (and the ability) for international conquest. A vast and endless horizon of economic growth which destabilized the old monarchical systems in Europe led to the dream of empire. At the same time, the social mobility of the commoner created the desire for legitimacy—a desire realized through social climbing, education, conquest, and a philosophy (liberalism) that explained why the commoner was just as good as a king and deserved to have his estates respected just as royalty did.

Every day, everywhere, every dawn broke over a world slightly bigger than before. And every technological step, every refinement in business practice, every new communication or bookkeeping method, every breakthrough in mathematics and gunnery and ship design and mechanization made the world smaller, more comprehensible, and more manageable. The discovery of the secrets of the heavens and the algorithms of heredity (i.e. evolution) brought with it the conviction that life itself and the universe as a whole was built very like a machine, and that all natural and human systems could be managed like machines.

Where trade links formed alliances and common culture, common governance grew. And in the late 19th century, with the corners of the globe explored and mapped, and the endless horizons beginning to feel more like slowly-contracting boundaries, growth began to slow. For the first time in centuries, an old idea began to quietly percolate:

Maybe wealth is not earned, grown or invented. Maybe the world is not a positive-sum game. Maybe, just maybe, it’s zero sum... I’d better get mine while the gettin’s good.

Beginning in the late nineteenth century, entrepreneurship started (very gradually) to shift from the realm of the market to the realm of government, and thus began the process of Institutional Centralization. In the United States, as elsewhere, the process took the guises of various moral crusades—in roughly chronological order (from the 19th century to World War 2):

Manifest Destiny, Abolitionism, Chinese Exclusion, Eugenics, Income Tax, Trust-Busting, Public Education, Spanish Imperialism, Miscegenation (both sexual and social), German Imperialism, Securities Regulation, Gang Violence, Fascism.

In each case, a moral issue that was seen at the time as a legitimate object of concern (some of which we would still see as objects of concern if phrased in the current politically correct language) was seized upon for propaganda purposes by political entrepreneurs who created fortunes and influence networks for themselves by successfully transferring wealth and power upward from the people to the aristocracy and the state. Some of these crusades succeeded in their putative aims, some did not, but all resulted in an incrementally greater concentration of power.

The process was much starker in places like Germany, where the slowing of growth during a capitol glut laid the groundwork for World War I, and the shattering of growth by the Treaty of Versailles led to a public desperate for answers, allowing political entrepreneurs to lubricate the wheels of power to rapidly centralize total authority into a few sets of hands, and then into one. Over the course of the twentieth century, China, Cambodia, Russia, Cuba, Argentina, and many, many other places would see the same dynamic play out—not coincidentally, always in places where, due to geopolitical factors, growth had slowed, corruption had proliferated, and the engines of economy had finally stopped.

A Brief Digression

Before I get on with the story (and oh boy, is there more to this story!) I should stop and address the question dangling in the air before me:

What the hell happened in Germany

All of these places I listed played host to incredible repression, oppression, and genocide. And yet, all these places—indeed, all places on the globe—had deep and ancient cultures that were successful for thousands of years. Those cultures weren’t unchanging any more than a human being doesn’t change from birth through old age, but (like a human being) they had roots that ran deep and they were always distinctively and fundamentally themselves. Historically speaking, totalitarianism and genocide are practiced by conquering armies, not by governments upon their own populations.

What was it about the twentieth century that changed all that?

In one word: Growth.

The fantastic opportunities provided by growth come with costs that are easy to bear in the moment, because the advantages on offer are so vast only a fool would turn his back on them.

You may have to move away from the family farm, but you’re moving to a city with unaccounted opportunity for mating, social climbing, and wealth building—and you can always come back to the family farm when you retire, if you really want to.

You may have to take your religion less seriously in order to advance your career, but hey, religion is often stifling and a whole lot of no fun, and if you mentally put it aside you don’t have it sitting as a roadblock while you rush into philosophical, scientific, financial, social, and epistemological waters where angels fear to tread.

Humans are creatures optimized for creating and exploiting ecological niches in the most hostile environments—natural and social—on Earth. Seizing opportunity isn’t even second nature to us, it’s first nature.

The trouble comes when growth comes too fast, or goes on too long, or (worse) both.

Each of those small, opportunistic decisions cuts off one of the thousands of invisible tendrils that connect us to those deep-rooted cultures. The cumulative effect of those decisions averaged over a century of constant, rapid growth, is to create a financial and physical ecology that is alien enough from the ancestral culture that the ancient wisdom (a built up reservoir of expertise on how to live well) doesn’t easily translate. A people who, three generations ago, could cope with a tremendous amount of stress and trauma because they stood on the shoulders of their ancestors become a people who can cope with precious little stress of any sort, because they stand alone on their own two feet with nothing much else to support them.

The places with mass genocides, totalitarian regimes, and totalitarian dictatorships were places that had:

1) grown and/or changed so rapidly that the underlying culture was unable to adapt

2) saw growth come to a sudden and screeching halt just as the expectation of growth was setting in

3) dealt with #2 by gravitating to political entrepreneurs who sought to fabricate a new culture and/or national mythos from scratch, having reached the conclusion that the inadequacy of the ancestral culture was somehow to blame for the failure of growth.

Back to the Story

In the installment dealing with the Geopolitical Centralization, I pegged the end of World War 2 as the key turning point for the centralization of international power.

Domestically, the centralization trend was well underway by 1890, fed by a wave of successive moral panics that were, in turn, stoked by newspapermen and political entrepreneurs. Two major turning points came coincident with each of the two World Wars.

The first came at the hand of Woodrow Wilson, whose vision of America as a moral exemplar for humanity led him to mastermind the Treaty of Versailles, found the League of Nations, double down on America’s imperial ambitions, and re-introduce racial segregation to the Federal Government and its armed forces. He also presided over the establishment of the Federal Reserve, the current instantiation of the Federal Income Tax, created the Federal Trade Commission, and imposed legislation that expanded Federal authority over labor and agriculture.

The second came at the hand of Franklin Delano Roosevelt, who reorganized the Federal Government onto a permanent wartime footing and established the bureaucratic world we’re all familiar with today—the Intelligence Community, the Department of Defense, Social Security, Department of Agriculture, and the mass of other alphabet agencies staffed with the best and the brightest (who were to be harvested from top-tier universities, themselves re-organized to be a useful part of the effort) with the management of American life. What emerged was a bureaucratic and corporate instantiation of Plato’s Republic: the rule of expert philosopher kings that we dubbed “Technocracy.”

Such a thing would have been unthinkable in the United States only twenty years earlier, but three things changed the game:

  • First, the Great Depression (unintentionally precipitated by the invention, incentivization, and insurance of leveraged stock speculation in the interest of speeding the growth of America’s communications infrastructure) had shaken the world’s faith in free enterprise, a crisis of faith that deepened as every single attempt to fix the ensuing deflationary spiral only made the crisis worse and worse. It was obvious that nobody in charge knew what they were doing, and nobody who might know what they were doing had any power, so something had to change.

    In England, the answer was “We Planned the War, We’ll Plan the Peace.”

    In America, with its deep pragmatism, the answer was “Treat the economy like a machine and administer it properly” (i.e. the technocracy).

    Central and southern Europe, being more vulnerable to total social collapse, responded to the Depression with a stronger flavor of the same mentality—a reaction against the chaos of laissez-faire economics on one side, and against the stagnation and aesthetic poverty of Communism on the other side. They called it the “third way” of political economy, harnessing the collective political will toward the end of bringing the business sector under the power of the state until the two were more-or-less the same entity. The Italians called their version of this system “fascism.”

  • Second, World War Two itself was a war unlike any other the United States had ever seen. It was the first “total war,” in which the full weight of the US economy was bent toward the war effort. Food was rationed, prices controlled, the bulk of a generation drafted into military service. No other war in American history depended more heavily on conscription—which, you’ll remember, is a euphemism for a situation in which members of the public are kidnapped under threat of imprisonment and execution and forced into life-endangering labor to advance the objectives of their political masters (this was called “impressment” in the ancient world. Today, were the situation not clouded by patriotism, we would call such an arrangement “slavery”).

    As a result, the generation that lived through the war was deeply trained in deference to authority—more than any American generation before or since—and that authority did right by them often enough for relatively high levels of trust to develop between the government and the white working class. More importantly, the experience of serving alongside their fellow citizens in a massively integrated military went a long way towards easing racial, ethnic, and regional tensions and distrust. The result was a United States more united than any time in history—before, or since.

  • Third, the Cold War and the Post-War Order built to fight it. The generation that experienced both the Great Depression and World War Two was very interested in never letting their children experience the horrors they did. Utopian dreams were ascendant, and the sense that everything was conquerable was in the air. The atomic bomb, for all its terror (and horrors), proved that the Enlightenment dream of Man as the Measure of All Things truly had been achieved. Humanity now commanded the atomic world and could call forth its power to influence world events, to produce electricity, perhaps even to power space ships. Thanks to Freud—one of the great political entrepreneurs (and hucksters)—humanity also believed it had learned how the mind works, and combined with the economic theories of Keynes (first employed to manage wartime military supply chains) and the latest discoveries in medicine (such as antibiotics), it was clear to everyone that society could finally be engineered to be flat, fair, open, and (most importantly of all), peaceful. No more great wars, no more great economic shocks, just a long road of ever-on and always-up forever and anon.

    It was a beautiful dream, and it legitimized FDR and Truman’s great centralization of power in the eyes of the public. But despite what those on the American Right would have you believe, this was not where it started. And contrary to the narrative promulgated on the American Left, this is also not where it ended. The Cold War could be won if we all pulled together, and so we fought another war...for the next fifty-odd years.

    And, for that whole time, the institutions grew.

The Thirty Glorious Years

Because of the urgency of the Cold War, the new institutions were staffed by the best and the brightest that the nation had to offer. Professionalism was the order of the day—just as it was in the military—and the obligation of managing the new system correctly in order to maintain the public trust weighed heavily on those in the system.

More importantly, the system was new, and there was a lot to work out. This gave each Federal agency an immense amount of flexibility when it came to problem solving, as they had not yet developed their internal manuals and org charts, or been hemmed in by rules imposed from above and fences erected by legal action.

The meritocracy that defined the early administrative state was also inherited directly from the military, and it remained a realistic guiding ethic in projects related to wartime matters (such as the Apollo missions and anything sponsored by DARPA) long after the rest of the system succumbed to decay.

It is in the nature of people to promote and favor those with whom they have an affinity, whether those people are the right candidate for a given job or not—and the administrative state, in the end, is run by people. The further it drifted from its professional military roots, the more easily it began to succumb to this failure mode. So, as peacetime enabled ambitious politicians to leverage the administrative state to secure votes, the administrative state became less concerned with “scientific management of the economy and the war effort, and maintaining the public trust” and more concerned with concentrating arbitrary power and insulating it from criticism and accountability.

This cultural shift accelerated the natural drift towards nepotism and ossification that all bureaucratic systems experience once they exit the start-up phase, and this changed the nature of the meritocracy. No longer were the “best candidates for the job” the ones who could get things done in the most creative, innovative manner—instead, they were the ones least likely to rock the boat, the most likely to toe the line, the least likely to accomplish the goals of the organization, but the most likely to perpetuate the existence of the organization.

Which, naturally, included creating propaganda extolling the virtues of the organization and propagating theories of funding that would incentivize wastefulness and disincentivize efficacy (such as basing each year’s funding upon what that organization spent the previous year, regardless of achieved results—a rationale which now dominates all Federal and most State budgetary protocol).

Nonetheless, the system had immense room to grow. The United States was the only advanced economy to survive World War Two, and that meant that investment and business opportunities abounded for three decades. Despite the ever-present danger of nuclear war and the culture of denial and nihilism that induced, the growth itself was never-ending, inspiring a faith in the future and an almost religious devotion to the idea of progress that seeped into every corner of the culture, from a race to the moon to the advancement of once-science-fictional technologies, to rising gender and racial equality, to the civil rights battles, to the moral panics that brought wave after wave of censorship, political repression, land-use controls, drug wars, propaganda campaigns, and economic devastation to those portions of society that seemed disinclined to toe the line for one reason or another.

The America that emerged from World War 2 knew how to break eggs to make an omelet, and it did so ruthlessly both at home and abroad, usually in ways that left a smile on the face of the Humpty Dumpty of the moment. It led the defeat of two of the most disastrous, genocidal, and oppressive regimes in history and it brought a third to heel. It avoided nuclear war and delivered the greatest era of peace and prosperity the world has ever seen—and if it did so at the cost of the subsidiarity that had put the country in the position to literally reach for the stars, it was a small price to pay. Besides, who was going to miss the way things were when things were going so well?

But in the greatest of all historical ironies, the very factors that brought ultimate power to Washington D.C., that put the possibility of global governance on the horizon, and that created a system of global trade that kept major wars at bay for for generations would also sow the seeds that would ultimately bring it all crashing down.

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We will explore the effects of this great centralization of power in the next installment: The Seeds of Destruction.

In the meantime, I invite you to post any corrections or arguments in the comments, or send them directly to me at