There is a common misconception regarding the term “the rule of law.” Lots of people, including U.S. officials, believe that it means that people should obey the law. But that’s not what it means. What it means is a society in which people have to answer only to the law and not to the edicts or orders issued by government officials. A society in which people have to respond to edicts and orders issued by politicians and bureaucrats is what is called “the rule of men.”
As Friedrich Hayek pointed out in The Constitution of Liberty, the rule of law is not all that is necessary for a free society but it is a necessary prerequisite for a free society.
For a good example of the rule of men, all we have to do is turn to the United States, where the U.S. government has just issued an ominous notice to U.S. banks. U.S. officials are telling the banks that the U.S. government does not want them to invest in Russian bonds.
Now, mind you, there is nothing illegal about U.S. banks investing in Russian bonds. It’s just that to do so would run counter to the U.S. government’s anti-Russia foreign policy. No, there isn’t a declared war against Russia but U.S. officials consider Russia to be a “rival” to the U.S. Empire — an increasingly “assertive” one. So, U.S. officials have issued their not-so-subtle notice to the banks: If you know what’s good for you, don’t invest in those Russian bonds because it will help our rival.
What will happen to banks that ignore the warning? They will be swarmed with bank regulators, who will write up countless violations of minute bank regulations. Or they will be audited by the IRS. Or their officers will be indicted for some insider-trading violation.
And when any of that happens, you can rest assured that U.S. officials will play the innocent and claim that their adverse actions against the recalcitrant bank have nothing to do with the banks’ having chosen to ignore the rule of men in favor of acting in accordance with the law, just as they did after indicting QWEST CEO Joseph Nacchio for some ludicrous insider trading violation after he refused federal requests to participate in an secret illegal scheme to sell out the interests of his customers.
According to an article in the Wall Street Journal, “So far, there is no consensus among the Wall Street firms about whether to move ahead. Some bank officials, including at Citigroup, say they won’t participate. Other banks, including Goldman and J.P. Morgan, continue to weigh their options.”
Ironically, this is the way that things used to work under the old Soviet Empire. It’s also the way things work today in Russia under the Putin regime. Government officials issue their edicts and orders, and businessmen and banks are expected to obey them.
The difference, however, is that Putin and Russia don’t pretend to operate under the rule of law while President Obama and U.S. officials do. Given such, who are the bigger hypocrites?