1. “The Rule of Law” Presentation © 2006 by Barry Brownstein

2. As We Complete Our Hayek Readings…  Let’s go to the scoreboard Let’s go to the scoreboard

3. Is There a Common Good?  “The ''social goal" or "common purpose" for which society is to be organized is usually vaguely described as the "common good," the "general welfare," or the "general interest."...The welfare and the happiness of millions cannot be measured on a single scale of less and more.” - Hayek

4. Public Financing of Stadiums: “Home Run for Corporate Welfare”  “During the 20th century, more than $14 billion in government subsidies went to the major league sports.”  “All impact studies use multipliers to estimate the effect of each dollar spent directly on sports on the wider local economy.”  “But as sport- and stadium-related activities increase, other spending declines because people substitute spending on sports for other spending.”  Independent studies do not show net gains

5. What Is Substantive Law?  “Where the precise effects of government policy on particular people are known, where the government aims directly at such particular effects, it cannot help knowing these effects, and therefore it cannot be impartial. It must, of necessity, take sides, impose its valuations upon people and, instead of assisting them in the advancement of their own ends, choose the ends for them.” - Hayek

6. What Is Formal Law?  “It is the Rule of Law, in the sense of the rule of formal law; the absence of legal privileges of particular people designated by authority, which safeguards the equality before the law which is the opposite of arbitrary government.” - Hayek  “The Rule of Law thus implies limits to the scope of legislation: it restricts it to the kind of general rules known as formal law and excludes legislation either directly aimed at particular people or enabling anybody to use the coercive power of the state for the purpose of such discrimination.” -Hayek

7. What Makes Civilization Possible? “ When a nation has a legal system based on these bedrock laws, the people can be free and they can organize themselves and accumulate wealth to move forward.” – Richard Maybury

8. The Belief Behind “The Rule of Men”  “Every human being by his nature is free; he controls himself. But in the Old World, men believe that some Authority controls them. They can not make their energy work by any such belief, because the belief is false.”- Rose Wilder Lane  “They do no question that belief, because when they submit to a living Authority’s control, and can not get food, they can always blame that Authority.” So they accept the planning and Authority consisting of relatively few men.

9. Turkmenistan  Niyazov the absolute ruler has changed his name to Akbar Turkmenbashy - “Great Father of all Turkmen”  His face is everywhere in posters saying “One People, One Nation, One Turkmenbashy”  January has been renamed Turkmenbashy, April for his mother and October for a book of his musings.  U.S. is involved because of “extensive hydrocarbon/natural gas reserves.”involved

10. Former Soviet Union  Oligarchs are those who former state run enterprises passed to.  The U.S. supports them believing they are “capitalists who believe in democracy.”  Oligarchs are not entrepreneurs. They are not accumulating knowledge and capital. They are using up capital, instead of creating. They are adept at bribing.  What happens if our own businessman who are only successful at extracting subsidies etc. dominate entrepreneurs?

11. Russia  Vast natural resources and educated population; yet not many entrepreneurs.  New shops, hotels in Moscow and St. Peterburg but little new productive assets.  Why? No trust or understanding of the marketplace. Feudal society under he czars  Until it begins to “respect capital and provides for its safety and nourishment” it will be in trouble.  “A fairy comes down the chimney of a poor family and gives them one wish, and they wish to have their neighbors' cows dead” Russian joke

12. Rule of Men  Stalin – “Man Of Steel”  Mao – “Great Helmsman”  Hitler – “Fuehrer”  Kim Sung and Kim Jong- “Dear Leader” with godlike qualities  In Russia (2004) businesses paid $316 billion in bribes. The total is more than two and a half times what the government collects in budget revenues.

13. Brighter Future for China  Long entrepreneurial history.  Song dynasty 960 – 1279 A.D. – world leaders in commerce and technology.  History of a strong merchant class.  Huge successful expatriate class.

14. “The Negative Way*” - George Washington  Sacrificed health and wealth to further the interests of the nation.  Because he refused to be King and refused a third term - his name will live forever. A new nation of laws not of men was born.  In the end the revolutionary army succeeded because of their superiority in purpose.  Without understanding purpose an organization or an individual cannot succeed.  *Dropping your personal sense of selfhood

15. Foreign Policy  “The great rule of conduct for us in regard to foreign nations is, in extending our commercial relations to have with them as little political connection as possible.” – George Washington  Many countries in the world because they do not understand the “rule of law” face a future of war and poverty. They are a source of conflict and anarchy.

16. The Rule of Law and Foreign Policy  “The fundamental message of the United States is the most powerful message ever crafted by mankind: we treasure the individual and provide an environment where every person can strive for his or her dreams.” Belief in the “Rule of Law” cannot be coerced.  Every time the U.S. violates our own founding principles our message is less credible. E.g.- support of dictators who “support” us.

17. The Fall of Rome  Romans “came to believe that peace and stability could only be maintained if political power were centralized in one man.”  Demand for revenue led to debasement of currency, increased taxes, ad hoc confiscations and eroded freedoms.  The wealthy escaped taxes and small farmers crushed by taxes signed on as slaves to survive.  Finally there was no money or will to defend the empire.

18. Corporate Values and Culture  Rules of just conduct- “humility, intellectual honesty, openness, receptiveness to new ideas, treating others with dignity and respect, recognizing and using everyone’s unique knowledge and abilities.”  “Without humility, individual and organizational learning is difficult if not impossible.”  “Intellectual honesty means people admitting what they do not know, acknowledging mistakes and searching for evidence that contradicts their positions..”