Free Trade and the US

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One of the characteristics of the anti-globalisation movement personified by US President Donald Trump is its apparent opposition to free trade. Free trade is not only associated with the globalisation agenda of the liberal elite but is also held responsible for the shipping of jobs and production overseas where cheaper labour and cheaper raw materials can be exploited, leaving at home nothing but crumbling factories and swathes of unemployed workers. Hence a considerable part of Trump’s “America First” programme appears to be devoted to distinctly anti-free trade measures, such as increased protectionism and tax penalties for firms relocating jobs overseas.

What should be the reaction of Austro-libertarians to this phenomenon? Do we not believe that free trade is almost the very essence of freedom and the fountain of prosperity? Should we not oppose any attempt to restrain trade by either tariffs or regulations? On the other hand, what are we to do when such policies are seemingly associated with nothing but destitution and misery for a significant proportion of the population?

For libertarians to simply repeat like a broken tape that trade should be left “free” runs the risk of considering only surface phenomena while failing to examine deeper, underlying problems. In the first place, of course, the association of the globalising movement with free trade is patently false. Those behind this movement are not in favour of genuine free trade; rather, they promote a heavily managed trade environment – one governed by trade agreements, trade deals, and a complex myriad of rules and regulations which favour only large corporations and the politically well connected. Indeed, trade agreements and trade deals are the antithesis of free trade, the latter of which demands a complete absence of the state from any involvement in trade. The terms “free trade agreements” and “free trade deals” are therefore nothing more than meaningless doublethink. A grave mistake that the anti-globalisation movement is likely to make is to confuse political globalisation – the consolidation of and intensified co-operation between states and state institutions, which is a relatively new phenomenon – with economic globalisation, which is private institutions trading peacefully and voluntarily on terms agreed by themselves, a situation which has existed for centuries. Political globalisation should be opposed bitterly while economic globalisation and the expansion of the international division of labour should be promoted. The bigger problem, however, is the fact that free trade today, if it is genuinely free, is carried out in a context where there is a gross, underlying violation of private property rights – in other words where the players who are demanding freedom are benefitting from the curtailment of other people’s freedom. For instance, banks are restrained from being “free” by heavy regulation and oversight because their lending activities have the tendency to blow up bubbles which lead to crippling busts. However, the reason for this tendency is that banks are, simultaneously, legally privileged (by the ability to hold only fractional reserves) and economically privileged (by being the first parties to receive new money that is freshly printed central bank – money which is itself, of course, subject to legal tender laws and of which the central bank is legally privileged as the sole issuer). It would be a travesty for Austro-libertarians to respond to any call for increased bank regulation by pointing out that such regulations are a violation of freedom. While this is true in and of itself, the real problem is clearly the state’s monopoly money and its dissemination through fractional reserve banking. To take another example, entities that are endowed by the state with a monopolistic or quasi-monopolistic privilege are normally able to charge higher prices to their customers and to pay lower prices to their suppliers. If, in response to the resulting “obscene” profits and high prices, the state proposes to regulate the prices of the entity’s products or tax away a significant portion of its profits, Austro-libertarians pointing out the pitfalls of price control and the injustice of taxation would be speaking the truth as far is goes. However, they would be ignoring the bigger, underlying problem which is the entity’s monopoly privilege, and that what is really needed is to rescind this privilege in order to open up the market to genuine competition. Only in this context is the freedom of firms to set prices both legitimate and economically beneficial.

When it comes to free trade, part of the underlying problem that is easy to ignore is that, of course, US workers are burdened by minimum wage laws and employment regulations which, to any employer, makes them relatively more expensive than workers overseas who may not be burdened by such interventions. However, the bigger “macro” problem is the fact that trade today takes place with the exchange of state-issued, paper currency which can be expanded at will, rather than with “sound” money such as gold or silver. The added complication in the case of the United States is that it is, currently, the issuer of the world’s reserve currency. What we will see is that, even without minimum wage laws and employment regulations, this would cause jobs to vanish overseas.

When the entire world is trading with “sound” money such as gold the prices of labour in the US and overseas depend upon the relative supply and demand for gold and for labour in each location. In which circumstances could labour be cheaper overseas? (By “cheaper” we mean that wages are lower per unit of production and not per hour. Wages in developed countries are higher per hour because labourers there can produce more in each hour on account of the relatively high amount of capital goods per worker – more tools, machines, factories and so on. Wages in poorer countries may be lower per hour because each worker can produce less per hour, but in equilibrium they would not be lower per unit of production). If labour is cheaper overseas then it means there is a relatively higher supply of money and a relatively lower supply of labour in the US while there is a relatively lower supply of money and a relatively higher supply of labour overseas. Employers therefore divert more of their funds to employing workers overseas in order to take advantage of the lower wages. This, however, is simply the correction of a disequilibrium which will reach its own natural limit. As money leaves the US then money there will become relatively scarcer while the amount of labour will remain the same and so US wages will fall; the new money flowing into countries overseas, on the other hand, will cause wages there to rise. At some point wages both at home and overseas will equalise. Of course, if the reverse happens – that wages are higher overseas than in the US – then the opposite process will occur, with money being drawn out of overseas countries and coming home to the US to bid up wage rates there. All of this is part of the natural process of economising behaviour which seeks to employ resources across the world by directing them to their most highly valued use. Absent any further state interference such as minimum wage laws and onerous employment regulations, all workers, both overseas and at home, will end up employed at the same wage rate (per unit of production).

What happens, however, when we are trading not with “sound” money, such as gold or silver, but, rather, with a paper money which can be issued by the state at will? If the domestic state chooses to expand the supply of money then this will cause an effect similar to that we just outlined. The supply of money at home will increase causing local prices – including wages – to rise. Prices overseas, however, will not yet have risen on account of the fact that the new money has not yet reached there. This process takes places through the complicating factor of the exchange rates between currencies, which is itself, of course, a price and is subject to the same influences. If the US prints more money but the overseas country does not then the first firms to spend the newly printed money on foreign currency will benefit from the old exchange rate and will be able to obtain more foreign currency than they otherwise would have which they can then use for purchasing goods and labour from abroad. Firms will therefore divert more of their spending to importing resources and seeking foreign labour than they would domestic labour. For the majority of countries such printing of currency can have only a very limited effect. If the inflation is a one shot affair then, eventually, increased bidding for foreign currency with the newly printed money will cause the exchange rate to adjust, strengthening foreign currencies and weakening the domestic currency. Fewer units of foreign currency can be bought with the additional supply of domestic currency and so the attractiveness of foreign goods and services diminishes, vanishing entirely when the currencies reach purchasing power parity. Currencies reach a state of purchasing power parity when the exchange rate between currencies and between goods is harmonious. For example, if an apple costs two South African Rands or one US Dollar, then in a state of purchasing power parity one US Dollar would equal two South African Rands. At this point there is no additional benefit from buying goods and services from abroad than there is from buying them at home. If, on the other hand, the inflation is continuous then such continuation comes to be expected. This expectation of inflation will in and of itself cause a much quicker adjustment to the exchange rate than previously, thus nullifying, or at least blunting, the benefits to the recipients of the newly printed money, robbing them of the power to ship jobs and the supply of resources overseas. The only thing that is experienced is domestic price rises. Of course, if the continuous inflation becomes abusive then it sows the seeds of hyperinflation as bigger and bigger doses of inflation are required in order to “cheat” inflationary expectations until the inflation reaches such a degree that such cheating is no longer possible and price rises even begin to exceed the rate of inflation. By this point, needless to say, a country has a lot more to worry about that jobs being shipped overseas. Thus what we can see is that with both “sound” money and independently issued, national paper monies mechanisms exist which prevent a permanent loss of jobs and the sourcing of supplies from overseas.

The situation is different, however, where the issuer of the paper currency happens to be the issuer of the world’s reserve currency. This is the dubiously privileged position in which the US and the US Dollar finds itself today. For when a country is the issuer of the world’s reserve currency the price adjustment mechanisms that we outlined above, which prevent the permanent loss of jobs overseas, are disrupted.

The US Dollar became the world’s reserve currency partly as a legacy of the Bretton Woods gold exchange standard, where the US pyramided the issue of US dollars on gold and the rest of the world pyramided its currencies on the US dollar. Today, however, the US dollar owes it reserve status largely to the petrodollar system – the agreement of oil exporting countries, led by their lynchpin, Saudi Arabia, to price and sell oil in US dollars – and the resulting domination of US based financial networks. The upshot of all of this is that in order the buy oil (which everybody needs) and in order to engage in international commerce pretty much everybody everywhere must buy and hold a significant quantity of US dollar reserves. And as the demand for oil has increased over the past forty years so too has the demand for the US dollar. Thus there has existed a continuously buoyant demand for the holding of US dollars which is sufficient to outstrip the increase in any supply of those US dollars. This buoyancy of demand is also maintained and strengthened by the fact that several countries, most notably China, unit recently pegged their currency to the dollar in order to fuel export driven growth. In other words, they deliberately weakened their own currency by printing more of it to buy dollars, thus pushing up dollar demand and increasing Renminbi supply. Even though China has used most of those dollars to purchase US treasury bonds, thus nullifying the increase in demand for US dollars, it would still be the case that their own currency would emerge weaker (which if, of course, the entire point of the peg). This leads us onto the next problem and one that is most relevant to the recent past – that the reserve currency becomes a “safe haven” asset. The US dollar index, which tracks the value of the dollar against a basket of other currencies, has risen since 2011, particularly as a result of crises in the Eurozone which has served to weaken the world’s second most dominant currency, the Euro. Indeed, against the US dollar, every single major currency is lower than it was five years ago. This is something that US dollar doomsayers are yet to understand. Yes, the dollar is being printed into oblivion, but so too is every other currency; the dollar just happens to be the least rotten apple in the cart.

The effects of all this are that when the Federal Reserve prints fresh, US dollars domestic prices will rise. However, because the dollar is able to maintain its strength on the world stage vis-à-vis other currencies, holders of US dollars find themselves in the continued position of being able to source goods and services cheaper from abroad than they can at home. Indeed, for several decades now the US dollar has effectively been able to buy more than it is really worth. People happily hand over goods and services in exchange for the medium with which they can trade oil and engage in international commerce. Because the US can simply buy what it needs by printing a currency which everyone wants, the result has been to turn it into a giant consumer economy rather than a producer economy – an economy which has no need for jobs. After all, why not just put all of those jobless people on welfare that can be paid for with printed dollars which will buy them Chinese goods? Indeed, in spite of the resilience of the American entrepreneurial spirit, the US is, today, a very difficult place in which to be a producer. According to a ranking by the World Bank, the US was as low as the 51st best place in which to start a business, a paltry 39th best place in which to deal with building permits, ranked only 36th for the ease of obtaining electricity, registering property and for taxes, and 35th for trading across borders. Yet, in full congruence with what we have explained here, the US was, apparently, the second best place in the world in which to obtain credit! Other rankings tell much the same story, with Forbes placing the US at 23rd overall on their list of best places to do business at the end of 2016 – not too bad, you might say, until you realise that is was ranked first just ten years ago.

Needless to say, much of the global monetary situation may now be changing, particularly with moves by China – itself a big consumer of oil – to compete with the petrodollar system and to establish alternative clearing institutions for international commerce that are not reliant upon the US dollar. What we can see from all this, however, is that, on the one hand, to blame free trade for the flight of US jobs overseas is clearly incorrect; yet it is foolish and naïve for Austro-libertarians to defend free trade on the surface when the underlying property rights are far from free. The lesson to be learnt, therefore, is that when confronting issues that threaten our freedom, Austro-libertarians should remember to examine them on the deepest possible level and not simply react to what they see in plain sight.


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Building a Libertarian World

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A difficult and perhaps insufficiently understood question concerning libertarianism is how libertarianism will be brought about in the world as we know it and, moreover, precisely what a libertarian world will look like. How can libertarians expect their theoretical understanding of their philosophy to emerge from this present world of seemingly perennial statism and how will the world be shaped once this libertarian world is accomplished? This essay will bring together a number of thoughts of this topic that have been addressed in previous essays, namely the relationship between libertarianism and wider morality, the nature and origin of law and concepts such as rights, obligations and property, and the importance of decentralisation and the relative size of state institutions, in order to try and create a unified picture of how libertarianism in theory can (or will) become libertarianism in practice.

Let us begin our examination, then, with an outline of libertarian theory and the place of libertarianism amongst wider political and moral theory. Libertarianism as a theory is concerned solely with the legitimacy of the initiation of physical force between rationally acting beings and either themselves or other physical matter of which the world is made (i.e. “resources”). Rationally acting beings are those beings who strive to attain their deliberately chosen ends through the utilisation of means, means that are scarce and can only be devoted to one individual’s end at the expense of everyone else’s. Libertarianism asks the question who may act physically in relation to a given piece of matter and who may not. It answers this question by stating that every rationally acting individual owns the physical matter that comprises his body (“self-ownership”) and all external, physical matter either of which he is the first user or of which he has received in trade voluntarily from a previous, legitimate owner (“property”). A violation of these principles – i.e. the uninvited, physical use of an individual’s person or property by another individual – is deemed to be an aggression, an unjust invasion of that which belongs to somebody else (for example, murder, assault and theft). Thus, from these core beliefs we derive the non-aggression principle to encapsulate the basic libertarian approach to all interpersonal conflicts born out of scarcity.

Therefore, libertarianism itself – to use the accepted parlance amongst libertarian scholars – is a “thin” rather than “thick” philosophy, addressing only the legitimate use of physical force. Another way of putting this is that, because everyone’s ends must be accomplished through physical actions which impact, physically, other matter in the real world, libertarianism concerns which persons may act and seek to fulfil their ends in relation to a given piece of matter, and which persons may not. Libertarianism does not, on the other hand, concern the contents of an individual’s ends or goals nor, once it is understood that an individual may act, does it have anything to do with whether or how he should act or which precise choices he should make. Libertarianism addresses neither the wisdom nor the foolishness, and neither the benefits nor the burdens that a given action may bring – merely that the choice to act in a certain way is the individual’s to make and further considerations about whether he should so act is the province of wider morality. A further way of putting this is that libertarianism deals with that which is legally permissible and may be done without response from the force of the law; it does not deal with that which is morally permissible i.e. with which behaviour is either morally accepted or morally questionable – all of which, in contrast to illegal behaviour, cannot be restrained or prevented by physical force, however odious or unpleasant. For example, I have the legal right to refuse to hold open the door for a lady; a SWAT team will not break burst in and arrest me for having refused to act in accordance with this social more. However, from a moral point of view, I have probably behaved quite rudely and in a socially unacceptable manner, meaning that such a choice was, most likely, not a good one to make. However, the choice is still mine to make and no one would have the legal right to use physical force to ensure that I hold the door open. In short libertarianism is about what I may choose to do whereas wider morality concerns what I should choose to do.

Overlooking or disregarding this important point is likely to cause a great deal of confusion. It is the mainstream view today that law and wider morality are not separate endeavours and that the law exists to enforce a positive, moral code. On the one hand the law is used to prevent us from making choices which are morally bad – past and present laws against vices such as drug and alcohol use and against various sexual preferences or adultery are a testament to that. On the other hand the law is also used to force us to act in ways which are morally good – such as the supposed charitableness, selflessness and altruism that is allegedly accomplished by the whole apparatus of the welfare state, which is funded, of course, through legally enforced tax contributions. Morally bad acts are outlawed because they are seen as bad choices to make from which bad consequences will follow and so nobody should be doing them. Morally good acts are forced because they are seen as good choices to make from which good consequences will follow and so everybody should be doing them. When a libertarian, however, then comes along and says that nobody should be legally prevented from injecting or ingesting whatever substances he wants in his body, that no one should be legally restrained from having consensual sex with whomever he wants, and that no one should be forcibly dispossessed of his lawfully earned money to be distributed to others, what he means is that people should be able to choose or to choose not to do these things – that he should have the choice to take drugs, or the choice to have consensual intercourse with a member of the same sex, or the choice to either keep or give away his own money. However, the casual observer, viewing these pronouncements through the prism of an intertwined legal and moral code, looks upon the libertarian desire to legalise acts such as drug taking as a moral endorsement of that act, and the libertarian desire to defund the welfare state as an admonishment of altruism or sacrifice while replacing it with selfishness. He overlooks or refuses to understand the fact that the libertarian is making neither a commendation nor a condemnation of these choices whatsoever – merely that the morality and wisdom of making these choices are no business of the law’s. Unfortunately, many libertarians serve to aggravate this misunderstanding by assuming that there is no further moral question concerning a particular act beyond its satisfaction of the non-aggression principle. Yes, a person should be able to, for example, say whatever words he wants on his own property without any interference from the law – but it does not follow from this fact that it is a good idea to say a particular thing at a particular time, nor does it follow that other people should not withdraw their support of you if they find what you have said objectionable. A person who takes a narcotic does not violate the non-aggression principle but it doesn’t follow from this fact that everything is okay and that there is nothing more to be said on the matter. Indeed, very bad consequences might follow for the drug taking individual and his family if he proceeds to do so and it would be ridiculous to suggest that these are irrelevant considerations. This does not mean to say, of course, that the non-aggression principle should not be primary concentration in building a just and peaceful society. Given that the violation of the non-aggression principle is so endemically legitimised by the institution that is responsible for nearly all of society’s woes – the state – it is, of course, entirely right that libertarians should persistently and consistently emphasise it. However, to view the non-aggression principle as the only worthwhile consideration would, if taken to its logical conclusion, amount to a travesty for the principle only concerns where one may act, not whether he should so act.  Shorn of all other reasons to act or not to act, those who wed themselves to the principle but to nothing else would be devoid of any impetus to make one choice over the other and would, in fact, never act at all! While it is true, therefore, that libertarians in their capacity as libertarian theorists are only concerned with the proper application of the initiation of violence in society, in their role as citizens in society they must also cultivate a positive, personal morality, a personal morality that will permit the libertarian to add value to moral debates far beyond the limits of libertarian theory – while keeping firmly within his sights that none of his views are anything to do with libertarian theory itself.

It cannot be emphasised enough how embracing or understanding the very limited scope of libertarian theory affords a tremendous degree of intellectual clarity for political and moral philosophy. Theories of interpersonal ethics concern how we, as rationally acting individuals, should behave towards each other – the choices we should make that affect our own lives and the lives of those around us. It might be a good thing for each of us to give to charity and to care for one’s elders, for example. However, if theories of interpersonal ethics concern the choices that people should make, then their starting point needs to be that an individual really does have a choice as to whether he should act one way or the other. A person behaves morally or immorally if he has moral responsibility for his actions – i.e. that what he did was born out of his own free will. He does not so behave if his action was forced or if he was otherwise acting as an automaton. This fact is frequently recognised with acts that are seen to be morally bad or evil. For example, if I am holding a knife and somebody grabs my hand and plunges the knife into the body of another person who subsequently dies, few people, if anyone, would agree that I was the murderer as opposed to the person who grabbed my hand. My action was not chosen by me; it was, rather, completely forced and out of my control and thus I do not bear moral responsibility for the ensuing stabbing. Similarly, the law recognises circumstances where an individual is placed under such a degree of duress that his moral responsibility is severely compromised if not totally eradicated. If, for example, someone holds a gun to my head and threatens to shoot me dead unless I stab another person then I am relieved of moral responsibility for the resulting injury or death, at least to a degree. This relief from moral responsibility is seldom, however, recognised with moral goods. If it is morally good for me to give some of my money to the poor then I can only be said to have behaved morally – i.e. to have done a good thing – if I have chosen that act. If, on the other hand, such an action is forced – that I am, Robin Hood-style, robbed of my money and it is then given to the poor – then I have not done anything good at all. I can neither be praised nor condemned for whatever result this action will bring because the choice was not mine – I had to give up that money regardless. It follows from this, therefore, that if giving to the poor is a good thing and is, further, the hallmark of a caring and compassionate society, it is ridiculous for this giving to take place through the forced mechanism of the welfare state. When people pay their taxes to fund the welfare state they don’t give voluntarily at all – rather, the money is forcibly taken from them. The original donors therefore did not behave in any way morally good or morally bad; indeed, strictly, they did not “act” in any way whatsoever. Because they were forced to give up their money, neither care nor compassion was ever shown on their part; in fact, it is more likely they will be extremely resentful. Moral theories that allow for the enforcement of their ends through violence are therefore not really theories of interpersonal ethics at all; rather, they are theories of how the enforcing party – i.e. usually the state’s officials and lackeys – should behave unilaterally, treating everybody else as little more than tools to be wielded towards whatever ends the specific theory so desires. That’s why all socialist and collectivist theories are completely contrary to the reality of human nature – they suppress the very real desires and choices of millions of ordinary people for the benefit of the ends sought or desired by a handful of political masters and bureaucrats. Libertarianism, however, preserves each individual as a moral agent with the ability to make the choices that he wants with the means that he lawfully owns; it forms a true foundation for wider moral theory by reminding such theories that seeking violent enforcement of their ends is no theory of moral behaviour at all, such behaviour requiring moral responsibility for one’s actions. Thus we can see the importance of the place of libertarianism in philosophy as a whole is as a thinly conceived theory concerning the legitimate use of force and violence between rational persons. It is not a complete moral philosophy but it serves as a firm basis for moral philosophy, and this important purpose would be severely impaired if libertarianism as a theory was, instead, conceived of as “thick” or demanding additional moral imperatives.

Beginning from this understanding of libertarianism in theory we can move on to discussing libertarianism in practice. How will a libertarian world be brought about and what will it look like? What kind of institutions will build and preserve this libertarian world? What is it that is preventing us from achieving a libertarian world today? What needs to be the focus of our efforts? In answering these questions we are going to set ourselves the somewhat ambitious task of attempting at least a degree of reconciliation between what are perceived as distinct “camps” within the libertarian movement. First, there are the “thin” libertarians and the “thick” libertarians mentioned just a moment ago; and second, there are the “anarchists” – those who believe that no state is justified at all – and the “minarchists” – those who believe that minimal state is justified for the prevention of aggression. What we will show is that, when it comes to the most likely and practical way that a libertarian society can be introduced, these largely theoretical differences may not be that important and that all libertarians can proceed towards one, common aim.

In beginning our task we first of all need to define precisely what a libertarian society in the real world will actually be. An uncontentious definition would be a society in which the non-aggression principle is adhered to so widely, through one way or another, that violations of it amount to little more than minor incursions and nuisances rather than endemic, perennial societal ills. Some violent invasions against the person or property of other people will always exist – there will always be, after all, criminals and those who are willing to do bad things. The important point, however, is that they do not approach the scale of systematic violence and destruction that our governments heap on us today.

If we accept this definition then there are three problems which we need to consider. The first problem is how to eradicate, from the mainstream consciousness, the legitimisation of the initiation of force or violence – in other words, how do we ensure that the non-aggression principle comes to be viewed as both true and just by almost everyone? How will all persons, regardless of their status or position, come to be subject to this same, basic prescription? The second problem, however, concerns how we will reduce actual violations of the non-aggression principle to a level far below that at which we languish today in order for a very real peace and prosperity to flourish. It would be no good if we achieved the first goal of educating everyone about the injustice of stealing and killing, for instance, yet we all happily stole and killed because the incentives and institutions required to deter such violent behaviour did not exist or, indeed, were impossible to bring about. If this was the case then libertarianism would simply be a theory without any practical application, a whimsical idea that would have no relevance to the real world. The third problem, which is the most difficult of the three to comprehend, is whether a libertarian world will be created from the top down or from the bottom up. Will it be sufficient, for example, for a small band of diehard libertarians to overthrow the existing rulers, install themselves as the supreme leaders and proceed to order everyone to adhere to the non-aggression principle? Or will a sustainable libertarian world be brought about some other way?

Happily, if we examine each of these problems in turn we will find that they point to a common way forward. Addressing the first problem of the legitimacy of force and violence in our world today, we can see that the primary vehicle for this legitimisation is, without a shadow of a doubt, the state – and the democratic state in particular. It is already acknowledged by almost everyone that individual, private citizens cannot steal, murder, thieve, etc. There is no general or widespread problem of people failing to recognise that I, as a private citizen, may not, for instance, steal from my neighbours to fund my business, nor may I use violence to get other people to do what I want with their property. I may not kill someone in the street or bomb houses because I believe there might be some threatening or nasty people inside of them. These acts are, quite rightfully, recognised as unjust and illegal. When it comes to the mechanism of the state, however, people’s attitudes are markedly different. It is, apparently, perfectly legitimate for the state to steal from its citizens in order to fund its business of welfare and warfare; it is legitimate for the state to use force to “regulate” what you do with your own person and property, even though what you may wish to do inflicts no violence or infringement against the person or property of anybody else; the state is allowed to drop bombs on houses if it believes there are nasty people it doesn’t like inside, writing off the innocents who were killed or maimed in the process as “collateral damage” (or at least the state can do this in faraway lands where its voters neither have to see nor think about it). Far from being a check on state power, democracy (the only form of government that is assumed, without argument, to be just by anyone who expects to be taken seriously) has served to increase the power of the state – and thus the extent of its violence – by providing it with a veneer of legitimacy. The only thing that can possibly be said in favour of democracy is that, once one realises that a majority will always get its way one way or another, it provides for a relatively peaceful and bloodless transition of political power from one majority to another. Today, however, democracy has been exalted to a level far removed from what it deserves for providing solely this simple benefit. Because people believe that they are “choosing” their leaders and “choosing” the policies that are implemented by casting their vote or “having their say” this, for some reason, means that it is alright for the state to go about its business of force and violence in almost any way it likes. The power of kings, emperors and those who otherwise claimed some kind of unique, divinely endowed right to rule was kept in its place by the fact that everyone else was shut out from either the use or benefit of state power; no king ever managed to create a world of paper money that could be printed and accepted as payment without limit to fund his warring ventures, nor could he build a redistributive welfare state; no king ever had an alphabet soup of departments and agencies managing your home, your family, your workplace, the products you buy, the services you use, and so on. However, because everyone in a democracy is apparently allowed to “have their say”, such a system not only allows everyone an opening to benefit or even direct the state’s immoral acts via the mechanism of government, but because such acts have been “chosen” by the “will of the people” they are transformed from provoking moral outrage to provoking moral celebration. Never mind, of course, that people do not actually have any meaningful say in a representative democracy – all they are allowed to do is vote, once every few years, between a tiny selection of carefully screened candidates who create the impression that they are bitterly divided yet agree perfectly on all of the fundamental features of the state which libertarians oppose. Only occasionally are the people allowed to come out of their corner to fight, as the British did with the recent referendum on EU membership and the Americans did with the election of Donald Trump as their President. What is important for the legitimisation of force of violence, however, is the fact that people believe that they are in control of the state. It follows, therefore, that delegitimising the state and weakening the power of the state would go a long way to delegitimising the use of force and violence everywhere.

This leads us onto our second problem which is how to minimise the actual incidence of force and violence in society. Unsurprisingly our answer points once again to the primary culprit, which is the state. As we just mentioned, a powerful driving force for the actual commission of violent and invasive acts is their perceived legitimisation under the aegis of the democratic state. After all, if it is okay to relabel theft and violence as taxation and regulation and to do these odious acts through the mechanism of the state, then obviously they are going to be done a lot more often. However, so many of the catastrophes and calamities for which the state is responsible result from the actual, physical wealth and power that many states have managed to accumulate, with that wealth and power concentrated in an ever dwindling number of specific people and institutions. As a result of this the ability for the state to expand its predatory effects has been left almost unchecked. The consolidation of state territories into unified governments has been particularly disastrous in this regard. The two most destructive conflicts in history – the two world wars – occurred after the unification of Germany and Italy, with the drain the Bismarkian welfare state inflicted on the economic prosperity of Germany leading to the drive towards autarky and the perceived need to conquer the largely agrarian lands to the East. The nuclear terror perpetuated by the Cold War was made possible only because such large and powerful states as the United States and the Soviet Union were able to fund the building of their nuclear arsenals. The United States, the only remaining superpower today, has caused havoc in Korea, Vietnam, the Balkans, Iraq, Afghanistan, Libya, Syria and God knows where else simply because it can do so relatively unopposed. Smaller states with smaller tax bases and access to fewer resources simply cannot do this. Yet, ironically, because the state is still viewed as the fountain of all goodness, it is further state expansion which is called for in order to prevent war and preserve peace – as if it is all of us barbarous citizens who are causing all of the strife rather than the political leaders with their armies, navies and air forces. Proponents of such expansion fail to understand the obvious fact that if you wish to minimise war and its effects then the last thing you want to do is to make belligerents bigger and stronger as opposed to smaller and weaker. Nor do they understand that if you wish to promote trade and prosperity then so too must the state be cut down to size. The original project of the European Union was designed to unify and pacify the old warring colonial powers, creating a trading block with tariff free borders through which goods and workers could pass unhindered. We can certainly agree that the aims are broadly correct – if you wish to achieve economic progress then you need to encourage capital accumulation, which can only be done through relatively strong private property rights, minimal taxation and minimal regulation. However, the path that was taken to achieve this was to consolidate and centralise Europe’s political institutions in Brussels and to, eventually, create some kind of European super state. This is the precise opposite of what you want to do if your aim is free trade and increasing prosperity. If Europe, instead, consisted of several hundred, or even up to a thousand small territories and independent cities the size of say, Monaco, Liechtenstein or Luxembourg then the lack of each state’s ability to access both natural and human resources, except through international trade, would be reduced to a minimum; thus such states could only introduce onerous tariffs and border controls at the expense of crippling themselves. Moreover, a small state cannot increase its internal taxes and regulations to levels which are too onerous otherwise residents will simply hop across the border (which, in a small state, is likely to be only be a few miles away) leaving the heavily taxing state drained of its productive population. Thus, what keeps taxes, regulations and border tariffs minimal to non-existent is the competition between many small states so that they can attract investment, talent and resources. In turn, production of these things is encouraged and wealth creation accelerates. However, in a vast super state covering thousands of square miles and controlling an array of natural resources and a population of millions, the taxing and regulating authorities are now left relatively unchecked. No longer do they have to attract resources and talent and neither can these things leave as easily – for they are already there within the territory of the large state and crossing a border that may be thousands of miles away is markedly more difficult. It is for this reason that the EU has become one of the most heavily regulating and interfering state institutions in the world, a fact which incites farcical hilarity, if not utter despair, when you consider that there are more than 12,000 EU regulations concerning milk. If all of these regulations are necessary it’s a wonder how previous generations ever managed to enjoy the stuff at all. It is true that there may be no internal tariffs and border restrictions within the EU and yes, goods and workers can move freely between, say France and Italy. Business leaders acclaim how great this is for commerce and enterprise, yet what these business leaders overlook is that the EU itself has become a burdensome engine of internal taxation and redistribution that far outweighs any gain achieved through the abolition of border tariffs. Indeed, each member state’s contribution to the EU budget effectively amounts to a tariff anyway – the only difference is that the burden of paying it is borne by the citizens of each state as a whole rather than individual industries or businesses which ship goods to the EU. Fortunately the EU does not have any direct, taxing power over the citizens of member states, yet it has been moving to nullify tax competition between states, the very element that is so important for keeping tax rates low and for attracting investment. And let us not forget, of course, that the EU is more than happy to charge onerous tariffs on imports from outside of the bloc. Super states, and prospective super states such as the EU, are not single markets promising trade, prosperity and the best conditions for enterprise – they are, instead, single bureaucracies of heavy taxation, crippling regulation and welfare parasitism.

In his astonishingly perceptive book, The Breakup of Nations, Leopold Kohr pointed out that almost every notable achievement of the human race – great art, great literature, great culture, great technology, great philosophy, and so on – is all but irrelevant to the preservation of peace and prosperity. The only relevant factor is the size, or, rather, the relative size of states. Big states prey on their citizens and their foreign counterparts not because they think they either should or that to do so is good (although they may believe these things), but simply because they can. Great power endows one with great temptation, a temptation which political leaders nearly always cave in to. The evidence for this is difficult to dismiss. Centuries of cultural refinement marked by some of the world’s finest achievements in art, literature and music did not prevent France and Germany from each having their turn at conquering the whole of Europe; the philosophy of freedom and liberty didn’t stop the British from building an empire; the economic and technological progress of the United States has not stopped her from interfering, disastrously, all over the world. Yet the era in recent history which supposedly (but not entirely accurately) marked the nadir of man’s cultural and economic achievement – the Dark Ages – was, by comparison, relatively tranquil, as it was also populated, for much of its history, by relatively smaller, weaker states. From all of this it is clear that the breakup of states into far smaller units – what we might call political decentralisation – should be a clear aim of libertarians.

It is on this note of decentralisation that we move onto our third and final issue which is whether a libertarian world will be brought about from the “top-down” or from the “bottom-up”. Would it be enough, for example, for a defiant band of libertarians to take over the state apparatus and to enforce a libertarian legal code? What we have just said about power and corruption should make our initial answer obvious. If libertarians take over the state won’t they simply become corrupted by its power and influence? Or, more likely, if the populace whom they now govern was not similarly enamoured with libertarian values, wouldn’t the leaders cave into the pressure to use the power of the state to “act” in order to correct some kind of perceived societal ill? A comparable occurrence of this nature in recent history is the American Revolution, which is popularly portrayed as the overthrow of a tyrannous, foreign king by the oppressed but passionate American people fighting for their freedom. Yet, in reality, what occurred was that a new elite simply served to replace the power vacuum that had been left with the departure of the British. Not only were the founding fathers far from unified on the question of precisely which type of government should replace the ejected monarchy, but very quickly aspects of the new United States began to resemble those of their previous colonial masters. We know today, of course, that the Constitution of the United States has utterly failed to constrain the power of the federal government. Yet even reading the original text alone should alert a critical reader to how un-libertarian it was in the first place. It does, after all, preserve the power to tax among a myriad of other horrors in Section Eight of Article One such as declaring war, raising armies and the infamous commerce clause. Within mere years of its adoption, the very same people who were victors over the repressive British provoked the whiskey rebellion, enacted the Alien and Sedition Acts, and even the great Thomas Jefferson found it difficult to constrain himself when, as President, he signed into law and draconically enforced the Embargo Act of 1807. If libertarians simply served to replace the despots they would very soon find themselves acting as the new despots. A genuine libertarian revolution will be impossible unless the power of the state is chopped from the bottom rather than simply given a haircut at the top.

The more important point, however, is revealed when we consider what it is that institutions such as property, rights, obligations and laws – the backbone of a libertarian society – are supposed to serve and how these institutions developed historically. The mainstream point of view in this regard is hopelessly confused, wallowing in a misunderstanding of the abilities and extent of human design and ingenuity. The results of such ingenuity are, of course, all around for us to see. We can easily marvel, for example, at the achievements of humans in the fields of science and engineering, at how we have transformed barren, dead matter into great structures such as buildings and bridges, how we have harnessed the power of electricity to provide us with heat and light, and how a device as small as a microchip can process information many times faster than the human brain. Every way we look we see the results of humans striving to shape the world in the way that we wish in order to meet our needs and improve the quality of our lives. Since the advent of Cartesian rationalism in philosophy, it has seemed almost obvious that if humans can shape the resources we have around us to do what we want them to do then so too can we apply this same engineering bent to society itself and to societal institutions. In other words, that we can deliberately shape society and design its institutions to do what we want them to do. If we can construct the Empire State Building then surely we can construct laws, regulations, rights, and obligations in order to make society a better place? That is the fundamental view of statists today – that society is something there to be managed, pushed in certain directions and squeezed into certain shapes by our political masters served by an army of elite intellectuals. The laws that are enforced are to be designed and enacted through legislation in order to push, from the top down, society onto a particular economic and moral path. Society, however, exists only because individual people perceive that social co-operation is essential for meeting their needs and for vastly improving their quality of life. In contrast to this, it would be quite possible for each person to be content to live an atomistic existence, finding his own food, building his own shelter and entertaining himself devoid of all social relations and interaction with anybody else. If this was the case then society, as such, would not exist. If the population of a territory consisted of 1,000 people yet each of those people lived such an isolated existence then that is all you would have – a piece of land with 1,000 people on it; you would not, however, have a society of 1,000 people. Because, as should be obvious, such an existence would result in the starkest and most brutal impoverishment, humans have, instead, decided to come together and co-operate. Such co-operation has developed from our existence as hunter gatherers, through the Neolithic Revolution and has reached its most advance form in the division of labour – the specialisation of each individual in a particular task which serves the needs of others. It is this social co-operation which is, in and of itself, society. Because the purpose of this co-operation is to further the needs of individuals it is the case also that the institutions that are required to facilitate this co-operation appeared because they made the pursuit of our individual needs and wellbeing easier. The great societal institutions – such as the family, the law, money, and morality – were never explicitly designed or “invented” by anybody. Rather, they were the product of centuries of evolution or of what we might call a “spontaneous order”, and the precise content of their makeup was determined by what facilitated the needs of individual people. The family, for example, developed during an era in which humans were pure consumers of what the Earth had to offer rather than producers – much like animals are. The availability of resources in a society which only consumes and never produces is heavily dependent upon the height of the population. As humans could keep on breeding merrily the population quickly rose to a level where the quantity of resources was insufficient and hence everybody suffered from a reduced standard of living. The family unit developed as a response to this problem in order to make fathers bear the cost of their own children. The more children they have then the more food and shelter they would have to provide for and so this furnished a powerful incentive to keep the population relatively in check. It is from this that our current code of sexual ethics has also developed – the requirement of sexual fidelity and the moral penalisation of sex out of wedlock, for example, all stem from the fact that such acts defeated, or could potentially defeat, the object of controlling the levels of population vis-à-vis resources. Money, which today is printed and controlled entirely by the state, was never explicitly designed by anyone but, rather, arose as a product of barter, whereby one or a handful of goods (usually, except for specific situations, precious metals) became more marketable than any other and hence came to be regarded as valuable not for whatever practical use they may serve but precisely because they could be exchanged. Nobody woke up one morning and, surveying the difficulty of trading individual goods directly, decided to say “I know! Let’s invent a good that we can all trade for everything else and call it money!” No wise leader started, out of the blue, to produce money or manufacture money, nor was the precise monetary commodity in a given situation explicitly chosen by anyone. Rather, given the immense power it afforded, the minting and issuing of money was usurped at a much later date – a usurpation which, of course, was only completed in 1971 when the US dollar’s last tie to gold was severed (and which may not be finally complete until states have succeeded in issuing a common, worldwide, paper currency). Law similarly evolved over centuries, or even millennia, out of interpersonal conflicts people ran in to over resources. The source of a legal case was the fact that two people each wanted to use the same resource to meet their own ends whereas, owing to the fact of scarcity, only one could do so. In other words the precise areas in which the law was concerned were decided by whether or not people could peacefully meet their needs in a given situation. If they could not then it was their perception of a conflict that gave rise to legal rules and principles. This is very important lesson that many libertarians, let alone everyone else, are yet to understand; the precise boundaries of aggression cannot be decided from on high by a wise and powerful leader because the elements of aggression – a physical invasion of another person’s property – are all dependent upon the parties’ perception of those physical transgressions as preventing them from fulfilling their needs with the resource in question. What is aggressive behaviour and what is not cannot be based upon what a political leader thinks is a conflict between two people (as all political leaders do when they enact legislation), nor can it be based upon some precise, scientific measurement of whether one body collided with another. If I shake a bed sheet and a piece of dust travels through the air and lands on your shoulder then, even though I have initiated an action which physically impacts on your person, this is not aggressive behaviour because such an action does not interfere with your ability to use your body to meet your ends. Indeed, most likely, you wouldn’t even be aware of the speck of dust at all. If, however, I threw the bedsheet over your head and wrestled you to the ground then this would probably be regarded as assault and the law would find me liable as such. Both actions concern a physical transgression of your person or property initiated by me, but only the one which interferes with your ability to use your person and property to meet your needs as perceived by you is the aggressive action. None of this should be taken to suggest, however, that the precise content of legal rules is purely subjective, nor should legal liability follow merely from somebody’s whim. Rather, objectively defined rules are drawn from typical experiences of what is and what is not aggressive, such typical situations arising before legal adjudicators again and again. Most people do not want to be killed by another person; most people do not want their belongings taken; most people do not want to be raped. So, for example, if one person kills another then it is presumed that the deceased did not so wish to be killed and the accused must adduce evidence to the contrary if he is to avoid liability. On the other hand, most people do not perceive that a speck of dust landing on their shoulder as a result of someone shaking a bedsheet is aggressive and invasive behaviour. So anyone who turned up before the court alleging that such an incident was aggressive would most likely be told that, even if, subjectively, this speck of dust prevented him from enjoying his person or property, he alone should bear the burden of protecting himself from this unusual sensitivity, rather than forcing everyone else to tiptoe around him. What we can see as a result of this, therefore, is that the precise boundaries of aggression which are expressed in precise laws are very much determined by the customary and conventional context. This is perhaps best illustrated when determining the requirements to enter contracts. If I sit down in a restaurant in Great Britain and order from the menu then that action is sufficient to make me liable to pay for the meal as that is how the situation is understood in this society. My refusal to do so on the grounds that I had not been told explicitly that I would have to pay would be laughed out of court. On the other hand, in another society, it might be the case that you are assumed to be a guest unless the proprietor of the establishment states that you must pay for your meal. If I raise my hand at an auction I might find myself liable to pay for one of the lots; if I do it outside in the street I am merely saying hello to someone. The action is the same but whether I am placing a bid or simply making a greeting has to be judged by the context. So the same thing can not only mean different things in different societies, with different consequences following, but so too might they mean different things in the same society depending upon the precise situation. Legal adjudicators have to assess what the actions of the parties meant and what they intended through their actions according to the social, customary and conventional context in order to determine the precise limits of legal liability. Because, as we said earlier, society is emphatically not something that is managed from on high but is, rather, motivated by individuals, this is an evolving rather than a static process. Such evolution can evolve only through case law, i.e. through law made or “discovered” through actual cases involving real people in real conflicts, rather than through legislation which involves only conflicts manufactured or perceived by politicians and bureaucrats. The importance of the customary and conventional context also applies to which beings may enjoy legal rights and which may not. Libertarians are often chided for their lack of agreement over the issues of abortion and the rights of children but, strictly speaking, these issues cannot be resolved theoretically. Libertarian theory will tell you which kinds of beings enjoy rights and which types of action are aggressive; it does not, however, tell you whether a specific being enjoys rights or whether a specific action is aggressive. The questions concerning the legal rights of foetuses and of children are of this latter category – do they qualify as the kind of beings to whom rights apply, i.e. are they rationally acting beings? And, if not, at which age or ages will a foetus or child be deemed, or at least presumed, to be a rationally acting being capable of enjoying rights? Is the fact that a foetus grows inside the mother an invasion of the mother’s body or has she demonstrated some kind of consent to the foetus’s growth? None of these questions are answered by libertarian theory but, rather, they concern the application of libertarian theory according to the customary, social and conventional context. To take a deliberately extreme example in order to illustrate this, early, primitive societies ascribed natural phenomena to the will of deities, and were unable to differentiate between inanimate phenomena (such as the sun or clouds) on the one hand and conscious beings on the other. Let us suggest that, in such a society, trees are perceived to possess personalities and to have rational thoughts and feelings which could, through some way, influence the course of events (in a similar vein, the present author, as a very young child, believed that trees shaking their branches were the cause of the wind, rather than vice versa). The legal system (or other social rules acting as a precursor to a legal system) of this society would recognise each tree as a legal person endowed with rights, and that to invade the tree’s physical presence would be an unlawful aggression against the tree’s person. Today, however, due to the advances of our scientific understanding, we have sufficient reason to believe that trees are not, in fact, rational beings nor do they possess the will or ability to alter the course of events. Although “living” they are not conscious and simply occupy the sphere of natural resources which can be owned by actual rational beings.

To re-emphasise, the important point about all of this is that, given that both the nature and the content of the elements that preserve societal order – such as rights, obligations, property – are determined by the needs of individual people, it follows that these elements can be neither determined nor shaped by groups of leaders or intellectuals acting from on high – in other words, by centralised, state institutions. Libertarians and free-market economists wax lyrical about how the state cannot hope to run and control specific industries productively in order to meet the needs of individual people and how the state has no rational method of directing resources in ways that best meet the needs of those people. Rather, such industries always end up succumbing to the priorities of the political leaders, the bureaucrats and the employees. Exactly the same is true of the institutions that concern societal governance. The entire state apparatus of legislatures, courts, bureaucracies, and their supporting police and military forces are designed not to give effect to and to prioritise the needs of individual people but, rather, to promote, enhance and push forward the visions of society held by liberal elites – visions of collectivism, equality, uniformity, and multiculturalism that destroy private, voluntary allegiances to localised institutions such as families, communities, and places of worship to direct it towards the glorification of the ever expanding state. The move towards greater state consolidation through supranational outfits such as the United Nations, the European Union, the IMF and so on is designed to concentrate decision making authority in an ever dwindling number of colossal institutions, centralising power and control in the handful of powerful oligarchs. A genuine libertarian society – a society distinguished by freedom for the individual – will therefore only come about through the destruction or dismemberment of the institutions which are diametrically opposed to this freedom. In practice this will mean halting and reversing the current trend towards state consolidation and inter-state co-operation, and seeking the breakup of individual states into as smaller territories as possible. This will scatter decision-making authority away from the centre and towards the individual as close as possible by achieving the increasing localisation of institutions which bear the responsibility for preserving order and governance.

The way forward for libertarians to bring about a libertarian world is therefore relatively clear – we must seek, emphatically, the de-legitimisation the state, the dilution of the power of the state, and the reduction of the size and territorial reach of each state. If, however, we needed to select just one of these elements – one call to action that could be regarded as the libertarian rallying cry – it appears that the third aim of reducing the size of each state is likely to have the greatest impact. Not only is it from this achievement that the other two are likely to follow but it is also the one which, at least after 2016, gives the appearance of being most likely to succeed and of being brought about in the right way from the bottom up rather from the top down. Ethno-nationalism and secessionism has returned to our world as a reaction against the forced centralisation of state institutions and metastasising of supra state bureaucracies; open borders, forced integration and globally managed trade are giving way to each state and smaller territories determining their own policies in this regard. Although our faith in the political process – the game that the statists want us to play – should be cautious, we have to hope that events such as the “Brexit” vote and the election of Donald Trump indicate only the beginning of this rebellion from the masses, a rebellion against the globalising, centralising and bureaucratising forces that will far eclipse the significance of those two events alone.

Moreover, this aim of seeking to reduce the territorial size of states and state institutions achieves also a degree of reconciliation between the distinct camps within the libertarian community we described earlier – between “thin” libertarians and “thick” libertarians on the one hand, and between “minarchists” and “anarchists” on the other. For libertarian “thickests”, we are fully conceding  that the move towards decentralisation and to smaller state territories to likely to be dependent upon the willingness of people to place their trust in more localised, informal, and voluntary institutions such as a common culture, a common language, common customs, a common morality and a common (or a common absence of) religion. It is these alternative elements which are required to shift people’s reliance away from the formal apparatus of the state for their feeling of identity, security and community, and also to generate a feeling of empathy and friendliness within each locale which is needed to grease the wheels of social co-operation. It is precisely because these common elements are the antithesis of statism and state growth that all socialising theorists and politicians have sought to denigrate and destroy them – as they are largely trying to do now through mass migration and the fostering of welfare dependency. By eradicating cultural, community, conventional, customary identities (as well as traditional morality) through its egalitarian, all-inclusive, non-discriminatory, socialising programmes, the state simply sows distrust, hatred, and envy which makes easier its task of theft, violence, and welfare statism. We as libertarians, therefore, should regard the promotion of these common elements and informal institutions as necessary for bringing about a libertarian world. For libertarian “thinnests”, however, we are also acknowledging that we, as libertarians qua libertarians, need not promote a particular culture, a particular language, particular customs, or a particular moral code. It is true that certain cultures, customs and moral codes may be more conducive to sustaining the non-aggression principle than others (and, as I have argued elsewhere, the requirement of non-aggression is, in and of itself, likely to promote and emphasise certain, broadly conceived values). However, it is not our job to determine from on high what these customs and cultures might be and to enforce them upon everyone else. Our focus, rather, is on breaking up the giant, behemoth states so that people can find their own way, building their own communities based upon their own values. Without the power of vast states to enforce and support them, the flourishing of these individual communities will undoubtedly depend upon them being able to adopt values which promote proper order, governance and social wellbeing. However, much of this is largely achieved by the fact of cultural harmony in the first place – that everyone in a community largely agrees on the same basic values and that everyone’s behaviour is broadly acceptable to everyone else. In short, that all members of a given society are basically kindred spirits. Determining precisely what these values will be is, for libertarians, a secondary task at best. Moving on to minarchists and anarchists, if we break up states into relatively smaller sizes then minarchists can be satisfied that each territory still has some official institutions that are responsible for law and order; anarchists, however, will be relieved to know that because such decentralisation and deconsolidation increases the relative power of the individual vis-à-vis the state then the practical distinction between the state as a compulsory association on the one hand and as a voluntary association on the other becomes much less clear. Indeed, at some degree it will be completely abolished. At the extreme end, a small commune on a few acres of land comprising merely tens of people will be heavily reliant upon gaining the continual trust and enthusiasm of each of those people if the commune is to survive. However, a vast commune such as the former Soviet Union can treat each individual person however it likes – stealing from them, forcing them to do what it wants, and, of course, murdering them. Moreover, the ability of a small state to launch any foreign wars – which, in the long run, is the source of the loss of most of our freedoms – is vastly reduced, if not eradicated.

This, then, should be the goal of all libertarians, lovers of freedom, and those who are passionate about free enterprise and free association – breaking up the state into as smaller territories as possible and rendering state power and influence as inert as possible. We can hold some hope that this may be the way in which the tide is turning and that we can finally bring to a close this chapter in human history that has been marked by socialisation, collectivism, statism, bureaucratism and endlessly destructive warfare built on a cushion of false prophets, false values, false money, and a false prosperity.


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Trump and Brexit – Some Thoughts for Liberty

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Following the British referendum to leave the European Union on June 23rd and the election of Donald Trump as the next President of the United States on November 8th it is possible that 2016 will come to be regarded as a turning point in the direction of world history, a turning point that is favourable towards the progression of liberty and the diminishing of the size and scope of the state. This analysis will remain relatively brief as there have been, to be frank, so many libertarian analyses of both Brexit and the Trump phenomenon that another one is probably not needed. This essay will focus on the meaning of precisely what has happened so far and what libertarians now need to do in order to capitalise upon these events.

The first thing to note is that people across the world are rebelling against the forces of globalisation under the aegis of increasingly centralised and consolidated state power. What might be called “the establishment” and its plans for increasing hegemony through open borders, managed global trade and military interventionism have been dealt a severe blow by both the Brexit vote and the Presidential election. For the first time in generations the false choices presented by broadly and blandly similar political candidates who happen to come from different parties have been shattered and now it the fundamentals that are at stake. Indeed, few votes in recent times could have signified a real choice between one path and another. A vote for Britain to remain in the EU would have bolstered the European project, while Democrat candidate Hillary Clinton – who spoke of her “dream” for a unified hemispheric common market with open trade and open borderswas practically the personification of the status quo. Voting for Brexit and for Donald Trump, however, signified a widespread desire to depart from this status quo, a rejection of the current path and the destination to where it was heading. These are momentous events and we cannot help feeling a sense of optimism for the future, a chance that we might finally emerge from the dark clouds of the twentieth century socialist experiment – an emergence which received its last victory with the relatively peaceful collapse of Soviet communism, and the dissolution of the Soviet vassal states in Eastern Europe into independent territories.

As significant as these events have been, however, we must now turn to making some cautionary notes. First, while there has been a widespread desire for change we must remember that a change from the status quo is the only thing that has been signified. Precisely what people want us to change to, on the other hand, is less certain. As the present author mentioned in his earlier analysis of the Brexit vote, apart from the liberating tendencies of decentralisation which would be afforded by the breakup of the European Union, it would be a mistake to characterise that vote as a conscious battle between freedom and tyranny. People are certainly waking up to the fact that the present regime does not (and is not designed) to serve them, but this is a far cry from saying that they have embraced the cause of liberty and anti-statism as a whole. It is looking increasingly likely, for example, that Britain will replace European socialisation and enslavement with its own version, particularly following the passage this month of the Investigatory Powers Act – the so called “snoopers’ charter” which has been dubbed the most far reaching spying legislation ever enacted – and the turn towards increasingly Keynesian economic policies rather the monetary fiddling of former Chancellor George Osborne. In the US, many of Donald Trump’s proposed policies – such as increasing protectionism – are far from adequate solutions to the problems that his election indicates he has recognised, and may end up making things worse. The greatest risk, however, is that the final catastrophes and calamities resulting from the heinously unstable financial system, which is drowning in a sea of debt created by reams of increasingly worthless paper money, will be realised within the next four years. For Brexit, this might not matter too much – the precarious state of the Eurozone is not likely to weather any serious financial collapse any better than an independent Britain. It could, on the other hand, be disastrous for the Trump administration. Apart from the fact there is no telling what Trump may do in response to these calamities, the average American, having no real grasp of economics or of cause and effect, may well associate this disaster with their new President and his markedly different economic policies. We can be almost certain that the defeated left will use such an opportunity to demonstrate that capitalist businessmen, led by one of their most prominent stereotypes, have failed once again and that only the experienced, professional politicians of the ilk of Obama and Mrs Clinton should have been trusted to steer the giant ship. Indeed, it is possible to suggest that the Trumpian revolution has come too early and may have been better in 2020 after a Clinton administration had to deal with, and be rightly blamed for, a complete economic collapse. Instead, a lot may depend, between now and then, upon the continuity of the trust that Trump has built with those who voted for him, his ability to identify the future financial disaster as the product of the very forces he fought in the election, and the continuing evaporation of the integrity of the left and the mainstream media.

The second and related issue is that, unfortunately, neither Brexit nor the election of Trump signifies any kind of unified desire for change – rather, they represent a stark and bitter division among their respective peoples. Although both results were decisive they were hardly landslides, and if one believes the official count of the Presidential election (which would include any illegal votes and other fraudulently cast ballots) then Mrs Clinton won the popular vote, losing only because of the Electoral College system. Thus, there is still a vast number of people who do not desire the change that the victorious voters desire. From this, we can expect a bitter battle, a battle that will ultimately be won by ideas. Although the “remainers” in Britain and the ideological left in the US are far from a coherent bunch, it is possible to suggest that they represent a more readily identifiable set of ideas than their opponents – and, of course, they benefit from the existing institutional structures. Their opponents, on the other hand, most likely had a myriad of different rationales for voting the way that they did and one of the problems that has been associated with Brexit in particular is that there is no particular “Brexit strategy” – some wanting a so-called “hard Brexit” of severing all ties from the so-called “single market” which would leave Britain free to pursue its own interests, with others wanting a “soft Brexit” promising continued access to the “single market” and some contribution to the EU budget, much like the relationship that Norway has with the EU. There is no problem, of course, with people having their own private reasons for voting the way that they did. However, this seeming lack of ideological unity may well make it very easy for the establishment forces to couch their worldview as the one that represents progress, inclusiveness and co-operation while writing off everyone who voted for Brexit or Trump as simply backward thinking racists, rednecks or “little Englanders” who want to retire to their little tight, white communities, shutting themselves off in isolation and having nothing whatsoever to do with the challenges that the world has thrown at us. It is true, of course, that part of the anti-establishment backlash was precisely because of this characterisation and the hubristic attitude that everyone who did not share the visions of the liberal elite could simply be slandered and ignored. However, it is also true that the anti-establishment voters for Brexit have still not yet elaborated convincingly how their side is the representation of genuine progress towards a peaceful and prosperous society – and it is this that presents the greatest threat to our ability to capitalise upon what we have experienced in this watershed year. It is here, of course, where libertarianism and libertarian ideas are perfectly suited for filling the vacuum as only libertarian ideas provide both a marked contrast to the establishment programme and a demonstrable ability to build a world of sustainable peace and prosperity. It is only libertarianism that can point out the falseness of the globalising elites’ desire for “inclusiveness”, “co-operation” and “unity”. For what they really mean is inclusiveness, co-operation and unity under the banner of globally expanding and consolidating state powers under the yoke of a single, global bureaucracy with the only possible alternative being, in the minds of the elites, to retreat into a barbaric, atomistic existence where everyone hates everyone else and we all wish to remain on our own private island. Only libertarianism can show that the elites’ vision of inclusiveness, co-operation and unity is the shell of all of these things enforced by the barrel of a gun – in other words that we would all be co-operating in an inclusive and unified manner if we were doing what the elites wanted us to do rather than what we wanted to do ourselves as private individuals who wish to make things better for ourselves and for our families. Only libertarianism can show that genuine co-operation and inclusiveness is practised not by the bloated bureaucratisation of all aspects of our lives, but by private individuals and institutions on their own terms through voluntary trade and consensual desire for association. Only libertarianism can show that, far from being against global integration and global networks, the genuine alternative to the establishment narrative is to create an expansive and integrated division of labour across the entire world, with each of us choosing to specialise in that which we do best in order serve other people. It is only libertarianism that can show that we, in rejecting the elitist approach, are embracing an outward looking and engaging manner with the rest of the world – not a closed, curmudgeonly, hateful and xenophobic society. Hence, 2016 marks the beginning, not the culmination, of the point at which libertarian education and libertarian ideas take on crucial importance because, having placed the fundamentals back onto the political table, there is now an ideological vacuum to fill. It is particularly crucial that we work to ensure that libertarianism fills this void given that so many of the young are choosing to fill it with Bernie Sanders-style socialism (which is really just a dressed up version of tax and spend Keynesianism). Needless to say, this would be a disaster.

One final possibility that we should countenance is that the sharp political divide may well provide an impetus for the kindling of secessionist movements. Remain voters in the Brexit referendum were heaviest in London, Scotland and Northern Ireland, while much of the rest of Britain was decidedly in favour of leaving. After the result the possibility was mooted, perhaps half-jokingly, of London becoming an independent city that could join the EU singlehandedly. In the US, Mrs Clinton carried the Pacific states and most of the North East while Trump carried the South and most of the Midwest and mountain states. With the backlash against the election result in the blue states, revolution and secession has been introduced as a possibility – something of an irony when it comes from the side that has, for decades, pleaded for gun control. We as libertarians should not be afraid of this possibility; indeed, we should positively welcome it. It is far better for a bunch of wilful yet smaller states and territories to go off on their own and socialise themselves rather than inflict their misery on the rest of us. Even where we do not share their motivations we as libertarians should look favourably upon any secessionist and decentralising movement that weakens the power that is concentrated in large and consolidated state entities.


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Regulation

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It is accepted by the mainstream that state regulation of the free market is a necessary feature of the so-called “mixed economy”, the supposed halfway house that allows us to benefit from capitalism without succumbing to its alleged excesses while, at the same time, avoiding the catastrophe of all-out socialisation and state control. This essay will subject this view to a critique and will reveal that, in fact, regulation of markets does nothing more than substitute arbitrary government preferences for the preferences of freely acting individuals, is a cause of the very “excesses” (such as oversized firms) which are blamed on capitalism, and that the best regulator is, in fact, the free market itself.

In examining “regulation” we should first be clear about precisely what it means, which is that the state will use the force of law in order to, compel, prohibit, restrict or otherwise subject to control some targeted behaviour of its citizens. In other words, it is a violent, physical intervention into people’s lives in order to produce one outcome while preventing another. This seems perfectly justifiable in instances when the behaviour that is subject to regulation is neither peaceful nor voluntary and is in fact invasive and predatory – in other words the particular behaviour under consideration constitutes a crime, such as murder and theft. However much libertarians may dispute either the legitimacy or effectiveness of the state in preventing and/or responding to such acts, we can at least understand the need for this kind of regulation – to protect people from the violent, invasive and uninvited actions of others, actions which are, of course, unjustifiable in libertarian theory. But what do we mean by state regulation of the free market? The very phrase “free market” is an abstraction used deliberately by commentators to deflect attention away from what it actually is and to create, instead, the impression that it is some kind of self-aware, self-controlling entity that can indulge in all of its irrational flights of fancy while being subject to neither rule nor reason when it seemingly appears out of nowhere to inflict grave harm upon us in the same way that a criminal might. The free market, however, is nothing more than individual people and institutions trading goods and services voluntarily on terms which they agree amongst themselves. It is a diffuse, decentralised network of people striving to meet their own needs as they perceive them and to seek others to provide the wherewithal to better their lives. It is an entirely peaceful, voluntary operation and no one is forced to participate in any exchange with another individual if he does not believe that he will be better off as a result of the exchange. For the state to regulate the market, then, means that the state will use force in order to diminish, control or otherwise outlaw certain transactions which otherwise may have been undertaken voluntarily had the regulation not been present. For the state to regulate is to introduce a code of violent compulsion into otherwise peaceful and voluntary relationships.

There is something distinctly odd when state “protection” through regulation is extended beyond crimes into the arena of voluntary relations. For what is it that people are really being protected from here? Voluntary transactions do not come out of nowhere to surprise us like an armed robber might do. Rather, they must be chosen freely and consciously by each individual person. So if every transaction in the free market requires a voluntary choice then the only purpose of regulation must be to “protect” us from the results of our own choices and to prevent us from entering certain transactions which we may otherwise like to enter if the terms are attractive to us. People often think that those being regulated are unscrupulous vendors who may try to sell us some kind of snake oil solution to a problem we may have. It is true, of course, that crooked businessmen may try to sell us something that doesn’t really work, is a fake, or causes some kind of fire or damage. However, these instances constitute a fraud or a tort and are already governed by the area of the law that regulates involuntary or invasive acts. Regulation of the free market, on the other hand, is solely concerned with restricting the transactions that people may be happy to undertake voluntarily with no force or fraud. As it takes two to complete a transaction – the purchaser and the vendor – if businesses are prevented from choosing to sell then you are equally prevented from choosing to buy. Our choices are therefore constricted by state regulation as much as those of businesses selling to us are and it is us who are regulated as much as businesses are. It is for this reason that an excessively regulatory and bureaucratic jurisdiction is often nicknamed “the nanny state” – a persistent and seemingly omnipresent matriarch who never ceases to stop interfering in your life in order to make sure that you make the “right” choices, choices that it believes are better for your life regardless of the maturity and sophistication of your own decision-making process.

There are several mantras or excuses that the state uses to justify its regulation of voluntary transactions – the prevention of rash, impulsive or short sighted behaviour; imperfect or otherwise flawed knowledge on the part of one of the parties to the transaction; maintaining standards of quality; and finally, the great all-encompassing excuse that seems to validate the state’s wading into anything it pleases, which is maintaining standards of safety. Doubtless there are other categories of state regulation also (such as environmental regulation and control of so-called “essential” industries) but these four form the backbone of the state’s regulatory bodies. We will proceed now to examine each of them in turn and in doing so we will reveal the damaging effects of state regulation while demonstrating how, in fact, the free market itself is the best regulator.

First, then, is the prevention of rash, impulsive, or short sighted behaviour. The implication here is that people may enter a transaction which provides, or has a chance of providing, benefits in the short term while providing a high likelihood of burdens in the future – possibly severely detrimental burdens such as economic ruin, ill health or early mortality. So in other words, people may choose to use tobacco, alcohol or narcotic products to achieve an immediate sense of pleasure without considering the longer term effects, or they may choose to gamble, bet, or otherwise enter some kind of financial arrangement that promises untold wealth if it is successful, but may result in economic ruin if it is not. In economic jargon the complaint here is that people’s time preferences are too high and that the inducement towards the present good is so strong in people’s minds that they heavily discount the possibility of the future bad. People discard prudence, foresight, and good judgment in favour of emotional, impulsive and irrational motives, and so the state should step in, so the argument goes, in order to prevent people from falling victim to their own lack of patience. In the first place we might as well mention that, while it is true that some or, indeed, many decisions may be regretted after the fact, it is the case that all actions can result in consequences that are either detrimental or not as favourable as those that were intended. Prior to an action, costs and benefits are only hypothetical and it is always easy to judge an action with the benefit of a retrospective view. However, as it is also true that some actions are more likely or are guaranteed to produce a longer term detriment in spite of an immediate gain, the more important point is that people’s time preferences are no business of the state’s and it is dubious to assert that people should, in all instances, prefer the longer term to the shorter term – at least not to the extent that the force of law is used to compel such a preference. There is no reason, for instance, why someone should not value the immediate pleasure from a cigarette instead of a longer, healthier lifespan and it is quite possible for an individual to regard a longer life as duller if it is devoid of short term pleasantries. The regulation of an action may stop, restrict, or otherwise control the action but it does not stop the motivating desires behind the action itself which are imbedded wholly within people’s minds. The preferences that influenced them still exist and have not been eradicated, and people are, instead, forced to embrace an outcome which they do not regard as preferable. So in other words, while the individual may have to forego a benefit today, in his own mind the pain of having done so in order to wait for another benefit to come sometime in the future (such as a longer, healthier life) may be worse to that individual. That person, from his point of view, suffered a loss rather than a gain. Regulation doesn’t, therefore, make benefits appear and costs disappear; rather, it simply forces people to endure what are, in their minds, heavier costs.

However, even if we were to accept the premise that people should take the longer view, the irony here is that regulation and state interference into people’s lives is what causes high time preference and rash, impulsive behaviour in the first place, along with the eradication of any kind of prudence, patience, good foresight and self-responsibility. In particular, the existence of the regulatory state fosters the mind-set that if an action is dangerous, or has a high chance of producing an unfavourable outcome, then the state will ensure that it is banned or the dangerous elements are removed. In other words because an army of bureaucrats has gone through the decision-making process on your behalf you simply do not have to care or pay any attention to the possible negative results of your actions because the guiding hand of the state will ensure that only good things can flow from anything you do. Indeed, the regulatory state is little more than a giant, inflatable cushion for people to avoid having to take responsibility for the consequences of their own decisions. When, of course, a decision in an unregulated area turns sour the cry is always “why were they allowed to sell this awful thing to me!” whereas what they really mean is “why was I allowed to choose to buy this awful thing from them!” What results, therefore, is a vicious circle where the growing regulatory state induces less prudence, a lower standard of care and thus more bad decisions that need to be met by increased regulation. To make matters worse if the regulatory state fails and you do happen to suffer some negative consequences, then in comes the helping hand the welfare state to rescue you anyway. If you drink or smoke too much and fall sick then state provided healthcare will look after you; if you gamble away your life savings then state benefits will still keep you fed, watered and sheltered even if you haven’t achieved the riches that you might have had you been successful. The upside of all of these decisions remains intact – that lucky horse may still promise to pay out millions and the whiskey will taste as good – but the downside has been heavily reduced as the state has insulated you from having to realise, or pay for, the full extent of the natural penalties of your actions if they occur. Thus, these types of frivolous and imprudent actions have become more attractive rather than less, and so they will be taken more frequently rather than less, resulting in more negative consequences rather than fewer. The result of this is, of course, moral hazard – carelessness for your actions when you can preserve your gains while heaping your losses onto everyone else. And finally, of course, all of this takes place within the sphere of the state’s inducement of a high consumption, high time preference society through the illusion of prosperity brought about by the forced lowering of interest rates, monetary inflation and the smokescreen of paper wealth.

Obviously, in a society that is wholly unregulated by the state people would be responsible for their own actions, and a culture of better decision making and more prudential planning would be induced. This does not mean, however, that you are completely on your own in determining whether you should proceed with a decision – an allegation of those who believe that the free market leads to an atomistic existence. It is this aspect that we will now explore when we examine the next reason that is proffered for the supposed necessity of regulation – imperfect or otherwise flawed knowledge on the part of one of the parties to the transaction. It is usually the case, of course, that the sellers of everything we choose to buy are experts in that particular product or service they are selling. They developed the product; they know what it should be capable of; they know the science behind it; they know where its raw materials or ingredients came from, who put them all together and how; they spend all day studying and marketing to their target demographic. We, on the other hand, are not so expert in these products, of which we may buy tens or even hundreds in a given week. We do not have the time to sift through mountains of information in order to find out whether a particular product is suitable for us, or whether it is likely to end up being either a waste of money or the cause of a much steeper loss. Surely the state should step in and compel companies to provide more information about their products? Surely it is only because of state regulation that we have mandatory lists of ingredients and nutritional breakdowns on food products and surely it is only because of the mandatory inclusion of warning labels that we know not to iron clothes while we are wearing them?

The key to unlocking this is to realise that the provision of information is an end in itself, an end which consumes scarce resources. Therefore, the value of this information needs to exceed the cost of those resources. To take a ridiculous example, the time it takes to cook an egg on the sunlit body of a car is a piece of information. The vendor of the car would spend valuable resources, such as labour, eggs, a stopwatch, etc. in gathering and publishing this information. However, if this information is useless to prospective purchasers of the car – in other words, it would not affect their desire to purchase the car one way or the other – then the vendor has incurred a deadweight cost and has simply wasted resources that would have been better spent on something else. How much information should be provided is part of the market process and it is consumers themselves who will determine through their purchasing habits whether or not a given set of information is valuable and is a requirement of a purchase. If consumers happily purchase products without receiving certain information then it indicates that the provision of such information would be a waste; if they choose to abstain then it may indicate that the purchase, on its present terms, is too risky and they require extra resources to be spent on providing more information about what it is they would be buying. It is here, of course, where the market’s own key regulator – price – steps in. At a low enough price consumers may be happy to purchase the product without further information as the risk of loss is relatively low so that gathering extra information would not be worthwhile. If the price was relatively high, however, consumers may demand more information so that they are more equipped for making a better decision before committing a relatively larger sum of money. And, of course, products sold with less information will, all else being equal, usually be priced lower than products sold with more information anyway on account of the fact that the vendor of the former products has not had to incur an extra cost. The forced provision of information by the state, however, is markedly different. Because it is not subject to the profit and loss test there is no way of telling whether such information is valuable or not; it is simply an arbitrary decree that resources must be directed in a way other than that desired by consumers. Additional costs are then heaped onto suppliers which, of course, result in higher prices for products – the extra money being spent on something that consumers simply do not want. To take a another extreme example, the state could mandate that an information booklet the size of a telephone directory should be sold with every loaf of bread, detailing the precise ingredients, the transportation process used, a detailed schematic of the ovens used for baking, the life stories of the baker and the wheat farmer and so on. It is obvious that the provision of this useless information would increase enormously the cost of a loaf of bread and thus make consumers worse off than they were before. The principle remains the same when the state requires seemingly more “sensible” – but still useless for the consumer – information to be provided.

The principle is also the same for the next two reasons that the state has for increasing the scope of regulation – maintaining standards of quality and standards of safety. The quality of a product is also part of the market process and cannot be subject to arbitrary standards. At any one time a higher quality product will, all else being equal, cost more than a lower quality product – meaning that more resources must be devoted to producing the higher quality product than the lower quality product. If more resources are used in creating a higher quality product then fewer resources are left over to be devoted to other things. Consumers must choose whether they wish their resources to be spent on a few higher quality or many more lower quality products through their purchasing habits. If they prefer the latter yet the government mandates that higher quality products must be produced then consumers are made worse off than they otherwise would have been. The sustainable way to increase quality is to increase the number of resources available so that such quality can now be afforded. It is here where the free market’s own regulatory mechanisms step in. If consumers, as a result of an increase of available wealth, demand that vendors produce higher quality items then quality standards are likely to develop within each industry. If vendors have to demonstrate that their products have reached a certain standard of quality then it creates a market for reputable, third party certifiers to examine the product and declare that it has met the required standards of quality that are expected by consumers. If it does not then no such declaration is made and the business must go back to the drawing board. Such third parties will be interested in making honest and trustworthy appraisals as it is the trustworthiness of their appraisals that lead to more product sales and hence, more vendors seeking their services for quality certification. Increased quality is therefore achieved through increased wealth creation which makes more resources available for this quality to be achieved, as opposed to state regulation which simply redirects existing resources from places where they are already needed.

Exactly the same is true when it comes to product safety because increasing safety also consumes valuable resources and we as consumers must determine how many resources we wish to divert from providing for other ends towards providing for more safety. With the regulation of product safety, it is important again to emphasise that we are not talking about the regulation of actions which may be defined as crimes or torts. If someone loads a child’s toy with explosives and it detonates then clearly such an action would be unlawful. Rather, what we are talking about is the regulation of safety standards that are accepted by both parties as terms of the contract – in other words, where the standards of safety sold are part of the product’s features or definition. For example, all else being equal, a car built with a thicker chassis, or a chassis constructed out of a stronger material, is likely to have greater crashworthiness than a car with a thinner chassis or a chassis constructed out of weaker material. If the latter car is purchased then the lower crashworthiness – and the resulting lower protection of the vehicle’s occupants in the event of a collision – is an accepted part of the contract and an accepted feature of the vehicle. Once again, the market’s own regulator – price – is king in this regard. All else being equal, the less safe car will be less expensive than the safer car. If consumers choose to purchase the less safe car the resources which could be spent on making the car safer are better off, from their point of view, being used somewhere else. If, however, the state steps in and mandates that, in the name of increasing safety, only the more expensive car should be sold then this would clearly lead to impoverishment. Indeed, some people may not even be able to afford the super safe car at all. They previously chose to purchase the less safe car because the value of the transportation it provided was worth the risk of being more heavily injured in the event of a crash. If state mandated “safety” standards price them out of the market so that they cannot afford a car at all then they have clearly lost very heavily. There is no such thing as a “no brainer” safety requirement that is valid in all places at all time – there is only what can be afforded. Requirements only seemingly become “no-brainer” when they can be easily afforded. And, of course, the way to increase the affordability of safety is to increase wealth creation so that more resources are available to be devoted towards increasing product safety. Just as with the increase of quality, if consumers, as a result of an increase of available wealth, demand that vendors produce safer items then industrywide standards of product safety will develop. If vendors have to demonstrate that their products have reached a certain standard of safety then, once again, the market is opened for reputable, third party certifiers to determine whether a product has achieved the standard that is expected by consumers. Underwriters Laboratories is an example of such a private, third party solution. Increased safety, like increase quality, is therefore achieved through increased wealth creation which makes more resources available for safer products to be made, as opposed to state regulation which simply confiscates existing resources from other ends.

What we have learnt from all of this is that regulation itself consumes valuable resources and so the value it produces must also take place in the societal rank of values. It cannot stand apart from the market process but must, rather, be part of it. The allegation that the markets are never “self-regulating” simply amounts to stating that people are not making the correct choices with resources that they own whereas the budding critic does. If the market is not “self-regulating” then, as we explained earlier, it means that people are not self-regulating and must be forced into making choices other than the ones that they prefer.

Earlier we explained how one of the tragic ironies of regulation is that it creates the very need for its own existence by perpetuating rash and foolish purchasing choices as people come to believe that the state is there to protect them from any possible negative consequence. Unfortunately, such a perpetuation is present on the supply side of the market as well. An increasing regulatory code heaps onto the shoulders of vendors increasing costs of compliance with that code. As well as spending money on market research, developing their products and targeting their advertising, prospective entrepreneurs not only have to hire armies of lawyers to ensure that they are complying with the regulatory code but very often the regulatory code itself will require the business to make an additional outlay – such as the requirement to publish extra information. The costs of compliance with regulation are more easily borne by large, established businesses yet they may be devastating to small start-ups or entrepreneurs with limited capital. For example, in a report for the Office of Advocacy of the U.S. Small Business Administration, Nicole and Mark Crain of Lafayette University calculated that the per-employee cost of federal regulatory compliance was $10,585 for businesses with nineteen or fewer employees, but only $7,755 for companies with five hundred or more. It is for this reason why regulation is, in fact, favoured rather than opposed by large, established businesses – for it creates a cosy cartel between business and the state which shuts out most prospects of new competition while at the same time saving face when they duly comply with these regulations for the “benefit of the consumer”. However, such stifling of competition is what creates some of the very problems that regulations are supposed to solve – poor provision of information, poor quality, and poor safety features. The result, therefore, is that regulation needs to increase in order to produce standards of consumer service that the free market would have produced by itself – except now with the deduction of the enormous cost of passing, complying and monitoring the said regulations. All of the supposed pitfalls and excesses of capitalism are therefore not a product of the free market but are, in fact, spawned by the regulatory state – and the response is supposed to be more regulation and increased oversight by a growing state bureaucracy. The most complained about industries in the world today, such as utilities, public transport and healthcare, supposedly demonstrate the tragedy of allowing private actors to provide so-called “essential” goods and services. Yet it is those very industries that suffer from the heaviest state interference.

State regulation of the free market is, therefore, a truly self-perpetuating, self-growing monstrosity, creating the very problems it seeks to solve – lazy, careless, and thoughtless purchasing choices on the one hand, and an oligarchy of large, greedy, unscrupulous businesses on the other, stifling economic progress and innovation in favour of micromanagement by a faceless bureaucracy. It is also a symptom of the globalist elitist agenda to unify and harmonise state bureaucracies into international trade agreements and treaties so that the reach of control and top-down direction does not stop at the state border – an agenda that was recently rebuffed (although will probably not be solved) by both the Brexit vote and the election of Donald Trump as the next US President. If we wish to regain economic progress and win back our liberty then destroying the regulatory state must be a high priority.


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Decentralisation and Liberty

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In some recent essays concerning the UK’s referendum in June to determine its membership of the European Union, and the virtues of small states as opposed to larger states, we elaborated some themes regarding how decentralisation and decentralising processes are a boon for individual liberty and a step towards harmony and economic progress. This essay will gather these thoughts together with an emphasis on how small or, rather, optimally sized institutional units pave the way towards two things that not only libertarians, but also everyone else, will claim to want to achieve – economic prosperity on the one hand, and minimal war and conflict on the other.

The mantra of statist and, indeed, mainstream political thinking is that unity, centralisation and the consolidation of states and state institutions is the way forward for peace and prosperity. Not only does this mean larger state institutions with more power but also the fusion of individual states into larger territories under a single jurisdiction. In some ways this seems plausible, even to the libertarian. Wouldn’t unified laws will aid certainty? Wouldn’t we be better off if there were no borders or tariffs to impede the trade goods and workers? And surely the possibility of war will be diminished if we all join together under one, unified banner?

The main problem with this view, however, is that it places the state, state institutions and what these institutions wish to achieve at the centre of society. All of the millions of individual people and thousands of non-state, voluntary institutions that are motivated by their own desires, values and choices are ignored or at least subsumed by the grander edifice. Most lay people who hold the centralising view probably do so naively, but it is the primary preoccupation of statists and intellectual elites that society is something to be managed, controlled or directed by them and those like them while all of the lesser beings should be made to obey quietly with the confidence that their highly educated masters are doing what is best for them. Indeed, rather than seeing any value in individual, voluntary and non-state institutions, the centralising view treats the human race as one, giant, amorphous blob, like a lump of play dough that can be shaped in any way and manner that can be chosen at will – and that the easier it is for the dough to be shaped then the better society will be. Hence, the holders of this view are likely to look favourably upon institutional centralisation and consolidation which conveniently places more power in the hands of people such as themselves to achieve their shaping of society according to their visions. This attitude was rife, at least implicitly, among the so-called “Remainers” in the UK’s “Brexit” vote on June 23rd. Not only, is it believed, that all good things flow from the top down like manna from heaven, but that anyone who was in favour of leaving the EU was, in some way, stupid, backward or a kind of provincial, country hillbilly. For instance, shortly after the referendum, Professor A C Grayling called on Parliament to block Britain’s exit from the EU on the grounds that it is Parliament’s job to determine what is best for the electorate, the latter of which lack “the expertise, patience and time” to make decisions via a direct vote. The implication of this is that the people do not know what is best for them and they have blindingly walked down the path of sheer folly by voting to leave the EU, and they should instead have placed their trust in those better educated than themselves. However, he has completely missed the lesson that should have been learned from this result. The establishment wheeled out all of the big guns in order to persuade the electorate to vote for “Remain” – including the current and the three former living Prime Ministers, most of Parliament and the Cabinet, the Bank of England’s chief and other big bank bosses, the IMF, directors from at least fifty-one FTSE 100 companies, and many heads of foreign governments including the President of the United States – and yet “Leave” still won the vote. When the advice of all of these heavyweights is rejected by the British public then, instead of stooping into a sulk over the supposed stupidity of the great unwashed and demanding that they defer to the “expertise” of their so-called representatives, Grayling and his ilk should realise that such a rejection indicates that everyone is just a bit fed up of being told what is good for them and having decisions made for them by political elites. Such decisions and endless promises of peace and prosperity have brought us, in the last twenty years, two burst financial bubbles, massive money printing that has made the rich richer while failing to provide productive jobs and increasing incomes for everyone else, and at least half a dozen disastrous wars and interventions that are producing deadly blowback in the form of terrorism. What the elitist attitude ignores is that society is not something that is there to be engineered and moulded like a lump of metal in a blacksmith’s forge. Rather, it is made up of individual people who shape it according to their individual thoughts, feelings and desires, motivated by what they believe is best for themselves and for their families. An economy is not some giant machine into which goes “input” to be processed by “jobs” into some kind of “output”, nor is it necessarily true that the higher the numbers of “input”, “jobs” and “output” the better everything is. Rather, a prosperous economy is the product of individual people trading resources voluntarily in directions that they see fit so that they can satisfy ends that they wish to see fulfilled. “Society” is not a collective that demands broad brush categories such as “food” or “houses” or “better railways” etc. Rather, it is me wanting, say, a ham sandwich at 1pm on Tuesday, or you wanting a small apartment in the Hampstead area of London to rent for three years, a business wanting to invest in a small car factory that will be completed in the five years, and everyone else wanting a myriad of highly specific ends in highly specific places at highly specific times that are the product of our own choosing. The economy is not something to be directed by central banks who squash the rate of interest down to its lowest possible point through so-called “monetary policy” or “quantitative easing” in order to “stimulate” some kind of beast into life. Rather, the rate of interest reflects the strength of everybody’s individual preferences for consumption ahead of investment so that the correct amount of resources can be sustainably channelled into roundabout methods of production. Each of us co-operates, through the division of labour, to accomplish things that we each want with the resources available in varying timescales that we are each prepared to bear. It is this co-operation of individuals to achieve their own ends through the nexus of production, trade and exchange that creates a society and not any management and direction from giant, all-encompassing institutions that achieve their ends through force.

The second problem with the centralising view is that the achievement of peace and prosperity in fact demands the very opposite of state and institutional centralisation and consolidation. As counter-intuitive as it might sound, harmony is achieved by division, not unity, while the growth and strength of the human race as a whole is accomplished by the weakness, relative to each other, of its component parts. Economic prosperity, for instance, is characterised by a growing complexity of the economic system – an increasing division of labour with more and more different people specialising in more and more different tasks to produce more and more different products for more and more different people. In other words, its natural tendency is to spread outwards from the centre with more diffused, decentralised knowledge and specialisation. Growth and centralisation of the institutions that support this prosperity under the banner of unity are therefore likely to stifle rather than aid its progress. Indeed the very concept of “unity” requires the same, repeated rules for everyone and the same approaches towards everything regardless of their individual, specialist needs. Hence you get the proliferation, in large, consolidated states, of “one size fits all solutions” that attempt to force everyone through a single, “unified” channel, as though all of us with all of our differences characteristics and requirements are being squeezed through a sausage maker to create a bland, blended puree. (Curiously, those who champion centralisation and state uniformity are also the ones who squeal for “diversity” and celebrating “difference” – at least when those diverse differences are demonstrated or practised by favoured minority groups). Indeed, it is usually, if not always, the case in nature that as something becomes bigger and more complex it is characterised by greater division and decentralisation, not by increased unity and consolidation. A human being is not simply a larger version of a single cell organism. Rather, he is made up of a countless number of individual cells that coalesce into different organs and tissues, each of which specialises in different life sustaining activities. We do not have one, single “unified” organ that pumps the blood, inhales and exhales air, rids the body of toxins, acts as a nervous system and also as a skeleton. In other words as nature achieved a complex human being by decentralising and delegating various functions to different organs that act independently of, but symbiotically with each other, so too will humans only achieve a complex and prosperous society by increasing the division of labour and the degree of specialisation in more and more decentralised institutions.

Division rather than unity is also necessary for creating and preserving the conditions that economic prosperity requires – strong private property rights, minimal taxation and minimal regulation. The benefits of a large number of divided states as opposed to large, unified states, is that if one tiny state of a size equivalent to Luxembourg implements, say, an onerous tax then only that state is affected and the disruption to everyone else in the world will be relatively minimal. If that state introduces ridiculously high border tariffs then only the small proportion of global trade into that territory will be burdened while freer trade will remain for everybody else. Similarly if that state introduces burdensome laws and regulations that infringe upon people’s lives only those people will be affected. The hampering effects of state action upon economic prosperity will, therefore, be localised and minimalised in a world of deconsolidated, small states. In a world of much larger states and state institutions, however, the introduction of a tax will affect everyone; the introduction of a new regulation will affect everyone, everywhere at all times regardless of their own needs and preferences; and the introduction of a border tariff will affect the trade of everybody who wishes to trade across the lines of the large, unified state. Hence the hampering effects of state taxes and regulations and infringements upon private property are magnified as the state becomes larger. This is not all, however, for the incentives to tax, regulate and otherwise infringe private property rights are much greater in a large, unified state than in smaller states. Smaller states are, by their nature, economically weaker than larger states and are more reliant upon maintaining the free flow of goods and services from abroad which simply cannot be produced with the resources at home. Each state will therefore compete with all other states to attract foreign investment and the unhindered import and export of goods and services by minimising taxes, regulation and border tariffs. Because the jurisdiction of a small state covers only a small area, if its rates of taxation, regulation and border tariffs are relatively high then investment will simply flee to a more competitive jurisdiction which may be only tens of miles away and the standard of living in the small state will plummet. A large state, however, whose jurisdiction covers a larger territory and possesses access to a larger number of domestic resources has no such incentive to keep its tax and regulatory burdens to the minimum. With more domestic wealth and resources available and with the threat of capital fleeing for foreign shores thousands of miles away minimised, large states are free to increase their tax and regulatory predations to a much higher degree than smaller states. One of the supposed benefits of the EU is the so-called common market – the notion that goods and workers may move freely under a single tax and regulatory code. Yet any benefits achieved by having to deal with a single code are likely to be outweighed by its gargantuan size whereas a myriad of small and trifling tax and regulatory codes in a world of greater state division is likely to be a better condition for promoting trade and prosperity. Indeed, former UKIP/Independent MEP Godfrey Bloom has referred to the EU as a “customs union” rather than a market union – in other words, a single bureaucracy rather than a single market, a chance for the state to stamp out the irritating competition between states which forces them to keep their tax and regulatory rates low (as demonstrated recently in the EU’s disagreement over the rate of tax Apple had agreed to pay to the Irish government) and replace it instead with a giant socialistic paradise of government control. Instead of emphasising the “unionisation” of tax rules and regulations, those who wish to encourage economic prosperity should instead concentrate on reducing them – and the only way to do this is to make the state entities which impose them smaller and weaker, not bigger and stronger.

The argument for the “unity” and the consolidation of states becomes even more absurd when we consider the desire to preserve peace and prevent war. Murders are committed by murderers; rapes are committed by rapists; thefts are committed by thieves. If we want to minimise the effects of murders, rapes and thefts then it is obvious that the last thing we want is for all of the murderers, rapists and thieves to join together under the banner of “unity” so they are free to combine their powers to murder, rape and steal to a greater degree with increasing ingenuity. Similarly, wars are started by states and are fought between states. Therefore, if we wish to minimise wars and their effects then it follows that we need to make states smaller and weaker; it makes no sense whatsoever to make them bigger and stronger. The argument that unifying states is likely to prevent wars seems to rest on the assumption that government is the glue that holds society together and it is in fact all of the people whom they govern who are the cause of endless conflict. Thus a bigger and powerful government is able to “unite” all of these people and stop them from fighting each other. Nothing could be further from the truth. Apart from the fact that, as libertarians, we know that the state’s dependence upon force and violence for its wellbeing renders it an institution that is bound to inflict rather than prevent conflict, bigger and more powerful states are the enablers of bigger and more destructive conflicts rather than our salvagers from them. Private actors and institutions are necessarily splintered, decentralised and reliant upon voluntary trade for their sustenance. Tiny states have equally tiny tax bases from which they can command a very limited number of resources. The ability of such persons and institutions to start and sustain wars is extremely limited. Large states, on the other hand, are vast concentrations of wealth and power which not only have enormous tax bases from which to draw the means to fund eminently more destructive firepower but the advent of central banking – another creature of centralisation and “unity” – has allowed large states to fund their conflicts through monetary inflation rather than through demanding their citizens to cough up directly. So does anyone sensibly argue that private actors and small states would achieve the level of carnage and destruction that the large and powerful belligerents managed to reach in the two world wars? Does anyone believe that a decentralised world of small states and private institutions would have had the ability to force us to endure a generation and a half of potential nuclear terror during the cold war as the vast territories of the US and the Soviet Union managed to do? The most spectacular terrorist atrocity (i.e. an attack by non-state actors) of the past generation – the destruction of the World Trade Center in 2001 – killed just fewer than 3000 people, a figure which, while undoubtedly tragic, stands in the shadow of the more than 1 million Iraqis who have died as a result of the US invasion of their country. There would, of course, be fewer states left to fight each other in a world of consolidated, centralised states. However, this completely ignores the fact that the states that remain are armed with a destructive ability far superior to any minor state or territory – and especially compared to any private criminal. Any conflicts in a decentralised world would be localised to small pinpoints on the world map, affecting, at most, a few thousand people and, with the participants lacking the resources to continue fighting and disrupting trade for too long, would probably be over in weeks if not days. Contrast this to the situation in which we languish today where the ridiculous cult of interventionism and “collective security” – another banner of “unity” – forces all such local conflicts to be escalated into drawn out, global catastrophes, as the forays into Korea, Vietnam, Iraq, Afghanistan, Libya and Syria have demonstrated. It is clear that if we wish to preserve peace and prevent war then we need to prevent the institutions that start and fight wars – states – from becoming too big and powerful.

On a related note, there is a distinct air of utopianism in the minds of the centralisers and consolidators when it comes to the issue of preserving peace. War and conflict are doubtless terrible things and we would have a much better world if they did not exist. However, it is also true that, for as long as humans have walked the earth, individuals and institutions have run into conflicts with each other and that these conflicts have been escalated into violence. This is just human nature. Unwittingly, in trying to prevent all war everywhere and at any time by “unifying us” under the yoke of bigger and larger states, the advocates of such an approach have, instead, served to escalate the size and duration of wars and vastly magnify their destructive capabilities. The more sensible approach, we would suggest, is to acknowledge that war and conflict will always exist and to recognise that a superior social system will never eliminate these aspects of humanity entirely, just as in the same way libertarians do not expect a free market in private defence and security to ever completely eradicate murder, rape and theft. Our task instead is to find ways to reduce the frequency, duration and potency of these awful things as much as possible. When it comes to war only cutting the potential belligerents down to size and reducing their ability to wage destructive wars in the first place is likely to achieve this.

As we have seen, the liberating effects of decentralisation owe themselves to the relative weakness of deconsolidated and splintered states and state institutions. However, these liberating effects do not arise out of the smallness of the states and state institutions per se. Rather it is because the individual person becomes stronger relative to an institution the more decentralised and localised that institution is. Within his own immediate family, which may consist of only half a dozen people, an individual person’s needs and views are likely to be highly influential upon the other members of the family. They will attempt to provide for and accommodate these views and needs as an active part of their lives simply because the individual is close to them both physically and emotionally. An individual will have a little less influence in his immediate community or on a civil or parish council, where there are more people involved and few of them will be as familiar with him as his immediate family. However he would clearly have more influence in such a circle than in an entire town or city. And once, of course, we get to the level of an entire country such as Great Britain, a diverse nation of various economic, social and ethnic backgrounds, a single person’s lonely vote in, say, a general election becomes a drop in the ocean along with all of the other c. 45 million votes that are eligible to be cast. And if a country such as Britain was to be absorbed into a superstate such as the EU an individual may be drowned out by a chorus of 500 million other voices. The larger an institution becomes then the more its ability to focus on the “micro” issues that really affect people’s lives is progressively diminished and is replaced by a concentration on “macro” or global issues, the successful tackling of which is determined not by the wellbeing of individual people but, rather, by the measurement of aggregated statistics. So whereas, say, a family will care about whether Dad has a job that he enjoys and pays enough to feed and house the family or whether Grandma can get her hip operation in a hospital local enough for her to travel to, large state governments will instead care about GDP and the size of hospital waiting lists. Whereas a local council might focus on whether there is a sufficient bus service to a small community or whether a particular street is clear of litter, large governments, instead, have transport and environmental policies. Who in the bureaucracy is likely to care whether these policies might overlook the specific needs of one community or street some hundreds or even thousands of miles away from the capital? More local institutions are also likely to be populated more homogenously, with each person experiencing relatively similar priorities and holding a relatively similar worldview. Thus the ability to induce empathy between those who lead and those who are led is much more likely and, indeed, may produce more of a situation of symbiosis, or a sense of “working together” to further common goals as opposed to the “command and follow” routine of large states. In other words, even though a particular institution may still function officially through the methods of power and force, the smaller and more localised it is then the more likely such an institution will approach the individual and his needs in a voluntary and peaceful manner – or at least relatively so compared to much larger, faceless state institutions. Even the socialisation of property – considered to be the antithesis of libertarians, or at least right-leaning libertarians – is less likely to be a problem in, say, a small, voluntary commune where all of the commune’s members can air their views as to how their collective resources should be put to use and where all the members are likely to share a common motivation and purpose. Yet a similar exercise on a nationwide scale has always proven to be a disaster – not to mention, of course, that is easier for someone to leave a small commune than it was to leave, say, the Soviet Union.

It is important to realise that decentralisation is not necessarily about breaking every institution down into its smallest possible parts just for the sake of it. There is nothing wrong with large entities or institutions if such sizes generate advantages that could not otherwise be attained. Rather, the primary purpose of decentralisation is to devolve decision making authority (or what might be called “sovereignty”) to its the lowest possible level and that the closer this is to the individual then the more liberating the decentralising effect will be. So there is nothing wrong with lots of individuals or small institutions deciding to form a large institution to achieve a common purpose. This is precisely what individuals do when they form companies and joint enterprises. Whatever criticism we might hurl at the inadequacy of corporate governance and executive dominance, it is still basically the case that the individual shareholder of such an entity can liquidate his position if he wishes to disassociate himself from the institution. Thus the ultimate fate of the institution is dependent upon the willingness of individuals to continue its existence rather than upon its own volition. When, however, such an institution, which may originally have been organised voluntarily, becomes the ultimate decision making authority – like the modern state has become – and is able to prevent its component parts from exercising any significant autonomous power that would seal its fate, then the anti-liberating effects of consolidation and centralisation will be felt. This has been the case with the United States which, having started off as an association of small, independent, sovereign states has become, at least since the American Civil War, a compulsory union with the power concentrated in Washington DC rather than in the state capitals.

Decentralisation cannot depend solely upon formal, constitutional arrangements or treaties and it is naïve to argue that such set ups are adequate. What matters is where the de facto ability to enforce decision making power lies. An individual shareholder has de facto power over a company, for instance, because a court will enforce the sale of his shares and whatever other rights he may have. Technically, the individual member states of the EU remain wholly sovereign nations and, indeed, are so at this present time – the perceived loss of sovereignty of which its citizens complain has come in part from the fact that the politicians of the individual state governments have been happy to haemorrhage more and more powers to Brussels that override the individual, local needs of each country. However, if all of the military, policing and judicial might of the combined EU member states was to be consolidated in Brussels – which is, of course, the eventual aim of the super-statists – then it would be the case that no individual member state would retain the ability to enforce its sovereignty over the larger entity. Hence, it was a good thing for the UK to vote to leave the EU before such a consolidation occurred. What matters for the process of decentralisation and its liberating effects, therefore, is that any legal or enforcement system must be able to give effect to the decision making authority of smaller and smaller institutions. Therefore, large, standing armies, and consolidated police forces and judicial systems run from vast buildings in the capitals of large states, such as the Pentagon in Washington DC, are the biggest fears for those of us who wish to achieve a world of liberty – and with it, a world of peace and prosperity.


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Equality

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It is widely believed in mainstream circles that equality between human beings, in one form or another, is some kind of virtue to which society ought to aspire and that rank inequality is a measure of severe injustice that needs to be corrected by state action. Equality between individuals has also been used as a primary weapon against those who favour capitalism and free exchange. Even though the worst excesses of inequality – such as the rising value of assets owned by the rich as a result of worldwide money printing – are in fact, products of a state corporatist system, it is true that proponents of the free market favour a system in which some people will be wealthier by virtue of their ownership of a greater number of resources than other people.

Our critique of equality here will be somewhat different from the usual free market or libertarian approaches towards tackling this issue, which normally explain the virtues of the free market and the ethics of private property and how these are better than striving for some kind of equality. Although we will certainly champion these arguments, our approach will be two-pronged. First of all, we will conclude that the aspiration towards some kind of perfect or immediate equality – i.e. the forced attempt to render all people absolutely equal now with today’s stock of wealth and resources – is undesirable, impractical and far from being a moral virtue. However, more importantly, we will go on to argue that, if someone desires a more approximate or gradual achievement of equality – such as the so-called “equality of opportunity” – statism, socialism and any kind of redistributionism must be abandoned and that those who seek to create such equality must instead embrace a social order that maximises the production of wealth. That social order is, of course, free market capitalism.

Perfect Equality

Our starting point in examining the advocacy for some kind of perfect or immediate equality is to acknowledge that nature places a formidable number of obstacles in the way of achieving such equality. One of these barriers is the fact of human action itself – the ability of each individual human to think, desire and consciously choose to devote the resources at his disposal in ways that he deems fit. In other words individual humans make decisions to act independently of one another. Some of these decisions will be good or better decisions while others will be bad or worse. Some people will make a greater number of bad or worse decisions than good or better decisions while others will make a greater number of good or better decisions than they do bad or worse decisions. The varying results of these decisions serve to place people in a state of inequality, with those that make good or better decisions ending up in a better condition than those who make bad or worse decisions. Any attempt to subvert these outcomes and to create, instead, a greater degree of equality between humans would subordinate all individually motivated behaviour to the directions of the state, lest anyone was to act in such a way as to put himself in a position better than that of his fellow human. Although this would be undeniably totalitarian and despotic the more crucial point is that any such drive towards equality would require a complete annihilation of the preeminent quality of human nature – that of rational action. It would render us all as nothing better than automated robots, unable to act upon our own feelings and desires while under the control of our political lords and masters. Hence, unless anybody is happy to become an unthinking cog in a society that represents mere machinery then we must conclude that equality is an inherently undesirable goal.

This formidable obstacle placed in the way of equality by nature – the fact that we think, choose, desire as individuals – renders perfect equality not only undesirable but also impractical. Let us say that even if we were able to stifle all individual human action and create a perfect material equality between every human being. It would still be the case, however, that individual people would value these possessions differently. A white stick, for instance, is likely to be very valuable to a blind man yet next to useless to a sighted man. If you give both of these men a white stick it is clear that, even though their physical, material possessions are identical, one has gained value more than another. Thus, if we have to strive for perfect equality it is useless to attempt to distribute resources equally, lest someone ends up more happy and content with the same possessions than somebody else and thus rendering them in unequal conditions. Perhaps such a problem could be resolved by simply giving them an equal amount of money? Wouldn’t everyone then be able to spend their equal amount of money on different things that are valuable to them? Unfortunately this would not work either because one person may need to spend more money to gain the same amount of satisfaction as another person. People who are more satisfied with spiritual and non-material needs may be content with spending very little of the money allocated to them whereas those who are materialistic and seek value in possessions may require a lot more for them to feel as happy as the non-materialistic folk. What the budding egalitarian would have to do, therefore, is to attempt to provide for each person’s needs regardless of the precise quantity of goods required for those needs. So in other words one person may receive a lot whereas another person would receive very little if they are both made equally satisfied by what they receive. This, however, turns the whole of economics on its head. Economising behaviour regulates needs to the goods available. Needs are insatiable whereas goods are scarce and we must choose which of our needs we value the most in order to allocate the goods available to them. There is not a fixed number of needs or a fixed quantity of happiness shared between all people which can be satisfied by an abundant stock of goods. Needs are also intangible entities, existing in only the mind. They cannot be measured with any yardstick and any attempt to do so would simply subordinate the real value of the needs as perceived by individual people to their value as perceived by some bureaucrat – and, of course, this bureaucrat will have his own motivations for determining who gets what. One’s own value of one’s needs is subordinated to the value of those needs as perceived by the state. Anyone who has needs deemed unworthy by the state, perhaps because they are “unpatriotic” or somehow not in keeping with the spirit of the “the people”, will be left far worse off than those who toe the state’s line, which is how redistributionist policy always works in practice.

If we look more broadly at the entirety of the natural state of human beings, things do not get much better for the budding egalitarian. Indeed so inherent is the natural state of inequality between human beings that we could even suggest that Mother Nature intended it to be so and that she willed such a state to be permanent. Individual people are born with different qualities – different heights, different weights, different physical and mental capabilities, and so on. So too are the environments into which they are born different. Not only will their parents and those around them also have varying characteristics and varying abilities at raising their offspring, but the precise climate, geography and availability of natural resources will differ from place to place. Hence, the Earth itself gifts different people differently and presents them with different degrees of challenge for them to live their lives. Some of these environmental differences are likely to have had a cumulative genetic impact as a result of natural selection that exacerbates further inequalities. A society which has developed in an area where resources are plentiful and where little work needs to be done to ensure survival will have had its physical and mental capabilities tested to a much lower degree than a society that has developed in a barren area where resources are scarce and what little the earth has to offer must be obtained through ingenuity and backbreaking physical work. Only the most intelligent and strongest will have survived and prospered in the latter society whereas practically anyone could have lived in the former society. After generations of reproduction, therefore, those who are born today in the latter society – the “difficult” one – are likely to have superior mental and physical attributes that are not enjoyed by those in the “easy” society. Ironically, therefore, those who descended from a society which originally had “less” are those who are likely to command greater wealth and income, by virtue of their superior strength and intellect, in today’s society characterised by global trade and the division of labour. Indeed, given that we have mentioned trade and the division of labour, we might as well point out that any drive towards an immediate and perfect equality would require the complete eradication of these elements for they are clearly founded on a rank inequality. The division of labour cannot exist unless people utilise different skills and different abilities to undertake different tasks. If two people wish to trade it is because they each start off with different things and each wish to obtain different things through the trade. In other words each partner to the exchange desires to be different and views himself as having gained something more than what he parted with.

The fact of all these inequalities alone does not, of course, prevent equality from being a virtue. Simply because something is does not been that it ought to be. However, the manifold extent of inequality that has been presented to us by nature indicates that, in order to reverse such a natural state, a considerable and extensive power of man over nature will be required. It is here where the notion of equality as an argument for some kind of socialism or redistributionism collapses. Creating a condition of equality will not require, as is typically supposed, a redistribution of existing wealth – that is, man’s existing power over nature – but, rather, the generation of more wealth in order to overcome the formidable barriers to equality that nature has put in our path. Those who desire equality should, in fact, not be dreaming up ways in which to rob the rich to give to the poor but, rather, should be finding the best possible way to ensure wealth creation. As we shall explore now it is in fact a society of private property and free exchange – i.e. of capitalism – which, by virtue of its superior productive ability, accomplishes this and which makes a tendency towards greater equality more likely.

The Equalising Tendencies of Capitalism

While we examine the equalising tendencies of capitalism, we must admit, lest w be accused of creating a straw man, that equality is not usually advocated in any perfect or absolute sense in the manner that we just subjected to criticism. Egalitarians do not typically strive for the complete eradication of all differences and idiosyncrasies between humans, even if social systems founded upon equality have tried to decimate all independent and unapproved opinions, culture, tastes, and personal habits. The staunchest of such egalitarians will still admit that the division of labour – upon which human prosperity depends – requires some people to be garbage collectors and others to be brain surgeons, for example, and that it would be a travesty for everybody to be garbage collectors or for everybody to practise brain surgery. Rather, the egalitarian strives for some kind of approximate equality. After all, approximate equality could be achieved so long as everybody is doing the job that he most enjoys and/or is best at, and surely people having some kind of access to roughly the same amount of wealth would be better than nothing at all? To implement such a programme through a socialist society would, however, produce the very opposite of equality. In a society governed by private property and free exchange, the ownership of all of the material wealth in existence is scattered between all of the private individuals who inhabit the Earth. As all persons are free to make their own decisions as to how best to deploy their wealth it is true that some people will have accumulated more while others will have accumulated less. However, those who accumulate more do so because they serve the needs of consumers better than anyone else – consumers entrust these resources to these particular people because the latter have, so far, proven themselves better at directing them to the most urgent wants of the consumers than anyone else. The wealthy in a capitalist society cannot abuse their position as their fortunes would soon begin to haemorrhage. Rather, they must continue to serve the needs of consumers better than anyone else, or consumers will drop them and their products in a flash while the productive assets that form their wealth will be transferred to other people. There also seems to be something of a limit on how much of societal wealth any individual can command in such a society. As of 2016 the wealthiest man in the world, Bill Gates, has a total fortune of $81.7 billion – a drop in the ocean compared to the $3.7 trillion budget of the federal government last year, and peanuts compared to the sums that central bankers like to print from thin air. Warren Buffett, widely regarded as the most successful investor in history, has admitted that achieving a significant annual return for his firm Berkshire Hathaway is now much more difficult than it used to be on account of the size that the firm has now achieved. It is typically believed that capitalism has a tendency towards monopoly, with more and more wealth being sucked into the clutches of a few powerful oligarchs. The opposite is in fact the case – one individual entrepreneur or investor can only direct his attention to so much before his talents are spread too thinly, or he has to delegate to lesser individuals. Hence, inefficiencies begin to creep in which provide an advantage to smaller, more nimble competitors and thus checking the growth of any established player. In a socialist society, however, matters are completely different. If you deprive all of the individual citizens of their ability to direct their labour and their resources to the employments that they feel are best then these decisions have to be made by somebody else. There must be someone who has de facto ownership and control over resources in order for these resources to be directed. These people are, of course, those who form the state and its planning bureaucracy. Clearly this amounts to an enormous concentration of wealth in the hands of a very small, political elite, a concentration which by far exceeds that of the wealthiest individual in a capitalist society. These elites will direct resources according to what they value rather than what is valuable for everyone else. Not only will you get parades of missiles accompanied by goose stepping troops, and the construction of vanity projects such as the unfinished 105 storey hotel in Pyongyang, but even if the direction of resources is for the benefit of other people this light will be refracted through the prism of the elites’ own preoccupations. If the minister of a particular socialist state or department thinks single mothers are hard done by then single mothers will get more; if he is an ex-railway worker then he is likely to account for the condition of railway workers more than someone who has no such background; if a relative of his died from cancer then he is likely to want to devote more resources to cancer research than someone who has had no such exposure, while those suffering from other illnesses and conditions must put up with lesser treatment. And, of course, he will have every incentive to direct wealth to personal favourites and political supporters that serve to keep him in his powerful position. No longer is his status and privilege determined by serving consumers who can choke off his supply of funds at any point they desire. Rather, he now depends upon currying favour with his political contemporaries. Furthermore, if he is able to maintain such favour he can simply resort, when directing resources to where he wants, to the use of force rather than the use of persuasion through offering a valuable service. Socialism does not eliminate any unequal, societal statuses; it simply changes the game of who rises to the top – and when you are at the top you are more unequal from the rest of society than in a capitalist economy. Moreover, socialism cements these statuses from a revolving membership determined by who best can serve consumers into semi-permanent and impenetrable political castes. All of this can be illustrated today in some of the so-called democratic socialist countries such as Venezuela, where the daughter of the late, former President Hugo Chavez enjoys a personal fortune of approximately $4.2 billion, while the country’s socialist policies have made basic necessities so scarce that the black market price for a dozen eggs have reportedly reached $150. According to The Daily Mail, at the Caracas Country Club the nation’s super rich socialists “enjoy lavish parties and gourmet cuisine, while middle-class people are forced to scavenge for food” at a membership cost of 458 times the average Venezuelan salary. The attitude of the elites is almost literally the modern day equivalent of Nero fiddling – “Should we stop enjoying ourselves just because the country is burning?” one is quoted as saying. Far from being a creator of any kind of approximate equality, socialism widens the gulf between rich and poor immeasurably, and to the extent that people are equal at all they languish in equal destitution.

Of course, after the twentieth century failures of communism and socialism, the aims of the equalisers and egalitarians have been watered down further into vaguer nuances such as the so-called “equality of opportunity” – i.e. that everyone may become richer and may become better off than other people as a result of their own talents and hard work so long as they all start off from the same supposed springboard. The idea is, in other words, that if an individual is born to wealthy parents resulting in a high quality of education and a comfortable upbringing he has a “head start” against someone from a poorer background who does not have these benefits, and that it is this kind of inequality that should be eradicated through redistribution. In the first place, any kind of birth into wealth and affluence does not by itself guarantee that the individual will have any talent or affinity for hard work. Indeed, the opposite is likely to be the case if he knows that, in order with stave off any hardship he encounters, Daddy will simply whip out his cheque book. Somebody who is less privileged, however, who has no alternative but to use his natural abilities and dedication to get ahead is more likely to do so. It is for this reason that most of the significant entrepreneurs and inventors were drop outs and rebels against the formal system of education and progression. The traditional path through school and elite university really only prepares one for a career in the establishment professions such as law, banking and the civil service – occupations which make you well off largely because the state ensures that your wealth is perpetuated. However, if we accept the premise that equality of opportunity through providing equal resources to the young will benefit the latter then it would not follow that the best manner to achieve this would be through redistribution. Rather, it would be better to follow a path of wealth creation so that the poorest in society are able to afford a high quality education – and an education of higher quality than the rich may have enjoyed in the recent past – sooner. The reason for this is that it is not the relative difference between rich and poor that is the significant factor – rather, it is whether the poor have enough to put them in a position in which they can compete effectively. While it is true that, in a capitalist society, the rich will get richer as the poor get richer and thus the rich will always be able to afford “more” than the poor, there is only a finite amount that they can spend productively on, say, educating themselves highly and sharpening their talents for entrepreneurship before any additional resources in this direction will produce diminishing returns. For example, a person can only read so many books in a day; if a rich person spends more on books he will not become more educated than a poorer person if he never has time to read those books. So if wealth creation results in the poor being able to afford as many books as the rich can read then both rich and poor will be equally well read. The rich may be able to afford more tutors than the poor, but they can only absorb so much information from so many tutors before all these mentors will drown themselves out in a cacophony of confusion. Therefore, if wealth creation permits the poor to afford as many tutors as the rich can absorb information from then both rich and poor will be equally well tutored. It is still true, of course, that the rich will spend more on educating themselves than the poor and it is also true that the rich will be the first to benefit from any innovations. However, as the poor get wealthier, this additional money spent by the rich tends to go towards additional pleasantries and luxuries rather than the substantial necessities of learning – for example, the classrooms may be nicer, the chairs comfier, the writing paper of a higher quality. But none of these things really matter a great deal when it comes to absorbing knowledge – or rather they matter far less than the poor being unable to afford any education at all. It is for this reason that wealth creation, through free market capitalism, rather than wealth distribution, produces a tendency towards equality and more adequately and permanently closes the gap between rich and poor, both in a very real sense but also in the sense of providing an “equality of opportunity”.

We can illustrate this further through examples in the wider economy. As Mises points out, when the automobile was first invented and only the rich could afford to purchase one, the gap between rich and poor was very wide. The rich had personal, motorised transportation while the poor had to go barefoot, put up with animal powered transport, or use the railway. Once, however, society became wealthy enough to mass produce cars that were affordable by the poor, both rich and poor now had access to motorised transportation. It is true that the rich spend more of their money on their cars than the poor do – and often a lot more. However, most of this additional money is spent on luxury additions such as higher quality paint and body work, sleeker aesthetics, leather upholstery and the fineness of the engine; the basic purpose of the car, to transport a person from A to B, is available to everybody and no amount of additional spending by the rich on their own cars can change this. This was not so before the poor could afford any car at all. Thus the gap between rich and poor has been narrowed through wealth creation. Similarly, the difference between a two bedroom terraced house and an enormous mansion is less than the difference between a house and no house at all; the difference between a gold plated toilet and a ceramic toilet is less than the difference between a toilet and no toilet. If a “poor” individual possesses a genuine talent his inability to afford champagne and caviar rather than bread and cheese is unlikely to prejudice his efforts to capitalise on this talent; but clearly he would be very disadvantaged if he could not afford food at all. What the rich spend on themselves goes towards luxuries and comforts which, while delightful, do not provide any significant material advantage to insulate themselves from a poorer person who can still afford the basics – and of course, the process of wealth creation soon places these luxuries in the hands of the poor anyway. Indeed, the rich, although they consume more goods and services than the poor, consume a lower percentage of their income than the latter do simply because more of their most urgent wants have been satisfied and additional consumption brings fewer and fewer benefits. The remainder of their resources therefore goes into investment or philanthropy – indeed, a wealthy society is awash with charitable giving simply because people have so much more to give. It is true, of course, that a poorer individual may have to demonstrate his talent if he is to persuade other people to fund him in his ventures, whereas a richer person could easily self-fund from his fortune. This, however, is arguably not a disadvantage. When you are risking other people’s money you have to rise to their standards and ensure that the decisions you are making are absolutely the right ones, decisions in which they will take a keen interest. Thus the talents and efforts of a poorer person are enhanced and focussed when he has to use other people’s money. Devoid of third party scrutiny, however, a rich individual, if he does not merely pursue his own flights of fancy without any check upon the hubris of his deluded conviction, is likely at the very least to be more slovenly and less disciplined in his approach. And in any case, if a poorer individual is genuinely talented then what is wrong with expecting him to establish this fact before others?

What we can see therefore is that any drive towards “approximate” equality or some kind of “equality of opportunity” is delivered not by a system of wealth redistribution but by a system of wealth creation. The only system that produces wealth creation, or at least produces it to its strongest possible degree, is a system of free market capitalism.

We might as well conclude with a final observation which is that people seem to be highly selective when it comes to advocating equality through wealth distribution. Apart from the occasional grumble it seems to be perfectly OK for elite sportsmen and women and movie starts to earn large amounts of money. Football enthusiasts in the UK are happy to wax lyrical about how many millions such-and-such a player is being “bought” for by a particular club, or how much one of them earns in a week, fully accepting the essence of the market and voluntary exchange in this arena. When it comes to the CEOs of multinational companies worth billions of dollars, however, it is always a different story – they are greedy fat cats, profiting off the work done by their underlings in the factories and production lines. This is so even though the multinational company may provide “essential” benefits to people such as food to eat and homes to live in, whereas the achievements of even the greatest athlete basically boil down to providing entertainment. The reason for this, of course, is that sporting and acting achievements are readily perceived by the individual, whereas the benefits of entrepreneurship and the stewardship of productive assets are not. If the cries for equality are to be consistent this should not really matter, of course – it should permeate all areas of human endeavour. However, if the ready perception of a wealthy person’s achievement is enough to justify it in the eyes of everybody else then clearly libertarians and free market enthusiasts should continue to extol the benefits of entrepreneurship and attempt elevate, to the level of sportsmanship and acting in front of a camera, the status of businessmen, investors and capitalists who provide goods and services which people want to buy at prices they can afford. This may be the surest way to purge mindless egalitarianism from mainstream social thought.


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Immigration

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The subject of immigration is keenly debated both within libertarian circles and in the mainstream, having been an important issue in the British referendum to leave or remain in the European Union on June 23rd and also in the forthcoming US Presidential election in November. This essay will outline the core libertarian theory concerning immigration before examining the key area for contention among libertarians – whether, in a world populated by states, any particular state should restrict or otherwise control movements across the border by persons who are not considered to be citizens of that particular state and whether this is in accordance with libertarian theory. We will also explore the additional question, assuming the same, worldwide condition of individual states, of which ways immigration can be said to be a “good” thing and in which ways it can said to be a “bad” thing.

In strict libertarian theory there is no treatment of immigration separate from the general libertarian approach to private property. In a libertarian world all pieces of homesteaded land would be owned by private individuals. Although the owners of neighbouring or otherwise closely situated pieces of land may share a common language, ethnicity and culture, there would be no legally defined national borders; all we would have are the borders, or rather, the boundaries of each parcel of private property marking the point where one person’s ownership ends and another person’s begins. Who, how and when other individuals cross these borders is a private matter for the property owner. It is his property and he can welcome and exclude whomever he likes and on whichever terms he likes. If the property in question is his home then his closest, most immediate family, who may also live there, are likely to have unrestricted access; more distant family and friends may be granted access at mutually agreeable times when they wish to see each other; a lodger will have access governed by a tenancy or licence agreement; and “handymen” or contractors may be granted temporary access to carry out certain work that the owner pays them to undertake. Everybody else in the world, on the other hand, is likely to be excluded. At no point, prior to any agreement or contract with the owner, does any person have a legal right to cross the border of another person’s property. An uninvited crossing is, in libertarian theory, defined as unlawful, aggressive behaviour and may be met legitimately with physical resistance. The only places where people could wander wherever they please, except for their own property, would be onto un-homesteaded or ownerless land as only in this condition would they be undertaking an action which does not interfere with the prior rights of another individual.

In a world populated by states, however, there are not just borders or boundaries between privately owned pieces of land; rather, there are borders between whole swathes of territory which form the landmass of the states. A particular stretch of land immediately on one of these borders need not be privately owned – it may be publicly owned if it is a road or a park or even ownerless if it is, say, an unkempt meadow (although the government will, of course, claim ownership over all un-homesteaded land). In such a world the question concerning immigration would not be whether immigrants would have the right to enter your home or, say, your privately owned business premises; not even the staunchest supporter of immigration contends that this should be the case and if we assume, as minarchists do, that the state has a legitimate responsibility to protect individual parcels of privately owned property from uninvited access by either foreign or domestic individuals then this stance is perfectly in accordance with libertarian theory. Rather, the issue concerns whether the state should grant, without question, prospective immigrants a right to enter the territory of the state at certain, designated  points on the border into publicly owned or ownerless territory that the state nevertheless claims is within its jurisdiction. This, necessarily, raises the further question of whether successful immigrants would be at liberty to access all publicly owned territory, such as roads, to use publicly funded facilities and to claim publicly funded welfare.

In this imperfect world of state borders the question we as libertarians have to answer boils down to how, in libertarian theory, we should treat the ownership of publicly owned land. If the government permits any foreigner to cross the border into publicly owned land can such an arrangement be equivocated with, or approximated to, an uninvited, physical invasion of owned property, in which case it would not be permitted? Or is it an action that is more equivalent to crossing into ownerless or un-homesteaded land and thus does not violate the rights of an existing owner? If we lean towards the first possibility then the resulting situation would be one of “open borders” – the de facto right of any foreigner to cross into publicly owned or ownerless territory of another state. However, if the answer is no then it does not follow that closed borders would result – it is only a quasi-invasion if foreigners cross uninvited. To listen to the mainstream arguments one would be forgiven for thinking that the immigration question needs to be met by an all or nothing answer – it is apparently a contest between liberals, or self-styled “progressives”, clamouring for fully porous borders on the one hand versus conservative, racist bigots who supposedly want to keep everyone out. We reject this false dichotomy and recognise that it is quite possible to be in favour of permitted, regulated immigration – allowing some people to cross the border as immigrants to come and live and work in the territory of the state while denying that privilege to others.

The most convincing reconciliation of this situation with libertarian theory is arrived at by asking a simple question. If the state was to dissolve itself today who, if anyone, would have the strongest ownership claim over the publicly owned land to which immigrants would gain access if they were permitted to cross the border? It is doubtful that such land can be construed convincingly as unowned given that it contains significant infrastructure – roads, railways, utility networks and so on – that have been deliberately engineered, bringing the land into a developed condition that is far from its natural, ownerless state. This infrastructure was paid for by the domestic, tax paying citizens for the benefit of domestic, tax paying citizens, and was not paid for by foreigners who have not been tax payers. It follows, therefore, that the strongest ownership claims to publicly owned land reside with the domestic, tax paying citizens of the state. As long as, therefore, the state owns and operates this land on behalf of the tax paying citizens it should be construed as the owned property of those citizens, to which non-owners can be excluded from entry in just the same way as a house owner may exclude strangers from his house. Thus it is reasonable to suggest that foreigners do not have a legitimate right to cross a state border. Moreover, if the opposite was true and libertarian theory was construed publicly owned land as ownerless then it would seemingly allow foreigners, or indeed, anyone, to homestead this land and take it out of public ownership. The suggestion that one could homestead a major road to the exclusion of the rights of those who were forced, by the state, to pay for that road’s construction, is clearly absurd.

An objection to this suggestion is that non-taxpaying domestic citizens, such as low earners and children, will be permitted access to the publicly funded infrastructure. If we are ascribing ownership of public assets to those who fund them through tax contributions then shouldn’t these domestic, non-taxpayers be excluded too? In the first place we could suggest that the taxpaying citizens – i.e. the taxpaying parents of children and taxpaying businesses who need customers to access them via public roads – have extended a quasi-invitation to non-taxpayers to use the publicly funded infrastructure. However, before we begin to contort our analogy in a tortuous fashion we have to remember that no answer we can give in this regard is going to be perfect. A world populated by states is not a perfect situation with which libertarian theory has to deal. Libertarian theory properly excludes the state entirely; however, if we have to suffer the state in some form then there is an impetus upon us to make it function in the most liberty-oriented way, an endeavour we can only accomplish by approximating ownership as it would be in a stateless society rather than by replicating it entirely. Moreover, it is probably not possible to distinguish taxpaying citizens from non-taxpayers on a public highway, whereas it is eminently possible to exclude foreigners at a frontier.

If we maintain this theme of attempting to approximate ownership in a stateless society we can also determine the situations where foreigners would be permitted to cross a border. As we noted earlier, in libertarian theory owners may invite non-owners onto their property as and when they see fit and upon whichever terms are agreed. Such an entry would not then be an invasion. The most likely way that such invitations could be extended to cross state borders would be if a foreigner is offered employment within the territory of the state, or married into a domestic family. Alternatively, perhaps, a foreigner may purchase property that is within the territory of the state. Critically, however, these invitations should initiate from private sources and private exchanges, not from quota systems or other arbitrary rules and restrictions emanating from the state. Not only does this serve more convincingly our approximation of public ownership with private ownership, but there are also sound economic reasons for stating that this should be the case. If, for example, an invitation to cross the border is dependent upon an offer of employment from a private company or individual it demonstrates that the skills possessed by the immigrant are genuinely in short supply within the domestic population as perceived by the real wealth creators. The immigrant will arrive and will be integrated into the employer’s workforce immediately, co-operating with the existing, domestic co-workers in the production of goods and services. This is less likely to exist with either unlimited immigration, or immigration defined according to government direction, where the influx of immigrants may simply be creating a greater supply of labour which pushes down the wages of existing, domestic workers, and is likely to increase racial tension and xenophobia.

Indeed, the economic cases for and against immigration are rarely stated correctly in the mainstream debate and so it is worth our while to concentrate on these for a moment. Those who advocate open borders will be keen to point out that immigrants bring productivity and skills which serve to increase the standard of living of the indigenous population. Those who argue for restriction, on the other hand, will stress that, in fact, an influx of foreign workers simply competes with domestic workers for employment opportunities, sowing the impression that foreigners are “stealing our jobs”. Both points of view contain kernels of truth yet neither is valid in all situations. Whether or not immigration is a benefit or a burden concerns whether labour and capital goods are balanced in a particular location. The applicable economic theorem in this regard is the law of returns, which states that if the quantity of a factor of production is increased while the quantities of the complementary factors are held constant, there will come a point when the increases will produce diminishing returns and, eventually, no returns at all. For example, a farmer who wishes to grow crops may take land, seeds, water and fertiliser as his factors of production. If he holds the quantity of land, seeds and water constant while increasing the quantity of fertiliser then at first he will experience increasing crop yields per additional unit of fertiliser he deploys. Eventually, however, further increases of fertiliser will produce fewer and fewer crops per additional unit deployed without further increases in land, water and seeds, until eventually there will be no additional returns at all. Finally, of course, production will cease altogether when the land becomes buried under a mountain of fertiliser. If, on the other hand, there are increases in the quantities of complementary factors of production in addition to increases in the quantity of fertiliser, it is possible for the farmer to experience an increase in crop yields per additional unit of fertiliser deployed. Exactly the same is true when the increased factor is not fertiliser on a farm, but is, rather, human labour. If labour is increased, through population increases, but it is not possible to increase the complementary factors of production then the increase in population will simply result in diminishing returns and an overall reduction of per capita real incomes. This will be particularly acute if there is a sudden influx of a particular type of labourer that requires specific types of complementary goods in order to be productive. If there is an increase in low-skilled, manual labourers then a given territory also needs to have the additional factories, machines, tools and equipment for them to use. If it does not then the existing stock of such items simply has to be used more intensively by a greater number of labourers, which, if the increase in labour is left unchecked, is the recipe for diminishing returns. There is no point in shipping in a boatload of carpenters if there isn’t enough timber for them to work on, or if there are not enough workshops to house them; it is futile to welcome more workers onto a car assembly line if the assembly line itself has not been built, or if there is a shortage of steel or aluminium. In principle, at least, this extends to highly skilled labour as well. If a state brings in from overseas a load of doctors then the additional hospitals, surgeries and medical equipment have to be available too. Obviously the situation can become dire if the incoming population cannot work at all – for example, if there are a lot of children suddenly entering a territory, or those otherwise demanding educational services, then there needs to be the additional schools and colleges, otherwise existing class sizes simply swell and the quality of education (i.e. the “returns” on inputs into education services) diminishes. All of these additional capital goods – the machines, the factories, the equipment, the raw materials and so on – are demanded right from the moment that the immigrants arrive and seek work. However, their availability is not immediate as the production of capital goods requires both time and, more importantly, savings. Therefore, if the labour is specific, i.e. specialised to only one kind of occupation, then immigration will serve simply to increase the supply of labour applied to the relevant capital goods, thus pushing down wage rates for the domestic population. If, on the other hand, the skillset of the immigrant labour is unspecific then it may be possible to put them to work in creating these capital goods – i.e. building the very factories and tools they need to increase their productivity. However, capital goods do not yield an increase in productivity until they are completed and if the immigrant population is to go to the effort of creating them then they need consumer goods to sustain them during this phase of construction, a phase which may take a number of years before the additional capital goods are able to increase the supply of consumer goods. The only source of the latter is the prior production of the indigenous population. In other words, the domestic citizens have to reduce their level of consumption today in order to save and fund the additional production of capital goods, thus lowering their standard of living. The only way to induce this voluntarily is to raise interest rates so that more people save out of their current income. However, higher interest rates are precisely what are discouraged by spendthrift governments and economists hypnotised by Keynesianism, who do everything that they can to lower interest rates and decrease the incentive to save. The domestic population therefore continues to maintain its preference for consumption over saving and so all that they see is higher prices for the very consumer goods they wish to buy and lots more people from far flung lands wanting to buy them. It was the understanding of this whole phenomenon which formed the basis of Malthusianism – that if population increases outstrip gains in productivity then society becomes, overall, poorer. For the indigenous population of a given state, the incoming population simply becomes competing consumers of existing, or a barely increasing stock, of goods and services. Indeed, some libertarians have pointed out that this may be the aim of the state in the first place – to bring in more welfare parasites and weaken the wealth and power of the indigenous population, thus expanding the size and scope of government.

On the other hand, it is clear that if there has been an increase in the non-human factors of production but not an increase in labour then these factors too will be subject to the same law, the law of returns. In other words, an increasing number of machines, tools and factories will be used by the same number of labourers, with the result that the latter become spread out more thinly over a burgeoning supply of capital goods. In this instance, an increase in population is precisely what is needed to increase productivity and to make use of the additional capital stock. So, for example, if an empty factory with nobody to operate it, and machines and tools lying idle, is filled quickly by immigrant workers then productivity can rise on account of the fact that there has been a commensurate increase in labour and capital goods. Such a situation is not unheard of in areas where there are extremely favourable reasons for creating capital goods – low tax rates, strong private property rights, good transport links, and good supplies of natural resources – except for a sufficient supply of willing labour. For example, a mining business has to open up shop where the ore it wishes to mine is located. The labour must come to the ore in order to ensure any productivity from the mine. Going back to what we said earlier, if there is an under or oversupply of either labour or resources, only private business owners and entrepreneurs should make decisions as to what moves where – whether labour should be moved to where resources are or whether resources should be moved to where labour is – for only they are in a position to judge, through pricing, profit and loss, which is the most cost effective solution in ameliorating the imbalance between labour and capital goods. Any direct action by the state in this regard will simply create surpluses and shortages either of labour or of capital goods in different areas, as government management of anything always does. Indeed, in a previous essay on “Overpopulation”, the present author argued that increasing population is generally not a concern, from an economic point of view, under conditions of an unmolested division of labour; but it does become a very acute problem when government interferes in population levels, especially in specific areas. In particular, if we look at the two most extreme positions the state could take with regards to immigration – a policy of completely open borders (or even an active pursuit of higher immigration numbers) on the one hand, and a policy of completely closed borders on the other – the former will tend to lead to a surplus of labour while the latter will tend to lead to a shortage. In a world without the state where each parcel of land was owned privately, areas with relatively high populations and low concentrations of capital goods would have higher access costs – higher prices to access roads, higher property prices, higher school prices, and so on, deterring immigrants away from an area where there are already too many people. On the other hand, areas with relatively low populations and relatively high concentrations of capital goods would have lower access costs, encouraging immigrants to move to the place where there are not enough people. Thus, through the pricing system, the market sends signals to prospective immigrants telling them which areas need them and which areas do not. In a world managed by states, however, a policy of open borders will mean that the free cost of access to state controlled territory such as roads, schools and hospitals artificially lowers the cost of immigrating, a situation which is, of course, exacerbated when immigrants have either unrestricted or lightly restricted access to welfare benefits. There will therefore be more immigrants and a higher population than the area requires. On the other hand, a policy of totally closed borders artificially raises the cost of immigration to the level of imprisonment or being shot on the frontier. Thus, while for some this cost is justified (as trying to cross the Berlin Wall was, although this border was directed at keeping people in rather than out), the overall result will be fewer immigrants and a lower population than the area requires. States with heavily restrictive immigration policies, such as the United States, can often find that their domestic companies become exasperated by the difficulty in hiring foreign talent while there will be relatively more attempts to cross the border illegally.

This leads us onto another central theme concerning immigration and that is racism and xenophobia. Any treatment of the topic of immigration cannot avoid addressing these issues, particularly given that any opposition, principled or otherwise, to a policy of “open borders” is often shouted down as racist or at least racially motivated. In the first place, libertarian theory has nothing to do with racism. Our conclusion earlier, predicated on the approximation of ownership rights with regards to publicly owned property, that states may, legitimately, restrict foreigners from crossing the border into the territory of the state says only that the state may choose to exercise such a restriction on behalf of its tax-paying citizens. It may equally choose to relax or forego any restriction. Libertarian theory says nothing about the motivations that the state, its politicians and bureaucrats, and the citizens it supposedly represent, may have for making a choice either way. It states only that they may make such a choice. Libertarian theory is emphatically not motivated by anything that could be construed as racist. Moreover, if one does cross over to a value judgment and state that immigration should be restricted in certain circumstances, as the economic concerns that we just outlined suggest is wise, then it is preposterous to assume that the motivation is necessarily racist. These economic concerns would be true in a world populated entirely by whites, entirely by blacks, entirely by Asians or whomever, all speaking the same language and all with a relative cultural homogeneity. Yet the argument – that an increase of labour without an increase in complementary capital goods would lead to diminishing returns – would still be exactly the same.

Rather, what we will attempt to argue here is that racism and bigotry derive from, rather than precede, a state’s policy of fully open borders and that it is such a policy which aggravates racial tension. A libertarian policy of managed borders, with invitations to cross extended to immigrations extended by private individuals and companies would, in fact, result in a relatively peaceful world where different races would co-exist without difficulty.

The key to understanding why this is so is to do with how the economic aspects we outlined above intertwine with cultural homogeneity in a given society. A society is not simply a collection of atomistic persons doing whatever they like whenever they like, even though such a society may exist hypothetically in libertarian theory. Rather, people in a society embrace a certain culture and the particular morals, rules, habits and hierarchies that are created by that culture. The reason for this is not accidental or spurious. Rather, relatively predictable, reliable, homogenous practices across the populace as a whole not only aid but may even be absolutely necessary for effective social co-operation, and it is through social co-operation – the division of labour – that people are able to raise their standard of living for themselves and for their families.  A common language is, of course, an important, if not the most important homogenous, cultural phenomenon required for social co-operation. It is no accident that in very few places in the world there is a complete mixture of different languages and that, for the most part, different languages are separated geographically. Even a country such as Switzerland, which officially speaks French, German, Italian and Romansch has different areas in which each of these languages is dominant, with only a handful of fully bilingual areas. The barriers to social co-operation if the opposite was the case are obvious. Imagine coming to work one day and finding that your boss speaks only Russian, your co-worker Chinese while the team you manage speaks a mixture of Spanish, Welsh and Punjabi. Cultural practices extend also, however, to such apparently menial aspects as the 9am until 5pm working day, or when the main meal of the day is eaten. If people stroll into the office whenever they please or vanish at 10 in the morning to enjoy a three course meal clearly social co-operation is impaired. This is not to imply, of course, that everybody has to do absolutely the same thing all the time in a given society. However, the exceptions prove the rule and different practices – such as working at night and sleeping during the day – are regarded as unusual. Moreover, there is also the fact that humans are a tribal race – we prefer to associate with those who are familiar to us, those who do what we do and those who agree with us, if only for the comfort of predictability, regularity and routine in addition to the contribution of such aspects to social co-operation. Indeed, if the benefits of cultural homogeneity for social co-operation are true then it is possible that our preference for it is an outcome of evolution, which has biased us towards desiring things, through instinct, that ensure are our survival and betterment. However, it would be a mistake to assume that most specific cultural practices emerged randomly or through simple preferences. Rather, they were shaped and formed by the challenges presented by the specific climate, geography, topography and the available resources of the particular locale. For example, the Mediterranean practice of taking a siesta in the middle of the day originated because the temperature was too hot to work at that time. Indian food makes use of a lot of spices because of the difficulties in preserving food in such a hot climate, a difficulty that was not quite so prevalent in regions further from the equator. The practice of circumcision originated out of the challenges posed to male hygiene and comfort in a hot desert environment. The creation of the family unit and sexual fidelity, which we take for granted today, originated at least in part from the need for fathers to bear the costs of raising their children when population levels in hunter gatherer communities began to outstrip resources, something which could not be managed in a culture of “free love”. The family is a cultural practice we see all over the world because the problem it solved was experienced throughout the world, whereas less universal cultural practices sought to solve only specific, local problems.

When immigrants move from one state to another they are usually moving from one culture to another – from one language, one religion, one set of social norms, one type of cuisine, and so on, to something else with varying degrees of difference. If a relatively homogenous culture is both a natural human preference, is a requirement for effective social co-operation, then it follows that cultures of both the immigrants and the indigenous population of a given state are not likely to mix naturally within the same locale and that, rather, one set of cultural practices must yield to the other. This is particularly so when the cultural practices of the immigrants were developed with regards to the challenges posed by their homeland and may be superfluous or completely contradictory to what is required in the state to which they have emigrated. When, as we outlined above, individual immigrants are invited to the state by individual persons and companies to accept an offer of employment it is because there is a pressing, economic need for their presence – there is a surplus of capital goods and equipment and a shortage of labour. The immigrants, in this instance, will begin work immediately and will mould themselves into the cultural practices and habits of the indigenous population. Furthermore, their skills and abilities, being in genuine short supply, will be recognised and appreciated by their co-workers, with whom they will be co-operating to create more wealth and a greater standard of living, rather than competing to consume an existing stock of wealth. It is true, of course, that immigrants may retain cultural practices of their homeland in the domestic situation of their own home; however, the first generation of children, born in the state to where their parents have emigrated, will become heavily surrounded by its culture. To them, this new state is their homeland and not a foreign place and they will know little to nothing of their parents’ place of origin. Thus they become even more integrated into the culture of the new state and will most likely consider themselves as citizens of the new state even if they retain an obeisance to the state from which their parents emigrated. This is not to imply, of course, that the culture of the immigrants will be completely eradicated. Indeed, in some cases, foreign cultural practices find their way into the indigenous culture. The delights of foreign cuisine, for example, are often embraced by a domestic population, as Indian and Chinese food has throughout the West. All we are saying is that at if social co-operation is to be pursued to its fullest extent, one of the cultures must become recessive and to the extent that the immigrant population form a minority it is likely to be the indigenous culture that remains dominant. The outcome, of course, is a prosperous society where immigrants and natives work together peacefully without racial tension or xenophobia.

Contrast this situation, however, with the case of where it is the government of the state which welcomes immigrants to its territory, either through a policy of open borders or according to some artificial quota system which is wholly unrelated to the genuine demand for additional labour within the state. Here, the immigrants will arrive without offers of employment but they will quickly look for them. However, because there is no demand for additional labour at the existing wage rates the effect of the arrival of the immigrants is to push existing wage rates down for the indigenous population. Thus the latter draws the perception that immigrants are simply creating a crowd, a crowd which competes for existing resources but seemingly does little to add productive value. This becomes exacerbated by minimum wage laws and other costly employment regulations that the state heaps upon employers – if wage rates drop below these levels then unemployment must result. Hence the perception that foreigners are coming over to “steal” jobs from the indigenous population, although both will be afflicted. Moreover, if the immigrants cannot find jobs then it is less likely that they will be integrated into the working practices and the cultural environment of their new state. What results, therefore, is that they form their own communities and their own local economies which, with little impetus to do otherwise, retains the cultural distinction of their homeland. Hence, the perception amongst the indigenous population, that entire towns and communities are being “invaded” by an alien culture and that one’s own homeland is being turned into an outpost of some far and distant country. The stage is set, therefore, for an increase in racial tension and xenophobia, an increase which will be exacerbated if the government follows a deliberate policy of multiculturalism – i.e. the explicit intention to create numerous cultures within the same society where one was previously dominant by inviting immigrants. Multiculturalism has rarely existed under purely voluntary conditions. The only exception is where vast swathes of immigrants from different places move to a previously uninhabited or sparsely habited area. The difference here, however, is that everyone, from wherever they have come, has moved to the new land in order to make a better life for themselves and they are attempting to do so in a place where there are few, if any, indigenous persons of a given culture seeking to preserve an existing culture. Everyone, in other words, is embracing change and the challenges that come with improving their lives, rather than attempting to defend one that already exists. Such was the early history of the United States which, of course, was populated by immigrants from all over the world.

What we can see, therefore, is that policies of open borders and forced integration are the cause of racism and xenophobia through economic and cultural clashes. They are not the solutions to these problems. However, even if there were no economic barriers to welcoming immigrants to a given state and even if the only motivation for indigenous people to exclude them was racism and xenophobia that sprung from their own minds entirely as a matter of preference, our priority is to ensure that all of the six billion people of different creeds, colours, races, and religions are able to co-exist peacefully on this small rock hurtling through space. If different peoples and cultures living in separate geographical locations achieves this whereas mixing them all together in a single place causes them to fight then it is reasonable suggest that preference should be given to the former.

Progressives often label their policy of mixing cultures in the same locale as a policy of achieving “diversity”. Yet the world as a whole already is a diverse place. Some places are hot, some places are cold, some are wet, some are dry, some have fertile soil while some are barren. As we said earlier, this diversity of geography, climate and topography, together with the unique challenges posed by each difference with which humans have to deal, is what creates diverse cultures. The forced creating of “diversity” in every single locale simply amounts to a travesty. Not only does mixing every culture everywhere in every location, in fact, create bland uniformity as opposed to diversity, it is the equivalent of trying to put a mountain, a hot desert, and a jungle all in New York City. To that extent we might say that attempting to create “diversity” is a utopian revolt against nature.

Conclusion

To summarise what we have concluded here:

  • In a world where the existence of states is assumed, the ownership of state property should be approximated to the ownership of the state’s tax paying citizens, thus ruling out a right, in libertarian theory, for non-taxpaying foreigners to cross the border;
  • That invitations to cross the border should be made to prospective immigrants by private companies and individuals;
  • Such a policy would prevent the relative surplus or shortage of labour experienced when the state actively manages immigration policy; labour and capital goods would be channelled, through pricing, profit and loss to where they are most needed;
  • That it is relative surpluses of labour through policies of open borders, forced integration and the pursuit of multiculturalism, which are the causes, and not the solutions to, racism and xenophobia. The prevention of surpluses of labour through the method we described would also prevent such racial and cultural clashes and is more likely to create a world of peace and prosperity for all persons, regardless of colour or creed.

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