The Utility State

Hydraulic Despotism

The first state was a water utility.

In agricultural societies, before the first state, high variance of rainfall caused periodic droughts and floods that destroyed crops and killed people. Eventually, the village chiefs had the idea to construct levees and dams, to control floods and to store water during droughts, and to build canals to deliver the river’s water to farms. Through charisma or predation, they conscripted others to build this system, and they raised a tax in grain to feed the workers.

When the system was built, it performed very well. There were fewer floods and fewer droughts. Farms were more productive and there was a grain surplus. This was a very productive investment.

But the farms didn’t keep their surplus. It was taxed away by the chiefs who had coordinated the project. They used that surplus to employ people outside food production, to build ziggurats and to produce luxury goods. Over time their spending developed a class of urban artisans and merchants.

But why did the farms not keep their surplus? A fair arrangement would be to tax only enough grain to maintain the public works, to expand them as the population grew, and to provide the water utility’s administrators an income comparable to the farmers. To create this outcome, the farmers could have violently over-powered the utility administrators. Why didn’t they?

The farmers didn’t know how the irrigation system worked. They didn’t know that there were stations for lifting water uphill using animal power. They didn’t know how to make the concrete that was used to make the levees and dams. They didn’t know about the system of “priests” who relayed information about water levels across the system, or about how that was used to decide which dams to open.

Only the largest estates even knew how to bargain with the priests, how to go before a court and argue for a larger allocation of water, a different delivery schedule, a lower tax rate, or a different route for a planned canal.

And the utility administrators misdirected the farmers. They didn’t want the farmers to think about the irrigation system. So they told the farmers that they weren’t engineers, lawyers, and politicians but instead they were priests. And they said that their control of the river didn’t come from their public works but from their relationship with the gods. They said that the gods lived inside their ziggurat, so the farmers couldn’t enter it. But really, their ziggurat wasn’t a temple, it was the corporate headquarters of the only game in town, and inside it contained no gods but only records of grain taxes, rainfall, and water levels. If a farmer entered the ziggurat, he wouldn’t have known how to read the records, and he couldn’t have imagined how they were being used to plan the system.

The farmers’ surplus was extracted by the chiefs because of information asymmetry. At one level, they lacked the specific technical knowledge to operate the system that their lives depended on. More fundamentally, they were misdirected away from noticing the system at all. They were insufficiently oriented to reality to be able to participate in the politics of their society.

The farmers relate to the system through a false story, but ultimately they see its results. They know that if there are floods or droughts and the crops don’t grow, the pharaoh must go. That’s inevitable, because the system can’t soften hundred-year floods and droughts. And when it happens, the pharaoh is said to have lost the favor of the gods, and he is replaced from within the priest class, and the farmers don’t question the system itself. The pharaoh earns the lion’s share of the surplus by risking to sit in the scapegoat seat. In Ancient Egypt, the pharaoh’s dynastic succession was interrupted by usurpation by a priest many times, but never in thousands of years was there a popular revolt.

Analysis

This story isn’t a metaphor. I think it’s more or less the true development story of most civilizations. The first public works most civilizations undertake is irrigation, which requires the formation of an authority to levy compulsory taxes, and that tax authority keeps most of the surplus through information asymmetry, which then funds further development. As the civilization develops in scope and scale, power necessarily becomes less centralized.

What are the lessons of this story for today?

What I like about this story is that it forces us to realize how similar we are to the peasant farmers in the story. Until recently, I didn’t know anything about where the water came from, where the electricity came from, or where the trash went. It never occurred to me to wonder who owns the local airport or how the road system is planned. I only have the fuzziest idea of how railroads and mines work. When I look at satellite images of the outskirts of my city, I mostly don’t know what I’m looking at. People today know less about the material foundations of our civilization (not just the engineering, but the operations, financing, and governance) than ancient peasants.

And I do think that is somewhat by design. The people who run the industrial system don’t want the public to think about them too much or understand them too well. For example I closely observe a power utility, and I often notice them saying less than they know and sharing less than they could. They don’t talk much about their transmission planning, employee safety, fuel supply, power plant outages, certain environmental programs, etc.

There’s even misdirection going on. Utilities talk a lot about their ancillary programs - rooftop solar, demand response, water conservation, etc. - that make up a small percent of their supply portfolio. And often times they talk very little about their key assets.

Is this information asymmetry intended to facilitate extraction? No. The organization that I’m most familiar with is not extractive. There is a community of observers who understand these industries and are keeping them honest.

I think every decision to be less transparent than they could be is individually rational and is intended to reduce their attack surface area, in terms of physical security or politics, by terrorists or ideological opponents. That logic, applied across every department of every organization in every industrial sector, adds up to significant information asymmetry.

The information asymmetry has a strange effect on discourse. When a governor talks about the affordability or reliability of electricity, he knows that his constituents don’t understand the system he’s talking about. He’s rewarded for symbolism. For example the pledges by the data center companies to pay for their own power, announced at the State of the Union, were entirely symbolic, as far as I can tell. The processes that actually matter for cost allocation are playing out in state utility commissions, but they’re too arcane to matter politically.

What matters politically, in the end, is the system’s tangible results. People notice when the system breaks - gas shortages, rationing at grocery stores, power outages, large price increases, etc. This creates a modern ‘mandate of heaven’ effect. When the crops don’t grow, the pharaoh must go.

We don’t have a pharaoh, we have political parties, but they serve a similar role in this context. When the system fails, people switch parties. Crises occur periodically, and the party in the White House gets punished for it, regardless of the actual cause-and-effect involved. These random events are a major contingent force in history.

In the 1970s energy crisis, the public never understood why the crisis was happening. Polls found that 80% of Americans believed that the crisis was artificial, the result of a supply-withholding conspiracy by the oil companies. No one knew what the Federal Power Commission was. Liberal politicians promoted that theory, which they knew was untrue, because it gave them an advantage in the real negotiations over the regulatory processes that the public didn’t know or care about. The crisis was the fault of New Deal Democrats in the 1960s, but by chance a Republican was president when the crisis hit, so republicans were punished for it. Then they the crisis resurged in the late 1970s, under Carter, Reagan was elected even though he and Carter had pretty similar approaches to the crisis in the ways that mattered - but important symbolic differences.

Does the industrial system actually matter? In the long term, it’s the most important thing. I think that the rise and fall of civilizations is best explained in industrial terms. And the disconnect between popular politics and industrial regulation is one of my long-term concerns. We see the importance of the industrial system especially at the pointy end of politics, in military operations, where infrastructure assets are frequently targets.

But the lesson of this story doesn’t only apply to the industrial system. Most sectors of society, including the post-industrial sectors, are too complicated to be generally understood by the public. So the same information asymmetry exists, creating a disconnect between the ground-level real politics and the symbolic politics for general audiences. Maybe one difference about the non-industrial sectors is that failures in those sectors don’t create immediate large changes to daily life, so there’s less of a ‘mandate of heaven’ loss that requires correction.

Anyway, I think the lesson to take away from the above story is to ignore the symbolic and focus on the concrete. Don’t be the peasant with very sophisticated opinions about the gods and no specific knowledge about the levees and dams.