The Elites and the Underground: No Law vs. Rule of Law vs. Excessive Law

“Rule of law” is an unquestioned prerequisite today for any free society and growing economy. Unfortunately, there is too little rule of law for 80-95% of the world’s population and too much for the rest.

The former population are what Hernando de Soto calls “extralegal” poor who want and need to be able to join the middle classes and thrive in those segments of the developed world that are now a decided minority (1, 2).

The latter are the political and economic elites who live in varying degrees, depending on country, officially under the rule of law but are facing, year after year, increasing erosion of that protection with the growth of dictatorship by excessive law.

The extralegals, as de Soto’s research has found at his Institute for Liberty and Democracy in Lima, Peru, have no legal existence in most third-world countries. They have no titles to their property, no legal descriptions of its location and other public records, and therefore no way to accumulate and protect assets—also known as capital. Yet most of these productive and innovative black-market entrepreneurs want to join the rest of their societies and be just as prosperous as everyone else.

The problem is that most of the ruling elites don’t want them to prosper. The solution is property rights and the rule of law.


Indeed, de Soto argues persuasively, property rights for the extralegals would go a long way toward eliminating terrorism—as it did in his country of Peru. And the impetus for the “Arab Spring” of 2010-11, his research has shown, was not religious revolution, but the economic desire of small entrepreneurs to be recognized and respected (1, 2).

The problem with the phrase “rule of law” when mentioned to most members of the developed world is that they assume they live under firm and objective rule of law.

To the Founding Fathers of the United States sound criminal law meant law “so clear that it could be understood when read by a person ‘while running’” (p. xxxviii, preface to Silverglate). We certainly live under law, but what we have is too much of it, and most of that is vague, overly broad, and arbitrarily applied.

No less than 87,000 rules have been implemented by the various federal administrative agencies in the US since 1993 and 4500 laws have been enacted by Congress during the same period. This does not include state, county, and city laws that are approved every year, a number that has been estimated at 40,000.

“Ignorance of the law is no defense,” our citizenship education classes have taught us. Just how are we supposed to keep up with this litany of decrees?

We aren’t, according to Harvey Silverglate in his book Three Felonies a Day.  Federal prosecutors relish the prospect of being able to find a law on the books that can be, and is increasingly, used against anyone, innocent or not.

The vague and overly broad edicts of college administrations and the US Department of Education, as well documented in Greg Lukianoff’s book Unlearning Liberty, have made free speech a rarity in the ivory tower. And judicial erosion has allowed no-knock searches, along with the militarization of our police forces (1, 2).

The worst confusion over rule of law is the nearly total ignorance of the origins of administrative or regulatory law. In addition to showing that it unconstitutionally puts legislative, executive, and judicial powers in one agency, Columbia University law professor, Philip Hamburger, details the origin of administrative law as the prerogative of kings to issue binding proclamations. This, Hamburger points out, was the prerogative of absolute power, especially since judges were expected to defer to their kings.

That this was the origin of our modern administrative or regulatory “rules” was even acknowledged approvingly by a “leading Progressive theorist” in 1927. Since that time, the issue has been rarely, if ever, discussed. As for modern judicial deference to administrative power, Hamburger says, “our judges do [it] far more systematically than even the worst of 17th century English judges.”

There you have it. The world today divided into the extremes of elites and poor.

Elites enjoying a good life while their countries ride on express trains toward dictatorship and poor living an underground life in shanties likely with no indoor plumbing or running water.

Genuinely objective rule of law, which means in particular clear and concise property rights, is urgently required to bail both groups out of their precarious situations.

Such a social system based on clear and concise property rights is capitalism.