Zero Sum Bureaucracy

Last week there was an article on the Compact website which went viral online. It details the systematic employment discrimination that has been going on for more than a decade against white males in the United States. I’ve seen several interesting responses to the article, but I haven’t seen anybody exploring the fact that this behaviour has emerged from a specific type of organisational structure, one that only came to dominate quite recently in the West. Since this also relates to the theme of capitalism that I’ve been writing about in recent weeks, it gives me an opportunity to join some historical dots and sketch out the larger arc at play.

We’ll begin with what might seem like a completely unrelated issue: the politics of Eastern courts throughout history. By “Eastern court”, I mean the political structure that predominated mostly in the Orient, where there is an all-powerful ruler, whether it be an emperor, khan, sultan, caliph, mogul, rajah, etc., and some kind of bureaucratic structure through which the ruler operates. We can contrast this with the Western model, which has often had all-powerful rulers but only recently acquired a bureaucracy. The Roman Empire, for example, had almost no bureaucracy and only got one later on when power shifted to the East. In feudal times, the Catholic Church carried out rudimentary bureaucratic functions independently of kings.

As a result, the bureaucracy has never been a threat to rulers in the Western tradition. This was not the case in the East, and that is why history shows Eastern rulers needing to take defensive measures against bureaucrats.

Once again, we see here an important divide between the Anglo and continental traditions. Voltaire and other intellectuals believed that a wise monarch accompanied by philosopher-bureaucrats was the ideal form of government. Frederick the Great of Prussia not only manifested the wise monarch archetype, he was also the first to build out a sizeable bureaucracy. Of course, the intellectuals who favoured this situation had a vested interest in the issue since the creation of a bureaucracy opened up job opportunities for them. It is no surprise that such thinkers didn’t have much time for democracy, which they saw as irrational and disorderly.

The Anglo realm had a proto-form of modern democracy in the form of parliament. This was not paired with bureaucracy, however, but with a different kind of organisation structure that had shown startling results: the joint stock company. Although France and Germany (the Holy Roman Empire) had a similar organisational form, conditions in Britain were much more favourable to corporations, especially once business interests figured out how to use parliament to pass laws to their benefit.

To understand how corporations became so dominant, we have to expand our picture of them. The modern conception of a corporation as being strictly about “business” is a constriction that has only been placed on them recently (by bureaucrats!). The original corporations had a much larger scope of action. From around the middle of the 17th century, the British crown gave corporations the legal right to raise their own armies, mint their own currencies, charge taxes, pass laws, and even have their own flags.

It’s not an exaggeration to say that corporations were microcosms of nation states. It’s for this reason that the corporate model was vital in the formation of the United States in particular and, to a lesser extent, Canada, South Africa, Australia, and New Zealand. A number of American colonies were originally founded as corporations, including Massachusetts, Connecticut, Rhode Island and others. Even here in Australia, the states of South and West Australia were originally corporations.

Because of the revisionist bias of modern mainstream historians, it is not well remembered that India had already fallen under an old-fashioned kind of imperialism when European traders such as the British and Dutch East India Companies first arrived. The Mughals had invaded the subcontinent from the north. Some of them were apparently the descendants of Genghis Khan, which should give you some idea of their demeanour.

Although they were Muslims, the Mughals had little interest in imposing religious ideology on the local population. In fact, the form of imperialism they practiced was very similar to the old Roman Empire. As long as the tribute was paid and the rules followed, they were happy to leave the locals in peace.

Thousands of Singh’s soldiers were paraded through the streets of Delhi before having their heads removed and stuck on spikes for public display. As for Singh himself, he was hauled in front of a baying mob and offered a reprieve if he converted to Islam. When he declined, his four-year-old son was sat on his lap, and he was ordered to kill him. When he declined again, he was made to watch while the executioner did the job. Then his eyes were gouged out, his limbs were cut off one by one, and his flesh was burned with hot irons. What skin he still had left was then removed altogether. Only after such incredible torture was he finally put to death. Even the Romans might have felt a little queasy at such a display.

This was the imperial milieu into which Europeans traders set foot. The Portuguese were first on the scene, and they tried the old-fashioned approach of taking land via military conquest and then setting up a trading post. They had some success but were mostly outgunned. Decades later, the Dutch and the British showed up. However, it was not soldiers who came ashore but representatives of corporations, what we would now call CEOs. These men did not attempt to militarily overthrow local rulers. Rather, they asked them for trade deals.

Now, if we think about the way that trade normally gets carried out in an imperial situation we see that it traditionally follows military conquest. That is, an army conquers a territory and provides the political and military stability in which trade can occur. However, traditional imperial leaders are military men who would consider involvement in trade to be deeply shameful. Traders have traditionally been near the bottom of the social hierarchy.

If a ruler came to the conclusion that traders and bankers were taking too many profits, or if they just needed some extra cash to finance a war or buy a new ivory backscratcher, they could take the wealth of traders either directly or indirectly via taxes and tariffs. That is exactly what happened to the British East India Company after they had established themselves on the subcontinent. But here we see the first signs that something very different from the historical norm was taking place.

Obviously, the British military was not on the ground in India to protect the traders. In fact, for the most part, the military barely secured the shipping lanes used by the East India Company. Therefore, the Company had to defend itself. Because of the cutthroat nature of seaborne trade in that era, they got a lot of practice and became pretty good at combat. Combine that with rapidly improving military technology, and the European traders who landed on the subcontinent were a very different beast from the traditional archetype.

Thus, in 1686, when a Mughal governor tried to pull a Darth Vader and alter the deal, the Company put up a spirited military resistance. This came to be called the first Anglo-Mughal war. The Company lost. However, they lived to fight another day, and over the next two centuries, their military capability grew steadily along with their trade revenues. 

But we shouldn’t think that the rise of the Company was predicated solely on old-fashioned military might. In fact, the most important event that raised them to the position of dominant trader on the subcontinent was not about fighting but healing.

Hamilton had already proven his worth by providing life-saving medical care for several local rulers. When Farrukhsiyar fell ill, he was called in to help. On both occasions, Hamilton saved the emperor’s life. Farrukhsiyar was so grateful that he showered the surgeon with money, diamonds, gold, and, of course, the obligatory elephant.

All of that was no doubt very gratifying for Hamilton individually. However, the far more important result was that the Scotsman was able to use his newfound friendship with the emperor to negotiate a breakthrough trade deal for the East India Company. The Company made a number of new requests. All of them were granted. Included in the new deal was permission to consolidate and grow the factory in Calcutta (in fact, it was now an entire settlement).

In the years that followed, trade grew substantially. The Company became the dominant European player in India, and Calcutta became a very wealthy city. Once again, a local ruler tried to alter the deal. But, this time the Company had both more money and more experience. In 1757, it fought off the Nawab’s attack and reclaimed Calcutta. From that point onwards, the military dominance of the Company only grew as the Mughal Empire disintegrated.

What had occurred in India was something that almost certainly that has no precedent in history. An old-fashioned empire died off, and a joint stock corporation became the dominant power. This is a complete inversion of the historical norm where, across numerous different cultures, traders are counted at the bottom of the social hierarchy. In the Roman Empire, traders were not far above slaves in the pecking order (many traders were slaves). If you’d told a Roman citizen that a trader could take over from Caesar, they would have split their sides laughing. Yet, that’s what happened in India.

Of course, modern European traders were nothing like the ancient ones, and that’s the whole point. Moreover, the trading class had been rising in Europe for centuries and had reached a particular state of advancement in Britain and the Netherlands. All of the legal and institutional structures were in place by the start of the 17th century when the British East India Company came into existence. It was this form of organisation that made Britain the dominant power in Europe and then the world.

There’s one final point to make about that. The men (yes, they were all men) who spearheaded these developments were not educated aristocrats. They were not the Voltaires of the world. In many cases, they had no formal education at all. Many of them were autodidacts, which was only possible because of the rise of the printing press and the fact that they had been taught to read by their mothers. What had occurred in Europe was the unlocking of talented individuals who, in any other society, would have been trapped at the bottom of the social ladder with no chance of realising their higher potential.

That’s the positive side of it. The negative side is that some less salubrious individuals were also let loose. Many of the men who ran off to join the East India Company and similar organisations were little better than pirates. In fact, large quantities of them ended up becoming actual pirates. The vices of such men are obvious. There was greed, corruption, boorishness, etc. But they also had their virtues: ingenuity, adaptation, improvisation, and a surprising discipline. It was these qualities which enabled them to outsmart and outmanoeuvre sultans, moguls, and other rulers in the various places around the world where they landed.

Now that we have sketched out the rise of the corporation, we are ready to understand who it was that curtailed its activities. We said earlier that the rollout of bureaucracies in Europe was inspired by the Chinese model. That is not a metaphorical claim. It was actually how the proponents of bureaucracy talked about it. In a report to the British parliament in 1853, the then chancellor of the exchequer, Stafford Northcote, referenced the Chinese when recommending a number of changes to the civil service. Identical changes were made in the decades following in other Anglo countries, including the United States.

Can it be a coincidence that the same set of politicians took the opportunity presented by the Indian Rebellion of 1857 to liquidate the British East India Company? Not at all. In truth, these political opponents had already pushed through a number of laws injurious to the Company in the decades prior. Its weakened position absolutely contributed to the rebellion of 1857 which then gave opponents the chance to strike.

When the East India Company was liquidated, the British didn’t pull out of India. On the contrary, this was the beginning of the British Raj, a small army of bureaucrats organised according to the exact same model that had been presented to the British parliament just years earlier. One of the cornerstones of the change was that all the top-ranking bureaucrats needed to have university degrees. If that sounds familiar, it’s because this was the beginning of the system which dominates to this day.

Thus, the arrival of bureaucracy in Western society was no accident. It came out of the concerted efforts of a determined group of politically active individuals. That group has only gone from strength to strength ever since. That is why the bureaucracy has become the dominant organisational form in our time. Even modern corporations are now bureaucracies. The bureaucrats remoulded corporations according to their own ideology.

This leads us back the purge of white men from modern corporations which has been picking up steam in the last decade. These corporations are now first and foremost bureaucracies, and one of the problems with bureaucracy is that there are always more potential candidates for leadership positions than there are places available. This creates a zero-sum dynamic that only gets worse the more aggressive and impatient subordinates become. We can hypothesise that the appearance of eunuchs in Eastern societies was not just about removing threats to the king but also about reducing internal competition within the bureaucracy. The discrimination against white men that has been happening in recent times is exactly the kind of thing that we would expect the zero-sum mentality of a bureaucracy to produce.

However, there is an even more direct reason why white men have been targeted: because they embody the archetype of the old form of capitalism, the kind practiced by the British East India Company, the kind which founded the USA. Thus, the battle that is going on now is the same one that began with the liquidation of the East India Company: it’s the bureaucrats vs the capitalists.

Of course, nobody talks about it in these terms. Instead, the whole debate gets translated into the form it took in continental Europe: fascists vs communists. That is the wrong way to think about it. The bureaucrat class arose independently within the Anglo tradition, and it quite explicitly went into battle against the capitalists. The purge of white males in the last decade is the latest round in the fight. The election of Trump (the arch-capitalist) was the counterpunch.