Some readers who enjoy British history may recall that period in the 18th Century when highway robbers like Dick Turpin acquired a certain notoriety as they held travellers at gunpoint and stole valuables while simultaneously charming their female victims. Like most such ‘legends’, the truth was usually rather grubbier and more unpleasant.
Well, I had an example of being charmed into surrendering a large chunk of my wealth by force the other morning. As in the USA, where working-age citizens are currently going through the chores of filing their IRS forms, the British Inland Revenue is busy getting us all ready to pay our taxes. I received a form which said, “You have been chosen to receive this new short tax return.” Golly, how grateful am I supposed to feel? I have been ‘chosen’, apparently. It is made to sound as if I have been invited on board a millionaire’s yacht off St. Tropez for a spot of weekend sailing.
Even worse, the form ends with the little motto, no doubt dreamed up by some clever chap, “Tax doesn’t have to be taxing.” Aahhhh! You see, the Inland Revenue can make the experience of telling us how much wealth we must pay out an easy, even pleasurable experience.
Why do I go on about this? Well, in a subliminal way, forms like this encourage the citizen to accept the tax burden as a natural, and even wholly benign part of the human order. It is another way of wearing us down. And that is a bad thing. Personally, I am actually glad that the Americans have a nasty time filing their tax returns because once a year it reminds the citizens of Jefferson’s Republic of just how far they have gone from the modest government ambitions of the Founding Fathers. The easier we Brits can pay our taxes, the less angry we might be about the taxes in the first place.
Of course, this all leaves aside the issue of whether, even in a minarchist or anarcho-capitalist order, we could get by without some form of collective funding for stuff like external defence and internal courts and so on. I have a few thoughts but it is too big a topic for a single blog item. I’ll have to return to this point another time. Of course that’s no reason why others cannot have a go. Comments welcome as always.
I’ve got to tell my favorite U.K. history/highwayman story.
Walking the South Downs Way, I descended from where the route follows the Seven Sisters to a small town where I took a break to look at the church. Like many English churches, it had a long list of the vicars on the wall going back more or less forever.
Vicars tend to be long-lived, so I was somewhat surprised to see one on the list who had served only one year. Sad, I thought. The poor man must have been struck down in his prime. Plague perhaps.
Then I spent 50P on a short history of the church and discovered the vicar in question had been executed for being a highwayman in his spare time.
This, of course, will no doubt attract heaps of criticism, but surely a potential debate on the relative merits of taxation gathering systems needs to be livened up?
A functioning state is necessary, however unappealing the concept may be here. Go visit Nigeria if you want to see what really happens when you get the justice and security you pay for, where rules and regulations are ignored at will. That’s anarchy in practice, and it’s not pleasant. In fact, it’s bloody horrible. All libertarians should spend a year working there. I spent two and a half, and I have enough cynicism for the whole of Western Europe.
I’ve said it before here, but pure libertarianism is as sensible and practical as Communism – both ideas make fundamentally mistaken assumptions about the nature of human beings. One assumes that they are basically decent and well intentioned, the other that they have essentially identical needs and desires. In reality, people are (en masse) selfish, venal, lazy, greedy and stupid – any political theory which fails to take this into account is itself doomed to failure.
Now, this doesn’t mean you can’t have a liberal country, but it does mean you need a state of some sort to enforce regulation where it is required (and ideally only where it is necessary). This state has to be funded. Other than some form of levy on the people, it’s hard to see how this can be achieved.
The state needs to do certain things that can only realistically be done at that level. Defence, enforcement of the rule of law and the maintenance of public order are the three critical things, because if you don’t have these then you are wasting your time trying to do anything else. Assuming you can rely on private organisations to provide these services is, in my view, crass naivete. What will inevitably happen is that corruption will creep in because some people will not e.g. want to go to jail, serve in the military or get a bad record and other people will e.g. oblige them in return for a certain consideration. See above re: humanity, qualities of.
Even if you could use private organisations, they still have to be paid. Where are they going to get their income? For the type of public goods under discussion here, we are essentially talking about organisations with a monopoly of force (the state) or a group of organisations forming an armed oligopoly or, perhaps, a group of armed organisations operating within an armed society. People don’t like to pay tax, but they generally realise they need to do it or suffer the consequences – at least here, this isn’t much more than a fine or a light jail term. In the more extreme libertarian scenarios, the consequences may involve loss of body parts.
An anarcho-capitalist society is essentially one dominated by the modern equivalent of robber barons. The group with the most money and armed force will become dominant and in time will become a de facto state, and we are back where we started but having passed through a lot of pain and misery in the process. FFS, where do you think the state came from, anyway?
The only rational and workable solution is surely to recognise that the mass of the people are flawed and that the state, being made up of humans, is also flawed. Therefore, some moderate degree of regulation (and hence taxation) is necessary, but this should be kept to a minimum.
About 40-something% of GDP seems a norm in the west for the share of the economy controlled by the state. I think this is excessive, but it can’t be reduced to zero. I doubt if it can realistically be reduced below about 20%, and even that comes with the effective abolition of welfare (some form of which is probably necessary, but not the bloated provision we have now).
And 70 years of Communism reminds the Russian people how far they went from the fine ideals of Marx, Engels, et al. Is anarchy necessary as well for people to realise that Utopian socio-economic schemes are never worth the bytes they are stored in?
Less Utopian idealism, more pragmatism, and let’s be realistic about the way people are. Whether they call themselves HMG or SecuriCorp Inc., we’re stuck with the highway robbers, but we can at least try to minimise their depradations.
End of bilious rant 🙂
The easier we Brits can pay our taxes, the less angry we might be about the taxes in the first place.
… and the less we will notice just how much is being taken. Better that taxpayers notice every penny.
The easier we Brits can pay our taxes, the less angry we might be about the taxes in the first place.
… and the less we will realise just how much is being taken. Better that taxpayers notice every penny.
Euan Gray said:
Thomas Jefferson said (in his first inagural address, 1801):
If people are bad, then why should they be given positions of power over other people? If people are good, then what do they need a government for?
Euan, your Nigerian example is a bit of a red herring. Let’s be serious here. You’re talking about a country where government corruption has been rampant, there have been many many long term episodes of brutal acts by the military, and a total disregard for human dignity and liberty.
It’s not surprising that coming from that kind of environment, Nigeria has ended up the way it has. In fact, this is an argument for libertarianism if you’re going to include mention of Nigeria, and honestly look at the place and include discussion of it’s history. Military’s raping and pillaging is not part of the libertarian philosophy. This is exactly what happens when power is centralized – and corruption exists.
That has nothing to do with what libertarians believe, and to use Nigeria as an example is simply dishonest.
A Natmani – People aren’t good, so they need government. Unfortunately, we only have people and not angels, so there is no option but to give some people power over others. The point is to limit this power, not to think it can be eliminated.
Ian – I’m not talking about Nigerian government, which is corrupt on a mythic scale, but rather about everyday Nigerian society and what happens when there are effectively no rules. In the absence of rules, the strong govern the weak and frequently do so arbitrarily and capriciously. Sadly, that’s human nature. Good people tend not to want to dominate others, and those who have the inclination to govern frequently have the inclination to abuse their power. Again, the point is to mistrust and limit government, but not to pretend it can be removed altogether.
Given that certain types of people will always seek advantage over the rest, and given that where there is no state to regulate this tendency, they will at times use unpleasant methods to get this advantage, how do you stop this happening? If we imagine our libertarian state as depending on private organisations for order and justice, who is responsible for limiting the activities of these organisations?
You will have a government. It will either be a de jure state or a de facto corporate government, but there will be a government. So, do you permit a state, limit it through a strict constitution and control it through a qualified democracy, or do you trust corporations to behave themselves if they are responsible for their own regulation, or do you depend on the armed people to control the armed corporations?
Case 1, you will have some abuses but a non-violent means of dealing with the worst of them. Case 2, you will inevitably and quickly get corruption and abuse of power. Case 3, you will have a violent society which wastes its potential on internal struggle.
The history of Nigeria. Hmm, not an edifying tale. For most of its post-independence period it has been under more or less kleptocratic military administration, and the civil governments haven’t been much better (in some cases, worse). Interestingly enough, the reason given for the first military coup was the ending of official corruption – in most societies, the military is the last part to degrade. It should be said, though, that the current administration, though not perfect by any means, is one of the best they’ve ever had, perhaps not unrelated to the fact that it is headed by a former military head of state who was also the first African dictator to voluntarily cede power. Like most African nations, Nigeria flirted with Communism, but unlike many managed to avoid disaster. The basic problem with Nigeria, as with many third world countries, is that the government’s writ does not run very far, but is too strong where it does control things. There is much petty regulation in Nigeria, but this can almost always be overcome by the judicious application of dash (i.e. a bribe). If you have money, you only need to follow the laws you agree with and can generally ignore the rest.
I suppose one of the problems with unqualified democracy is that the people will happily tolerate incompetence and abuse as long as they personally profit or think they profit – this is why it is electorally impossible to abolish welfare. With corporations, then as long as the shareholders are doing ok and in the absence of a regulatory framework they will generally permit the board to carry on doing whatever they are doing. Corporations are no better than states in providing government type services. In fact, given that they exist to make a profit, they can be (but aren’t necessarily) worse.
One of the reasons for the existence of the modern state is to limit and regulate the powers of the agencies which provide these services. Instead of powerful and unregulated private companies and guilds, you have a government department. Do you trust corporations to regulate themselves in the wider interests of the generality of the people in the absence of any legal compulsion to do so? If they don’t do it, who is going to make them do it? A privately run court system where you will inevitably be able to buy the justice you want?
The end result of an anarchic system is not a sea of independent human republics cooperating with each other in a free market – it is chaos, corruption, greed and violence. Similarly, the end result of a Communistic system is not a workers’ paradise but a dictatorship required to force the sclerotic economy to just about function. Both libertarianism and Communism are wonderful in theory, but deeply flawed and unworkable in practice.
EG
Euan – You say that some form of welfare is probably necessary, although not the bloated provision we have now. Singapore has absolutely no welfare. None. Not a penny. If you lose your job, you go out and find another one, even if it’s temporarily being an office cleaner while you look for another position on your previous level. Or your family takes you in and feeds you. End of story. The government figures you can take care of yourself, and if you can’t, then your family will have to take care of you. Not taxpayers who don’t even know you.
Singapore is the polar opposite of Nigeria. Absolutely everthing works, all the time. There is no corruption.
Welfare is a slippery slope and should be abolished. As should the NHS. People should not be looking for the state to assist them in the business of going about their lives.
Verity – it would appear that Singapore is not a notably corrupt nation, and according to Transparency International it ranked in 2002 5 places above the UK, 11 above the US and 20 above France. Of course there is corruption there, but from what I gather it is more or less confined to fiscally beneficial nepotistic arrangements within the ruling elite and so generally does not directly impact the bulk of the people.
On the other hand, Singapore has a very strong state which is not shy about interfering in people’s lives when and where it feels this is needed. Efficient it may be, but libertarian it most certainly is not.
A limited degree of public welfare is necessary, although whether this should be state provided, charitable, or a mix of the two I’m not entirely sure. I would think that in any transition from the current UK system to a more efficient limited government, state compulsion would be necessary to counter the inherent selfishness of the people and their degree of acclimitisation to a “free” system.
As for the NHS, I am far from convinced that it should be abolished, although it is in dire need of radical reform. On my recent second trip to Texas (yes, I’m back and I came back via a trip to Paris too), Canadians, Britons and Americans moaned about the US system, complaining that it was slow, ineffective, frequently incompetent and expensive. Much the same can be said of the British or Canadian state systems, of course. Two days and just under $1,000 to treat a toddler’s stomach bug. One man effectively made much worse by incorrect antibiotic administration. Sure, these things can and do happen anywhere, but I’m not convinced that in practical terms private organisations are any better than the state at providing this type of service.
The state can, and probably has to, subsidise health care for those unable to afford it, those with chronic conditions, etc. Ths doesn’t mean it needs to own and manage hospitals, but some form of compulsion is necessary in order to force an equitable degree of care for the worst off. The theoretical advantage of the state is that it does not seek profit, although this advantage is admittedly entirely theoretical and never borne out in practice. The theoretical advantage of the corporation is that it is more efficient since it is subject to commercial pressure to reduce costs.
For the NHS, I think the solution is to have private companies owning and running the hospitals, surgeries, etc., and the state only regulating the insurance side of things. This in itself is a problem whichever way you cut it:
(a) the state can compel people to take out insurance, in which case (as with compulsory motor insurance) the insurer knows he has a captive market and tends to load his premiums;
(b) the state can make paid insurance voluntary, but insufficient people will pay and so the burden of state subsidy remains high;
(c) the state can subsidise premiums for the less well off, in which case there is a temptation to premium loading again because the government will cover the extra;
(d) the state can compel insurers to provide cover for everyone, in which case people will moan because the healthier will pay a lot more for a service they rarely use. People aren’t as constantly charitable as many here seem to assume they are;
(e) people can be left to fend for themselves, and families expected to look after their own. This may work in Singapore where the culture of the people is naturally more collective and subservient, but in the more individualist west it’s got a plastic bag’s chance in Hell of working. Why do you think old people get shunted off into care homes? Because families don’t want to have to look after them, they want lives of their own. This is the price of individualism.
(f) charity can be expected to provide. Fine, but does it provide sufficiently for the cost of very expensive long term treatment of what may be terminal conditions? Unlikely.
Welfare and health care subsidies have to be paid, one way or anther and there is no escape from this. Either you pay through taxation, insurance, or restrictions on your flexibility as an individual human, but you have to pay. Here in the UK, it would seem the people are more prepared to pay through taxation than any other way.
Firstly can I just mention that the comments on this thread are more intelligent and of a better calibre than the average. (Well until now..)
Euan & Verity mentioned the enigma of Singapore, a strong authoritarian state, illiberal but on most measures successful. I think it shows that economic freedom is the prime imperative in a society’s success. Pinochet’s Chile was a better place to live than Castro’s Cuba is even today. But even Singapore realises that in the networked information age it needs to liberalise. (Incidentally I wonder if perhaps that’s part of the reason why they are relaxing the law on chewing gum, the law has a totemic illiberal aspect to it).
Asian cultures tend to be more tolerant of benevolent dictators or pseudo-democracy (as in Singapore, Japan and in a minimal sense Hong Kong) and the Chinese work ethic makes Calvinists look like slackers.
As to Anarcho-Capitalism: it probably could work at the level of a city, like an ancient Greek city state. At the level of a nation state its impractical if not impossible. Nevertheless Anarcho-Capitalism as an ideology is like a diamond cutter to woolly ideologically half baked thinking. As a theoretical tool or starting point it works well. Nozick seemed to me to use it as an ideological benchmark. Maybe Anarchism, Communism, Kibbutzim and Buddhism might work in a city sized unit where culturally like minded people come together. Having said all that I don’t see how Anarcho-Capitalism could come about from the initial conditions in which we find ourselves. Therefore after all is said and done whilst temperamentally I am an Anarcho-Capitalist, pragmatically I’m a Libertarian realist, however it still doesn’t stop me advocating Anarcho-Capitalism after I’ve had a few drinks…
Euan, unlike Marx and Engels, the American Founding Fathers laid out in very great detail (read the Federalist Papers by Madison et al), how a society of limited government and under the rule of law would function. These men were hard-headed realists who had seen how government could, when freed of certain constraints, morph into tyranny. To compare the classical liberals to Marxists in this respect just does not make sense.
I am a bit of an agnostic as to whether a state could function without some form of coercive funding. However, Euan, I do not share your fairly contemptuous view of most of our fellow human beings.
Rather, how they thought it would function.
Unfortunately, like all idealistic solutions, it did not long survive the passing of the generations that brought it into existence. I wouldn’t say they were misguided or plain wrong, but I think optimistic is probably the best word.
That would be true enough, to an extent, if that’s what I was doing. However, it wasn’t so it isn’t.
It was suggested that the annual taxation pain should remind the American people how far astray the US has gone from the initial intent of the Founding Fathers. My point was that (a) the optimism and idealism of the FF proved misplaced, as the cited suggestion clearly implies, (b) the theory and idealism of Communism proved misplaced as they foundered on the rocks of practical reality with horrendous results, (c) the same fate awaits libertarianism if any given country is unfortunate enough to attempt to translate that particular Utopian theory into practice and finally (d) it would jolly nice if people would learn to be a little less susceptible to idealism and a little more practical in developing socio-politico-economic theory.
Which was the last one that got by on voluntary contributions from a grateful populace?
You may call it contemptuous. I prefer realistic. Whatever label is used depends on your personal point of view, but let’s just say I don’t get disappointed or surprised at the antics of our fellows too often.
If people were basically decent and noble, were not as I assume, would we have grasping states? Would we have out-of-control welfare systems? Would we have gangs of indolent malcontents roaming our inner cities? Would we have penally redistributive taxation systems? Self-interested politicians and self-serving lawyers? Scroungers happy to claim welfare for 50 years and never do a day’s work?
Contemptuous or realistic?
EG
Euan
[i]Given that certain types of people will always seek advantage over the rest, and given that where there is no state to regulate this tendency, they will at times use unpleasant methods to get this advantage, how do you stop this happening?[/i]
Just last week we had an example of a London neighbourhood hiring private security to patrol their streets. There is already a well developed, private industry for protecting person and property. As the state reveals itself to be more and more inefficient at supplying this, along with all other resources, and yet a division of labour is still required for protection, hiring private security firms, private detectives, and insuring against types of aggression will steadily become more common place.
[i]If we imagine our libertarian state as depending on private organisations for order and justice, who is responsible for limiting the activities of these organisations?[/i]
The same people or organisations that are responsible for limiting the actions of individuals to what is just: I can simply hire protection.
But suppose we reverse the question, it we are to have a minimal, limited government, what is to ensure the rule of law and constrain the government? As Norman Barry pointed out one time, the very idea of limited government assumes that the law and government are two distinct things, since, in order for the government to be constrained by legal limits, the law must be above government. Hence government cannot be the sole source of law.
Neither can government be its sole guardian. If it is suspected that a government has exceded its legal limts, then what? Surely a trial must occur, but who hires the judges, who supplies the courts? With government, or anybody else having a monopoly over such things, along with a monopoly on deciding what is in accordance with the law and what is not, we get the situation in which one party to a dispute judges in its own cases, and writes the rules for itself.
And what of enforcement of the law? If only the government is to provide law enforcement, then who will enforce the law against the government?
You see, the very notion of limited government implies independent rules, and independent agencies, distinct and seperate from the government, able to enforce them. But when we get this, we cease to have any sovereign authority, any agency with a sole right to determine, apply, and enforce the law. We cease to have a monopoly on legitimate force, and end up with market anarchy.
[/i]You will have a government. It will either be a de jure state or a de facto corporate government, but there will be a government. So, do you permit a state, limit it through a strict constitution and control it through a qualified democracy, or do you trust corporations to behave themselves if they are responsible for their own regulation, or do you depend on the armed people to control the armed corporations?
Case 1, you will have some abuses but a non-violent means of dealing with the worst of them. Case 2, you will inevitably and quickly get corruption and abuse of power. Case 3, you will have a violent society which wastes its potential on internal struggle.[/i]
Many would say that corruption and abuse of power are the inevitable consequence of having a government, not of having no government. Moreover, in case three, you point out that violence is costly. However, if that is true, and if most of the costs are internalised, then surely that would create an incentive to resolve conflicts peacefully? Perhaps through private courts hired by arbitrators?
Euan:
Have you read The Machinery of Freedom, in particular chapter 29, which describes how such organisations might work and chapter 30 on the stability problem? If so, what’s your answer to it? It answers your question above.
Paul:
Can you explain? I’m having trouble understanding why.
Suppose we implemented some constitutional reform so that power was completely devolved to the level of the city and the central goverment was abolished. The nation would now be composed of a collection of independent city states, like ancient Greece.
Suppose further, that each of the city states reforms its institutions so that it becomes an anarcho-capitalist society. Now you say that anarcho-capitalism could work at the level of the city, so it works for each of those cities. But if it works for each of the cities, then isn’t it also working for the nation as a whole.
So, isn’t it likely that if anarcho-capitalism can work at the level of a city, then it can also work at the level of a nation, but if it fails at the level of a nation, then it will fail at the level of a city?
Commenting from Singapore(though I’m supposed to be studying!). To say that the government does not provide any welfare at all is a bit of an extreme. It does provide a very basic welfare for the really poor. Enough for a small rented flat and 3 meals a day, but not much more than that. The government recognises very well the incentives for people to work!
Click here(Link)
Back in my time working in the detention barracks, a high proportion of AWOL folks did so because they had to earn some odd jobs to support their families. Indeed, I heard from a few of my NCO and officer friends from other units that many of these stories were true. Some families are really too poor. There’s a demographic trend as well, though I’ll only mention in passing that most of these are large muslim families with more children than they can afford.
I’m beginning to suspect the only reason we’ve been able to stay relatively liberal economically is EXACTLY because of the more authoritarian political and social systems in place. It is no doubt very distressing to consider the probability that economic liberty is opposed to political and perhaps social liberty.
And even then, the government budget/expenditure is still about 15-20% of the GDP, much of it going to education and defense. Call us paranoid, but like I’ve said before, we aren’t going to hand our security over to commercial mercs and two platoons of volunteer infantry!
Oh, and chewing gum? The misconception is that it’s banned. It’s not. Just that the SALE of it is banned. Quite a difference, and one reason why people returning to Singapore from overseas tend to have one or two packs of chewing gum for personal enjoyment! 😀
The Wobbly Guy
Uhm, you’re assuming people are rational all the time. And then you just need one SOB to get lucky, and then we’re back under the iron paw of Genghis Khan/Alezander/Hitler/whatever.
As a US citizen now residing in the UK, I have consistently noticed how much more pleasant the Inland Revenue employees are, as compared to their US counterparts.
Next time I’m on the phone with one of them, I’ll be sure to snarl and spit: “Stop being so pleasant – I know all about your insidious knavery!”
Thanks, Samizdata!
Uhm, you’re assuming people are rational all the time. And then you just need one SOB to get lucky, and then we’re back under the iron paw of Genghis Khan/Alezander/Hitler/whatever.
Funny that the SOB’s were all examples of just how bad governments can be. However, are you suggesting that since people are rational, we ought to grant some of these occasionally irrational people the sole right to decide what the law is, how it applies in certain case, and to control its enforcement? Is it really the best option to grant these sometimes irrational people this kind of monopoly?
Richard – The point is not that private corporations cannot provide such services – they can – but that if they are relied upon to do so in the absence of a regulatory authority then problems are likely. In a democracy, the government can be ejected by the people if it exceeds its authority (that doesn’t mean it necessarily will be ejected, just that it can be), whether that democracy is qualified or not. There is a clearly defined mechanism for this. This is not the case in a libertarian nation with no state. The democratic state is answerable to the electorate, the corporation only to its shareholders who are likely to be a much smaller number with a vested pecuniary interest. This is not a sound basis for a society. Private security companies today are constrained by laws not enacted by them in what they can and cannot do. Libertarianism would remove that constraint.
And so you end up in Case 3 of my scenarios. Well done, you have replaced a flawed but basically functional system of independent jurisprudence with reliance on naked force. I find it hard to see this as progress.
Limited government in no sense necessarily implies independent agencies separate from government. It realistically means a state much as we have now but doing far less. Sovereign authority remains vested in the people or in the Crown (depending on whether you like kings or not). Where the rule of law exists, the state is subservient to the law, otherwise there is no rule of law (obviously).
Philosophically, you can argue that the law in a conventional state is the codified will of the majority of the people. This derives from basic morality being what is and is not acceptable to the majority of people in a more primitive stage of that society. In a democracy, the representatives of the people enact law on their behalf, but are subservient to it themselves (with minor exceptions). Measures are put in place to ensure, insofar as is possible, that reasonably decent and honourable people make judgements under this law. It’s not perfect, but it does more or less work most of the time.
Many people are also somewhat naive.
And what standard are they resolving this conflict against? Set by whom? Enforced by whom if the parties don’t want to agree? Who stops the decision going to the highest bidder? Who stops someone paying to change the standard?
EG
Yes. You limit the time they have this monopoly, restrict exactly what they can do with it, and ask the people to judge how well they have or have not done every so often.
It’s called the democratic state.
EG
Euan,
I was with you most of the way, but that last post was just too much.
The democratic state is answerable to the electorate, In your last but one comment, – now that was funny….
Then in your next comment, you do it again,
It’s called the democratic state, such humour, such naivety, …….
I don’t think you have been paying much attention to events in Europe lately…..
Euan-
If you truly believe that people are as bad as you say, then how do you expect them to choose a leader to lord over them who is not equally as bad? The quality of a nation’s leadership in a democratic state reflects the quality of the culture that elects the leadership.
People are not inherently bad, but they can not choose to be good if statists and tyrants take away their right to choose in the name of whatever vaguely defined and supported utilitarianism results from their mistrust of other people.
Look at the history of the “divine state” during the last 100 years and you will see how it is more of a threat to people than any business monopoly.
The totalitarian state is nothing but a monopoly of pure power, and centralized democratic states are no better because of their tendency to make the majority the tyrant and every minority, including the smallest one – the individual – the subject of that evil.
Even if you are right in thinking that states are required to prevent monopolies, remember that the free market never made a death camp. Only states have reasons to kill the masses, as you say “en masse”.
Andy:
I said it might work at the level of a city. At the level of a nation state it requires national defence. I don’t know if that is possible in practise – I know the theory but…
I remember reading somewhere that if London seceded from the UK it could afford to cut taxes to 10% and pay for the national defence entirely. Just so long as we didn’t have to pay for the rest of the national welfare state. London might have to boost up its border defences against the defunded Northern welfare dependents mind you.
Like I said earlier regarding anarcho-capitalism, in my heart I am one, in my guts I know its nuts. The fact that it has never successfully existed at the level of a city or otherwise IS relevant.
Hong Kong is about as good as it gets in terms of free markets in the real world…
Euan:
I’ve already asked you if you’ve read The Machinery of Freedom which addresses your objections to the market provision of law and order, but you don’t seem to have noticed.
Have you, and if so, what’s your response to it?
PauL:
But a city would have to defend itself as well. If an anarcho-capitalist nation cannot defend itself against a hostile neighbour, then surely an anarcho-capitalist city can’t either?
Wouldn’t the problem of defence in anarcho-capitalism get easier as the total population living under anarcho-capitalsim gets larger? After all, one of the arguments for anarcho-capitalism is that an anarcho-capitalist society would likely be much less aggressive than a statist one. If all the world were anarcho-capitalist, then the problem of defence would essentially disappear.
I’m not so sure that it is. As far as I’m aware, it has never existed at all, successfully or otherwise. That means that there is no empircal evidence as to whether it would be successful, but it also means that there is no empircal evidence as to whether it would be a failure.
We could have a similar discussion about liberal democracy if we were living two hundred years ago.
Ernest:
Well, that’s what I get for posting after midnight 🙁
I think it’s true enough that peoples tend to get the governments they deserve, and that the electorate frequently is reluctant to remove a government as long as they, the voters, perceive themselves to be doing well enough out of it. I think I alluded to that in an earlier post, and I believe it is an inherent defect in unqualified democracy. I’m reasonably confident that this would be less of a problem if the franchise was restricted to those who contribute to society (i.e. by working, owning sufficient property, etc).
Ultimately, though, the democratic state is answerable to the electorate. Any European country can vote to secede from the union, and at least in current circumstances I find it hard to believe that there would be any desire or ability to compel it to remain by means of military force. Whether anyone chooses to vote this way is, of course, another matter. I also do not think the EU will long survive in its current form.
For a start, there has never been a successful polyglot confederation in history, and the nearest you get is the Soviet Union which was held together only by naked force. The Russian Empire was different in its structure (what were nominally separate republics under the USSR were integral provinces within the Empire, and this, as Lenin failed to realise, really does make a big difference). Even so, in both cases we are considering territory acquired by conquest rather than voluntary accession and maintained in Imperial times by aggressive Russification and colonisation.
Secondly, the democratic deficit within the EU’s internal structure will, sooner or later, cause serious problems. Already the Eastern states are becoming aware of the burdens as well as the benefits of EU membership, and there is in the west not inconsiderable disquiet about the proposed constitution. I think the referendum results will be interesting.
Thirdly, the poor economic performance and the huge unfunded welfare liabilities are going to compel economic reform.
It is quite possible to hold together the EU even if the member states are unwilling. However, this requires force and I cannot imagine there is the political will to do this. It is also possible that enough of the people will accept that the EU is the way to go. I’m not at all sure they will, but it’s possible.
A Natmani:
I don’t think people are inherently bad or evil. I do think, though, that, taken as a whole, and irrespective of the outstanding qualities of many individuals, they are rather selfish and lazy and make dumb decisions.
If you institute a system of widespread social welfare funded through taxation and ensure that sufficient numbers of voters are entitled to benefit from it, then it is not unexpected that people will keep this system in operation. You appeal to their laziness by giving them money for nothing. You appeal to their selfishness and jealousy by telling them the rich are paying for this. You exploit their capacity for stupidity by stating in emotional and simplisitic terms that this is “fair”, “equitable” and “socially just”. People swallow all this and they vote for its continuation all over the western world.
Given that this actually happens a lot, are my basic assumptions that wide of the mark? They may be unpleasant and, as one said, contemptuous, but they do seem to be borne out by the facts.
In theory, democracy is not necessarily a good idea. Then again, in theory Communism is a great idea, as is anarcho-capitalist libertarianism. In practice, they are both crazy and horrible, but democracy in practice just about works most of the time. I think the only thing to do is restrict the franchise a little and ensure strict limits in constitutional law as to how much the state can spend and on what.
Andy:
No, I haven’t read it and I did miss your question the first time around. Perhaps you’d care to summarise? Feel free to do it by email if it’s already well known to everyone else here. However, the essential point I’m making is that I cannot conceive of a workable and practical method of preventing justice and legal decision going to the highest bidder if there is nothing higher in the land than commercial organisations.
On National Defence:
One can also argue, albeit with slightly less justification, that if the whole world were Communist the problem of defence would also disappear.
The problem not considered here is what happens if there are only a handful of A-C nations? Defence has little to do with how aggressive your own nation is, but a lot to do with how aggressive others are.
I can accept that A-C societies would be less externally aggressive than others at least in theory, but I think they would inevitably be much more internally violent. This might, and probably would, in turn result in the purchase of external force for the resolution of internal conflict.
I think you would inevitably get the A-C city states buying each other out or otherwise taking each other over, and you would just repeat the experience of English history in the 9th and 10th century – you will return to the concept of the unitary centralised state. Perhaps, to paraphrase Marx, libertarianism contains within itself the seeds of its own destruction?
EG
But, as I have said, anarchism provides this regulatory authority, in the form or any other person or group of people equally able to utilise legitimate force.
There is no such mechanism for this, as is clearly proven by the case of Hitler – he simply got voted in and then abolished elections.
Secondly, any mechanism you think there exists is surely limited by majority rule. You only get to remove government from power if you are in the largest section of the electorate.
Nope, Security is Us unlimited is answerable to SafinBed Protection Ltd, and Stronginthearm and sons, co. and any other company out there in the market, should Security is Us ULtd try to aggress against them.
No, it would widen it, by allowing countless other protection agency to enact laws against each other.
This is again evidence that you are criticising anarcho-capitalism without actually knowing it. The oldest answer to this criticism I know of came from Benjamin Tucker in 1887. But first, let’s point out that the same criticism can be made of the position you defend. Suppose that a citizen of the State of Paraguay aggressed against a citizen, or citizens of the UK? What then? Would there be open war? Would their be violent conflict? No, because nation states generally have treaties to work out this sort of thing.
In expecting the question of what would occur should a citizen of one voluntarily funded, non-monopolistic “state” felt that the citizen of another similarly arranged “state” had violated his rights, Tucker responded
You have to remember that protection companies are profit seeking firms. As such, they have an incentive to use the cheaper means of satisfying their customers, or else they will lose business to firms that do whilst they don’t. War between protection companies is very costly, meaning that firms need to pay their employees enough to risk being shot at, guarantee investors a return large enough to get them to risk the gfact that their stock might literally be blown up! In addition, it is expensive because of the risk of dragging thrid, or fourth, etc. parties and their protection agencies in. On top of this, a company which has a reputation of resolving all its differences with others through the barrel of a gun is not a company that people will often try to do business with.
For this reason, if cheaper alternatives to war are available, firms will adopt them. Arbitration is one such alternative – and so the system of courts and treaties that Tucker observed.
In fact, this is even more likely to be an attractive alternative to war for protection firms than it is for states. After all, states don’t need to be so greatly concerned about the expenses of war, since they don’t have to rely on voluntary payment or contribution for the “services” they provide.
Wrong. A state doing less than it does now is not a limited state, but a smaller state. There is no limit to its size, so it is not limited. There is no limit to what it may do beyond what it is doing, so it is not limited. It is the difference between a state that simply observes freedom of speech and a state that is legally obliged not to restrict freedom of speech. Limited states, by definition, are limited by something. Other wise they are simply states with a small number of powers that may grow at any time the state chooses.
But for government to be limited, there needs to be an organisation that is not the government that is able to prevent the government exceding its limitations. It needs to be authorised to adjudicate grievances against the government, and enforce the law against the government – including the crown. But if this is the case, neither organisation would have sovereignty, and there would be anarchy.
But there would be no guarantee that the law would be neutral, that the law would be certain and that people would be equal before it. In fact, we know that it wouldn’t be. As Bryan Caplan wrote,
So the rule of law is incompatible with government.
And this is supposed to provide an objective standard for law? The subjective whims of most people at a given time?
Besides, laws do not derive from the majority of people. Legislation derives from the opinions of some minority who have been elected to legislate. Whether those that have elected them approve of the legislation is another matter. They probably offered a bundle of propsed pieces of legislation as a reason as to why they ought to be elected, which means that even though people elected them to pass certain pieces of legislation, those that voted for them may not have voted for them to pass other pieces.
Nor did a majority elect them. A lerge portion of the population can’t vote. Other portions didn’t vote, and others voted for the guys that lost.
And on top of this, legistlation isn’t the only soucre of law – we also have judge made law, which is where we get much of our civil law, and the roots of the common law tradition.
How is this an answer to my point? Reading Samizdata for some time certainly helps one build the opinion that it is a reasonable view of the world.
Well, we all believe that the law ought to be just, and, as libertarians, we all have a view of what just law looks like, namely that is protects people’s ability to do as they choose with their person and property, and punishes those that interfere with this ability.
Whether we get libertarian law, though, is another matter. There are strong reasons to believe that market-made law will be libertarian, though.
The law will probably be produced the same way that law has been produced privately in the past – like the Law Merchant, or the Common Law.
If they don’t agree, they will fight. But that is no different to what we get with states. In the end, we should root for the guy with justice behind him.
Bidder for what? Why would anybody agree to an arbitration company that is likely to give the judgement according to whoever is able to pay the most?
I think most of the criticisms of the state can be levelled against an anarcho-capitalist society with equal justification. Furthermore, I think that the mechanisms of constraint present (or capable of being present) in a state are not necessarily present in A-C society, or are present only in a weaker form.
The state is made up of people, but is an entity greater than the sum of the people who comprise it. This is also true of a corporation. People are fallible, and are in my view en masse not necessarily reliable. The same defects that are therefore present in the attitude of the state can be present in the attitude of the corporation, since both are constituted of and controlled by people.
It is argued that the state will seek a monopoly position in the exercise of force, enforcement of the law and administration of justice. Unrestrained, there is no reason why a corporation would not seek the same thing. I think in each case there is a restraint, however.
In the case of the state, it can ultimately only exist on the sufferance of the people. The rulers of the state can be ejected by defeat at an election, by legal reverse in the courts if they respect the rule of law, by (and this is the case in Britain anyway) armed force if they decide to grossly ignore the constitutional provisions, or ultimately by popular revolt. There are many examples in history of all of these things happening.
The corporation is restrained by the will of the shareholders and/or in the A-C scenario by the effects of other corporations acting in the marketplace or the armed resistance of the people. The problem I see, though, is that this restraint is much weaker than the restraints on the state.
A-C seems to assume that corporations want to operate in a free market. Do they, though? From a corporate point of view, it is easier and potentially more profitable to operate in an oligopoly or monopoly position. How much better if Secure-Corp and Cops-R-Us can reach an agreement to split the market between themselves and shut down or take over the competition? How easier is it not to have to bother about competing, to have a captive and guaranteed market? Under a western democratic state, generally speaking, companies are not permitted to do this, or may do so only to a severely limited extent. In an A-C society, there is nothing to stop them doing this.
It will be argued that a third company can come along and offer the same services cheaper, thus preventing the two big boys from doing this. However, what is to stop the big boys removing the competition either through purchase, intimidation or outright violence? Well, it is argued, the third company can hire a court of arbitrators to seek a judgement against the others. Fair enough, but since people are not immune to venality, what is to stop the big companies inducing the arbitrators to decide in an “appropriate” manner? It is argued that nobody would want to use a corrupt court – but the big companies would, and since they would have large amounts of force, money and (realistically) patronage at their disposal, corruption will inevitably ensue.
Well, if all that doesn’t work, the third company can assert its right through hiring protection. I utterly fail to see how resorting to naked violence is any improvement over what we already have. If they don’t agree, they will fight, it was stated – how, FFS, is this in any way whatsoever progress?
It is argued that money, force and patronage is also available to the state and that it can and will use it in the same way. Yes, it’s available, and yes, it does sometimes get used, particularly in undemocratic states but also to a lesser extent in democratic states. But it is, at least in functioning democratic states, subject to law.
In summary, I think A-C society is no more than the law of the jungle. It would in my view inevitably be violent and corrupt and I cannot see for the life of me how it would constitute progress over the state. In fact, I am convinced that in time (and probably not very much time) the biggest and baddest corporations will seek and obtain a position of monopoly or near monopoly and will, inevitably, become a de facto state.
The modern unitary state evolved from the unification of rival petty kingdoms. This is exactly analogous in my view to the process that would inevitably take place between rival corporations if they were providing the same kind of services – defence, order, security. I am absolutely convinced that the creation of an A-C society would result only in a period of violence and then a rapid return to the existence of a monopoly unitary state. It would in the long term achieve nothing other than unnecessary bloodshed and a pointless repetition of a process that has already taken place in history.
EG
So they fight over it and the strongest/richest/least scrupulous guy wins & dominates the rest. Alternatively you have a balance of fear. Please, this is no way to build a society. Perhaps you could explain exactly how this differs from the competing petty kings and robber barons who were out-evolved by the unitary state?
Just as a single unitary state is more effective and efficient than rival petty kingdoms, so is a single corporation more efficient than a host of competing smaller ones – same revenue, no duplication of overheads = greater profit. The number of competing companies in this field, without meaningful external restraint, will dwindle to one, which will essentially be a state.
The NSDAP formed a minority government under the leadership of a charismatic demagogue in the circumstances of a ruined economy (ironically enough, thanks largely to naive American ideas of justice at Versailles). This is a danger in democracy, albeit one that doesn’t arise all that often. However, it is one of the reasons why many people accept some restriction on their ability to act completely freely.
Yes, that is essentially the point of democracy. Otherwise you have the tyranny of minorities. Extremists like Hitler, or like our own NF, BNP, Communists, etc., attract tiny votes in normal circumstances and the mechanism for keeping them out of government is to have an electoral system that favours the majority, and only over a certain threshold. The UK system is pretty good at this.
Will? Necessarily will? What makes the corporation so much more constantly rational than people? Money isn’t the answer, because corporations frequently make dumb decisions that cost them fortunes – they are, after all, run by people, just as states are. If you’re going to say that, then you can say with equal validity that states will necessarily choose less expensive means than war. Indeed, democratic states generally do, which kind of undermines the argument that states necessarily resort to violence.
You have completely missed the point. The constitutional form of a limited state is one that is indeed limited by, for example, constitutional restrictions on how much it can spend, prohibitions from doing certain things, constitutional subservience to a supreme court, separation of powers, etc. The structural organisation of such a state need be no different than for example the US or (with some modifications) the UK. This does not mean that independent agencies are needed to carry out the duties of the state, although that is one way of doing it.
Separation of powers, not anarchy.
Rubbish. The state recognises and accepts that it is subject to the law. This is why, for example, you can take the state to court. Although the judges are appointed by the state and the courts funded by the state, in a healthy democratic system which accepts the rule of law the judge will generally consider the case on its merits. If the contrary were the case, the state would never lose in court – and would you care to consider the UK state’s current track record in court? I mean, we’re not considering the USSR where the verdict and sentence were agreed in advance.
It’s not perfect, and it seems that it shouldn’t work in theory, but in fact the type of court system we have in the UK and in the US (which is in concept not that different) actually works surprisingly well virtually all the time. It basically depends on having decent and honourable judges who accept that the law is greater than any person and greater than the state which created it, and who further have the intellectual ability to take a disinterested and reasonable view of it.
Pretty much, yes. Outside of religion, there is no absolute objective standard of what is right and wrong. Some things, like murder and theft, are generally considered at almost all times to be immoral and wrong, but even that’s not an absolute.
Reasonable among a small group of like minded people, yes. However, you cannot extend the opinion of the Samizdatists to cover the bulk of humanity. There are undoubtedly corrupt governments, no-one is going to argue with that. There are also corrupt corporations. There are parts of the world where corporations that effectively are the goverment are also corrupt. I think that government by corporation is more likely to be corrupt than state government, because of the profit motive.
The profit motive and market competition make corporations more efficient than the state in manufacturing and in providing (some) services. The ethos of discipline and honour makes soldiers good at fighting wars and generally the last part of society to go bad. However, armies don’t make good governments, however decent and disciplined they are, and there is no reason to suspect that corporations would, however efficient they are.
Insofar as their actions do not prejudice others, of course.
The guy with lots of money would probably agree to it, don’t you think? I don’t mean that the two parties approach the bench with competing sacks of cash. I mean that, where the court is essentially available for hire and where there is no higher court, the probability of considerations being exchanged for appropriate decisions is rather high.
There is NO ideal society or perfect political philosophy. There is NO absolute moral or ethical standard. There are only human beings, who basically want to rub along together reasonably comfortably and with the prospect of doing reasonably well in life. The question is, what is the least flawed way of enabling this to happen? There has to be order and some degree of social discipline. Most people agree that the weak and helpless need some assistance, whether they believe this through Christian charity or basic humane decency. Most people agree that they don’t want the French, I mean other nasty people, treading all over their society.
In order to achieve these ends, REALISTICALLY you need a state, even if it is not theoretically pure or efficient. This state should be controlled and limited, and within certain bounds responsive to the wishes of the people, but it needs to be able to act where it is competent. Therefore, it needs funds. Therefore, the people need to fund it, and there has to be a degree of coercion in this because nobody really wants to pay tax.
In the end, it comes down to pragmatism. Let’s accept we need a state, but let’s limit what it can do and minimise the burden of regulation, interference and taxation, starting from a presumption of liberty and working backwards from there.
Flogging it all off to the highest bidder is not going to work, any more than a soviet of workers’ and peasants’ deputies is going to work.
EG
Chapter 29 summarises how law and order could be produced on the market. Unfortunately, chapter 30, which discusses the stability problem isn’t webbed but I think, after skimming through Richard’s comments, that he’s been touching on some of the arguments. I must confess, however, that the comments in this discussion are longer than my the patience to read them properly, so apologies if I miss anything.
I don’t see how you could argue that. Communist states have tended to be rather aggressive, even towards each other.
But in any case, I don’t remember any of the objections to communism being that a communist state couldn’t raise taxes to pay for defence, but it is probably the most fundamental objection to anarcho-capitalism.
Indeed, David Friedman entitled the chapter on defence “National Defence: The Hard Problem” and concludes that it might be prudent to wait for the collapse of the Soviet Union before implementing full-blown anarcho-capitalism in the US.
Actually, I did consider that problem if you read my comment again:
I already said that defence against aggresive states is harder for small A-C societies than for large ones. Or in other words, I considered precisely the problem that you claim I didn’t.
Skimming through your later comment, on the stability problem, you say:
Wrong. The arguments for anarcho-capitalism assume no such thing. The problem of preventing a market being taken over by a monopoly or cartel is explicitly considered in The Machinery of Freedom. See chapters 6, 7 and 31.
You continue:
If you have a look at David Friedman’s home page, you’ll see that he lists some conditions for anarcho-capitalism to work. The second one is relevant to your point above:
Whether or not the situation you describe will be a problem depends on the costs curve for the production of protection services. If it is such that large companies tend to have a lower average cost than small ones, so that the market will consist of a few large firms, then the cartel you describe might be quite likely.
However, if the cost curve is such that small companies operate more cheaply than large ones, then the problem disappears. If the market, in that situation, initially consists of a few large firms, then the firms will tend to break up into smaller ones to cut their costs. You won’t see “the big boys removing the competition either through purchase, intimidation or outright violence” in that situation: when a firm takes over its first rival, it has to accept a cut in profits; when it takes over its fifth, it’s now making losses; by the time it takes over its tenth, it’s used up all its resources and has nothing left wth which to take over its eleventh.
The usual pattern for cost curves is that economies of scale are significant at low levels of production and diseconomies of scale are significant at high levels of production. So monopoly or oligopoly more likely to occur if there are a small number of customers. For this reason I take the opposite view of Paul, I think anarcho-capitalism is more likely to work at the level of a nation than at the level of a city. A cartel of protection agencies reistating government might be likely in a single town, but becomes less likely if those protection agencies can export services outside the city and, in turn, have to compete with protection services imported from outside.
In that case, you should read The Machinery of Freedom.
But as I argued above, whether that will be a problem depends on the cost curve of the production of protection services. If you really are convinced, then you must have some persuasive evidence that there are significant economies of scale, that large firms can operate more cheaply than small ones. Do you have any such evidence?
This is simply wrong. For most industries, as I’ve argued above, economies of scale are only significant at low levels of production. At larger levels, with increasing marginal costs, any advantage to be gained by eliminating the duplication of overheads is outweighed by the increase in variable costs.
After complaining about the length of everyone else’s comments, I seem to have written a rather long comment myself.
Actually, you can’t say that with equal validity. The shareholders of a corporation have secure property rights in their shares. If they make a decision which is likely to be disasterous for the company ten years later, they will pay for it themselves. Politicians typically stay in office for only a few years. If a politician makes a decision which will cause disaster ten years later, his successor will pay for it. What penalty did Ramsey McDonald and Stanley Baldwin pay for the part they played in disarming Britain in the 1930s?
If you think that, then I recommend reading The Future of Freedom by Fareed Zakaria. A couple of quotes:
and
The coercive power of a mercenary cartel out to expand themselves is already greater than one which relies purely on market forces for pay. Thus, they can attain larger amounts of equipment and manpower more easily by taxing the people under their control, hereby making it easier to smash other such organizations into the dirt, even if they might be less efficient.
Note: It doesn’t matter how efficient they are, just that how much strength they have in absolute terms. You might be efficient with 2 companies of leg infantry, but a regiment of mechanized infantry, which may cost many, many times more, will still make sure you’re very, very dead.
You might even say they are no longer a bunch of contractors then, but rather land grabbing thugs themselves. Like any other in history. To believe they can be stopped by other private contractors makes me want to laugh. They will either destroy their competitors, or the competition will cut their losses and run. Money is worthless if you’re dead, after all.
Assuming that they are unstable due to diseconomies of scale is not a sure thing. Like conquerors throughout history, such an unit might discover a voracious appetite for more land, more populace to tax. It’ll increase and increase in size until somebody opposes it with equal force. Either way, you have to have some mechanism for people to pool their resources to afford tanks, aircraft, all the tools of industrial war. But then, that’s a de facto state already. And brings us back to square one.
In fact, the rise of nation states in Europe and taxation could be considered as being part of the requirements for building military forces. Guns and cannon were expensive. Before that, there was less tax, I believe.
Also, how did the first rulers in history come about? Simple, they set themselves up as heads of various ‘protection militias’, and worked from there. It may have been swords and horses then, and you could argue the disparity in tech levels wasn’t so big. Now though, even if you equip the entire populace with machine guns, a single B-52 bomber will still shatter them.
Could a group of people afford to purchase a B-52 or a company that employs such a vehicle? Perhaps, but they’ll have to pay for it, and perhaps pay a great deal. And again, how’s that different from taxation?
Andy:
I’m not an economist, but part of my job is calculating sell prices and cost bases for my company in a whole range of actual and hypothetical cases. I do know something about economies of scale, site fixed, variable and corporate overhead costs, and the effects of competition.
Basically, the premise of anarcho-capitalism as you delineate it is valid if, and only if, economies of scale only apply to low levels of production. This is not true, however. If it was true, it is unlikely that General Motors (or any other large corporation) would exist. How much does a mass market car built in a production run of say half a million cost? And how much a low volume hand made car? Of course larger companies can work more cheaply than smaller ones.
It is not really relevant whether you produce cars, widgets or police services. The basic economic facts still apply:
You have variable costs of operation which will not significantly change whatever the scale of your operation (assuming you produce in the same manner – going from hand finishing to automated mass production will redcue them). Normally, these are the majority of your costs (e.g. raw materials, per capita training cost, etc). The gross total of your variable costs is not as important as the total per product i.e. if you need twice the raw materials to produce twice the product, your material cost per unit is unchanged. Some variable costs will of course reduce per product with increased scale – more efficient use of transport and storage, better purchasing power, etc.
You have site fixed costs, which are related to the cost of your operational base, plant or office – things like rent. Many of these would increase if you expand, but would reduce as a proportion of your total expense if your output also expands in line. For example, to double the land area you rent, your per hectare rent cost may actually decrease slightly.
You have overhead costs, such as corporate financing costs, management salaries, head office costs, etc. Again, these can rise as you expand, but not as linearly as your site fixed costs – you don’t need twice the office space or twice the managers if you double your site space, for example.
Now, suppose Cops-R-Us takes over Secure-Corp, and assume their sizes are identical, they pay the same, etc.
The new company has twice the costs, as well as twice the sales. It will also have the financing cost of buying Secure-Corp. Given sensible direction, it will fire chunks of duplicate management, probably close one head office, rationalise operational and training bases and quite probably reduce the number of operational security personnel it has. All categories of costs go down, and it can sell the same degree of service at a lower price from a reduced cost base and probably still make the same cash profit as the two companies could separately (less the cost of the takeover, of course).
It doesn’t necessarily matter that the cash advantage is small. The new company now has a much larger market share and is in better shape to increase further. In our example, instead of two comapnies training 6,000 recruits in two separate facilities, the new company may be able to process the same number through a single, larger facility at consequently reduced per trainee cost, which would obviously have been impossible before.
Obviously, I am not prepared to divulge details, but the company I work for has reduced combined overhead and fixed costs by buying up smaller competing companies over the years. It can now make more of the same product for less cost than the separate companies combined, and is the largest (by far) player in its marketplace.
I believe what I do not through academic theory but by real experience of how such things actually work.
I read Chs. 29 and 33. I think it reinforces my belief that A-C is idealistic, theoretically attractive but hopelessly impractical in reality. Why bother having competing brands of justice? Competing enforcement services? Apart from anything else, it’s wasteful and the scope for creating a violent and corrupt society is greater than where you have a settled democratic state. I have actually seen societies where you basically get the justice you choose depending on what you pay to whom – it doesn’t work. Furthermore, you only need to look at the comparative histories of Scotland and England to see the relative strengths of the unitary state versus the competing fiefdoms – England united into a single state, Scotland didn’t and now Scotland is in all but name an English protectorate.
EG
Oh, and before I forget, there’s a well known expression for forces in battle. Some law or some such that argues that larger units are more effective in battle. Ah yes, I believe it was called the n-squared law.
So if we’re talking about combat effectiveness, a larger combat unit would be more efficient compared to smaller formations.
Okay, let’s use a hypothetical. Let’s say a company operates 4 tanks at say… a total of 400K a month. Another company, some thugs, operate 12 tanks at not 1200K, but 1600K a month(using your hypothesis of diseconomies of scale). So, they require 4 times the pay to have thrice the force. Does that mean they are less efficient?
Not always. The n-squared law indicates that the 12 tanks, all other things being equal, will beat the 4 tanks with losses of less than 4 tanks, and can probably take on a few groups of 4 tanks one by one. Their actual combat efficiency may be more than that of 4 seperate groups of 4 tanks each. Anybody who has played an RTS game will know this in their gut.
Throw in the fact that they can exort whatever they want from their ’employers'(eg. the poor saps under their thumbs), and this is not even an issue. This is also why national armies rose to the fore; there was no other way to oppose such a formation.
Not if they sell the shares 9 years later, though. In any case, I was thinking more of the managers of the corporation, who are quite capable of making insane decisions without the blessing of the shareholders – I know, I’ve seen it (in other companies, of course, not mine).
The corporation is no more or less reliable in this sense than the state. Because the state generally has bigger issues to deal with, like macroeconomic policy, should we declare war on the French (again), and so on, the potential consequences of an error are that much greater. The flawed decisions of corporate managers and directors are not likely to start a war (although, under A-C they might) or destroy the global economy, but that doesn’t mean they are magically less likely to screw up just because they aren’t civil servants or MPs.
I think this idea of assuming corporations are inherently more benign and effective than states is just as daft as thinking the workers would be better at running factories than professional managers. It would be funny, if some folks didn’t actually believe it.
Libertarianism seems to me like Communism in a mirror, and those who propose it are, I’m sure, nice folks – but wrong.
EG
It is true that corporations do not want free markets. On the other hand, the existence of only one, or only a group of firms in an industry does not mean that there is no longer a free market. Moreover, it doesn’t even imply a monopoly, since a monopoly is absence of competition, whilst a single form that dominates an industry still faces potential and indirect competition. The only way you can get a monopoly is by using or threatening to use force against any who would enter an industry.
Sure there is. Why would company A agree to let company B control that portion of the market – especially when demand for protection against company B would go unsatisfied should B become aggressive. In typical cartel fashion, each member would have an incentive to go behind the backs of the others, chisel their share, and the monopoly would collapse.
Then it’s a monopoly at the time we are considering it, but it may not always be so. For this purpose, it’s still a monopoly. Are we at war because, although we are not actually fighting anyone, we face a potential conflict? Of course not.
No, that’s one way of preserving a monopoly. You can achieve monopoly honestly by selling your product in such numbers and at such a low price no other outfit can stay in the market.
Because Company B drove a truckload of cash to the doorsteps of Company A’s shareholders? Because B has a more efficient structure, and A’s shareholders think it would be better deal for them to sell? For, basically, these and any other reasons one company takes over another. It happens all the time and is a natural part of the capitalist market.
EG
Richard – Sorry, wasn’t thinking about cartels when I wrote that.
Anyway, companies frequently enter into cartel agreements where this suits their overall strategy. This is generally illegal, but it doesn’t stop them doing it.
It is easier to do business in a cartel, because you don’t have to worry so much about going out to win work. This is especially the case where you are supplying a more or less essential good or service – consider the oil or plastics industries, for example, which are largely run by cartels, whatever government commissions might find when they “investigate” them.
What works for one, works for the other in a cartel. It makes life easy and secures income. In an A-C society, there is nothing I can see that would deter or prevent the formation of cartels.
EG
This presumes that the commodity or good is a natural monopoly in the first place. Otherwise, the monopolistic company would be running at a loss, protpertionately greater than that of the firms it is trying to undercut, and all the smaller firms would have to do is simply wait him out. Which is precisely a problem Rockefeller faced.
Company B would have to bribe company A with the equivalent of the expected returns that A could get were the market open to A. But seeing as this would be the returns that B is itself trying to get, this would mean that B is giving all that it gains from the monopoly to A, thus gaining it nothing. It would also not be getting the money it would have got from serving the customers on A’s side of the border.
But this is not a rational strategy for anybody. You don’t see Mars and Nestle saying, “you only sell to this bunch of people here, and We’ll only sell to this bunch of people here.” Neither side has any incentive to agree to this. Mars is trying to sell to Nestle consumers, and Nestle to Mars consumers.
Why? If I have the largest widget factory on Earth, run it with an exceptionally high degree of automation 24/7, am the majority shareholder in my company, have low corporate debt and decide I don’t need huge profits, then I can undercut pretty much anyone, anywhere and still make all the money I want.
Anybody trying to get into the market to compete with me will have to raise enough cash to make his operation at least as efficient as mine, can’t make a per-widget profit much greater than I do and STILL has to pay off the finance he raised to get there. Even if he manages to do that, I can probably run cash-zero or even slightly negative until he bails out (which won’t be long).
In this manner, I can over time create a monopoly in widgets without doing anything dishonest.
EG
This means that what you are saying is that it would be impossible to prevent the formation of monopolies, via cartelisation, in a free-market economy, and so the state must intervene if we want to prevent monopolies forming via cartelisation.
Most libertarians, anarchist or not, would disagree with this. See, for instance, Bryan Caplan on the matter. Or Rothbard’s Man, Economy and State. Of course, a lot rides on how we define a monopoly. Caplan would agree with you that a monopoly might exist when a producer captures the entire market simply by doing better than anybody else. He would argue in the same breath, though, that competition still constrains this monopoly to act efficiently. Others might disagree if they define a monopoly as solely an absence of competition, which would lead them to the conclusion that a monopoly can only arise as a result of coercive privilege.
Its these huge numbers of ifs that make it unrealistic. If you have the largest widget factory on earth, and the size of the factory is consequent to the efficiency of the firm and its ability to please its customers, then other widget manufacturers will also be running factories of comparable size.
If a high degree of automation is also what is needed to please customers, then other firms will also establsih a comparable degree of automation.
I see little reason why conditions for you are likely to be substantially different from those everybody else in the industry would face, and so price cutting would make you both lose money at the same rate.
Correct, but not only via cartels. This is why we have anti-trust legislation.
Actually, it’s the potential for competition that does this. An honest monopolist who wishes to retain his monopoly honestly will of course run efficiently in order to ensure competition will fail, if he feels there is any potential for competition. A dishonest monopolist would not necessarily feel constrained to act efficiently if he has other means of ensuring an absence of competitors.
Perhaps. Corporations are run by people, and as such can and do make dumb decisions. My competitor may use less efficient equipment, may have “ethical” investors who want to employ people rather than robots, may automate too late, may not have technically literate staff who understand the equipment as well as mine do, etc, etc.
Your logic assumes everyone’s widgets are the same, each corporation has an identical cost base, equally (in)competent management, the same sales strategy, the same quality ethos, the same public image, etc. By this logic, everyone would charge a high price for their indistinguishably crappy products and price reducing market mechanisms would not work. Technically, this is called Communism 🙂
To be serious, there would inevitably be differences, tangible and otherwise: location, cost base, quality, unique selling point, acceptable profit margin, corporate image and reputation, etc. Even the colour of the box. If it all adds up to no more than a penny a widget, it’s still an advantage for someone. What happens depends on how, and how far, he wishes to exploit this advantage.
EG
If you throw in the fact that widgets are weapons, the unscrupulous monoploy owner will probably be emperor of the world. 😉
Hail emperor Gray! 😛
I don’t understand Bryan Caplan’s assertion that businesses will naturally steer away from predation. In the U.S., Wal-Mart has been accused of predation all across the country. It is now one of four low-priced department stores in my entire community, after driving four others out of business, and holds the largest customer base by far. As if that isn’t enough, they’re expanding. They have thrived on predation, and don’t show signs of slowing down.
It was only a matter of time, had to happen, best interests of the people and all that, etc. 🙂
Neither do I. In my experience, companies will happily predate and collude wherever they see an advantage.
I think his preumption is that corporations and the people who run them are professional economists and will adhere strictly to theory. They aren’t and they don’t.
Perhaps it’s better to pay less attention to academic theory and look outside the classroom window to see what really happens?
EG
Euan:
In your argument about economies of scale, you’re making the mistake of assuming that because you can observe companies making savings by merging and eliminating duplicated fixed costs, those opportunities will exist no matter what the level of production and in all industries.
That’s not generally true, even in the case you cited of car manufacturing. If it were true, we wouldn’t see a small number of large firms, we would see a single large firm. We would have a monopoly, not an oligopoly.
This is only true sometimes, it isn’t true in general. In most industries, marginal costs of production increase as a company expands. I work for a company which employs fifteen people. About ten years ago, before I joined, it employed about twenty five. My boss has told me that at that size it was just to expensive to manage effectively. You seem to be assuming that the properties of the world near you are the same everywhere else.
I’m not claiming that an oligopoly of protection services isn’t possible. It’s just that the existence of oligopoly in other markets isn’t evidence that it’s inevitable. Why point to the car manufacturing as a model? Why wouldn’t it be more like the restaurants?
Even if they sell the shares 9 years later, they will still pay for it. The bad decisions they have taken will reduce the price that the buyers are willing to pay.
But those effects can be mitigated by a takeover bid. If the managers have been making bad decisions because the shareholders are too numerous to moniter the company effectively, then the share price will fall. This creates an opportunity for an investor to buy up the cheap shares, replace the incompetent managers with competent ones, see the share price rise as a result and sell his shares at a profit.
There is no corresponding mechanism in a democracy. If a voter is unable to control his government, he is more like a shareholder who cannot sell his shares in a worthless company.
Even accounting for bad decisions taken by companies, what do you think are better run, business or the government?
Euan writes in several comments above that the Founding Fathers were optimists. Well, true up to a point. But they were certainly realists about the dangers of Big Government, centralised authority and the need for checks and balances.
I think the track record of the US as a broadly free nation over the past 200+ years bears out my view that these fellows were models of sagacity compared to the communists and socialists of their time.
I tend to steer towards the minarchist view these days.
Being accused of predation isn’t the same as actually engaging in it. It is possible that they are selling at low prices because they can, and thats what customers want, rather than as some plot to take over the retail industry.
Proving a firm is charging a monopoly price is impossible, because, in order to be able to tell if it is charging above the market price, you would have to be able to say, independently of what is actually occuring in the market, what the price of a good ought to be. This is impossible.
But for the same reason, proving that predatory pricing is occurring is also impossible, since you would have to know that the market price for that good should not actually be that low, and you cannot possibly know this.
I doubt it. Most histories of Anti-Trust law, how it was introduced and how it is used, that I have seen don’t lead me to support this conclusion.
Absolutely. But other than by providing customers with the best product he can at the lowest price – i.e, by behaving efficiently, what other means does the monopolist have? Apart from using force against other would-be competitors? This is precisely what is legal now, since we have licensing laws, quality control regulations, etc. etc. that allow monopolistic or oligopolistic control of an industry.
In addition, why presume that there is only room for one efficient firm in an industry?
Lol, well we certainly don’t want communism, so we better keep the state intervention in case we get it!
Actually, my argument is the same as this one, from somebody better qualified than I:
From David Friedman’s The Machinery of Freedom. The referred to US Steel was formed with 60% of total steel production. Now it only has 25% – it was unable to use its size in order to establish a monopoly. Likewise, Standard Oil, under Rockefeller, often threatened to cut prices and start price wars. However, their competitors knew what the effects would be. When they threatened one competitor, the manager of Cornplanter Refining Company, he related his response, “Well, I says, ‘Mr Moffett, I am very glad you put it that way, because if it is up to you the only way you can get it [the business] is to cut the market [reduce prices], and if you cut the market I will cut you for 200 miles around, and I will make you sell the stuff,’ and I says, “I don’t want a bigger picnic than that; sell it if you want to,” and I bid him good day and left”.
Standard Oil’s threat was never followed through, and Cornplanter’s capital grew from $10,000 to $450,000 over just twenty years. In fact, many of the price wars that Standard Oil was involved in were started by smaller competitors trying to eat into Standard’s market, and the example of Cornplanter shows that many were successful. John S. McGee remarked that “It is interesting that most of the ex-Standard employees who testified about Standard’s deadly predatory tactics entered the oil business when they left Standard. They also prospered.”
Spot on, Andy. I am about to go to the local fish and chip shop for lunch – and, surprisingly, it is not a fish and chip megastore! Fish and chip shops tend to be of a similar size, sell similar sized portions, for similar prices. Of course Anti-Trust lawyers would presume that this is evidence of collusion. Economists, however, would simply say that this is because that is the efficient size for a fish and chip shop to be. We may have our Macdonalds, and our Burger Kings, and KFCs, but a vast portion of the fast food market is made up of small firms.
Protection is a service industry, so companies are likely to be small if compared to other similar industries. For instance, law firms are small. private doctor’s surgeries or dentitsts are small businesses. Cleaning companies are small businesses. I doubt know how many security companies there presently are, but I expect there are quite a few.
Andy – You’ll note I didn’t say large companies always operate cheaper than small ones, just that they can.
In general, however, as companies expand and assuming they are prudently managed, fixed and overhead costs tend to become a smaller proportion of total costs due to increased organisational efficiencies. Variable costs of production per unit in some cases will reduce, the most common causes being reduced waste in larger scale production and reduced purchase cost because of greater buying power. This doesn’t always happen, but it does happen a lot.
The opposite can also happen as companies expand and become wealthier. Management can become slack, complacent and inefficient, usually requiring more managers to do the jobs that are no longer being done by the lazy managers and thus increasing unit fixed and overhead costs.
You don’t say why your boss found increased payroll too expensive to manage properly, and maybe he didn’t tell you. He may have hired incompetent staff, expanded his staff too quickly or too much, realised the supposed extra sales potential wasn’t there after all, failed to rationalise his organisation, or just plain found it too hard to cope with personally, any number of perfectly valid reasons. To assume from that single experience that in general corporations can’t expand efficiently is surely somewhat naive and simplistic? I mean, companies do it successfully all the time, so your premise simply cannot be true.
Ford started from one man’s idea to become one of the largest and most efficient car manufacturers in the world. But it’s not just cars. McDonalds started with one man’s idea and now, we are told, serves billions. Microsoft started with two guys and a computer in their garage.
If your premise is true, then we might expect Henry Ford to have realised economies of scale by going from hand finishing to mass production, which of course he did. But then, according to you, the advantage would disappear, and he would never have expanded beyond that point because it would have cost more than the gain. But he did. Hugely and successfully. Care to explain this?
I think maybe what you are getting confused with is that, as you expand, the cost saving from each degree of expansion reduces and eventually you will reach the point of diminishing returns where it is indeed counter-productive to expand further. That doesn’t mean, though, that you cannot expand your company hugely before you reach that point, even to the extent of monopolising the market. It also doesn’t mean that companies would never expand beyond the point of diminishing returns – they might, and might be quite happy to do so as long as their shareholders are happy with the end results.
In summary, then, generally as a company expands it can realise efficiency savings. There are exceptions, and there are limits, but generally it is the case, your boss’ experience nothwithstanding. Sometimes, however, there is no room in the market for expansion and even if the company was more efficient it would still lose out because it couldn’t sell the volume of goods or services it was now producing. Sometimes, it’s a niche market where any expansion is counter-productive – do you remember when Sir John Harvey-Jones, late of ICI, visited the Morgan car company and advised them to radically increase output? He was told to bugger off, on the grounds that he knew nothing about niche products and that mass-market techniques don’t apply to them.
That’s true, but that’s because the provisions of the democratic state (or any other kind) apply to everyone within its borders, whether they like it or not. You don’t, as an individual, choose which party will govern you. However, although there isn’t a strictly corresponding mechanism, there is an analagous one – emigration.
Instead of the ludicrous and unworkable idea of having essentially competing governments in a single country, why not just move to live under a government more in tune with your thinking? If you think Britain’s too regulated and conformist, move to America. If you don’t think it’s regulated enough, move to Germany. It’s like selling your stake in one company and buying shares in another, but in a situation where you need to live in the company’s offices.
There are good and bad examples of both, but define “better”. A man can run a company with ruthless efficiency and will win the plaudits of his peers, but try doing the same thing with government and suddenly they’ll all call him a dictator, a fascist or a zealot. There is very little overlap, in my view, between what governments and companies are good at, and it is pretty much impossible to give a hard and fast answer to that.
Private corporations are generally far better than state enterprises at manufacturing. States are far better than corporations could be at prosecuting war and conducting foreign relations. Each is better than the other at it’s own thing.
EG
He did tell. He said that the staff effectively divided into two groups of people working on different contracts, who rarely spoke to each other, except through him. For the type of work we do, this had no advantage over splitting the company into two, but made his job as a manager harder.
Yes, I can explain it. The situation you describe is entirely consistent with what I have said. If Ford ever had a monopoly, it was only temporary – his company did not expand indefinitely. At some point he got to the stage where future expansion was no longer profitable.
You seem to think that I have said that economies of scale cease at a very low level of production. I have said no such thing. I have merely said that they will cease at some level of production – what that level is will depend on both the cost curve and the demand curve for the product. However, I do assert that situations where that leads to monopoly or oligopoly tend to be the exception rather than the rule.
Whether protection services will tend to be provided by a competitive market or a monopoly or oligopoly is an empirical question. Merely pointing out that there are a small number of large car manufacturers doesn’t answer it. Monopolies/oligopolies account for a small fraction of the total economy.
Like I said, why do you think car manufacturing is the appropriate model for protection? Why isn’t it the restaurant business?
I’m not confused with anything. I could even start peppering my comments with the equations, if you like.
It is a general rule for most industries that marginal costs increase as production increases and at some point they will outweigh any savings to be made by eliminating fixed costs by, say merging with another firm. This means that beyond some point the firm will actually see a reduction in profits if it expands any further.
This is over and above the diminishing returns you describe. Such a situation would require that marginal costs are constant at all levels of production, and the returns diminish because there are fewer fixed costs to eliminate by mergers or aquisitions.
No, it’s the other way round. Most services are supplied by small firms. Large firms are the exceptions.
But emigration is much more costly than selling shares, which I suppose is why you said it “isn’t a strictly corresponding mechanism”, and so it’s far less effective at disciplining governments.
I rather doubt it. If a politician simply did the things which, in business, would be described as “ruthless efficiency”, he’d be hardly likely to be described as “a dictator, a fascist or a zealot”. He’d have to start imprisoning or murdering political opponents and other things like that before he’d be accused of being those things.
I wonder. I remember Noreena Hertz saying that Israeli businesses employing Palestinians and Jordanians were probably doing more to promote peace between Arabs and Israelis than anything that was being done by their governments.
Licensing and quality control regulations have nothing to do with market share. Anti-trust legislation seeks to promote competition by restricting cartels and monopolistic practices. I’m not convinced they actually work, or that that attempt is even necessary, but that’s their intention – to prevent, not to allow monopolistic control.
As to whether a monopoly or would-be monopoly can retain its position, this really depends on what resources are at its disposal in relation to those on the other side. It is true that selling more products at the same unit loss means a greater total loss, but there are other things to take into account – how much cash does the monopolist have, how long can he afford to sell at a loss, how great is his unit loss in comparison to his competitor’s and in relation to his own reserves, how prepared are his shareholders to bankroll losses until the monopoly is secure, and so on. Yes, the attempt may well fail, and probably would, but that doesn’t mean it necessarily and always will.
My point was not that monopolies will inevitably emerge in any scenario, or that cartels will do likewise, but rather that in the provision of essential public goods like security and defence, and in the absence of a regulating state or other final authority, the formation of monopolies and cartels is more likely and that furthermore there is essentially nothing to prevent it. There’s a lot to encourage it – avoidance of the loss of one’s expensive human assets, for one. This may or may not be a bad thing, but if you have a monopoly private security and defence provider, how is this different from a state? Apart from the fact that this new state may raise even higher taxes because he wants a profit as well, that is.
There are also weaknesses in the idea of using corporations for military and para-military operations, such as (a) such operations essentially destroy your assets (principally people), (b) money is not a good enough motivating factor for most people most of the time to lay down their lives, (c) it assumes there is a natural market in profitless death and destruction, of which I am far from convinced. As the Wobbly Guy pointed out, money isn’t a lot of good to you when you’re dead.
Mercenaries can and do cut and run when things get bad, surviving to fight (and earn) another day. Professional soldiers are more prepared, if necessary, to stand to the last and die for what they believe in. If you doubt it, contrast the performances of the mercenary-heavy Royalists versus the more professional state army of the Parliamentarians in the Civil War. No commercial defence contractor can hope to stand up against a professional state army.
EG
But you haven’t demonstrated that this is the case. Your argument has largely consisted of the observation that monopolies/oligopolies sometimes exist and then, the unsupported argument that the same conditions which give rise to say, General Motors or Microsoft, will apply for protection services.
Can you be more specific? Can you identify the fixed and variable costs for protection services and then show that the fixed costs are a significant proportion of the total costs and that the marginal costs do not rise significantly as output rises?
As far as protection from, say, nuclear attack rather than ordinary crime is concerned, I think that service is probably a natural monopoly. However, that sort of service is probably a public good as well, so has an even more serious problem than the inefficiencies of a monopoly.
Licensing closes an industry off to all but approved people, and approval generally has to come from other members of an industry. This way people in the industry can reduce supply and raise prices, or gain other purks without fear of competition. A monopolistic position is gained. The best source on this is probably Milton Friedman’s Capitalism and Freedom about the American Medical Association’s control of licensing authorities. Similar histories of taxi licensing reveal the same tendency, though.
The point is that they can gain and sustain monopoly position by, and only by, securing a share of the market by coercive means.
OK, but my point was that without the ability to threaten would be competitors with force from entering the industry, and without the ability to threaten consumers with force to get them from buying other things or chosing not to spend their money at all, there is no way that a company can make itself secure against competition.
Good question. I did make an observation in a different discussion here, though. I reproduced a post I made on another forum:
Of course, such a company would be in a position sufficiently powerful enough to coercively prevent anybody else from selling protection within that geographic area, and, as such, could become a state. However, the legitimacy of such a state would obviously still be in question due to its coercive nature, rather than being purely defensive like a security firm.
Absolutely. This is precisiely why that “scenario 3” you described, in which protection agencies fight it out, is likely to be unrealistic, given cheaper, less risky solutions, such as arbitration. I also think that arbitration would be preferable than companies deciding “well, we’ll only offer our services to these guys, if you only offer your services to those guys” (not to mention the fact that this still does not solve the problem of what is to happen when customers of one agency want their agency to punish customers of another, and so does not solve the problem of intra-agency conflict).
I could compare the performances of recent mercenary activity with that of proffessional soldiers in Iraq and get a possibly different story, though. However, proffessional soldiers must be attracted to the job just as mercenaries are. neither are conscripted, so in both cases enlisting must be shown to be in their interest.
Euan-
Didn’t your mother ever teach you that stealing is wrong? If it is wrong for individuals to steal from each other – regardless of the implied necessity – it is wrong for governments to steal from individuals.
You support a form of government with enough power to steal from some people to support the “welfare” of other people. Please explain how you think this is just or moral and how this state could possibly consider itself a champion of individual liberty.
Too many governments operate on the premise that a majority vote in support of theft or slavery legitimizes these activities. If you truly want a “welfare” state, you are implicitly giving your support to institutionalized theft and the subjugation of liberty to someone else’s idea of a better world. At that point, nothing separates your point of view from that of the status quo but scale.
Many people share your point of view; that if we could just work within the system for positive change and try to limit the power of the state, everything would be OK. Implied with this is the idea that people simply must be compelled to do X, Y, and Z (whatever is important or deemed “necessary” by the spinsters). This sequence inevitably leads over the slippery slope of totalitarianism and into the heart of darkness, if you will.
Look, I’m dead against the state taking money from me, but in certain areas, it’s sheer necessity. It’s either a bit of ‘legalised’ theft by the state in the form of taxation, or VERY BIG theft by some conquering bastard with his morals up his ass.
Either you pay some of your income now to support your nation’s defence, plus law and order(optional), or you get assraped when some muslim invader thnks he’s entitled to ALL your infidel possessions. This was the dilemma my country faced, and the one reason why we have maintained our defense budgets where they were. There is no other option save in the deluded minds of A-Cs.
It’s the lesser of two evils. Binary solution set, get used to it.
The Wobbly Guy
The Wobbly Guy-
The solution set is far from binary, and I won’t get used to it because that means getting used to giving up not only my own liberty but the liberty of other humans, which I consider just as vital to my quality of life as my own liberty.
Why should a person sacrifice their life fighting for a government which takes away their liberty and could quite possibly take their life before they have a chance to throw it away for said government? In the 20th century, more people were killed by their own governments than were killed in all international and civil wars, by a ratio of 4 to 1. I have no problem with volutary collectivism but perhaps you can now see why I am totally and permanently set against coercive collectivism, even for the purpose of national defense. There are many non-coercive solutions to the issue of national defense.
The national defense of a free society would likely take many forms working with each other at different times and in different contexts and scales.
A voluntary defense cooperative consisting of free agents and otherwise unassociated defense collectives would likely present more effective resistance to foreign invasion than a single government with a single military and a single, bureaucratically determined strategy (employing unwilling draftees and slaves of the state).
The reason capitalism works so well (though perhaps I should say would work well if it could unchain itself from the state’s red tape) is because innovation and risk-taking are rewarded rather than punished. The bottom line is that people function at a higher level when they are doing something of their own choosing rather than someone else’s choosing.
Expanding the free market ethos into the types of human endeavor previously assumed to be strictly the domain of governments (such as national defense) could very well have a positive effect on the effectiveness of those activities.
We know where overarching and all-powerful governments get us – hundreds of millions of dead bodies, widespread destruction, and poverty spread across the face of the earth – so what have we to fear in giving another method a try? What do we have to lose? Democide?
Though you wouldn’t know it by looking now, the founders of the United States were courageous enough to attempt a grand experiment in just how far individuals could be trusted with their own lives. They didn’t go far enough, and some of their ideas were fatally flawed from the beginning, but their courage should serve as an example to each freedom loving person alive today of what could be accomplished if people took a stand against modern day King Georges and the absolute tyranny that is the result of a willingness to compromise basic freedom for the “warm smell of the herd”.
Here are some other peoples’ thoughts on private national defense:
Click! Click!
Richard:
But then you’re not comparing two armies fighting each other, you’re comparing a professional army carrying out what is essentially a colonial police action for which it was never trained with a small group of army-trained security specialists. And in any case, the conduct of the US army in Iraq hasn’t been bad.
A Natmani:
These slaves and unwilling draftees would, presumably, be the members of the highly respected and all volunteer British armed services? And the equally all-volunteer American services? And the bureaucratically determined strategy would be the same one created by the all-professional general staffs of these services? Or am I missing something?
Communist and fascist dictatorships screwed up, so anarcho-capitalism must be worth a try? Give me a break.
All the democide screed illustrates is that dictatorships are nasty, and millenarian dictatorships are especially nasty. We don’t need an A-C experiment to tell us that. Actually, I thought some of the democide stuff was pretty good, until he started blaming the UK for state sponsored murder in Northern Ireland.
The state is not perfect. Nobody likes paying tax. Nobody likes being compelled to pay tax. States make mistakes. Some people think it’s not fair that, just because they don’t agree with the state’s current policy, the whole thing should be abolished. Well, boo-hoo.
Corporations make mistakes too. In A-C society, they would pretty soon start leaning on people who didn’t want to pay their insurance premiums. They would supplant the state and in due course they would become the new state, repeating the evolutionary pattern shown in the amalgamation of petty kingdoms into a single nation state. Waste of time, really.
This is why you are not a general.
Whatever you’re smoking, can I have some? This is daft, there is no way on God’s green earth a bunch of volunteer defence cooperatives could stand up to a well trained, disciplined and organised professional army backed by the mobilised resources of a state. It just isn’t possible. Even the French could probably beat them.
Volunteer cooperatives aren’t going to invest billions of dollars in nukes, in heavy bombers, aircraft carriers, etc. They just won’t, because they are too expensive. Of course, it will be argued, why would they need such offensive weapons? Because the possession of offensive weapons and the willingness and ability to use them is a form of defence – and a pretty impressive one at that. More so, one might argue, than a few wild-eyed A-Cs prepared to die for the right to buy their own defence.
I’ll pre-empt the argument of Vietnam and Afghanistan. Firstly, the Americans didn’t learn what the British learned in Malaya (and Borneo, and Kenya, and Oman, etc), which is that to defeat an insurgent enemy you need to use similar non-conventional tactics. The British started off in Malaya the conventional way – artillery, bombers, etc – but sooned figured it out and sent in small teams of specialist troops. It worked. To date, the British are the only nation to have completely defeated (and not just fought to a truce) a terrorist enemy, and more than once at that.
Unlike the Americans, the Russians did learn from the British when they were in Afghanistan, but by then it was too late and although they were gaining ground rapidly the die was already cast for withdrawal.
All in all, your military strategy is a recipe for disaster. It will not work. Accept reality, accept the state is not going away any time soon however unpleasant it may be, and focus on limiting what it does.
EG
Euan-
Please excuse my total lack of brevity. This will be my final “comment” on the thread.
I will take your negligence of my question on the ethical status of institutionalized theft to indicate that you can not rationally defend state-imposed theft. Just saying ‘that is just how it is’ doesn’t serve as a reasonable defense of anything in a conversation between adults. Rather, that is something people tell their children when they don’t have the knowledge to explain exactly WHY a particular rule is in effect.
If you skip this issue entirely, you may be able to rationalize the HOW using historical examples, but without the WHY you leave the floodgates to totalitarianism wide open – they’re just downriver from the ruined and broken dam of federalism.
I’m saying that individual liberty must come first or all is in vain; what you fight must be different than what you are fighting for or you may as well turn the gun on yourself. You seem to be saying that we must accept an imposition on our rights to fight against other possible impositions on our rights.
Although all analogies fail at some point, I will attempt to give you one of many reasons WHY I think individual liberty is most important in the form of an analogy; that of society as a house in which individuals are the bricks and mortar of the house of civilization. Unless you focus on the quality of the bricks first and foremost, the house will fall apart.
Given the collectivist climate present in today’s political estate market, most people only focus on the architectural plans and either pay little attention to the building materials or worse, start from the assumption that the components as a whole (err, en masse) either lack the integrity to support a structure in the first place or that their value stems solely from their financial cost.
Ignorant designers place all the materials solely in the context of the overall design and fail to start from the beginning – the quality and condition of the most basic building materials.
Who is the architect? In the statist scheme, the architect is clearly the government or the tyrant. In a free society, the architect is known by many names: The Invisible Hand, Conscience, Free Will, Mutual Benefit, I, The Golden Rule, Positive Sum Game, etc.
Now on to the rest of my excessively long response:
The armed forces of the US and UK are volunteer forces because of two reasons:
1. There is not enough support for a conscripted military in either nation.
2. All-volunteer militaries perform better than conscripted militaries because of reasons I have explained previously. These two nations understand this and have changed the structure of their militaries to reflect this understanding in much the same way the communists of China have instituted a weak capitalist economic system to help sustain their imperialistic barbarism.
Now, decouple the high performance nature of volunteerism from the wasteful and indulgent nature of the state and hire these well-trained forces as employees protecting company assets and you have an even better force which does not use force to support itself and which has no long-term imperialist motive. I’d much prefer to live in a world in which power was vested in individuals and their businesses rather than in governments – it isn’t good business to kill your customers. Profit is no more Force than a Handshake is a Punch In The Nose.
Look at the military of Iraq and how poorly it performed against the might of the volunteer US and UK forces.
First, leeching off the productivity of our somewhat free economies and using volunteer forces, the coalition devastated the enemy.
Second, whether or not the war against Hussein’s Iraq was a good or bad thing in itself, it exemplifies the possible power of wealth and resources that are produced by relatively free economies.
Third, many Iraqi soldiers were compelled to fight and die for something they had no vested interest in preserving and consequently many of them were killed or simply surrendered.
Fourth, imagine the incredible wealth and prosperity that a truly free society would produce without the heavy hand of government holding down the engine of creative freedom and picture its members.
Do you think such a free society would voluntarily fight to defend their system against foreign invasion? Do you think they would give willingly and without the need for coercion to support the defense of that system? I think so and I hope so, but there’s no way to find out unless such a society is given a chance to exist in the first place. This is clearly where you and I differ; I say take the risk for a better tomorrow and you are apparently unsure it is better or afraid of just doing it. More power to you and your right to think and express what you want.
Take a closer look at the system in the US as it stands today: people join the military and are given wages just above subsistence levels, if that. Then, they are expected to fight and die for that wage and a patriotism that is based on vague notions of freedom that seem to be less credible every time they come home from a tour of duty (re: the P.A.T.R.I.O.T. Act). Then, they are taxed just like other citizens except when they buy directly from the government, while those on welfare who are “protected” by the military (not counting the members of the military on welfare, since most qualify for it because of their low wages) pay no net taxes and typically vote for the political party that, at best, and depending on the season, stands against reducing the welfare budget and for reducing the military budget. The amazing thing is that US soldiers perform so well! Imagine how well they would perform if their conditions and wages were directly and rationally tied to the level of risk they assumed! And no, hazard duty pay apparently isn’t enough or more people would be signing up for service.
Do you think the current situation here is fair? Is this a positive example of the welfare state you so ardently support?
Imagine one of many alternatives: A truly free society; imperialism becomes a term usually used when discussing business acquisitions and war is more often associated with the term ‘price’ rather than with the term ‘total’. People are hired by private companies as protection agents (or soldiers, or whatever you want to call them) and pay no taxes because there is no state to pillage their wealth. Because there is a market for well-trained soldiers, third party firms profit from training future soldiers and other third party firms profit from the public quality certification of these “boot camp companies”.
The market establishes wage prices for soldiers based on ability, training, experience, and supply and demand. Demand is influenced heavily by current political conditions, so a state of social insecurity produces higher wages and more opportunities for people willing to engage in life-threatening activity for profit. Soldiers are promoted and demoted, given raises and pay cuts based on company success and ethic which is in turn determined by market forces, which reflect either the values of the customers or the bankruptcy of the company. Supply is influenced heavily by the treatment of soldiers and by the number of casualties in previous conflicts, of which there would probably be fewer than we see today (more on why later).
Defense becomes a controllable expense and is thus used as infrequently and efficiently as possible. Companies understand that violent conflict is the most expensive exchange they can engage in, and they overwhelmingly prefer to deal with other companies and people using commonly accepted and non-violent business tactics. Violent companies lose their customer base to peaceful companies because customers profit from and buy in to peace. Think about it: peace is profitable and war is massively expensive; war costs so much that governments are compelled to steal from the people they claim to defend just to pay for it.
To protect their assets from the threats of foreign invasions and insurrections by internal coercives, several companies preemptively and voluntarily join together to create defense co-ops which organize co-op scale training, supply and maintain strategic forces, choose force leaders, and perhaps maintain diplomatic connections with other entities. The cost of these co-ops are built into consumer level pricing, which would seem to equate with taxation except for the fact that consumers are free to purchase their goods and services from whatever source they choose.
Yet other companies would provide two services: to protect individuals from coercion initiated against them by a defense co-op gone awry and direct protection from foreign invaders, common criminals, and internal political coercives such as Marxists, Maoists, Welfare Statists, Social Democrats (…ok, tongue in cheek here –everybody knows that Social Democrats are against private gun ownership and thus would never try to start a “devolution”), and other such ilk.
This scenario is not a kind of formula to be forced upon free people ‘for their own good’, it is just one possible form that could arise given the ingenuity and flexibility of free people making free choices. This scenario also depends upon one basic assumption: that free people are willing to voluntarily use their resources to remain free and prosperous.
The success of any society depends on the quality of its values, regardless of the predominant political climate and/or structure. In my mind, the best set of political values is based primarily on the value of individual human life which in turn relies on and supports universal and reciprocal liberty between all people. If a society loses sight of these values, it loses itself. If a society is willing to give up liberty and peaceful exchange in favor of statism and violence, it will become a violent state and either die fighting the meaningless political distractions of the moment or die having fallen into bottomless pit of ever-increasing debt and the cultural ruin caused by government policies and education.
A Natmani:
I didn’t miss the point about the legalised theft that is taxation. However, if we have to have a state (and I cannot accept that, in practical reality, there is a workable alternative), then it has to be funded, and this funding has to come through some form of taxation. However, it is worth pointing out that under an A-C society, you would still have to pay for the services you now get from the state, except then you would get them from a corporation. Inevitably, there would be little choice in the matter – just as the state could not provide services adequately if huge numbers decided not to pay tax, so the corporations couldn’t if large numbers decided they didn’t need insurance. Furthermore, since the corporation is, if it is competing with others, taking the money from a much smaller funding base, it cannot make purchases or investments on anyhting like the scale of the state and is severely limited in what it can do. Perhaps that’s the point, but it will likely result in, if anything, more aggressive revenue collection because each penny is proportionately more valuable. Really, at the end of the day, what is the difference?
As for the military and the logic of A-C defence philosophy. Well, if you have a wealthy and prosperous society which doesn’t want to spend money of defending itself because it’s wasteful and pointless, then you can only expect that that society is going to be easy prey for someone who either wants its resources or detests its attitude. Unless it is physically isolated with a vast unexploited economic potential (like the US in 1939), you’re doomed.
Your envisioned defence cooperative have to do everything the state currently does in terms of national defence, internal security and public order, and as well as that it also has to protect its customers against rival corporations. All of this isn’t cheap, and if the responsibilities are split between several competing corporations you will lose the economies of scale the state enjoys and will thus be severely restricted in just how much you can do. Again, this may be the point, but it’s bloody silly from a national security point of view.
Finally, I think you are excessively paranoid about the evolution of the state. You assume that it will inevitably and necessarily evolve into a dictatorship. This is not the case. Again, and in practical reality, the state is a necessary evil. It just has to be limited and watched.
A-C is not a practical solution.
EG
I think Anarchy, State, Utopia is actually shorter than this thread.
🙂
You have kept making this point, and I have kept responding that to demonstrate this, you have to demonstrate that there are significant economies of scale in the production of protection services. Your only argument for this is that a handful of other industries have significant economies of scale.
Apologies if you have given a response, buried deep in the enormous thread above, but you still haven’t answered the question that I have now asked twice. Why do you assume that the cost curve for protection services will be more like that of car manufacturing than that of restaurants?
Euan Gray wrote:
You might wish to read this article on florists in Louisiana. The current florists are using the bully power of the state to impose onerous licensing examinations on would-be florists in order to shut new florists out of the market.
Big companies want licensing and quality control legislation in order to drive up artificially the cost of entry into a market.
“Didn’t your mother ever teach you that stealing is wrong? If it is wrong for individuals to steal from each other – regardless of the implied necessity – it is wrong for governments to steal from individuals.”
I don’t think taxation is theft unless it becomes unnecessarily large. The problem we face is that the alternative to taxation is being charged for public services. If you think emergency services can’t get any worse, think again. Imagine what would happen if an ambulance or police officer refused to come to your house because you couldn’t afford the bill. I would rather offer up my taxes and fight government waste than eliminate taxation completely. However, I would agree that the government’s authority over taxes may be getting out of hand. The tax amount should correspond to the amount of money the government is spending on our services.
So are you arguing that private corporations considerably smaller than the state can in fact make purchases and investments on the same scale that the state can, simply because there are (apparently) no economies of scale? Unless I’m missing something, that doesn’t make sense.
Why would it not? Forgive the verbosity of the following, but it is apparently necessary to go back to basics to illustrate what I would have thought would have been an extremely simple point.
It doesn’t take much to prepare the products of a restaurant – a smallish room, a cooker, some cheap ingredients and a moderately skilled cook. To build cars, you need forming presses, iron foundries, rubber plants, expensive machine tools, professional supply chain management, large industrial premises, etc. These cost a great deal of money – tens of millions rather than a few thousand. You don’t strictly need a car, but everyone needs to eat. So why, then, are there not a small number of mega-restaurants?
If you open a restaurant only, say, for treating your wife to a night out on birthdays, anniversaries, etc., it will cost you a small fortune for each meal. If, on the other hand, you maximise efficiency by opening it to everyone every evening, you are realising an economy of scale in your operation and your unit costs per dinner come down. Now, because people aren’t going to drive 500 miles for dinner, the marketplace doesn’t support a very small number of very large restaurants but rather prefers a large number of small places, which, if they are well run and successful, have maximised their economy of scale by producing at or near their capacity. Enlargement would be fruitless, because it means you need to cast the net wider for clients, and you run into the driving 500 miles for dinner problem.
Cars, on the other hand, are products that can be made in a single mega-complex located anywhere and distributed widely – it doesn’t cost all that much to ship a car from Coventry to Aberdeen, especially if you’re doing it trainloads at a time. Cars are also expensive to make, and you don’t get a lot of profit from them. Around $200/vehicle is typical profit for US manufacturers, for example. If you made a larger profit, you’d only be able to sell a few cars because of the higher unit cost, which would affect the amortisation of your capital investment among other things. Now, you can do this – specialist sports cars are often made like this, but it’s a niche market (see above re: Morgan cars). The better model for standard cars is to sell cheap and in high volume, and since you need different (and more expensive) tools to do this, the point at which you maximise the efficiency gains through increasing size is much further down the line than for a restaurant. But that’s ok, because you’re selling into a much larger, much more geographically spread marketplace, so you can expand to this point without running into the same problems, or rather you expand much further before you run into them.
Turning to security services, the client does not travel to a security base, station himself there, and temporarily hire bespoke security for his stay. Security in the A-C model we’re looking at is a large scale service involving the “manufacture” of substantial numbers of units (i.e. guards, soldiers, policemen) and their disposal around a wide area, potentially a nation. Due to attrition through retirement, death, resignation, etc., there’s lots of repeat orders. Since they can be trained and controlled from pretty much anywhere, it follows that this is most efficiently done from a centralised operations base rather than from a large number of local depots – the army has centralised training schools, not one for each regiment in its home town. Therefore, there are significant economies of scale to be made in having a centralised command, control, administration and training system, potentially up to the level of monopoly supplier, in the provision of security services in an A-C society.
Why does this not happen now in our state? Because the market for private security and defence forces is much smaller than it would be in the A-C nation and so the level at which you maximise economies of scale is much lower. Combined, the (state) police and armed services in Britain number over 250,000 – there aren’t anything like that number of private security staff, But if there were…well, you’d see similar rationalisation and large scale efficiency gains. It’s simply cheaper (more efficient) per officer to run one large establishment rather than 10 smaller ones for the same total number of officers (within reason – you wouldn’t try to maintain a million strong army from a single base).
I trust it’s clear now.
EG
The same thing happened recently in (I think) another state regarding funeral services. It’s not folks using the power of the state, it’s a corrupt cartel of existing businesses giving a cut to the local government.
This happens sometimes. However, there’s no reason to suppose it wouldn’t also happen under an A-C or libertarian society, except the florist cartel would be giving money to another corporation in return for that corporation, say, refusing to provide insurance cover, denying protective services, etc. It’s just corruption, it happens with corporations as well as states.
EG
As a further illustration of the restaurant versus car plant model of security services, which I forgot to add to my earlier post, there is the question of taste and choice.
Most people don’t go to the same restaurant every week. People like variety, and because food is cheap and a daily necessity, they can afford to eat Chinese one day, Indian at the weekend, French the following Tuesday, and so on. The market naturally supports a wide range of necessarily smaller establishments.
Most people don’t buy a new car every week. Millions of people will buy the same compromise model that gives them approximately what they want in performance, economy, comfort, etc. Therefore, the marketplace naturally supports a smaller variety of mass produced models.
Equally, in A-C, people aren’t likely to change their security provider each week. The same tendency to a smaller number of larger suppliers applies as it does for cars. Maybe the car isn’t the best analogy – consider credit cards or banks instead. You can chop and change, getting a new customer deal each time, but most people don’t and you can only do it so frequently. There are a number of banks and card issuers, but it’s really a fairly small number of reasonably big companies that do it (due to economies of scale – there used to be a lot more banking companies than there are now). One company could become a monopoly or near-monopoly supplier, but state law prevents this.
EG
Alex –
Suppose I paraphrase what you said above and simply change some of the words:
You see what I am getting at? If funding services by stealing people’s money to pay for them is a good way to ensure that value is got for the money, and that the service is a good one, provided in exactly the propertion it needs to be, etc. then why not fund all services like that?
The whole thing that makes a tax a tax rather than a price, or a voluntary contribution, is that nobody gives a damn what you would rather. Telling us what you would rather was done with your money is irrelevent. You are perfectly within your power to do what you want with your money. Give it to the government if you want.
The whole question about taxation though and whether you are for or against it, is about what you would rather do with other people’s money. And you do not have any rights over other people’s money. Suppose other people would not rather offer up their taxes? Then what? The whole point that voluntary taxationists are on about is that if people don’t want to give money to other people, they shouldn’t have to. It is not about stopping you paying what you want to pay. It is about stopping people from having to pay what they don’t want to pay.
Oh, and how to we pay tax collecters?
Moreover, how much should be spent on services. Which services need more money, and which need less. If you were to say that the public sector as a whole needs more, implies that private uses of the money need less. How could you know this? Or saying that the public sector needs less spent on it, you mean that more ought to be spent on private sector uses or saved. Again, how could you know this. When is enough money being spent on health care. If it was funded privately, people would purchase units of health care, or medical coverage, whatever, until an additional unit of it was worth less to them than some other use of their money. This implies subjective prefferences, and so would entail your being a mind reader in order to plan the allocation of resources away from some public or private sector uses, and into other public sector uses.
I think you need to go back to your von Mises and Hayek and learn more about why the market is a vastly superior means of co-ordinating the allocation of resources than the state. Why socialism doesn’t work, in short.
Just for fun, before this mega-thread gets archived:
I understand that in the USA more money is spent per capita on health care than in the tax-pillaging UK. So it looks like you either pay a certain amount through taxation for a not terribly good service, or you pay a little more through insurance and co-payment for a service of pretty much the same level.
In the case of the NHS, it was seen as a relatively good way of ensuring people who could not otherwise afford it managed to get a humane level of care. It hasn’t turned out that way, but nevertheless something has to be done to ensure the lowest of society still gets humane treatment, and it doesn’t seem to be the case that a purely private system does this any better than a purely state system.
In the case of defence, it’s a means of ensuring that necessary defence measures are taken, even though lots of people don’t want to pay for them. I imagine you didn’t object too much to paying tax for the armed services as a deterrent during the Cold War. Pay tax or learn Russian, Comrade 🙂
It was tolerably well known that British socialists would have been the first up against the wall if the Red Horde ever crossed the Channel, because they would be inconvenient troublemakers. In a similar manner, I suspect that the first people to moan about the iniquities of corporate government under an A-C system would be the denizens of Samizdata. Maybe they’d remember that guy that kept telling them about cartels, monopolies, corruption and the inevtiable re-emergence of the state, but now with added profits. Maybe not.
Confucius say, if you want to make an anarcho-libertarian a socialist, first make him live under anarcho-libertarianism.
Just having some fun 🙂
EG
Interesting. It is worth noting, though, that health care is pretty far from being provided on a free market in the US, and there is still plenty of coerced spending on it, as well as monopolistic pricing.
Firstly, stealing is still wrong even if it is done for the benefit of the poor.
Secondly, health care would be much cheaper in a free market, where competition kept prices down, quality up, and ensured that providers had incentives to reduce costs.
Thirdly, selling only to the rich isn’t a very good business startegy. It makes much more sense to try to sell to as many people as possible. This isn’t universally true, of course, but generally is the case. It helps explain why Mars bars are 50p and sold for mass consumptiion rather than £50 and sold only to Richard branson.
Fourthly, Friendly Societies in the 19th century provided free medical check ups, health insurance, life insurance, and many other services on a co-operative basis to the poor. By the time the 1911 National Insurance act was passed, three quarters of those it coverred were already recieving similar services from Friendly Societies, and society membership was increasing at such a rate that by the 1920’s everybody would have been coverred. What the National Insurance Act did do, though, was to abolish the Friendly Societies as it was amended by a proposition from GPs to forbid collective bargaining by consumers.
Fifthly, charity, being based on voluntary donations, has much more incentive than state welfare agencies, to ensure that money is not being wasted, that it is not being used on welfare scroungers but people that need it, that it is used in a way to “help people help themselves” rather than to create a culture of permanent dependency and pauperisation (eg, Oxfam’s campaign slogan “give a man a fish, he eats for a day; tech him to fish, he eats for a life time”), and much more incentive to ensure that donors get the results they wanted when donating. This is because they are competing for donations against other uses of the money, rather than merely expecting portions of a stolen revenue.
Well, Capitalism is beating communism in China without a cold war, so… However, I’ll admit that national defense is the trouble shooter for anarchism. How much so, I don’t know. After all, the public good argument would justify conscription too, but those that defend that line of argument rarely defend conscription. And lets face it, joining up as a soldier is a sizable investment with some major risks attached. If people are prepared to do that, why not invest capital?
Also, how much of a public good is it? Sure, an attack on East Anglia cost a lot to me, so I would benefit as much as East Anglians were East Anglia protected. But how much benefit would I get knowing that Kamchatka or some other distant Eastern European country is defended against invasion? The idea that I would free riding off any payment to protect them is ridiculous – but how far do you draw in the boundries?
Also, not all public goods are prisoners’ dilemma games. In sure that the more imminent the attack, the more willing I would be to tolerate the fact that people might be free riding on my defense expenditures. That would make national defense something closer to a Chicken Game or even an Assurance game.
In addition, I’m not sure if there is much empirical support for entirely private or voluntary national defense. There is a lot to be said for militias over standing armies. George Orwell reported that even though he instinctively found the Spanish Militias to be a ridiculous idea, they actually worked – until Russia started witholding weapons. But beyond that? The Soviet Union was driven out of Poland without the need for a tax funded army. Britain out of India. How was the Colonial army funded in the American War of Independence. I know that militia were important, but there were regulars too, right? Plus, could they have won without intervention from the French, with a regular, tax funded, standing army? So there are instances when nations have been defended and invaders repelled, and wars won, without tax funded standing armies. They are few and far between, though.
Absolutely – look at how much trouble the Labour party is to the Labour government! lol!
To be fair, it isn’t only anarchists who have called for the abolition of taxation. Nozick never defended it in his work, calling a Land Tax impractical, and Taxation of earnings “on a par with forced labour.” Ayn Rand wanted the abolition of taxation. Certain individualists in the UK at the beginning of the Twentieth century did, too, like Auberon Herbert. So too did the young Herbert Spencer, and various Abolitionists in the anti-slavery movement. In fact, John Locke said that taxation without consent was robbery, and his more radical followers took this up, especially in the American colonies. They would all want a voluntarily manned and funded health service and military.
Of course, it is the anarchists who point out that it is a cruel joke to say that people don’t have to pay for something if they don’t want, but that if they try to pay somebody else for it, the state will do them over!
Doh! Another long post!
You are missing something.
What I am arguing is that you have to demonstrate that large scale fixed costs, like factories or whatever, that a state or large corporation can buy are necessary for the production protection services. The point is not whether a large firm does not have more purchasing power. Of course it does. The point is whether such purchasing power is necessary. Sorry if I didn’t make myself clear.
You try to answer my question here:
With all due respect, I think this is nonsense. I don’t see why a large, centralised police station, which sends out hundreds of policmen to patrol thousands of streets is going to be more effecient than dozens of smaller, independent police stations, each of which sends out perhaps twenty policeman to patrol a few dozen streets. You haven’t identified a single fixed cost in that paragraph. Nor have you shown that marginal costs are declining. Since the managers of a large firm are more remote from both the customers and the owners, they tend to make more mistakes than those of a small firm. So the large, centralised police station will be operating at higher marginal costs than a small one. Until you identify the fixed costs to balance the savings, a large, centralised police station will have its fees undercut by smaller ones.
But where are the large fixed costs? Or the declining marginal costs? What is the analogue of a factory in the police service? So far as I can tell, the major cost of policing is manpower, which is variable, not fixed. Nor does the marginal cost of manpower decline with scale – the hourly wage rate at best remains constant with scale, but might increase in the case of a monospony, and the managers in a large firm will make more frequent mistakes.
You don’t need to worry about answering this point for defence. If you can remember that far back, I have already said that defence is the strongest objection to full-blown anarcho-capitalism. An example of a fixed cost in this instance is ABM technology to protect against a nuclear attack – it will cost the same to shoot down a missile carrying a 10 megaton warhead as a 10 kiloton warhead. However, there is a more serious objection in this instance, namely the free-rider problem in raising the money to pay for it.
This is irrelevant with regards to the question of whether it will tend to be a monopoly. I’ve used the same bank for over a decade, but whenever I’ve investigated changing, I’ve felt spoilt for choice. I just don’t believe your assertion that it’s the law that’s preventing the banking industry becoming a monopoly. It’s never been a monopoly in the past, even before such law’s were enacted.
In that case, read this(Link).
Scroll back up, and you’ll see that I already said that David Friedman said that it might be prudent to wait for the collapse of the Soviet Union before implementing full-blown anarcho-capitalism. I’d already beaten you to it on that point.
In his 1978 book Private Police Hilary Draper suggests that there are as many private police in the UK as there are public ones.
Bryan Caplan notes,
So, empirically, the comparison of the number of private police to at least the number of state police, if not the Armed Forces on top, gives greater weight to the private sector employing more than the public. And I’m not sure if this even includes private detectives.
So what would empirical evidence tell us of the second part of your claim – about the size of companies? Of course, if the state were abolished, the tasks security companies have to do would increase and increase, as would the demand for them. How this effects them remains to be seen. Nevertheless, in Police Review of March 1972, Chief Inspector Sydney Pleece reffered to “about 150-200 medium to very small companies offering various services in the Metropolis” – this from the Metropolitan Crime Prevention Branch, of course. We know, as you say, that cartels and collusion are illegal, but this doesn’t explain why there are so many security firms when there are so few firms in other industries that still don’t need trust-busting. Bryan Caplan suggested that there are approximately 10,000 security firms in the US. He also notes,
Empirically, security companies tend to fall into the small business category. I once worked for a cleaning firm (like, for two weeks – who’s gonna stick that for longer?!), which is comparable as both security and cleaning fall into the service sector. The cleaning company I worked for had just about zero base of operations. Obviously files had to be stored somewhere, but the boss would just phone you up, tell you where you would be working regularly, and when, and he or his assistant manager would come round each location and check up.
One area where government police may have substantial need for fixed costs and there are tremendous economies of scale, though, is in R&D type operations – information gathering and retrieval, and storage.
I apologize if this has been answered already, but what is the alternative to taxation that would guarantee that the government is adequately funded?
Firstly, what is an adequate level of funding? Surely this involves talking about how much government there ought to be. Funding for the soviet state must surely be vastly more expensive than funding for other governments.
Secondly, isn’t the question more about guaranteeing that something is ethically funded? If injustice ought not to exist, then surely how we do things ought to be limited to the just means.
Thirdly, how would you know when government was adequately funded. Surely it would require the establishing of equilibria between supply of government and demand for it. But this assumes, (a) market provision of the services of government, and (b) that everybody wants the same degree of government.
Fourthly, didn’t you already answer your own question? You said that you wanted government to provide you with certain emergency services, and that you were willing to offer up your money to get them. That’s one way.
Well, companies that can make cars and tractors can make tanks too. And it is well known that this predicates a high barrier to market entry. And some weapons of war have even higher orders of difficulty. Eg. Stealth technology. It’s not just training. Industrialized modern warfare dictates “fastest with the mostest”, and economies of scale of production and the n-squared law will inevitably favor the larger armies/defense firms/thug formations.
Just something to consider for those who are thinking about economies of scale for defense contractors and state-level enterprises.
Next. Could an AC society stand up against organized and statist funded thuggery like Saddam’s? Mao’s? Stalin’s? The answer, sadly enough though we may wish otherwise, is No, No, and No.
BTW, I support a conscript system along with a solid professional core, and a huge reserve pool. I was a draftee myself, so I have first hand knowledge. Something about gun education and national pride too. This is a huge drain on manpower, of course, and carries a high cost on the economy in the form of tax for equipment and labor drains, but the very fact of industrialized warfare argues that nothing else is sufficient for defense, especially when surrounded by a horde of possibly hostile enemies.
Militias sound good, but as Richard has pointed out, there have been few instances of such in history where standing armies were defeated by non-tax funded formations. And that was in the past, where the technological differential was much less.
Nowadays, the gap between high order/high capability units and self funded militia is vast. A simple look at the current mess in Iraq shows this very clearly. Even with the US forces pulling their punches, they are kicking the crap out of the Islamic militias. That’s the reality of pitting militias against well funded, well trained statist armies.
Of course, again there are exceptions, like the Russians in Chechnya, but some would say it’s the Russians being stupid, and not because the militias were being particularly effective. Besides, their homes were wrecked in the process, their economy dumped. When you get to that point, the point of ‘defense’ as a deterrant is moot.
Besides, the Russkies are still there. So much for the militias and guerillas.
See, I think that liberty is worth defending. I think that people have rights, and that is why we need some sort of organised means of defending them against aggressors, bot internal, and external. Of course, if we had conscription, the first people that liberty would need to be defended against would be the government. Conscription is forced labour, backed up by an ideology that says that you exist to serve your government. It is slavery, pure and simple. And the whole point in the British army is to prevent the British becoming a nation of slaves – so conscription kinda defeats the purpose of the army altogether.
Absolutely right on with this one, though, if guns were legal most people would probably get this anyway.
Tell me, is the British nation bigger than the area defined by the state’s borders? Is it smaller? Or is it, by coincidence, exactly the area that the state presumes the right to rob and pillage us in?
And how old is the nation, too? The United Kingdom is some three hundred years old, almost – dating from the Act of Union. Britain was not a single nation before that point. The land was the same – the roling dales, the greenery that William the Conqueror apparently fell in love with, the hills and forests, Scotland’s and Wales’ mountains and lakes, all the beautiful land we love – that was here before the United Kingdom existed, and before the nation of Britain existed. One can love that land without loving the nation.
“It seems to me that the term “nation” is inseperable from “nation state.” And, as Perry says, “the state is not your friend.”