In this first
decade of the 21st century, liberal thought, in both its theoretical
and political aspects, has reached a historic crossroads. Although
the fall of the Berlin Wall and of real socialism beginning in 1989
appeared to herald "the end of history" (to use Francis
Fukuyama’s unfortunate and overblown phrase), today, and in many
respects more than ever, statism prevails throughout the world,
accompanied by the demoralization of freedom lovers.
an "aggiornamento" of liberalism is imperative. It is
time to thoroughly revise liberal doctrine and bring it up to date
in light of the latest advances in economic science, and the experience
the latest historical events have provided.
must begin with an acknowledgement that classical liberals have
failed in their attempt to limit the power of the state and that
today economic science is in a position to explain why this failure
was inevitable. The next step is to focus on the dynamic theory
of the entrepreneurship-driven processes of social cooperation that
give rise to the spontaneous order of the market. This theory can
be expanded and transformed into a full-fledged analysis of the
anarchocapitalist system of social cooperation, which reveals itself
as the only system that is truly viable and compatible with human
In this article,
we will analyze these issues in detail, along with a series of additional,
practical considerations regarding scientific and political strategy.
Moreover, we will make use of this analysis to correct certain common
misunderstandings and errors of interpretation.
Error of Classical Liberalism
The fatal error
of classical liberals lies in their failure to realize that their
ideal is theoretically impossible, as it contains the seed of its
own destruction, precisely to the extent that it includes the necessary
existence of a state (even a minimal one), understood as the sole
agent of institutional coercion.
classical liberals commit their great error in their approach: they
view liberalism as a plan of political action and a set of economic
principles, the goal of which is to limit the power of the state
while accepting its existence and even deeming it necessary. However,
today (in the first decade of the 21st century) economic science
has already shown:
- that the
state is unnecessary;
- that statism
(even if minimal) is theoretically impossible; and
- that, given
human nature, once the state exists, it is impossible to limit
We will comment
on each of these matters separately.
as an Unnecessary Body
From a scientific
perspective, only the mistaken paradigm of equilibrium could encourage
belief in a category of "public goods" in which satisfaction
of the criteria of joint supply and nonrivalry in consumption would
justify, prima facie, the existence of a body with a monopoly
on institutional coercion (the state) that would oblige everyone
to finance those goods.
the dynamic, Austrian conception of the spontaneous order that entrepreneurship
drives has demolished this entire theory put forward to justify
the state: the emergence of any case (real or apparent) of a "public
good," i.e., joint supply and nonrivalry in consumption, is
accompanied by the incentives necessary for the impetus of entrepreneurial
creativity to find a better solution via technological and legal
innovations and entrepreneurial discoveries which make it possible
to overcome any problem that may arise (as long as the resource
is not declared "public" and the free exercise of entrepreneurship
is permitted, along with the accompanying private appropriation
of the fruits of each creative, entrepreneurial act).
in the United Kingdom, the lighthouse system was for many years
privately owned and financed, and private procedures (sailors’ associations,
port fees, spontaneous social monitoring, etc.) offered an effective
solution to the "problem" of what "statist"
economics textbooks depict as the most typical example of a "public
good." Likewise, in the American Far West, the problem arose
of defining and defending property rights concerning, for instance,
head of cattle in vast expanses of land. Various entrepreneurial
innovations which resolved the problems as they arose were gradually
introduced (cattle branding, constant supervision by armed cowboys
on horseback, and finally, the discovery and introduction of barbed
wire, which, for the first time, permitted the effective separation
of great stretches of land at a very affordable price).
flow of entrepreneurial innovation would have been completely blocked
if the resources had been declared "public," excluded
from private ownership, and bureaucratically managed by a state
agency. (Today, for instance, most streets and highways are closed
to the adoption of innumerable entrepreneurial innovations –
the collection of a toll per vehicle and hour, the private management
of security and noise pollution, etc. – despite the fact that
most such innovations no longer pose any technological problem.
Nevertheless, the goods in question have been declared "public,"
which precludes their privatization and creative, entrepreneurial
most people believe the state is necessary because they confuse
its existence (unnecessary) with the essential nature of many of
the services and resources it currently (and poorly) provides, and
over the provision of which it exercises a monopoly (almost always
under the pretext of their public nature). People observe that today
highways, hospitals, schools, public order, etc. are largely supplied
by the state, and since these are highly necessary, people conclude
without further analysis that the state is as well.
They fail to
realize that the above-mentioned resources can be produced to a
much higher standard of quality as well as more efficiently, economically,
and in tune with the varied and changing needs of each individual,
through the spontaneous market order, entrepreneurial creativity,
and private property. Moreover, people make the mistake of believing
the state is also necessary to protect the defenseless, poor, and
destitute ("small" stockholders, ordinary consumers, workers,
etc.), yet people do not understand that supposedly protective measures
have the systematic result, as economic theory demonstrates, of
harming in each case precisely those they are claimed to protect,
and thus one of the clumsiest and stalest justifications for the
existence of the state disappears.
that the set of goods and services the state currently supplies
can be divided into two subsets: those goods and services which
should be eliminated, and those which should be privatized. Clearly,
the goods mentioned in the above paragraph belong to the second
group, and the disappearance of the state, far from meaning the
disappearance of highways, hospitals, schools, public order, etc.,
would mean their provision in greater abundance, at higher standards,
and at a more reasonable price (always with respect to the actual
cost citizens currently pay via taxes).
we must point out that the historical episodes of institutional
chaos and public disorder we could cite (for example, many instances
during the years prior to and during the Spanish Civil War and Second
Republic, or today in broad areas of Colombia or in Iraq) stem from
a vacuum in the provision of these goods, a situation created by
the states themselves, which neither do with a minimum of
efficiency what in theory they should do, according to their own
supporters, nor let the private, entrepreneurial sector do,
since the state prefers disorder (which also appears to more strongly
legitimize its coercive presence) to its dismantling and privatization
at all levels.
It is particularly
important to understand that the definition, acquisition, transmission,
exchange, and defense of the property rights which coordinate and
drive the social process do not require a body with a monopoly on
violence (the state). On the contrary, the state invariably acts
by trampling on numerous legitimate property titles, defending them
very poorly, and corrupting the (moral and legal) behavior of individuals
with respect to the private property rights of others.
The legal system
is the evolutionary manifestation of the general legal principles
(especially regarding ownership) compatible with human nature. Therefore,
the state does not determine the law (democratically or otherwise).
Instead, the law is contained in human nature, though it is discovered
and consolidated in an evolutionary manner, in terms of precedent
and, mainly, doctrine.
(We view the
Roman, continental legal tradition, with its more abstract and doctrinal
nature, as far superior to the Anglo-Saxon system of common law,
which originates from disproportionate state support for legal rulings
or judgments. These judgments, through binding case law, introduce
into the legal system all sorts of dysfunctions that spring from
the specific and prevailing circumstances and interests in each
case.) Law is evolutionary and rests on custom, and hence, it precedes
and is independent of the state, and it does not require, for its
definition and discovery, any agency with a monopoly on coercion.
Not only is
the state unnecessary to define the law; it is also unnecessary
to enforce and defend it. This should be especially obvious these
days, when the use – even, paradoxically, by many government
agencies – of private security companies has become quite common.
This is not
the place to present a detailed account of how the private provision
of what today are considered "public goods" would work
(though the lack of a priori knowledge of how the market
would solve countless specific problems is the naïve, facile
objection of those who favor the current status quo under the pretext,
"better the devil you know than the devil you don’t").
In fact, we cannot know today what entrepreneurial solutions an
army of enterprising individuals would find for particular problems
– if they were allowed to do so. Nevertheless, even the most
skeptical person must admit that "we now know" that the
market, driven by creative entrepreneurship, works, and it works
precisely to the extent that the state does not coercively intervene
in this social process.
It is also
essential to recognize that difficulties and conflicts invariably
arise precisely in areas where the free, spontaneous order of the
market is hindered. Thus, regardless of the efforts made from the
time of Gustav de Molinari to the present to imagine how an anarchocapitalist
network of private security and defense agencies, each in support
of more or less marginally alternative legal systems, would work,
freedom theorists must never forget that what prevents us from knowing
what a stateless future would be like – the creative nature
of entrepreneurship – is precisely what offers us the peace
of knowing that any problem will tend to be overcome, as the people
involved will devote all of their effort and creativity to solving
has taught us not only that the market works, but also that statism
is theoretically impossible.
Is Theoretically Impossible
economic theory of the impossibility of socialism can be expanded
and transformed into a complete theory on the impossibility of statism,
understood as the attempt to organize any sphere of life in society
via coercive commands which involve intervention, regulation, and
control and emanate from the body with a monopoly on institutional
aggression (the state). The state cannot possibly achieve its coordination
goals in any part of the social-cooperation process in which it
attempts to intervene, especially the spheres of money and banking,
the discovery of law, the dispensing of justice, and public order
(understood as the prevention, suppression, and punishment of criminal
acts), for the following four reasons:
- The state
would need a huge volume of information, and this information
is only found in a dispersed or diffuse form in the minds of the
millions of people who participate each day in the social process.
- The information
the intervening body would need for its commands to exert a coordinating
effect is predominantly tacit and inarticulable in nature, and
thus it cannot be transmitted with absolute clarity.
- The information
society uses is not "given"; it changes constantly as
a result of human creativity. Hence, there is obviously no possibility
of transmitting today information which will only be created tomorrow
and which is precisely the information the agent of state intervention
needs to achieve its objectives tomorrow.
and above all, to the extent state commands are obeyed and exert
the desired effect on society, their coercive nature blocks the
entrepreneurial creation of the very information the intervening
state body most desperately needs to make its own commands coordinating
(rather than maladjusting).
Not only is
statism theoretically impossible, but it also produces a whole series
of distorting and highly damaging peripheral effects: the encouragement
of irresponsibility (as the authorities do not know the true cost
of their intervention, they act irresponsibly); the destruction
of the environment when it is declared a public good and its privatization
is prevented; the corruption of the traditional concepts of law
and justice, which are replaced by commands and "social"
justice; and the imitative corruption of individuals’ behavior,
which becomes more and more aggressive and less and less respectful
of morality and law.
Huerta de Soto, professor of economics at Rey Juan Carlos University
in Madrid, is Spain’s leading Austrian economist. As an author,
translator, publisher, and teacher, he also ranks among the world’s
most active ambassadors for classical liberalism. He is the author
Bank Credit, and Economic Cycles.