Limits of Privatization
By Llewellyn H. Rockwell,
Clinton administration, believe it or not, wants to privatize a
government function. No, not the mails, the parks, or the highways.
Showing an unexpected faith in capitalism, the administration is
preparing legislation that would allow private business to collect
private companies would, no doubt, do this more efficiently than
lumbering government agencies. Even so, tax collection is one "service"
that private enterprise should not provide. Or do we, for the first
time in American history, want real Robber Barons?
nature of business is persuasion and voluntarism, not force and
fear. As a long history shows, when government recruits the private-sector
to more efficiently maraud the people, the result is corruption
and disaster. The President should read For
Good and Evil: The Impact of Taxes on the Course of Civilization
by Charles Adams. Private tax collection has been the ruin of many
countries, and many politicians, in world history.
17th-century England, Charles II imposed a Hearth Tax, assessing
two shillings per chimney in each house. To collect it, the King
contracted out with private parties, empowering them to enter private
homes at will.
"Chimney Men" were ruthless and hated, and a ballad of the day expressed
the popular attitude: "There is not one old dame in ten,/And search
the nation through,/But, if you talk of chimney men/Will spare them
a curse or two."
of the privately collected tax helped depose Charles's brother,
James II. As soon as the new monarchs, William and Mary, were installed,
the House of Commons abolished the tax, ending a "badge of slavery
upon the whole people" that allowed "every man's house to be entered
and searched at the pleasure of persons unknown to him."
practice of private tax collection, or "tax farming," dates back
at least to ancient Greece. When longs raised taxes, and had trouble
collecting them, they hired private enterprise to do it. The taxmen
were, of course, cruel, dishonest, sometimes violent, and always
despised. "Every door now trembles at the tax-farmers," wrote a
lady from Cos.
the "Great" exported the practice, and when his satrap Ptolemy founded
his own dynasty in Egypt, he too institutionalized tax farming.
Collectors guaranteed a certain amount of taxes to the state, swearing
to get every last obol or make up the difference themselves.
the Ptolemaic government awarded tax contracts, it was the commercial
event of the year. And over time, the collectors erected an elaborate
administration based on intimidation, threats, and plunder. Tax
evasion became virtually impossible.
the peasants couldn't pay, the privatized tax collectors extended
credit, and then charged exorbitant rates of interest, giving this
legitimate market institution the sinister cast of "usury." Men
abandoned families and farms, and allowed crucial dikes to fall
into disrepair. Others went to tax-debtors prison.
private tax collectors were a plague of locusts for Egypt, and their
depredations led to a civil war, which ended only when Ptolemy V
issued a general amnesty for tax rebels and tax debtors. The Rosetta
Stone of 200 B.C. was erected to publicize the "Proclamation of
farming brutalized pre-Revolutionary France as well. The ancien
regime sold tax-collection contracts to private parties, who
paid a fixed sum immediately, usually 10%, for the right to extract.
That gave the government fast cash and a firm assurance of more
tax farmers organized themselves into corporations, issued paper
money in lieu of taxes, and marketed them to the government as bonds.
To maintain their high value, tax farmers became almost a government
unto themselves, suppressing tax revolts and shaking down peasants
for every last sou.
French court paid the price for this during the Reign of Terror.
Some parts of the terror were more terrible than others, however.
In an early version of Proposition 13, the people rounded up the
tax farmers, tried them in people's courts, and condemned them to
death. As heads tumbled, the taxpayers cheered.
a result, the revolutionary government abolished tax farming, and,
to this day, France prohibits private companies from collecting
is a productive, efficient, and powerful organizer of human energies.
But there are some things capitalism should not do.
also shows us that while privatization is a useful political strategy,
it is not a first principle of government. For one thing, it begs
the question of what a free society should allow in the first place.
We should no more privatize Treasury Department functions than those
of the Federal Reserve System. It is important to advocate the abolition
of agencies that are inherently illegitimate, as it is the privatization
of such proper services as garbage collection.
regards taxes, if government is going to raise them, the least it
can do is assume the responsibility, and the blame, for collecting
them. In bringing back tax farming, the Clinton administration should
pray it is the exception to a long history of disasters. Or is that
the sound of a whetstone on a guillotine blade that I hear in the