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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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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Small States – the Key to Liberty?

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Although libertarians share a passion for personal liberty, free enterprise and the primacy of the individual over the collective, they can differ markedly over the precise role and scope of the state. The main division is between so-called minarchists on the one hand, who believe that there is a limited, justifiable role for the state in defining and preserving property rights, providing security and dispensing justice, and between so-called anarchists on the other who believe that the state, however minimal the services it provides, is always an unjustified invasion of individual liberty and that all defence, security and adjudicative services should be provided by the free market just like any other end.

This division is far from being a futile theoretical exercise and is, indeed, important in determining and clarifying the nature of libertarianism. The present author, for example, self-identifies as a Rothbardian anarchist who sees no justification for the state whatsoever and that anything else is antithetical to individual freedom. However, what we shall argue here is that there is another distinction that is likely to be much more important when it comes to the actual achievement of individual liberty in our world today. This distinction is not between how big or how powerful a state is within a given territory, but, rather, the size of that territory in the first place. That actually, a world of liberty will be achieved much more effectively if we concentrate on breaking up existing states into smaller states rather than trying to limit the scope of government within an existing, large state. Moreover, as we shall see, the realisation that smaller states are more conducive to individual liberty goes at least some way to abolishing any practical difference between minarchism and anarchism.

The vast, monolithic state is, in fact, a relatively new phenomenon. Germany and Italy, for example, consisted of much smaller territories and independent cities until the late nineteenth century; the United States was intended to be a union of smaller, independent, sovereign states, and the transformation of the US into a single, large state occurred informally as a result of the civil war and the gradual consolidation of sovereign power in Washington DC. Other large states were born out of independence from conquest with many simply being artificial lines drawn on a map by politicians. The latest experiment is, of course, the European Union which has, since the post war era, attempted to draw an increasing number of powers away from the capital cities of the individual member states and concentrate them in Brussels. This tendency of increasing the size of states has gone hand in hand with the gradual replacement of laissez faire with socialisation, statism, social democracy and increasing belligerence on the part of the resulting behemoth states. All of the vast conflicts of the twentieth century – the two world wars and the cold war – occurred after major consolidations and empires were in place. Today, we are left with the belligerence of the United States and its Western allies as they seek to control the Middle East and to quell the growing ambitions of Russia and China which are, of course, two more states that cover a vast territory.

There are several reasons why larger states erode liberty while smaller states tend to be more conducive towards it. The first and most obvious is that a larger state has access to a vastly greater sum of resources – more natural resources such as oil, gas, farmland etc. and, of course, a larger population to subject to tax slavery. Thus the large state is able to command relatively more wealth than a smaller state. The greatest impact of this is with regards to foreign policy. It is not likely, for example, that a territory the size of Monaco or Liechenstein would have the wherewithal to produce the military hardware of the United States. Even if its tax base could, in some way, pay for all of the necessary resources it would, in the first place, be heavily reliant upon foreigners who would have to supply, manufacture and then store all of the aircraft, tanks and missiles and so on. This conveys to foreign governments the power to restrict the military growth of the small state and with it all of the derivatives that accompany an increasing appetite for warfare such as suspension of civil liberties, freedom of the press, and so on. Indeed, in small states which are reliant upon foreign powers for their military equipment, such as Singapore, it is usually to the benefit of the foreign state to see the smaller state armed. Second, a large state possesses a larger population and thus can benefit from a wider division of labour in its bureaucracy. Hence larger states have no end of specialist agencies, departments and units that are each devoted to a particular area of government which serves to more effectively augment and consolidate the potency of government power. The US federal government, for example, employs approximately £4.1m people across an alphabet soup of abbreviated names and acronyms for hundreds of government departments and agencies. Smaller states will not have this luxury. Liechtenstein, for example, has an entire population of just over 37,000, a bare fraction of the federal government of the US, so many of its government employees must presumably carry out several core functions rather than individual, specialist occupations. Third, consolidation of smaller states into larger states reduces the competition between states. If a small state becomes too burdensome and oppressive in its rate of taxation and regulation then people can simply jump ship. Thus there will be a drain of productivity from the onerous state to the benefit of less domineering states. Indeed, rather than any so-called, internal “separation of powers” between the different organs of an individual state, it is in fact the competition with other states that provides the real check and balance to state power. We can therefore see that the real motivation for the consolidation of smaller states into larger states, the increasing number of trade agreements and treaties between states and, furthermore, the recent hullaballoo about corporate tax avoidance is to restrict choice amongst the taxed population. If such restriction is achieved, people will stay put in their home state and government can subject them to ever increasing restrictions, safe in the knowledge that nowhere else can offer anything better. The logical end – a vast, monolithic world state – would have absolutely no check whatsoever on its expanding powers, short of people’s abilities to escape into outer space. Moreover, sealing the border of a small state is markedly more difficult than sealing the border of a larger state. Smaller states are more reliant upon foreign trade for resources and the migration of intellectuals, entrepreneurs, businessmen and cultural or sporting icons, and so they have to permit a relatively porous border. A larger state, however, has much of these things home grown already and thus is able to invoke more impenetrable border restrictions, safe in the knowledge that it is not providing an overwhelming degree of disruption to its economy. And, of course, in a smaller state people are physically closer to the border so that even relatively impoverished people who wished to escape to a neighbouring state could brave the journey by foot in a few days. It would be much harder, however, for the same type of individual to escape the US to Mexico from, say, Kansas. Fourth, a larger state possesses a greater number of domestic industries compared to a smaller state. This creates both the incentive and the wherewithal to impose a greater number of protective trade restrictions and tariffs. If a smaller state, however, specialises in, say, two or three industries but does not have a steel industry it is clear that any protective tariff imposed on imported steel would be protecting absolutely nothing and everybody within the state is simply having to pay higher prices for steel. Moreover, as we noted, smaller states are more reliant upon foreign trade in the first place and any the effects of any restriction in that regard are likely to be greatly magnified compared to the same in a larger state. Fifth, all else being equal, a larger state comprises a greater proportion of the worldwide economy than a smaller state. Correspondingly, there will be a wider acceptance of its government-issued, paper currency. Larger states therefore have a much greater ability to inflate their currencies to support government spending and, moreover, export this inflation abroad. It is no secret that the status of the US dollar as the world’s reserve currency, where everyone has a willingness to buy and hold dollars, has permitted a perpetual inflation of the dollar for decades, the eventual disastrous effects of which are only just beginning to be felt. A smaller state, however, whose currency has a smaller circle of acceptance and is barely used in international trade, is more likely to simply inflate itself into oblivion and has to enact price controls and capital controls much sooner than the larger state. Thus the chickens come home to roost much quicker in a smaller state, much like we are seeing in present day Argentina. And finally, in smaller states where the population is more homogenous in culture and outlook, it is much more difficult to set up a welfare state and to invoke the attitude that state welfare is permissible. In the first place, the lack of contrasting demographics provides little excuse for racial or cultural differences and, moreover, differences in the level of education to be used as a justification for alleged inequalities that can be somehow ameliorated by state welfare. In a larger state, however, it is possible to drill into the minds of welfare recipients a sense of entitlement resulting from their alleged misfortune while at the same time encouraging a sense of guilt and obligation in the minds of those who happen to be better off. Second, in a large state the disparate groups and populations, some of whom are wholly net tax payers and others wholly net tax receivers, are distant and unfamiliar to each other. The social security cheque of a poor, blue collar, unemployed man in urban Detroit, for example, may well be written by a middle class lawyer residing in Westchester. In other words, if you are a tax payer your money simply vanishes into a pot and you never get to see first-hand the nature and quality of the people who benefit from it, nor do the latter – probably residing on the other side of the continent with different coloured skin, a different language and different social and cultural practices which are entirely alien from yours – ever get to see you. Thus, with such an impersonal and faceless affair, there is little incentive for anyone to care about sponging off anyone else, nor is there much cause for tax payers to become outraged at who is sponging off of them. In a smaller state, however, the person writing your welfare cheque may quite easily be your neighbour, from whom there is nothing much to distinguish you in terms of background and education that should cause you to be any more “disadvantaged” than he is. Therefore, in a smaller state, it becomes much easier to determine which individuals are productive and generating wealth on the one hand, and which individuals are unproductive and acting as a leech upon everyone else on the other. Both the willingness to accept and to fund state welfare is therefore kept firmly in check in a smaller state.

To reiterate, none of this means to say that the theoretical debate between minarchism and anarchism does not matter. However, we can also see how the conduciveness of smaller states towards liberty and larger states towards tyranny goes some way towards eliminating the schism between minarchists and anarchists. The government of a smaller state is closer to the population not only geographically but also in terms of its values and cultural outlook. The result of this is that the crucial issue of the consent of the governed is at least partially, if never perfectly, resolved by a small state. Any government action is likely to be tailored to the specific needs and values of the smaller, local population as opposed to the one-size-fits-all solutions imposed by larger states. A degree of empathy and understanding between the governors and the governed is far more likely in a smaller state as opposed to when the government draws to its so-called “representatives” from distant and unfamiliar lands in a capital city that is hundreds, if not thousands of miles away. There is at least, therefore, a greater chance that the government is working for you and with you, even if you may disagree with some of its policies and have to obey certain edicts which you would prefer to disobey. Moreover, in a smaller state with a smaller population a single vote out of, say, a few hundred thousand people carries more weight than a single, drop-in-the-ocean vote in a population of tens of millions. And if the world as a whole consisted of thousands of small states and free cities with relatively small populations what would be created is a “patchwork quilt” of independent territories, each with their own social, political, cultural, economic, and religious idiosyncrasies, to the extent that everyone would be able to find somewhere that is broadly conducive to his own needs and values. Some states or cities, for example, could be relatively liberal with, for example, legalised drug use, and/or permissibility of homosexuality, whereas others could be conservative and/or religious and permitting the expression of only traditional cultural values. Moreover, although the industry of each state would necessarily have to specialise in what was possible in terms of the geography, climate and access to raw materials, each independent state would seek to pursue excellence in academia, art, culture, and sport on a much more local scale than is possible today in larger states. Therefore, states, and cities in particular, would once again become seats of great learning and culture as opposed to the havens of poverty and crime that many of them are today.

At the heart of all of this is the right to secession – the freedom of territories, cities, districts and the individual property owner, to break away from one state, join another, or even to go it alone entirely (indeed, the possibility of individual property owners seceding is one that Mises entertains in Liberalism, dismissing it only out of impracticality). In the first place it is, of course, the recognition of the right to secede that will shatter the behemoth state into smaller states. The prospects of a move towards this are not at all bad. Secessionist movements are beginning to show signs of success in various parts of the world, notably in Scotland where, in spite of a failed independence referendum last year, voters awarded 56 out of a possible 59 UK parliamentary seats to the Scottish Nationalist Party in May of this year. The US state of Texas passed a bill in June of this year that will see the opening of its own bullion depository in order to provide some kind of independence from the inflationary zest of the Federal Reserve. Indeed, given that the imperialism of the West is founded upon the hegemony of the dollar, seceding from this empire of paper money may be both the most symbolic and practically effective rejection of the large state. Second, however, with the right of secession comes the strongest chance of reconciliation between the theoretical schools of anarchism and minarchism. For if there is a right to secession, states are little more than a collection of property owners coming together voluntarily to provide for a common purpose in a way that suits those particular property owners. If these property owners could leave and take their property with them if they so desired the issue of consent – the preoccupation of anarchists – is overcome. However, in order to prevent secessionist fervour, the state – the group of property owners as a whole – cannot become overly burdensome or invasive towards particular property owners lest they leave. It would also be likely that too much socialisation and the implication of a welfare state would lead to weakening competitiveness with neighbouring states in which fewer areas were socialised. Thus, the scope of the state within a particular territory – the preoccupation of minarchists – is likewise resolved. Moreover, the threat of secession and the competition with other states would cause the government of a particular state to behave more like a business, seeking to attract “customers” to join its territory, so that even if certain services were socialised they would have to be run in a competitive manner because endless tax funding would simply never be a possibility as it is in a large state. There comes a point, therefore, where the distinction between the state as a compulsory, aggressive institution on the one hand, and a purely voluntary and privately endorsed entity on the other begins to dissolve. In short, whichever way you look at it the only way to achieve either the absence of a state desired by anarchists or a small state desired by minarchists is to oppose, resolutely and emphatically, the large, overarching state.

It is clear that this understanding can have important ramifications for the libertarian movement as a whole. While the theoretical debate between minarchism and anarchism will (and, in the opinion of this author) should remain, when it comes to decisive action towards achieving a free world we can see that pressing for the eradication of large states and their dissolution into smaller states may be a unifying way forward. Moreover, although libertarians should, at heart, remain fully radical and uncompromising in their detestation of the state, we can see that the less revolutionary stance proposed here is likely to be more acceptable to a public which still views at least some kind of state as a necessity. Libertarians would be able demonstrate to the public that the large, monolithic state is inimical to their prosperity while at the same time avoiding all of the “who will build the roads” and “who will catch the bad guys?” questions, discussion of which tends to alienate people from the libertarian cause. However, unlike the advocacy of other “half-way” measures to reduce state power (such as so-called  tax reform and school vouchers), which simply rearrange the deck chairs on the sinking ship of the state, pressing for the breakup of large states is a positive move towards eliminating the state entirely. There is, therefore, nothing half-hearted about this approach. Once we begin to put the world on the path to breaking up large states, not only will the worst excesses of state oppression be vanquished, but the achievement of restricting the geographical size of states may, in and of itself, also achieve the final libertarian end – either minimal “night watchman states or, a complete, de facto eradication of the state as an aggressive institution.

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“Ending Useless Lives” – A Critique of Matthew Parris

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The UK Government’s Assisted Dying Bill, which was defeated in the House of Commons in September of this year, was, rightly, a controversial one. The question of assisted suicide, in order to prevent the onset of pain or the so-called “loss of dignity” from a degenerative disease or old age, is disputed amongst libertarians too, with some asserting that if you own your body and your life you should be able to do whatever you want with it, whereas others claim that anything that seeks the destruction or termination of one’s life is antithetical to freedom.

We are not, of course, hoping to resolve this kind of debate here. Rather, the focus of this essay is an interesting article that appeared recently in The Spectator authored by Matthew Parris entitled “Some day soon we’ll all accept that useless lives should be ended” and subtitled “If the law does not lead, it will follow — at root the reason is Darwinian”. Parris states forthrightly what he believes will be a result of any assisted dying law, a result that most people do not wish to countenance – that, one day, we will encourage and/or require people to end their lives. Unwittingly, however, Parris unveils not the dangers of any assisting dying bill at all. Rather, it is the dangers of the culture of statism in which such a law would be enacted, a culture of government permissibility, prohibition and encouragement which has seeped into our psyche that rejects any difference between law and positive morality.

The argument (deployed by opponents of assisted dying) is that licensing assisted dying is to smile upon the practice. The legal change would act as a cultural signal that society now approves. This would in time lead to pressure on those who might not otherwise have contemplated ending their lives, to hasten their own demise — so as ‘not to be a burden’ on others. One day (say the faith squad) it could even become the norm.

I am sure they’re right. We who may argue for ‘permissive’ legislation must have the intellectual honesty to admit that the ending of a legal prohibition does act as a social signal. In vain do we protest that ‘nobody is forcing’ upon anybody else (say) same-sex marriage, or the cashing in of pension pots, or a quickie divorce, or the possession of marijuana. Indeed not. Nobody is forcing these delights upon others, but humans are social animals and one of the ways a society signals its attitudes is by criminalising behaviour it thinks very harmful, and decriminalising behaviour towards which its attitude has softened. [Emphasis added]

It is clear from this that Parris views government laws and the will of “society” as harmonious – that government restricts what “society” does not want and permits what “society” does want. There is, therefore, in Parris’s view a union between government and people, that we are all one. It is clear also that Parris views “government” and “society” as primacies – any rights and freedoms we enjoy exist because society and government have been kind enough to pass “permissive” legislation so that we can enjoy them. “Society”, however, is not some mysterious entity with its own cognitive ability and even if it was there is no reason for the government to be in step with anything “society” decides. The prevailing attitudes, opinions and points of view on certain moral subjects originate in the minds of individuals in disagreement with the points of view of other individuals. After all, if everyone was in agreement the alleged immoral act would never occur and hence laws against it would be pointless. Never does Parris consider that the law is simply being used by one set of persons to curtail the freedom of others. Never does it occur to him that the law’s proper scope is to simply prevent invasive violence between individuals and not to confer any moral propriety on anything. Rights and freedoms originate with individual people and do not require the government to permit them. They require a total absence of government, not any piece of government paper with a Royal assent or presidential signature in order to bring them about.

The stoning to death of women taken in adultery under sharia law is undoubtedly the signal of a cultural attitude towards adultery. Were you to advocate the abolition of this punishment, Islamic moral conservatives would be right to warn that the move would both indicate and encourage a softening of public moral disapproval of female adultery. Likewise, the progressive removal of legal restraints on homosexuality has been both consequence and cause of an increasingly sympathetic attitude towards gays. It is futile to deny this

Assisted dying is not a novel desire, not a strange new way of thinking. As a moral impulse, the idea that one might hasten one’s end because one gained no pleasure from living and one had become a burden on friends, family and the state has been with us since the dawn of man. You will find it in literature right down the ages. In your own lifetime you will have heard it expressed by others of your acquaintance. The impulse, though, has usually been discouraged — resisted as an unworthy attitude to life — and this cultural disapproval is reflected in law.

To alter the law in a permissive way would therefore be pushing (as it were) at an open door: legitimising a moral argument that has always been present (or latent) among humans. I would have every expectation that, given the extra push, the habit would grow.

All of this would be true only if one accepts the view that law either is or should be, by its presence or absence, a promoter of positive morality. As libertarians we reject this view. Perhaps stoning adulterous women and criminalising homosexual behaviour was rejected not to signal any cultural approval but merely because what people do to each other in their own bedrooms is no business of the state nor of anyone else? Legalising them simply means that legitimised violence cannot be used to prevent them by people who have no business interfering in the lives of others. There is no reason to suppose that legalisation, as well as having been a consequence of relaxed social attitudes towards certain acts, should be regarded as a continuing cause of this tolerance. Everyone is still free to disapprove of such acts and to disassociate themselves from them if they so wish. Nor is there any reason why legalisation should transform simple permissiveness into encouragement or promotion. Adultery may be legal today but it is not culturally acceptable to cheat on one’s partner, and such acts are met with indignation, disapproval and rebuke. Where there has, on the other hand, been a continuing social relaxation to acts such as homosexual behaviour it is because a greater exposure to these acts that legalisation permits has caused people to realise that such acts are probably not as horrific as they might have once thought from when all they knew about them was disseminated from the propaganda of the government and moral zealots. If, on the other hand, murder was to be legalised it is likely that such exposure would cause people to still regard this as horrific and abominable. Legalisation is not, therefore, necessarily a direct cause of any social attitude towards anything.

And so it must — indeed, in the end, will: and if it does not lead, the law will follow. At root the reason is Darwinian. Tribes that handicap themselves will not prosper. As medical science advances, the cost of prolonging human life way past human usefulness will impose an ever heavier burden on the community for an ever longer proportion of its members’ lives. Already we are keeping people alive in a near-vegetative state. The human and financial resources necessary will mean that an ever greater weight will fall upon the shoulders of the diminishing proportion of the population still productive. Like socialist economics, this will place a handicap on our tribe. Already the cost of medical provision in Britain eats into our economic competitiveness against less socially generous nations.

This does not mean an end to social generosity. It does not mean an end to economically unproductive state spending. These are social goods that we value for non-economic reasons, and should. But the value we place on them is not potentially infinite. They have their price. Life itself has its price. As costs rise, there will be a point at which our culture (and any culture) will begin to call for a restraining hand. I believe that when it comes to the cost of keeping very enfeebled people alive when life has become wretched for them, we’re close to that point.

Parris seems to have forgotten that “tribes” are only handicapped because they existed in a pre-capitalist era where they had to compete with either each other or with other tribes for a finite number of resources. Capitalist economies, however, allow every person to take their place in the division of labour and all are better off from the resulting manifold increase in productivity. More alarmingly, however, Parris seems to think that all values and ends are collectively held and desired. What is “useful” as well as the “costs” and “prices” of attaining these ends are all decided by the “culture” or by “society”. It is absolutely true that all ends have their price but the only reason these ends are priced by “society” is because the government has taken upon itself to socialise welfare and medical care. People only become a burden to everyone else because they are forced to pay for the sustenance of other people’s lives through the conduit of the state which cannot and will not ever do so in the most cost effective and sustainable way. Indeed, it is government that creates the problem of hordes of sick and dying individuals by encouraging demand through the provision healthcare and welfare that is either free or vastly reduced in cost at the point of need.

Parris refers to “socialist economics” as harming “the tribe” yet he doesn’t seem to realise that the tribal mentality that he adopts is precisely a symptom of socialisation and collectivism. Socialist economics doesn’t harm “the tribe”, which in Parris’s case seems to mean his country the UK, a country that must, for some reason Parris does not explain, remain “economically competitive” with other countries. Rather, socialist economics creates tribes in the first place, with the tribal leaders – the government, the heads of planning, etc. – deciding what is important ahead of everyone else. The value of “economic competitiveness” ahead of other ends would be valued by them, the leaders, and forced upon everyone else, with the “useless lives” sacrificed for that end. Parris makes a mistake typical of collectivist thinking which is to regard society, or man’s propensity to be a “social animal”, as requiring each human to value the same ends or to work towards the same goals. This is not true. Society exists because humans realise that they can pursue their own ends (that differ from everyone else’s ends) peacefully and more productively through the division of labour and voluntary trade. The beauty of this system lies in the fact that everyone can coexist peacefully and harmoniously while pursuing their own material, self-interest (and indeed can accomplish their individual goals to a much greater extent). It is utterly false to view society as a vast machine in which individual people comprise nothing more than metaphorical cogs and pistons, all fitting together and moving along to produce the same output. If, therefore, socialisation was ended, how much should be spent on medical care and on other so-called “economically unproductive” ends would be a matter for each individual person with their own individual means, or with the voluntary assistance of other people. They would willingly sacrifice their individual “economic competitiveness” and direct resources to providing for their care in old age at a point that was desirable to them without forcibly burdening everyone else.

I don’t even say we should look more benignly upon the termination of life when life is fruitless. I say we will. We may not be aware that our moral attitudes are being driven by the Darwinian struggle for survival, but in part they will be. And just as we feel ourselves looking more sympathetically at those who wish to end it all, so we shall be (unconsciously) looking at ourselves in the same way. The stigma will fade, and in its place will come a new description of selfishness, according to which it may be thought selfish of some individuals (including potentially ourselves) to want to carry on.

We admire Captain Oates for walking out of his tent and into his death when he judged his enfeeblement was threatening his colleagues’ chances of survival. That is an extreme case, but it illustrates a moral impulse that I expect to grow — and for the same reasons as it occurred to Oates: the good of our fellow men.

I do not therefore need to campaign for assisted dying. I do not need (and wouldn’t want) to persuade anybody that the time has come for them to end their lives. I don’t need to shout from the rooftops that suicide can be a fine and noble thing, or rail against the ever growing cost of medical care in the final, prolonged phase of people’s lives. My opinions and my voice are incidental. This is a social impulse which will grow, nourished by forces larger than all of us. I don’t exhort. I predict.

In these closing paragraphs Parris makes clear that he is not advocating the ending of life at some point that it is deemed socially useless. Rather, he makes it clear that it is an inevitable result of a Darwinian struggle for survival. This case may be probable, or even certain, under current conditions. The problem, however, is that Parris’s analysis once again misses the elephant in the room. Captain Oates only walked out of his tent because the resources available to him and his “fellow men” were finite – his “enfeeblement” threatened the survival of his colleagues because they lacked the ability to produce more resources. Government socialisation of welfare and medical resources replicates the predicament of Captain Oates across society as a whole, stifling production, and increasing demand of what becomes a dwindling supply of resources at ever spiralling costs. Moreover, statism and socialisation entrenches in our psyche the “common good”, the willingness to sacrifice the individual to upon the altar of the collective, a willingness which has only become necessary precisely as a result of the ineptitude of collectivism. So although we may have some, limited agreement with Parris’s “prediction” we can, as libertarians, respond emphatically that none of it is necessary if one simply puts an end to the mantle of the state. Had Parris abandoned his collectivist mind set he might have realised this.

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“Capitalism – A Treatise on Economics” by George Reisman – A Review

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It is not often that the present author is moved to review any particular publication by a specific author, let alone one that was published nearly twenty years ago. However, Capitalism by George Reisman, at more than one thousand pages long, is the first major treatise that is at least related to the “Austrian” tradition since the publication of Murray N Rothbard’s Man, Economy and State in 1962.

Although Reisman is a contemporary of Rothbard and a fellow student of Ludwig von Mises, Reisman’s approach to economics is markedly different from either. Indeed, armed solely with knowledge of his pedigree one might be forgiven for wondering why more attention has not been directed towards to Reisman’s work from within “Austrian” circles. It is only after having read this treatise that one can see why. Although Reisman claims that Mises is his primary intellectual influence, there is very little of this treatise that could be regarded as distinctly Misesian. Rather, Reisman’s direct influences are the classical economists (especially Smith, Ricardo and J S Mill, upon whom he relies for support to an extent far beyond his reliance upon Mises) and Ayn Rand. Reisman specifically rejects the categorisation of economics as the science of human action, and prefers, instead, to regard it as “the science that studies the production of wealth under the division of labour”. He therefore willingly abandons any analysis of individual values, means, ends, and choices, and restores economic theory to the study of holistic aggregates; indeed we might say that his definition of economics, which views wealth as an entity possessing some kind of objectively determinable magnitude, demands such a restriction. Reisman positions the businessman, rather than the consumer, as the centre of the economic system, stating that consumers (as a whole) are largely dependent upon businessmen (as a whole) rather than vice versa. While, according to Reisman, consumers provide the direction of economic activity (i.e. the precise direction of resources to fulfilling specific industries), businessmen and capitalists are responsible for its extent, i.e. the limits of saving and capital investment. In other words, it is the decisions of capitalists that determine the extent of “economic progress” (a term Reisman prefers to “economic growth”) rather than those of consumers. A corollary of this is that production and producers are reinstated as the keystones of economic activity rather than consumption and consumers (there is at least an implication in parts of the treatise that production is good and proper whereas consumption is bad and wasteful, although this is much muted compared to the same in Reisman’s classical influences). Furthermore, it is clear that Reisman does not regard his approach to economics as a wertfrei science and, instead, believes his economic theory to be a rigorous promoter and defender of the capitalist system – an attitude that cannot be avoided by his definition of economics as the study of the accumulation of wealth under the division of labour, a division that he says is only possible under private ownership of the means of production. Thus, in Reisman’s world, a discussion of economics is a discussion of capitalism which, presumably, explains the book’s title.

What can we say about Reisman’s approach? Without beating about the bush we must state at the outset that Reisman, who is thoroughly acquainted with “Austrian” economics, has jettisoned a tremendous degree of sound theoretical understanding from the science. Although Reisman, who self-identifies as an “Austro-classical” economist, endeavours to restore to economics many of the (in his opinion) sound doctrines of the classical economists that were allegedly rejected following the discovery of the law of marginal utility and the backlash against Marxism, we must conclude that the result is something of a retrogression rather than a synthesis of two, hitherto quite disparate, schools of thought. In Reisman’s world, the achievement of all ends and their associated costs never advance deeper than the objective measurement of exchanges for money. He never advances any exposition of individual ends and subjective costs (indeed, he explicitly rejects the doctrine of opportunity cost). Hence the entire purpose of the economic system as serving the needs of individuals and the types of decisions that individuals must make in order to achieve these ends is missing, subsumed by the supposedly limitless need of man as a whole to accumulate “wealth” in perpetuity. In other words, Reisman’s restoration of the primacy of the production of “wealth” overlooks the fact that all production is ultimately aimed at providing for consumers and that it is the ends of consumers to which the economic system is geared. It is perfectly consistent to state, as does the wertfrei “Austrian” school, that the purpose of all economic endeavour is to provide for consumption while on the other hand remaining firm that the means of achieving this consumption can only be served by increased production. Therefore, while we can hold that the desire for consumption is the ultimate cause of economic progress, we can also state that production is the proximate cause. Thus, while Reisman’s categorisation of economic theories under the headings of either “productionism” or “consumptionism” – the former of which involves the promotion and encouragement of increased production as the means towards economic progress, the latter the promotion and encouragement of increased consumption – provides an instant and convincing cognitive aid, it obscures the clarity afforded by this insight of the “Austrian” school.

Furthermore, Reisman’s repositioning of the capitalist/businessman as the driver of economic progress relies upon capitalists providing the bulk of investment funds, i.e. that it is the consumption/saving decisions primarily of businessmen that determines the extent of economic progress. He argues that the wages of labourers do not provide a significant source of investment funds and are usually consumed either immediately or are saved in order to purchase durable consumer goods such as housing or automobiles. Any investment saving that labourers do happen to undertake is likely to be wholly disinvested at retirement, thus netting out the saving of younger generations. However, there is no reason for Reisman to think that this this must be the case. It is just as possible for investment funds to come from the savings of everyday individuals that are then lent to businessmen for them to deploy in their enterprises via a conduit such as bank savings accounts (and such a view would greatly undermine any opinion that capitalism keeps the masses in servitude as wage labour). The distinctive role of the businessman is that he provides entrepreneurial talent in order to generate economic progress by directing those saved funds to where they are most urgently desired by consumers. Yet Reisman’s treatise lacks any extensive theory of entrepreneurship and only passively recognises the need for superior decision-making in order to fulfil the ends of consumers. This lacuna in Reisman’s theory means that in order to position the businessman as the driver of economic progress he has to paint him as the primary provider of investment funds. This contrasts greatly with Reisman’s mentor, Mises, who makes entrepreneurship a hallmark of Human Action, thus giving us an insight into the economic significance of the businessman that extends far beyond the fact that he simply didn’t consume his wealth. (Some of Reisman’s views on what determines an individual’s consumption/investment preferences, which inform his theory here, are also incorrect and we will explore these below). In any case, however, Reisman seems to support his theory through a blurring of economic categories, such as labourers, consumers, capitalists, etc. (something which, irritatingly, is done all too frequently). In reality, all individual people in the economy participate in different categories at different times – a man is clearly a labourer when he goes to work, a consumer when he spends his wages in the shops, and a saver when he buys a corporate bond. However, when we are discussing, for the purposes of conceptual clarity, the roles of individuals in these economic categories, we isolate those specific roles from other categories and thus we always talk of labourers qua labourers and consumers qua consumers, etc. So even if it may happen be true that the particular people who are businessmen are responsible for the greater part of saving and investment, businessmen are consumers too and considering them as consumers qua consumers it is their decision to refuse to consume their wealth today in favour of accumulating greater wealth for consumption tomorrow that provides the source of investment funds. It is therefore true to state that it is the choices of consumers who determine both the direction and extent of economic progress. Moreover, as Mises also recognises, any consumer who is currently a wage earner can transform himself into a businessman, entrepreneur or capitalist by saving and investing his wages (while, equally and oppositely of course, any businessman who decides to consume his fortune may end up as a wage earner).

Finally, it is one thing to state that the preoccupation of the economic activity of any one (or even most) individuals may be with the accumulation and augmentation of their own wealth. But it does not follow from this that the science of economics itself concerns the accumulation of wealth. Animals preoccupy themselves with the need to attain food and shelter but this does not mean that the focus of zoology is with the achievement of these things.

Examining Reisman’s treatise on its own, non-wertfrei terms as a rigorous defence of the capitalist system, much of its earlier part is a detailed offence against the fallacies of socialism, collectivism, interventionism and environmentalism (and later, Keynesianism and inflationism). These devastating, if often heavy handed, critiques are likely to be viewed as by Austro-libertarians as Reisman’s greatest achievement in this work, even if some of it was previously published as The Government Against the Economy. A specific and lengthy chapter is possibly the most passionate assault against the ecology movement, a chapter that could easily be expanded and published as a separate treatise (Reisman’s stress of the anti-human zeal of environmentalism resonates with that of environmentalists, such as former Greenpeace Canada President Patrick Moore, who have become disillusioned with the movement). Reisman’s explanation of various forms of government intervention, such as price fixing, with reference to specific notable examples such as the oil recession of the 1970s, in which he traces out all of the effects (and effects of alternatives to) government meddling have rarely been matched. Yet much of the remainder of Reisman’s exposition does not in fact read as a promotion or a defence of the capitalist system; rather it is more akin to an aggregative, accountancy-laden explanation of what the capitalist system does, much like a description of some giant machine that swallows up inputs measured in numbers and churns out some kind of output, also measured in numbers. Reisman categorises an endeavour as productive according to its ability to earn money voluntarily through exchange. Hence all government functions, relying upon taxation, must necessarily be classified as consumption and not production. In other words, government can never produce and must always be a leech on the genuinely productive, capitalist system. Moreover, his excellent critique of socialism recognises that socialism must entail tyranny and a replacement of the ends sought by individuals with the ends sought by leaders. However, Reisman’s aggregative, accountancy approach never builds upon this insight. In the depths of the latter half of the treatise one almost forgets any connection between these accounting entries and how the capitalist economy serves the needs of individual people. One of Reisman’s stated aims in the treatise is to show how a proper understanding of the capitalist system should prevent one from feeling any kind of “alienation” from or subjugation by the capitalist system – something which Reisman comes closest to achieving through his analysis of the division of labour. Yet in the main it would appear that the Mises-Rothbard approach of detailing the economy as a network of bilateral, voluntary exchanges between individual people striving to meet their own needs through voluntary co-operation (and how these disparate and often conflicting goals and purposes nevertheless mesh into a harmonious, productive society) is much more conducive to achieving this than is Reisman’s aggregative, accountancy method. While it is true that the ability of capitalism to manifestly increase the standard of living and the degree of material wealth lends it a tremendous amount of moral weight, we can suggest here without too much elaboration that any rigorous defence of capitalism and, moreover, freedom can proceed only by focussing on the primacy of the needs of each individual person, not all of which can be measured or attained though objectively viewable exchanges for money. This omission in Reisman’s work also weakens the distinctly economic flavour of this treatise, as individual choices, desires, wants, decisions and actions do not seem to matter.

Turning now to some of Reisman’s theoretical contributions to the science of economics, there are two that stand out in particular. The first is his attempted demolition of the “conceptual framework” of the Marxist exploitation theory by asserting the primacy of profit rather than of wages. In Reisman’s view, critics of Marxism, including Böhm-Bawerk, have accepted the categorisation, originating with Adam Smith, of profits paid to capitalists as deductions from wages, and have sought explanations in order to justify this deduction. Reisman, however, asserts that wages, paid to labourers, are, in fact, a deduction from profits. If profits are calculated by subtracting business costs from business revenue, it is clear that if a person undertakes an enterprise to achieve, say, 100 units of revenue then every monetary outlay he expends in order to achieve that 100 units of revenue must count as a deduction from it. The fewer costs he has the more profit he is left with. Thus it is profits that represent the primary economic income, not wages. It is conceivable for the economic system to have profits but not wages in the event that every individual person operated as a sole trader and employed no other individuals. If, however, a businessman hires labourers to assist in his enterprise, the wages he must pay to these workers for their assistance are deducted from the ultimate sales revenues. Therefore, according to Reisman, wages only appear in the economic system on account of the help that other people provide to a businessman’s enterprise, and their help stakes a claim on his revenue. Thus it is wages that are deducted from profits, not vice-versa.

Whatever the merits of this view we must conclude that, to the dyed-in-the-wool Marxist, it is likely to be beside the point. The source of contention in the exploitation theory is that the businessman doesn’t do anything and simply leeches off the productivity of the worker; in other words by hiring labourers the businessman simply abdicates any participation in the act of production yet still gains an income. Reisman himself provides the answer to this by pointing out that labour is not the only source of productivity in a division-of-labour society and that it is, in fact, decision making, risk-taking, management and oversight that are also essential – in other words, entrepreneurship. And yet, as we noted, any extensive treatment of entrepreneurship is precisely what is missing from Reisman’s theory. Therefore, it must be submitted that an understanding of entrepreneurial profit and loss and the insulation of the labourer from business risk coupled with the time preference theory of interest provides a more effective demolition of Marxism than the primacy of profit theory which, if correct, provides only additional ammunition for it.

This brings us to Reisman’s next theoretical contribution which is his net-consumption/net-investment theory of aggregate profits, profits which he tries to explain in an environment of an unchanging supply and flow of money. The attempt to explain profit in terms of physical goods is relatively straightforward. Goods, of course, can increase or decrease and thus there can be absolutely more (profits) or fewer (losses) of them across society as a whole. We can also understand clearly, across the time structure of production, how the consumption of a smaller quantity of physical goods can be foregone today in order to produce a larger quantity of goods tomorrow. This is not so when it comes to accounting for profits and losses in terms of money which is assumed to be fixed in supply and flow. For every transfer of money that represents a credit to ones businessman’s income must show up as a corresponding debit to another businessman’s costs. Hence, while some individual businesses would earn profits and others would suffer losses, all profits and losses across the economy as a whole would net out and hence any question of aggregate profit would be impossible. The only method of solving this conundrum is to somehow, on the societal balance sheet, create a credit entry to income/equity without a corresponding debit entry to costs. It is the explanation of how this is possible that Reisman sets out to achieve.

The first element of aggregate profits – “net consumption” – derives from the fact that business revenues from consumption spending by labourers (and, as we noted, Reisman categorises all spending by labourers as consumption spending) shows up also as a business cost in the form of wage payments. Therefore, revenue and cost cancel each other out on the societal income statement. Similarly, business to business spending will be counted as both an equal and opposite revenue and cost and will net to zero. However, “the payment of dividends by corporations, the draw of funds by partners and proprietors from their firms, and the payment of interest by business firms” (which Reisman regards as “transfers”) to business owners, which provide the latter with a source of consumption spending, does not show up as a business cost yet does, once spent, show up as a business revenue. Thus the rate of profit is determined solely by the desire of the capitalists to consume. This element of profit has, Reisman claims, the ability of providing continued aggregate profits in an environment of unchanging money. For example, if the volume of spending is 1000 units of money each period, business costs could be 900 while business revenues could be 1000 and profits 100 in each and every period. (Reisman uses similar reasoning to explain how the rate of profit is increased by taxation as all taxation is consumption spending). The second element, “net investment”, derives from the fact that business spending on assets to produce business revenue are capitalised as assets and only later depreciated incrementally as a business cost. Thus, in an environment where the volume of spending is the same, business revenue exceeds business cost. For example, if 100 units of money are expended on capital assets, 800 units are spent on business costs, and there are 1000 units of business revenue, profits would be 200 as the 100 units spend on capital assets are not charged as a cost. Reisman believes that net investment provides a finite outlet for aggregate profit because, eventually, depreciation charges from assets previously capitalised will equal the value of new assets capitalised. For example, if 100 units of monetary spending on assets per year are capitalised and then depreciated at an uncompounded, annual rate of 10%, depreciation charges will be 10 units in year one, 20 units in year two, 30 units in year three, and so on until, in year 10, depreciation charges will exactly equal the 100 units of additional investment and so net-investment will provide no source of aggregate profit in that year. Thus, Reisman believes, only net consumption is capable of providing continuous, aggregate profits period after period. Net consumption and net investment are, however, joined at the hip. Reduced net consumption provides increasing funds for net investment to be capitalised on the balance sheet and charged as business costs only at increasingly remote points in the future.

What can we say about this theory? It should not be surprising to “Austrians” that Reisman’s theory is based upon net-consumption and net-investment as it those elements that are determined by the “Austrian” theory of time preference, which affects the rate of interest. (What Reisman refers to as “profit” is what most “Austrians” would refer to as “interest” – Reisman offers no explicit distinction between entrepreneurial profit and loss on the one hand and what “Austrians” would regard as interest on the other). Yet Reisman regards his theory as standing in opposition to the time preference theory and, moreover, the older productivity theory of interest. However, Reisman’s approach, characterised as simply a description of accountancy practices and the summation of money flows, does not challenge the time preference theory at all. The primary question of profit and interest that is answered by this latter theory is why do businessmen not impute the full value of the final product to the factors of production. In other words, why, even after businessmen are compensated for their managerial or oversight activities as a factor of production, is there always a further residual surplus that is not eliminated by competitive bidding amongst entrepreneurs? Why is there, to use Reisman’s terminology, a “going rate of profit” at all? The net-consumption/net-investment theory, while explaining that rises in net consumption will increase the rate of profit while reductions in them will lower it, only really explains how, from an accounting point of view, profits are possible. Reisman offers no extended treatment of the motivations of capitalists in paying (and of labourers in accepting) a sum lower than the total of business revenues and thus it is difficult to regard this as a distinctly economic theory. A more convincing explanation of his theory would detail how, with decreasing time preference, more funds are advanced to factors of production yielding revenue in the future, thus diminishing net consumption and the rate of profit, while these expenditures will be capitalised at increasingly higher amounts, depending on the time period when they come to fruition, relative to the ultimate business revenue that is earned. Thus Reisman’s accountancy-laden approach would, in this way, be fully reconciled with the “Austrian” approach to profit, or, rather, to what “Austrians” would call interest.

When Reisman does address the motivations that determine net-consumption and net-investment he does so erroneously. Reisman defines time preference as the determinant of “the proportions in which people devote their income and wealth to present consumption versus provision for the future.” It is Reisman’s link between this posited desire to provide for the future and net-investment that causes him to declare that net investment can provide only a limited contribution to net profit. To quote: “As capital and savings accumulate relative to income, the need and desire of people to increase their accumulated capital and savings still further relative to their income diminishes, while their desire to consume their income correspondingly increases”. In other words, the more saving and capital people possess the more they have provided for the future and thus productive expenditure will fall and consumption will rise, choking off net investment in the form of further additions to the asset side of the balance sheet. Thus depreciation charges begin to equalise new investments and aggregate profits from net-investment begin to fall. This view, however, is mistaken. Time preference has nothing to do with the desire of people to provide for the future. The need to provide for the future is always a present end just like any other and could be achieved by plain saving rather than investment. Time preference, rather, is the rate at which individuals prefer a larger quantity of goods available at some point in the future ahead of a smaller quantity of goods available today. It is perfectly possible for people to continue to invest sums of capital that will not produce consumer goods for well after they are deceased. Indeed, this is precisely why people have inheritances to bequeath. Many of the buildings, factories and infrastructure we have today were created not in our own lifetimes but were handed down to us from past generations. And it is further possible that capital accumulation and technological progress, which Reisman himself stresses enhances the ability to produce capital goods, will enable the production of capital goods that last further and further into the future. People would not even need to create capital goods that last so long with the purpose that they do so – in other words they could be perfectly limited in their own time horizons and yet still produce capital goods that yield a product well after the elapse of this time horizon. Let’s say, for example, that the current rate of time preference means that the produce from all assets appearing after thirty years hence is fully discounted to zero. In other words, only what the assets can produce in the next thirty years is valuable to present persons. If a capital good was created that could yield produce for sixty years, after the elapse of each year, another year’s discounted produce would be capitalised as this year is drawn into the thirty year time horizon. Therefore, such assets will provide a continued source of credits to business equity (and, thus, profits) without corresponding business costs. This is precisely the case with some of the most valuable patches of urban land which, for all intents and purposes, will go on producing well beyond the lifetimes and time horizons of any living person. Thus there is no reason for net-investment to be so limited in its contribution to aggregate profits in the environment of unchanging money. Moreover, we can see in this way how accumulating, aggregate profits that are capitalised for longer and longer periods is the hallmark of an economically progressing society – one where more and more capital is invested for longer – while the opposite, aggregate losses, represents retrogression through capital consumption.

Finally, as we noted above, there is no reason to discount saving by labourers a source of investment funds. This would divert spending from business revenue as the funds would be lent to businesses who would then spend it on “productive expenditure”. Without any corresponding business revenue the rate of profit would fall. (Thus we can see why increased funds that are made available for lending must be made at increasingly lower rates of interest).

There are one or two further disagreements we can cite here. First, “Austrian” business cycle theory, the jewel in the crown of “Austrianism”, is never explained at length and instead takes its place in a wider treatment of the effects of inflation. Second, his treatment of neoclassical price theory is too aggregative and does not explain how individual bidders and suppliers bring about a harmony between the quantity demanded and the quantity supplied. Third, as in his critique of the time preference theory of interest, Reisman often perceives differences or disagreements where there are none, such as that alleged between his productivity theory of wages and the marginal productivity theory of wages, the latter of which he describes incorrectly. And finally, in spite of having been the translator of Mises’ Epistemological Problems of Economics, Reisman has little to say concerning method – something which perhaps descends from his rejection of economics as the science of human action, which underpins Mises’ methodological dualism that divides economics from the natural sciences.

Overall, therefore, the question of whether Reisman’s approach to economics has successfully synthesised the “Austrian” and classical schools, and, moreover provided a progressive outlook for the science of economics must, regrettably, be answered in the negative. Rather, Reisman’s positive economic theory in this treatise comes across more as a restatement and re-polishing of classical economics (with some corrections to that school of thought), peppered with insights from neoclassicism and the “Austrian” school. Reisman’s rejection of the primacy of human action as the subject matter of economics has been at the expense of not only losing a great deal of theoretical understanding in the wertfrei science that this affords, but also weakening any positive promotion for capitalism and freedom.

Nevertheless, while this review has been mainly been critical of Reisman’s positive economic theory, we must end by celebrating the fact that our author has, in this treatise, many great things to say concerning socialism, environmentalism, interventionism, inflationism, Keynesianism and all other manner of false doctrines rejected by “Austrians” and libertarians alike. What Reisman has put to paper here are among the finest critical analyses of these areas ever written and, even if one cannot agree with Reisman’s specific, economic outlook, these contributions alone place Reisman in the top rank of economists whose work should be studied avidly.

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Capitalism – the Real “Third Way”

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Conventional understanding views economic history as some kind of big battle between unfettered capitalism on the one hand (as supposedly demonstrated by the late nineteenth to early twentieth century United States) and full blown socialism on the other (as the Soviet Union was supposed to have been). Allegedly, both extremes have their positive aspects but are, individually, weighed down by their supposed negative ones. So capitalism, for example, is able to raise the standard of living by several-fold in a person’s lifetime and showers us with more goods than we could possibly imagine. On the other hand, so this conventional belief goes, it promotes a consumerist, materialist and greedy “sink or swim” society that has no regard for the unfortunate and the least well off. Hence the vision of the US as the kind of place where you can buy whatever you want but if you happen to be poor or become afflicted with an illness then you are on your own. Socialism, however, stagnates and reverses the standard of living to the extent that nothing ever works and the population is mired in permanent poverty. On the other hand, so this conventional wisdom dictates, everyone is apparently more equal and the goods that they do manage to produce are distributed “fairly” across society. (Curiously this understanding of economic history seldom tends to acknowledge the tyrannous nature of socialism which, in the Soviet Union, resulted in the deaths of tens of millions of people – one might ask whether this negative feature is so off the scale that it would completely obliterate the chance of socialism being taken seriously as an ethical proposition at all?). Thus, in order to create the best society, we allegedly have to try and combine the economic growth of capitalism with the supposed equality and fairness of socialism, discarding the negative aspects of those two systems in order to arrive at we have today – a social democracy, the “third way”, an economic order that is “somewhere in the middle” between greed and need.

The first problem with this conventional thinking is that neither of the two polar opposites have ever really existed, or at least not in the manner that their proponents imagine them. Capitalism has never existed because government interference in the economy has always been present, simply in lesser or greater quantities at different points in history. Often the interferences at lesser points have provided the catalyst for more intense government activity in later periods, such as the booms and busts and the stop-start flirtation with centralised banking in the last half of the nineteenth century paving the way for the Federal Reserve System that dawned in 1913 just in time to print enough money to pay for World War One. Socialism has never existed because, as Ludwig von Mises so convincingly told us nearly one hundred years ago, it is, quite literally, impossible to build a socialist commonwealth without economic calculation. The Soviet Union survived to a large extent because it could refer to international markets for prices for the factors of production which enabled it to provide at least some kind of functioning economy, albeit at a vastly reduced rate of output compared to the rest of the world.

The real polar opposites that we have endured in the post-Renaissance era are not unfettered capitalism and unfettered socialism at all, but, rather, state corporatism and state socialism. State corporatism, the alignment between government and business, has its epitome in fascist economies such as Nazi Germany and Fascist Italy, but it describes also the imperialism of nineteenth century Britain and the evolution of the United States, which received corporatist boosts during the War between the States, World War I and the New Deal, the latter of which, modelled on Fascist Italy, has successfully sealed the fate of the US as a permanent “corp-tocracy”. State socialism, on the other hand, is not the ownership and use of the productive assets by all for the benefit of all. Rather, it is their ownership by the government and the bureaucracy with productive capacity devoted to their ends, such as missile parades in Red Square, rather than the ends desired by the people, with the people themselves treated as expendable public slaves whose disobedience warrants a one way trip to the gulag.

Second, the blend that has actually been achieved in modern government is not between capitalism on the one hand and socialism on the other. Rather, it is between state corporatism and a democratised form of state socialism. On the state corporatist side, we have central banks printing massive quantities of money, dishing it out to Wall Street which expands credit, creating artificial booms and busts and lining the pockets of the financiers. At the same time large swathes of industry are subject to government patronage and privilege to the extent that in sectors such as energy, transportation, finance, healthcare, and so on there is no genuine free competition. To top it all off, armaments manufacturers profit from the continued proliferation of invented and unjustified foreign wars. On the state socialist side, however, we have politicians bribing voters with other people’s money, and demands for social justice, fairness and equality, anti-discrimination are met through the forced redistribution of wealth and income.

The fissure between these two extremes has not produced any kind of successful mixed economy that selects the best aspects of each system at all. Rather, it has resulted in some kind of bifurcated system that is based on antagonism and resentment. Those clamouring for state corporatism, fake privatisations and government support for business simply want to line their pockets while leaving everyone else to foot the bill. Those wanting state socialism, noting that state corporatism seems to do nothing except make the rich richer and the poor poorer, want to end the anti-democratic structure of state corporatism and return key industries to “public ownership”.

Third, if the two dominant social systems have been state corporatism and state socialism and the postulated “third way” of blending the two has failed, then what, we might ask, is the real third way? There are only three possibilities. First, unfettered socialism; second, unfettered capitalism; and third, a mixed economy of genuine socialism and genuine capitalism (what we might call “interventionism”).

The first option, socialism, is clearly a non-starter as its inability to perform economic calculations means that it is suitable only for bringing chaos out of order. A socialist economic order is no order at all; it is a disaster that would quickly relegate the human race to the Stone Age. The third option, interventionism, is also a non-starter as it produces distortions that must either lead to further interventions or to a complete abandonment of the intervention altogether. For example, if the government intervenes to set a price ceiling on a certain good that is below the market price the result, all else being equal, will clearly be a shortage of that good. The government therefore has one of two options in order to restore supply – to intervene further and take over the supply chain; or to abandon the price control. If it takes the first option, this requires further interventions in other industries which will create similar distortions and disarrays which will breed further interventions all the way until there is full government control over everything – i.e. socialism. Socialism, however, is impossible as so will collapse almost immediately. If it takes the second option, then capitalism is simply restored. In the opinion of the present author we are now reaching the apex of the so-called mixed economy where this decision will have to be made. Decades of excessive money printing and perpetuated malinvestment through the resulting credit expansion has driven financial markets to a zombie-like existence bathing in a sea of insolvency. We are now close to the point where governments will either have to completely socialise financial markets or abandon their policy of cheap credit and restore sound money and credit.

This leaves, then, only capitalism, the genuine free market, as the only prospective and sustainable economic order. Only capitalism, based upon voluntary trade resulting from each individual peacefully pursuing his purposes, is able to avoid the pitfalls of socialism, of the pseudo-capitalism in state corporatism, and of the pseudo equality and fairness of state socialism, all of which are based on force, fraud and antagonism. As we discussed before, all of the alleged pitfalls of capitalism – inequality, greed, selfishness, and so on – are not part of the capitalist system at all and are more appropriately assigned to one of the other systems where everyone attempts to live at the expense of everyone else. Only the restoration of a genuine free market capitalism can therefore lead to a peaceful and prosperous society.

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Economic Myths #14 – Share the Wealth

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Clement Attlee is, with little doubt, one of the more notable of Britain’s former Prime Ministers. Apart from the long lasting effects of his legacy he was, in 2004, voted the “Greatest British Prime Minister of the Twentieth Century” in a poll of 139 academics. Needless to say, with such a high ranking in academic circles, almost every “accomplishment” of the post-war government that he led (with the possible exception of decolonisation) is likely to be an anathema to libertarians. Not only did he nationalise key industries such as the railways, canals, road haulage, coal mining, gas, electricity, telephones and steel manufacturing, he practically created the “cradle-to-grave” welfare state, the jewel in the crown of which was the now untouchable sacred cow, the National Health Service. Furthermore, he successfully entrenched the “Keynesian consensus”, the idea that full employment would be maintained by Keynesian fiscal policy, that was to unite all parties of any stripe for another three decades until the election of Margaret Thatcher’s government.

With such profound and fundamental changes to British society, many of which are still felt today, it is important to have an insight into Attlee’s motivations towards the legislation that his government passed. His own background, (not unlike that of most left wing intellectuals) was decidedly non-working class. The son of a solicitor, he was raised in Putney, an area of London populated by the professions. He was educated at an independent school and later read Modern History at University College, Oxford. He was not exactly born with a silver spoon in his mouth but neither was he consigned to life working in factories or in the coal pits. According to Wikipedia, his original political leanings were conservative. It was after he spent three years managing a charitable institution for working class boys in Stepney, East London, that he “came to the view that private charity would never be sufficient to alleviate poverty and that only direct action and income redistribution by the state would have any serious effect”. Thereafter, he became a “full-fledged supporter of socialism”. Which such self-assuredness, can we expect Attlee’s post-war government (to borrow a phrase from the infamous Beveridge Report that influenced his government’s policies) to have come close to completely “abolishing want”? Unfortunately, the facts speak otherwise:

  • Coal production in 1947 fell seven million tons below the output of privately owned mines ten years earlier, resulting in a three week industrial power cut in London and the Midlands;
  • The government constructed 134,000 fewer homes per year at a higher cost per unit than were built in either of the two years preceding the war;
  • Wages were frozen to wartime levels while the cost of groceries soared as their supply declined;
  • When US and IMF loans dried up, the costs had to be borne by the British working man, leading to the “taxation and tears” budget of 19491.

And summing up the welfare state:

The [Beveridge] plan merely furnished a thin cushion against total disaster for the most impoverished third of the population. True, every citizen (whether or not he needed it) was entitled to prenatal care, a birth subsidy, hospitalization and medical care of sorts, unemployment insurance, an old-age pension, funeral costs, and an allowance for his widow and dependent orphans. The subsidies and allowances were tiny, and, with mounting inflation, barely sufficed for the poorest – sixteen dollars at birth and eighty dollars for a pauper burial. Medical services were spread so thin that even at the price of nationalizing the existing medical profession, it was impossible to guarantee first-rate care. With food rations hovering near the starvation level, sickness became more frequent and national; production fell still lower. So poverty was not eliminated but increased to plague proportions, and life was a nightmare for everyone but the most dedicated bureaucrats. A man might have “social security,” yet he could not go out and buy a dozen eggs. After four years of Socialist government, he was only entitled to an egg and a half per week, as decreed by Marxist No.1, John Strachey, Fabian Minister of Food and Supply2.

The origin of Attlee’s political views betrays his belief in a common economic error, a belief that can clearly have disastrous consequences if its holder happens to one day become the leader of his country. This view of either private charity or forced redistribution as the solution to poverty is based on the flawed notion that there is a fixed pool of wealth for everyone – that when one person possesses wealth it necessarily results in another person being without it. From this false premise it follows that the alleviation of the poverty of one person requires wealth to be disgorged from another. The solution to poverty, however, is that wealth is created and not simply redistributed – the pie gets bigger and not just chopped up in a different way. Capitalism and the free market, far from creating haves and have-nots, involves the progressive accumulation of capital that produces more products at cheaper prices that everyone can buy. More factories, more machines, and more tools that produce a greater supply of goods for less and less effort serve to alleviate material poverty. All of us become better off as a result. If, on the other hand, wealth is to be confiscated from some and redistributed to others, it retards this very process of wealth creation. While a specific redistribution may allow the beneficiaries to afford to purchase a bit more in the short term, in the long run there will be less work, less saving, and less capital investment and accumulation. The number of products produced will fail to increase and thus their prices will remain high and out of the reach of the poor. Redistribution is, therefore, a temporary solution at best. At worst, it traps the people permanently in the stagnant poverty that you are trying to get rid of.

Let us imagine ourselves, for one minute, as employees of the charitable institution of which Attlee was manager. How do we interpret that which we may see every day? From some kind of absolute standard, the poverty and destitution of the slums in the East End of London may have been “terrible” or “bad”. No one would ever seek to deny this. It is important to realise, however, that poverty, fundamentally, is not caused by humans but by nature. The earth is and never has been the Garden of Eden, full of delicious goodies that are ripe for our picking. The first person who trod the virgin soil of the Earth was in a position of absolutely crippling poverty by our modern standards. All he had was himself and his bare hands – no shelter, no food, no clothes, no tools, absolutely nothing. (Indeed, we might ask, how on Earth would “redistribution” have helped him when there was nothing to distribute!). But from the moment he dug the soil with his hands, from the moment he picked up the first plank of wood to build into a shelter, from the moment he fashioned a tool from basic materials such as a rock and a stick, so began the long, slow process of capital accumulation and wealth creation, a process that only really began to accelerate in the early 1800s. Humans, in other words, have to work to overcome the natural state of poverty in order to build up a civilisation as prosperous as the one we have today. To view a snapshot of this process at any one moment in history and to declare self-righteously that “those people over there are in poverty!” is to judge this march of progress against an ideal – as if earth should be the Garden of Eden. The appropriate standard against which to make a judgement however, is the best that can be done given the eternal condition of scarcity. If one cries “something must be done” it ignores the possibility that something is already being done and has currently reached its best possible stage before moving forward to bring greater things. Wealth creation and capital accumulation takes time – we did not get refrigerators and cars the very moment the first person on earth decided to get off his backside and start working. But this process has caused the percentage of people living on one dollar a day to fall from 85% to 20% in two hundred years – and that achievement has been accomplished while the population has multipled five or six times.

The only way, then, by which we can judge that there is “too much poverty” at any one time is to ask a single question – is there anything that is slowing down or causing an artificially imposed constraint upon the process of wealth creation? The answer can only be what Franz Oppenheimer referred to as the “political means” for an individual to gain wealth – that, rather than work oneself to use unowned resources, or to trade goods voluntarily with others, one confiscates them violently from people who already own them. Although we can see that Attlee’s solution – redistribution through the welfare state – is a major part of this, so too is any restrictive and regulatory encroachment upon private property. In Attlee’s day, we can point to the fact that the decade of his birth, according to historian David Cannadine, marked the peak of aristocratic power and influence in British society. Today, it is the power of the privileged financial barons of Wall Street that benefit from cheap, freshly printed money, robbing the poor of the their purchasing power and ploughing it into assets, causing bubbles, malinvestments, booms, busts, unemployment and misery. If we really want to solve poverty, we should be removing these barriers to wealth creation that favour the privileged elites rather than compounding the entire sorry state of affairs with further economic evils.

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1Rose L Martin, Fabian Freeway – Highroad to Socialism in the USA 1884-1966, Ch. 7.

2Ibid. p. 76.

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