Artemis Banner for Blog: The End of History

Two of my favorite “modern philosophy books” are Trust and The End of History and the Last Man, both written by Francis Fukuyama.  He wrote both books back in the 90s and their central theme is extremely prescient for where we are today.

Trust is an absolute necessity for not only a civil society, but also for an economy to flourish.  Trust allows for the issuance of credit… and those of you with maxed-out credit cards know…credit creates a consumer economy.

Years ago, some buddies and I went down to Baja California to play golf.  (I know, I know… I’m not sure what is worse, that I went to Mexico or that I used to play golf.  Please forgive me for both transgressions.)  Down there I noticed a number of partially-built homes looking out over the ocean.  The views were incredible and the abandoned construction I attributed to a defaulted developer or something.  As we were on one of the greens, I noticed that one of the homes that was clearly under construction had evidence of people actually living in it. 

One of the members of the group did a fair amount of business in Latin America, including Mexico, and I pointed out that the one-quarter built home had someone living in it. 

“Oh, all of these homes are occupied.”

“Really?  They don’t look habitable.  Why would someone live in a home like this?”

“Well, they have no idea when the home will actually be completed.”

“Poor work ethic on the part of the construction company?”

“No… lack of credit.”

“Huh?”

“The construction company has no idea if the homeowner will ultimately pay if the construction company extends them credit.  There is virtually no mortgage industry here in Mexico, so the homeowner can’t get a loan on the property to pay the construction guys.  So… the homeowner saves up his cash, and when he has enough, he has the construction guys come out and work until that cash is depleted.  Then he starts saving up again.”

“Why not just complete the whole thing on construction company extended credit.  If the homeowner defaults, then the construction company can put a lien on the home and force a sale?”

“Because that would necessitate the use of the judiciary… and no one trusts the judiciary.”

…and there is the rub.

(If you have arrived here from our newsletter, continue reading here…)

I have always said that the single most important linchpin in a society is the judiciary.  People need to have trust in others… but we also want to have a back-up plan in case that trust is misplaced.  If I know that in the final analysis I can take you to court if you breech the trust that should have been there between us, I can at least limit the amount of loss I have sustained by the breech.

If I cannot rely on the court system, either because it is too heavily centered towards a class of litigants, or because of abject corruption, I have no “safety net”,  no “stop loss”.

Without that I am going to be very, very leery to lend money or extend credit.  When that happens the economy stops.

I also have to have “trust” in my government, not so much that I agree with its decisions, but that the rules promulgated are predictable.  Even if they are, in my opinion, unjust, I can at least arrange my affairs to limit my exposure to them.  True… they can set up a scheme that might destroy the country… but it does not mean I have to put my capital at risk by participating in their machinations.  In the final analysis, I can just buy gold and wait out the storm.

When the rules are unpredictable, that is when things get dicey.  When the rules are arbitrary and capricious, that is when respect for the rule of law itself begins to falter and the whole system comes under scrutiny.  When that happens, revolutions typically follow.

There is a reason so many people ran out to buy toilet paper; they did not trust the item would be there on the shelf when they needed it.

There is a reason so many people ran out to buy guns.  They did not… and do not… trust that the government (read police) will be there when they need them.

When the government tells you it is releasing criminals back into your neighborhood, and then tells you that its main focus is on enforcing “policies” set forth from city or state leaders… (not laws… policies)… but that your safety… well… you are on your own for that one… then those same leaders have admitted that the single most basic function of government is really not their concern.  Control of the population is its concern… the rationale of that need to control is not, in its opinion, a desired debate subject.

The virus will not kill our civilization; our abandonment of civil liberties will. 

For once those civil liberties have been forfeited, the government becomes the “other”, the “rulers”, “the authority”… and the trust between the governors and the governed is irreparably lost.

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