The Uncanny Valley of Regulation – Departing from Graeber’s Utopia of Rules

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Anthropologist David Graeber has released a new book titled The Utopia of Rules, which is largely a collection of previous essays, loosely compiled around a favorite topic of ours here at Unfettered Equality: bureaucracy.

Graeber casts bureaucracy as a cultural phenomenon that straddles the line between the public and private spheres – and indeed seems to most thrive at the intersection or line of collusion between the two. As an example “paradigmatic of the fusion of public and private power,” Graeber discusses occupational licensing abuse, something that we have covered here at length. However, Graeber wants to get at the cultural source of “bureaucratization” as a wider force in society, and so he must talk about something closer to everyday life. Speaking about the maze of private policies and public regulations that constitutes modern banking, Graeber surmises that the present situation is largely a result of collusion:

…were it possible to investigate how these regulations came about, one would find that they were composed jointly by aides to legislators on some banking committee in a process greased by generous contributions to the coffers of those same legislators’ reelection campaigns.

Graeber here plays a bit fast and loose with his claims, falling back on the epistemic inaccessibility of the state (“were it possible to investigate…”) rather than providing any solid evidence. As it happens, it is possible to investigate how regulations come about, and American history seems to bear out Graeber’s analysis.

A classic example comes from railroad regulations during the Progressive Era. Contrary to the narrative that often surrounds accounts of that period, railroad regulations were not passed purely by virtue of fiery trust-busting politicians with the aim of reigning in Gilded Age railroad monopolies. The large railroads themselves sought regulation in order to protect themselves from price wars and regional competition from smaller railroads. As summarized by Roy A. Childs Jr. in “Big Business and the Rises of American Statism” (emphasis added):

…there was, in the case of the railroads anyway, no sharp dichotomy or antagonism between big businessmen and the Progressive Movement’s thrust for regulation; and the purpose of the regulations, as seen by key business leaders, was not to fight the growth of ‘monopoly’ and centralization but to foster it.

And lest the reader suspect that Childs is cherry-picking (again, emphasis added):

Regulation in general, far from coming against the wishes of the regulated interests, was openly welcomed by them in nearly every case. As Upton Sinclair said of the meat industry, which he is given credit for having tamed, ‘the federal inspection of meat was historically established at the packers’ request… It is maintained and paid for the by the people of the United States for the benefit of the packers.’

The point of this analysis is to suggest that bureaucratization is not something that has occurred purely because of large state organizations housed in those brutalist cement labyrinths that dot the D.C. landscape. Bureaucracy is not only – or even mainly – about the alphabet soup bureaus that the American right loves to lambaste. Rather, bureaucracy is a predatory structure of state capitalism that exists along a line of overlap between public and private.

In other words, for Graeber, bureaucracy is about class: a managerial class vs. the rest of us. It is common knowledge that there exists a revolving door between large industries and the government agencies that regulate those same industries. That turning door is one of the gears of state capitalism.

This story would seem at first glance to support a common libertarian response: lessen the government’s power as part of the equation, and the unfair advantages of the private institution will likewise be lessened, making the situation both more fair and more free. If you deregulate the industry, businesses will see less of a point in manipulating that industry through government influence. To put it pithily, get rid of the state power, and there will be no state power to abuse.

But Graeber joins other anarchists (and progressives) in critiquing this assumption of a one-to-one relationship between deregulation and decreasing regulatory capture. In fact, Graeber proposes that the opposite occurs. Graeber calls this “The Iron Law of Liberalism:”

The Iron Law of Liberalism states that any market reform, any government initiative intended to reduce red tape and promote market forces will have the ultimate effect of increasing the total number of regulations, the total amount of paperwork, and the total number of bureaucrats the government employs.

Part of what Graeber is getting at here is that the language we use to talk about regulation is “completely inadequate:”

So what are people actually referring to when they talk about ‘deregulation’? In ordinary usage, the word seems to mean ‘changing the regulatory structure in a way that I like’… In the case of airlines or telecommunications in the seventies and eighties, it meant changing the system of regulation from one that encouraged a few large firms to one that fostered carefully supervised competition between midsize firms. In the case of banking, ‘deregulation’ has usually meant exactly the opposite: moving away from a situation of managed competition between mid-sized firms to one where a handful of financial conglomerates are allowed to completely dominate the market.

But what could be a possible driving force for Graeber’s law? What possible mechanism underlies the seeming unstoppable march towards increasing bureaucracy?

An analogy from art could be useful here. In computer graphics, Uncanny Valley Syndrome refers to the feeling of revulsion the audience experience when viewing a character that is almost human, but not quite there. This is why Wall-E is more appealing to us than a humanoid robot with synthetic skin. There exists a vast trough of severe unnaturalness between the peaks of definitely-not-human and definitely-human.

So here is my thesis: there is an uncanny valley of regulation – an uncanny valley of rules. Between the two peaks of strong, fair government and no government at all, there is a vast trough of unfairness:

The trough exists because some have the power to play by different rules than everyone else. Some even have the power to make rules for other people that they themselves won’t have to follow. And it is here that we see a possible reason for Graeber’s Iron Law of Liberalism. It is a foolish reduction to consider what a given “industry” wants from the government. The reality of American history touched upon above tells a story of the most powerful entities in each industry colluding with regulatory agencies to write the rules for everyone else. And so a half-step towards deregulation, far from removing an entities ability to engage in regulatory capture, may actually increase that ability. For many Americans, the reality of this aspect of our culture, wherein the powerful play by a different set of rules than the rest of us, was put on clear display during the bailouts of the financial crisis. Graeber himself returns to the example of banking to put this in concrete terms:

… of course, the power of those same banks to charge account-holders eighty bucks for an overdraft is enforced by the same court system content to merely collect a piece of the action when the bank itself commits fraud.

John Rawls famously argued that a society should be judged on how it treats its most vulnerable members. Our society seems to be organized around how it treats the strong.