States and Corporations

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To say that the existence of the state is, in the mainstream, uncontroversial would be something of an understatement. While the precise individuals who form the state and the specific acts that they choose to do with state power often attract controversy, the existence and sustenance of the state itself is deemed to be essential for not only a functioning and orderly society (such as that which could be provided by a so-called “night watchman” state) but also to contribute, or even to cause, the economic and cultural progression of that society. This belief has become even more potent since the state, sometime in the twentieth century, became endowed with so-called “democratic legitimacy”, i.e. it is supposed to be run by representatives chosen by the people for the people.

Let us run through some of the uncontroversial and supposedly necessary aspects of the state that are barely questioned by anyone today.

First, the state possesses a territorial monopoly of the legitimised use of the initiation of force and violence. The state alone is permitted to fund itself not through voluntary exchange but through compulsory levy (i.e. taxation); people are required to pay to the state that which the state says they should pay regardless of the “service” that they receive from the state in return. The state, further, is permitted to confiscate the legitimately earned wealth and property of individuals and to hand it to other individuals in order to achieve so-called “social justice” and a reduced inequality of wealth and income. Further, the state may use this legitimised force to ban certain uses of one’s own property that in no way interferes with the person or property of anyone else. It may also use this force to compel individuals to deal with their property in certain ways specified by the state, usually at one’s own expense – a power of the state that is euphemised by the term “regulation”.

Second, the state alone is tasked with maintaining law and order and the protection of the person and property of individuals from criminals. The possession and trade of goods and services to enable individuals to accomplish this themselves – such as personal firearms – is increasingly restricted by the state to the extent that such possession or trade itself becomes a crime, even if the intent is simply to prevent criminal acts against oneself. You are therefore utterly reliant upon the state for your own protection and, moreover, you are defenceless against the state when its employees aggress against you. Nevertheless this does not prevent the state from requiring private organisations to police the populace on its behalf – such as in the collection of taxes from payrolls and the requirements of banks and other financial institutions to report on the transactions of their customers.

Third, should the state fail to maintain law and order and to protect your property from criminals, it is then the state to whom you must turn if you want a redress. For the state also enjoys over its territory the privilege of being the sole provider of the dispensation of justice in conflicts between parties, including in conflicts which involve itself. This takes place not just in state run court houses refereed by state employed judges but also (when the state or some of its members have been seen to cause an incident that results in public outrage) in so-called “independent public enquiries”. These are undertaken by a different employee (or retired employee) of the state and the funding still flows from state coffers so there is no wonder why these are almost always written off by the general public as a whitewash.

Fourth, the state alone is tasked with providing so-called “national defence” and securing the state’s borders. Although the restriction of civil liberties in the face of either a real or imagined threat against the state’s sovereignty by a foreign invader is not uncontroversial, it is hardly new and is, in fact, a hallmark of every war into which the state drags its people. More commonly, however, the state may prevent foreign visitors from entering the territory of the state even if domestic private property owners have invited them. People who wish to come to the state’s territory to create jobs and wealth, or simply those who wish to work, are forcibly restricted by the state, even if a domestic employer is willing to hire them. The state also controls, by force, the flow of trade across its borders and imposes tariffs and other restrictions on the movement of goods, regardless of whether a domestic individual or entity wishes to conduct peaceful trade with a foreigner.

Fifth, the state alone is permitted to print and issue currency in the form of paper money or electronic credits to the extent that it may create this money and use it to buy goods and services for itself without having worked to create any wealth in the first place. Other people who do this are labelled as “counterfeiters” and are subject to the full brunt of the state’s forceful retaliation. Such a power to create money is bound only by the economic consequences of price inflation and credit expansion but it permits the state to fund and grow its activities without resorting to increased taxation, instead robbing the domestic population of the purchasing power of the existing notes that they hold.

Sixth, the state forcibly maintains a monopoly over transportation networks such as roads, highways, railways and airports. If they are not nationalised outright, the state frequently contracts out the provision of other supposedly “essential” industries such as healthcare and the supply of utilities such as gas, electricity and water under the rubric of “privatisation”, yet it maintains a tight control over these industries to the extent that they are little more than a state dominated oligarchy.

Seventh, the state tasks itself with the “education” of the children who are born and/or raised within the state’s territory, mandating, through the threat of punishment, attendance at certain ages dictated by the state, regardless of what children may prefer to be doing or better at doing. The state employs the teachers, sets the curriculum, determines the standards to be achieved through examination (i.e. sets the grades) and is responsible for inspecting its own schools and institutions. Private education is possible but, apart from being monitored closely by the state, is nearly always prohibitively expensive and thus is seen, with some resentment, as being the preserve of the wealthy and privileged. Thus the majority of people have little choice but to turn to the state to provide the education of their children. Furthermore, the state takes it upon itself to interfere in the general upbringing of children, with state run schools often tasked with policing parents and dispensing lessons such as “citizenship” and “personal, social and health” education in order to make up for supposed parental shortfalls.

Finally, the state is supposed to protect us and to provide for us in our hour of need – such as if we lose our job or when we retire. State provided retirement benefits are little more than a giant Ponzi scheme. Funds confiscated by taxation from the earliest “beneficiaries” to provide for their retirement were not saved and invested by the state; rather, they were consumed in current expenditure. Instead, it is the current tax confiscations of younger generations that pay for the pensions of today’s retirees. The state forcibly prevents private individuals and companies from engaging in such a scheme as it ultimately results in collapse and losses for the later investors, and those that do offer such a service are thrown by the state in jail. The state’s own scheme is, as we are beginning to see today, susceptible to such a fate yet the state exempts itself from having to follow its own rules.

No doubt readers can think of many other “uncontroversial” aspects of the state that are held dear among mainstream views. Each of these aspects could be demolished in separate, longer treatments and many libertarian writers have, of course, done just that. What we wish to do here, however, is to ask our fellow citizens who do not counter these “functions” of the state a very simple question: if you accept with gladness or even celebrate these aspects of the state that we have just listed, can you imagine also permitting a private corporation to do the same things that the state does? Can you imagine a private corporation being able to initiate the use of force and violence against other people? Would a private company be allowed to force you to do what it wants with your own property? If you get into a contractual dispute with AT&T should AT&T be allowed to judge the outcome of the conflict? If American Airlines assaults or kills your family should American Airlines sit both in the dock and on the judge’s throne? Should Microsoft be tasked with national defence and arm itself with nuclear weapons? Should McDonalds be able to tell you which foreigners and which goods and services can cross the border even if you want them to come and visit you? Could we imagine a world in which Google or Walmart can print paper money and force people to accept it in return for goods and services? Or a world in which Facebook builds all of the roads and runs all of our utilities? Would it be possible for, say, Apple to be able to force our children to attend its schools? And finally, should we allow Bank of America or J P Morgan Chase to force investors to participate in Ponzi schemes? Most lay persons are likely to recoil in horror at the thought of any private corporation being able to do all of these things. Yet, bizarrely, they either accept or defend the fact that the state should participate in these activities.

One likely retort to this is that the state is supposed to govern for “the people” whereas companies are interested in making profits for their shareholders. Indeed, the state uses its self-proclaimed subservient and altruistic nature to exempt itself from all of the proper behaviour that is required of private citizens, who are supposed to be interested in only their own gain. While it is true that companies are primarily interested in making a return for their shareholders (why else would the shareholders have invested in the business?), it is also true that companies can only achieve these profits by serving the needs of their customers. It is the customers who decide, through their choices to spend or not to spend money with the corporation, whether those profits are made. In any case, however, we might point out that an odious act does not transform into a good one simply on account of for whom it is done. If I steal your money this act is rightly viewed as wrong, regardless of whether I intend to keep the money for myself or whether I intend to give it to someone else who may, in my opinion, “need” it more than you do. Similarly, therefore, if the state confiscates your money through taxation and distributes it via the welfare state the fact that it goes to “the people” makes this act no more moral than if the bureaucrats kept it all themselves (which, of course, they often do – not only are the administrative costs of the welfare state frequently underestimated but most of the money disappears into the hands of the state’s favoured contractors and suppliers rather than directly into the bank accounts of the poor). Moreover, we don’t even have to go so far as to cite strictly moral or immoral acts to illustrate this point. Monopolies, for example, are viewed as being bad because they tend to reduce quality and raise costs over time; this fact does not change simply because it is the state that runs a monopoly over say, healthcare, rather than a private corporation.

Another likely response to our question is that the state is under the supposed “democratic control” of the people and that if the state uses these powers “illegitimately” or irresponsibly then they will be booted out at the ballot box. Apart from the fact that, again, an illicit act does not become moral simply on account of who controls those who are doing it, a citizen has the right of voting between a bare handful of carefully selected and screened candidates only once every four or five years. Moreover, a person cannot choose with any specificity which policies and manifestos to support. Rather, he has to throw what little weight he has behind a single candidate (or party) and all of that candidate’s stances on a wide spectrum of issues, from whether we should continue funding wars in the Middle East down to whether a person may light up a joint in his own home. And once elected the successful candidate can simply abandon whatever promises he made in return for your vote straight after. As if that wasn’t bad enough, what if your preferred candidate does not get elected? You still have to suffer the implementation of the odious policies of an alternative candidate whom you may utterly despise. With a private corporation, however, you can choose to vote or to not vote for them with your wallet every single minute of every single day. You don’t have to wait for a few years if you want to switch from Tesco to Sainsbury. Moreover these choices are very specific. If you change your grocery supplier you are not also changing your telephone provider. If you ditch Ryanair and start flying EasyJet you can still get your clothes from Debenhams. If a corporation takes your vote, i.e. your money, then breaks its promises it made before you handed it over it is called “breach of contract” and for this the company can be sued. And finally, your choice to shop at Sainsbury’s or Tesco is not dependent upon a majority of other people wishing to do so – both are able to trade regardless of whether they are supported by a majority of consumers.

What we can take from all of this is that if a private corporation possessed every single right and function of the state except the power to tax and demand your patronage, then you would have more control over it than you do over the state. The situation we have produced, therefore, is, on the one hand, a society of corporations over whom each individual has a high degree of control yet which are required to abide by all of the laws and at least a basic code of morality, and on the other hand a state which no one can control yet can, for the most part, do whatever it likes. It seems to me that if we are to suffer the illicit and illegitimate powers of the state at all they would be far safer in the hands of a private corporation rather than the state.

Of course our goal is that nobody should have the right to carry on these acts that we outlined in the first part of this essay – that they should be illegal regardless of who does them and in whose name. No one should have the power to tax, to confiscate the income and wealth of other people; no one should be able to print money; nobody should be able to arm themselves with all manner of horrific weaponry while forcibly disarming everyone else; and no one should be able to run a Ponzi scheme. When you take all of these characteristics of the state and ask yourself what life would be like if anyone else was allowed to do them, you rightly begin to shudder with fear. So why should we ennoble the state with the dubious privilege of being able to do them?

Hopefully what we have outlined here is a useful point with which a libertarian can turn a debate with a statist or state-biased lay person, and to cause that person to reconsider either his active or his tacit support for the state and its actions.

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The Choice Illusion

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In the mainstream debate both for and against a free market, one argument that appears continuously is that the free market is predicated upon choice and the ability of the individual to choose. Those in favour will argue that more choice promotes competition and increases the freedom of the individual to meet his ends, and so the increasing of choice and stifling of monopoly wherever it appears is a good thing. Opponents will counter that choice can be wasteful, costly, inefficient and overwhelming particularly when it concerns supply of provisions as basic as water, and, furthermore, that often the appearance of choice is merely an illusion conjured up by private companies that basically operate in a profit-maximising cartel.

Wading into this debate as a libertarian we can see that the basic statements on each side are not incorrect. However they either overlook or misunderstand the true nature of choice in a free society. The kernel of truth in the pro-choice argument is that voluntary behaviour, expressed through choice, leads to market outcomes that provide the most benefit to the consumer. But such an advocacy is formal only – people choose voluntarily not only which suppliers they are willing to patronise, but also the extent of choice itself in a particular industry is the outcome of voluntary action. In some industries, for example, particularly those that are growing and innovative, consumers are willing to support multiple suppliers with a large range of different products and all of these may be viable. We might say that smartphone manufacturing is representative of this kind of industry. In other industries, however, which are perhaps maturing or consolidating and reaching the end of their innovative stage, the benefits to be gained from economies of scale and simple and straightforward products with little differentiation might be what consumers desire. This is particularly true of the supply of commodities where the only differentiation is price and the only benefit to consumer can be reduced costs. This kind of supply naturally lends itself to one or only a bare handful of suppliers and choice in such an environment may be reduced to minor differences in customer service but is otherwise likely to be stressful, wasteful and unnecessary.

However, pro-choice advocates often are not arguing in favour of this formal meaning of choice, but rather they assume and press ahead for a choice that is substantive. In other words, for every single industry there must, necessarily, be several suppliers from which a consumer can choose, however basic the product and however costly the splintered operations. We have already examined the economic fallacies of this belief from the point of view of competition law and the shibboleth that increasing competition is always a boon to the consumer. However, it is also a dangerous ruse that can be used to create nominal or illusive choice while preserving an overarching government monopoly or control that allows government favoured private companies to line their pockets, at the same time allowing all of the blame for the waste and inefficiency to be directed not to the governmental element but to the “free market” vestige of the particular industry. In the UK the privatisation frenzy of the Thatcher and Major governments was often justified by the need to give “choice” and “competition” to the consumer. Britain’s railways for example, are now “privatised” and whenever you board a train there will be a private company’s logo emblazoned on the carriage and you will see front line members of staff wearing uniforms that indicate their representation of these private companies. But the track, stations and signalling are wholly owned by Network Rail, a statutory company that has no shareholders and is under the de facto control of the government. The train operations themselves are not subject to the forces of natural competition but are parcelled out by the government into geographical monopoly franchises to private companies chosen by the government and who, with the government’s blessing, are allowed to operate the franchise for a set number of years before they must retender. This cauldron of public and private activity blended together led to the UK’s railways being judged the worst in Europe from the point of view of cost and efficiency in early 2012. Yet it is “privatisation” and “competition”, those fancy public-facing corporate logos on the timetables and uniforms, that are lumbered with the blame, rather than the government string-pulling. The energy industry is just as bad, if not worse. The electricity infrastructure is owned by National Grid, with six dominant, government-licensed suppliers sending their product through the same wires in what is a ridiculously regulated and cost-heavy sector that is not only seeing rising prices for consumers and talk of fuel poverty but is also on the verge of collapse. Indeed the Soviet-style description of the regulatory framework by Energy UK, the industry’s trade association, only scratches the surface but it is a succinct summary:

The electricity and gas markets are regulated by the Gas and Electricity Markets Authority, operating through the Office of Gas and Electricity Markets (Ofgem). Ofgem’s role is to protect the interest of consumers by promoting competition where appropriate. Ofgem issues companies with licences to carry out activities in the electricity and gas sectors, sets the levels of return which the monopoly networks companies can make, and decides on changes to market rules.1

All of this is before we even go near the odious and destructive high street banking cartel.

Given all of this is, is it any surprise that people lay the blame for poor service, for high costs, for inefficiency, for waste, and for private companies lining their pockets at the door of free marketers’ obsession with choice and competition? Is it any surprise that, not realising that it is the underlying control and forcing of substantive choice to the benefit of its favoured friends in “private” industry, that there are calls for renationalisation of public communications networks and utilities? There is a strong case to be argued, not only from the point of view of its danger to the reputation of the free market but also from that of the level of service offered to consumers, that private companies operating government controlled services is often worse than explicit and outright nationalisation.

As libertarians who cherish the free market our devotion to choice is encapsulated by our commitment to voluntary behaviour and interaction and is only a subset of this wider concept. We do not mean a controlled and enforced, substantive choice in every industry, nor do we mean the illusion of choice created by the government that rips off the consumer and leaves the free market to bear the brunt of their ire. Leave the consumers alone entirely to express their preferences through voluntary action. Leave them alone to determine how much choice they want. Only then will we see industries that are genuinely able to meet the needs of consumers with ranges of products that are suitable to their ends at prices that they are able to afford.

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1 Emphasis added.

Leave me out of it!

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Debates between libertarians and those who advocate any kind of statist intervention, whether it be relatively minarchist or all the way up to full blown socialism, frequently take the form of “X should not happen vs X should happen”. For example a budding libertarian might argue “the post office should be privatised” whereas his opponent would concentrate on saying “the post office should be state owned.” Lost in these kinds of exchanges are the fact that libertarianism, and all political philosophy in general, is a set of norms concerning the application of violence and nothing more (or more specifically, all political philosophies are theories concerning where, when and by whom the violent enforcement of rights over property is permissible). Libertarians are not, therefore, against any kind of organisation such as Government per se, or even against socialisation or communism. Their strenuous objection is to the fact that these institutions use violence to enforce their ideals in ways that contravene the libertarian prescriptions. There is nothing wrong with anything the Government does, merely the fact that people are forced to obey it and pay for it through their taxes.

With this in mind then, let us suggest some novel retorts in debates that may cause one’s opponent, whether they are part of the statist intellectual bodyguard or merely the average Joe expressing an opinion, to sharpen his/her mind towards consideration of the fact that what they are really asking for is unilateral, violent enforcement by the State.

1. Healthcare.

Statist: “All healthcare should be run by the Government. It should be free. The NHS is a great thing”.

Libertarian: “I have no problem whatsoever with you paying into something called the “National Health Service” if you want to alleviate the burden of you falling ill. But why do you want to force me to do it as well when I don’t want it?”

2. Roads

Statist: “Of course we need Government to build the roads!!!”

Libertarian: “If you want to pay the Government to build your roads then go ahead and do so. I, however, would like to patronise privately built roads and I won’t go anywhere near the roads that you are paying for. Why do you want to force me to pay for the roads that you want when I don’t want to force you to pay for the ones that I want?”

3. Railways

Statist: [Ignoring the fact that Britain’s railways are emphatically not privatised]: “Bring back British Rail! The railways should be Government owned!”

Libertarian: “I’m perfectly happy for you to choose to pay this organisation that you call “Government” to run railways you want to travel on. But I don’t want to travel by train. Why must I be forced to support them?”

4. Police

Statist: “Of course you need Government! What would happen to crime if there wasn’t the police!”

Libertarian: “If you wish to make contributions to the Government’s policing so that they will protect you from crime then go right ahead. I really don’t want to stop you at all, it’s your money. But I would rather pay someone else to protect me from crime. Why do you want to force me to pay for your preferred provider and not mine?”

5. Taxes

Statist: “Taxes should be raised to provide vital funding for important Government functions”.

Libertarian: “If you want to write a cheque to the Treasury then go right ahead, the freedom is all yours. But why are you forcing me to pay for an organisation that I despise and want to have nothing to do with? I’m perfectly happy to let you spend your money just the way you want it, but when I want to spend my money just the way I want it you’re saying I should be thrown in jail! Why?!”

6. Industry

Statist: “All industries should be nationalised and run for the people, not for greedy profit-seeking shareholders”.

Libertarian: “It’s perfectly fine for you to pool all your money and your possessions and set up socialised industry with like-minded people. There is absolutely nothing wrong with mutual organisations, co-operatives, or even communes if that’s what you want to do with yourself. But I want to invest my money in profit-making industry and earn a return on my investment. I’m more than willing to leave you alone to do what you want with your money, just leave me alone to do what I want with mine.”

No doubt many other examples could be imagined by the reader, but in short your reply to all of them is “just leave me out of it!” The key effect is to cause your opponents to realise that, whereas you, the libertarian, are advocating peaceful co-existence and have absolutely no problem with organisations that they may advocate, they, on the other hand, are arguing for the violent imposition of what they want on you. Probably not many who argue in favour of statist intervention understand that they are, in fact, proposing a solution of violence to society’s alleged ills and that they are, therefore, thoroughly violent people. So next time you, as a libertarian, are stuck in such a debate, see how kindly your opponent takes to the realisation that, when laid bare and shorn of any fanciful rhetoric, their arguments are advocating nothing more than for society to be run by guns pointed at the many by the few.

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