I rarely discuss presidential politics in my reports, because I think a presidential election is 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 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 are 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.

November10, 2007

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

Copyright © 2007 LewRockwell.com