Are We Learing Yet?

Before beginning this week’s post, a quick reminder about my invitation to participate in an online study group about how to understand stories at a deep level, using Shakespeare’s King Lear as a case study. Details can be found here. You can register your interest here. If you’re looking for something new and (hopefully) exciting to start the new year, this could be it!

With that said, let’s get into the post.

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It’s been quite the week in international affairs, and I couldn’t help but notice that two of the issues that popped up are directly related to the theme I’ve been exploring in posts over the last month or so, namely, the tension between capitalism and bureaucracy. On the one hand, we had the abduction of Venezuela’s Maduro, which critics instantly seized on as a violation of “international law”. On the other hand, we saw the violation of US law in the Somali childcare fraud story, which has direct correlations with what is going on here in Australia with the huge levels of fraud around the NDIS program.

Of course, these cases of fraud are just the tip of the iceberg. Look everywhere around the Western world right now, and you find fraud across so many different areas. A lot of that fraud is not even technically illegal. It is the weaponisation of “the system” by a variety of bad actors. But the real problem is that most of the bad actors belong to the system. That is the part of the Somali childcare story that didn’t get a lot of attention and which needs more exploration.

As I pointed out in recent posts, the transition from capitalism to what we can generally call technocracy began in the middle of the 19th century but really picked up steam in the early 20th century. A very practical way to understand what changed is to look at the way businesses used to be run. Prior to the 20th century, almost any business that was not a large corporation (joint stock company) was a sole proprietorship or a partnership in which there was no legal distinction between the business and the owner. The profits of the business belonged to the owners, and so did the losses.

A second important point to make about this time is that there was very little taxation of individuals, including their business activities. This was not due to any kind of benevolence on the part of the government. It was born out of the fact that it was very hard to collect tax and the costs outweighed the revenues. Government preferred to focus its efforts on areas where money could be profitably extracted, such as import duties at ports and taxes on real estate.

As a result, it was incredibly easy to start a small business prior to the 20th century. All you had to do was offer your goods or services for sale and hope to find somebody who would pay for them. No paperwork was needed. No government agency needed to be notified. No regulations needed to be adhered to. As long as you kept your customers and creditors happy, the government would not be involved.

Many immigrants to Australia and the USA in the 19th century took advantage of this state of affairs and started businesses when they arrived. If childcare had been viable at that time, there would have been nothing stopping newly arrived entrepreneurs from going into that line of work. In fact, many of those who immigrated did go into business as private educators, governesses, and the like.

And this brings us back to the Somali childcare issue. On the surface of it, the story sounded like a repeat of those from the 19th century, namely, hard-working immigrants moving to America and going into business for themselves. That is certainly how the apologists would have wanted to present it to the public. It’s a testament to how far gone the corruption has become that they were not even able to create the mirage of a legitimate business.

If an immigrant to Australia or the US in the 19th century had put up such a sign in front of their premises, they would have received precisely zero customers. For the mostly Protestant communities of that era, being able to spell properly was literally a religious matter. Enormous amounts of blood had been shed in order to allow people to read the Bible for themselves. That’s why literacy rates were higher than any other society in history. To start an education business with the name “Quality Learing Center” would have been like starting a pub with no beer; guaranteed to fail.

In that respect, it’s not surprising that the “Quality Learing Center” had no customers. But businesses that don’t have customers are supposed to go broke. That’s what would have happened in the 19th century. Between then and now, something has changed. In the 21st century, customers have apparently become an optional extra.

But the strangeness of the story doesn’t end there. The whole idea of Somalians in Minnesota is weird. Let’s take tens of thousands of people from one of the hottest nations on earth and dump them in one of the coldest states of America. Let’s take people from one of the poorest nations and have them run businesses. Let’s take people from a culture where childcare is a family responsibility and put them in a culture where childcare is a service to be purchased on the free market. Everything about the story is the opposite of what would make sense.

These kinds of inversions are what we find regularly in some of our greatest literature. Oedipus and King Lear begin their stories as powerful kings and end them as destitute beggars. Macbeth begins as a brave and noble general and ends up being hunted to death for his crimes. We see the same thing in nature. Day gives way to night, summer to winter. The ancient Greek philosopher, Heraclitus, called this process “enantiodromia”. A more modern term for a related phenomenon is “goal displacement”.

The Somali childcare story is the latest in a long line of inversions that show that the era of the technocracy is reaching its ultimate inversion. The system has turned into its opposite. To understand that, let’s go back to where it started.

We have already seen that there were almost no taxes levied on individuals and their small businesses in the middle of the 19th century for the simple reason that there was no cost-effective way to do so. It is no coincidence that the rise of the bureaucracy went hand-in-hand with the advent of income tax and similar measures. All of the idealistic virtues put forward by proponents of bureaucracy were well and good, but, ultimately, things need to pay for themselves. The reason why governments were happy to embrace bureaucracy in the early days was because they enabled what James C. Scott called “legibility”, which primarily means “taxability”. Bureaucracies earned money for the government.

In relation to business, this process evolved gradually with new legal structures around limited liability companies and the new accounting practices that went with them. This leads us to another crucial part of the dynamic because the profession known as accounting also arose during this era. Accountants became the middlemen between government and the private sector. They ensured that the rules created by the bureaucracy were followed. The government was now able to tax individuals in a cost-effective manner.

In fairness, there were also benefits to individuals and businesses. The introduction of limited liability companies meant that entrepreneurs didn’t have to go to jail just because their business was going through a rough patch. People who are not in jail are still able to contribute to society, whether starting a new business or working for one as an employee. As a result of all these changes, business activity increased overall. Government could then use some of the increased tax receipts to invest in infrastructure that helped businesses. It was a positive feedback loop that benefitted almost everybody involved.

This new dynamic was predicated on two new groups that had emerged, bureaucrats and professionals. We can call them the technocracy. In relation to taxation, the technocracy consists of the tax office and professional accountants who mediate between it and the private sector.

It’s important to stress that this new system really was of benefit to almost everybody in the early days. However, as is always the case in human affairs, a pattern which works well in the first instance inevitably gets applied to domains where it is of less value. Eventually, it gets applied even where it is of negative value. That is where the technocracy has ended up in our time.

The technocratic pattern has now come to cover pretty much any activity you can think of. There’s a government department for every damn thing and a gaggle of university-trained “experts” just dying to implement the latest theories. Meanwhile, the taxation code has grown exponentially, and armies of bureaucrats and accountants are required to administer it.

All of this has only been made possible by the massive expansion of business activity that arose out of the advent of technocracy. But it’s here that we see enantiodromia at work. At the point of greatest seeming success, the system begins to turn into its opposite. The growth in the tax code no longer serves the purpose of increasing the tax take of government. On the contrary, it becomes a way to spend the tax on the ever-growing wage bill of the bureaucracy. The means becomes the ends.

Let’s return to the Somali childcare issue. In the mid-19th century, an immigrant could get off the boat in New York, hire out a premises and begin trading. The government was barely involved. There was no bureaucracy or professional class to worry about. Business was almost entirely a relationship between owners and customers.

Let’s consider the same business in 2026. First, you need to create the company as a legal entity. Only then can you open the necessary bank account to run the business. Only then can you rent out premises for the business. The childcare industry in particular is regulated to the hilt. All kinds of medical training and equipment are needed. Character assessments must be carried out. Records must be kept of every little detail. Regular inspections will need to occur.  There’s the fire code. The health and safety regulations. There are the various utility connections that require contracts to be entered into. Of course, there is no way to run a business without a professional accountant to do the books.

All of these things are needed before a single customer walks through the door. And therein lies the whole problem. The technocracy, which benefitted all parties in the early days, now benefits almost nobody. The original benefit to government was increased tax. Now, governments are up to their eyeballs in debt. The original benefit to individuals was lower risk. Now, individuals have to pay through the nose for every one-in-a-million chance event that might happen.

The only two groups who still benefit from the system are the technocrats themselves, the bureaucrats and the professionals. Note that the money they receive for their services must be paid irrespective. The “Quality Learing Center” may have no paying customers, but it still needs an accountant to do the books. Bureaucrats need to disperse the government grants that keep the business afloat. All of the other services required in order to run a business still get paid. The technocrats still earn their living, but the system itself is no longer producing value.

In truth, the technocracy has been a drain on the system for several decades. Ideally, its growth would have been checked long ago. But what Heraclitus had realised way back in ancient Greece was that it doesn’t work that way in the real world. In the real world, things must turn into their opposite. Oedipus and King Lear must become beggars. The “Quality Learning Center” must become the “Quality Learing Center”. Things must become parodies of what they once were.

In truth, the Somalians are just the patsies. They are needed because the average American could not run such a business precisely because the average American still believes in business. An American who told their family and friends that they were opening a childcare company could count on receiving praise and support. No doubt, the family and friends would want to visit the new premises to see how it was going. They’d show up and see the sign and the empty factory, and they’d know immediately it was a scam. Only people from a completely foreign culture could participate in the technocratic racket that creates companies like the “Quality Learing Center”.

That’s also how we can know with some certainty that the whole thing is in its last phases. When you have to fly in patsies from the other side of the world, the gig is almost up. The irony is that one of the main selling points made in favour of bureaucracy in the early 19th century was that capitalist interests were corrupt and a bureaucracy based on rules would solve the problem. Well, to borrow the well-known phrase, it is power that corrupts, and it turns out that technocrats are no different from capitalists, kings, and popes in that respect. Which is to say, they’re just humans.