This talk was delivered in Auburn, Alabama, on the occasion of Professor Hoppe's receiving the Mises Institute's 2006 Gary G. Schlarbaum Liberty Prize.

Conventionally, the state is defined as an agency with two unique characteristics. First, it is a compulsory territorial monopolist of ultimate decision-making (jurisdiction). That is, it is the ultimate arbiter in every case of conflict, including conflicts involving itself. Second, the state is a territorial monopolist of taxation. That is, it is an agency that unilaterally fixes the price citizens must pay for its provision of law and order.

Predictably, if one can only appeal to the state for justice, justice will be perverted in favor of the state. Instead of resolving conflict, a monopolist of ultimate decision-making will provoke conflict in order to settle it to his own advantage. Worse, while the quality of justice will fall under monopolistic auspices, its price will rise. Motivated like everyone else by self-interest but equipped with the power to tax, the state agents' goal is always the same: to maximize income and minimize productive effort.

State, War, and Imperialism

Instead of concentrating on the internal consequences of the institution of a state, however, I will focus on its external consequences, i.e., foreign rather than domestic policy.

For one, as an agency that perverts justice and imposes taxes, every state is threatened with "exit." Especially its most productive citizen may leave to escape taxation and the perversions of law. No state likes this. To the contrary, instead of seeing the range of control and tax base shrink, state agents prefer that they be expanded. Yet this brings them in conflict with other states. Unlike competition between "natural" persons and institutions, however, the competition between states is eliminative. That is, there can be only one monopolist of ultimate decision-making and taxation in any given area. Consequently, the competition between different states promotes a tendency toward political centralization and ultimately one single world state.

Further, as tax-funded monopolists of ultimate decision-making, states are inherently aggressive institutions. Whereas "natural" persons and institutions must bear the cost of aggressive behavior themselves (which may well induce them to abstain from such conduct), states can externalize this cost onto their taxpayers. Hence, state agents are prone to become provocateurs and aggressors and the process of centralization can be expected to proceed by means of violent clashes, i.e., interstate wars.

Moreover, given that states must begin small and assuming as the starting point a world composed of a multitude of independent territorial units, something rather specific about the requirement of success can be stated. Victory or defeat in interstate warfare depend on many factors, of course, but other things such as population size being the same, in the long run the decisive factor is the relative amount of economic resources at a state's disposal. In taxing and regulating, states do not contribute to the creation of economic wealth. Instead, they parasitically draw on existing wealth. However, state governments can influence the amount of existing wealth negatively. Other things being equal, the lower the tax and regulation burden imposed on the domestic economy, the larger the population will tend to grow and the larger the amount of domestically produced wealth on which the state can draw in its conflicts with neighboring competitors. That is, states which tax and regulate their economies comparatively little – liberal states – tend to defeat and expand their territories or their range of hegemonic control at the expense of less-liberal ones.

This explains, for instance, why Western Europe came to dominate the rest of the world rather than the other way around. More specifically, it explains why it was first the Dutch, then the British and finally, in the 20th century, the United States, that became the dominant imperial power, and why the United States, internally one of the most liberal states, has conducted the most aggressive foreign policy, while the former Soviet Union, for instance, with its entirely illiberal (repressive) domestic policies has engaged in a comparatively peaceful and cautious foreign policy. The United States knew that it could militarily beat any other state; hence, it has been aggressive. In contrast, the Soviet Union knew that it was bound to lose a military confrontation with any state of substantial size unless it could win within a few days or weeks.

From Monarchy and Wars of Armies to Democracy and Total Wars

Historically, most states have been monarchies, headed by absolute or constitutional kings or princes. It is interesting to ask why this is so, but here I have to leave this question aside. Suffice it to say that democratic states (including so-called parliamentary monarchies), headed by presidents or prime-ministers, were rare until the French Revolution and have assumed world-historic importance only after World War I.

While all states must be expected to have aggressive inclinations, the incentive structure faced by traditional kings on the one hand and modern presidents on the other is different enough to account for different kinds of war. Whereas kings viewed themselves as the private owner of the territory under their control, presidents consider themselves as temporary caretakers. The owner of a resource is concerned about the current income to be derived from the resource and the capital value embodied in it (as a reflection of expected future income). His interests are long-run, with a concern for the preservation and enhancement of the capital values embodied in "his" country. In contrast, the caretaker of a resource (viewed as public rather than private property) is concerned primarily about his current income and pays little or no attention to capital values.

The empirical upshot of this different incentive structure is that monarchical wars tended to be "moderate" and "conservative" as compared to democratic warfare.

Monarchical wars typically arose out of inheritance disputes brought on by a complex network of inter-dynastic marriages. They were characterized by tangible territorial objectives. They were not ideologically motivated quarrels. The public considered war the king's private affair, to be financed and executed with his own money and military forces. Moreover, as conflicts between different ruling families, kings felt compelled to recognize a clear distinction between combatants and noncombatants and target their war efforts exclusively against each other and their family estates. Thus military historian Michael Howard noted about 18th-century monarchical warfare:

On the [European] continent commerce, travel, cultural and learned intercourse went on in wartime almost unhindered. The wars were the king's wars. The role of the good citizen was to pay his taxes, and sound political economy dictated that he should be left alone to make the money out of which to pay those taxes. He was required to participate neither in the decision out of which wars arose nor to take part in them once they broke out, unless prompted by a spirit of youthful adventure. These matters were arcane regni, the concern of the sovereign alone. [War in European History, 73]

Similarly Ludwig von Mises observed about the wars of armies:

In wars of armies, the army does the fighting while the citizens who are not members of the army pursue their normal lives. The citizens pay the costs of warfare; they pay for the maintenance and equipment of the army, but otherwise they remain outside of the war events. It may happen that the war actions raze their houses, devastate their land, and destroy their other property; but this, too, is part of the war costs which they have to bear. It may also happen that they are looted and incidentally killed by the warriors – even by those of their "own" army. But these are events which are not inherent in warfare as such; they hinder rather than help the operations of the army leaders and are not tolerated if those in command have full control over their troops. The warring state which has formed, equipped, and maintained the army considers looting by the soldiers an offense; they were hired to fight, not to loot on their own. The state wants to keep civil life as usual because it wants to preserve the tax-paying ability of its citizens; conquered territories are regarded as its own domain. The system of the market economy is to be maintained during the war to serve the requirement of warfare. [Nationalökonomie, 725–26]

In contrast to the limited warfare of the ancien regime, the era of democratic warfare – which began with the French Revolution and the Napoleonic Wars, continued during the 19th century with the American War of Southern Independence, and reached its apex during the 20th century with World War I and World War II – has been the era of total war.

In blurring the distinction between the rulers and the ruled ("we all rule ourselves"), democracy strengthened the identification of the public with a particular state. Rather than dynastic property disputes which could be resolved through conquest and occupation, democratic wars became ideological battles: clashes of civilizations, which could only be resolved through cultural, linguistic, or religious domination, subjugation and, if necessary, extermination. It became increasingly difficult for members of the public to extricate themselves from personal involvement in war. Resistance against higher taxes to fund a war was considered treasonous. Because the democratic state, unlike a monarchy, was "owned" by all, conscription became the rule rather than the exception. And with mass armies of cheap and hence easily disposable conscripts fighting for national goals and ideals, backed by the economic resources of the entire nation, all distinctions between combatants and noncombatants fell by the wayside. Collateral damage was no longer an unintended side-effect but became an integral part of warfare. "Once the state ceased to be regarded as 'property' of dynastic princes," Michael Howard noted,

and became instead the instrument of powerful forces dedicated to such abstract concepts as Liberty, or Nationality, or Revolution, which enabled large numbers of the population to see in that state the embodiment of some absolute Good for which no price was too high, no sacrifice too great to pay; then the 'temperate and indecisive contests' of the rococo age appeared as absurd anachronisms. [ibid. 75–76]

Similar observations have been made by the military historian and major-general J.F.C. Fuller:

The influence of the spirit of nationality, that is of democracy, on war was profound, … [it] emotionalized war and, consequently, brutalized it; …. National armies fight nations, royal armies fight their like, the first obey a mob – always demented, the second a king, generally sane. … All this developed out of the French Revolution, which also gave to the world conscription – herd warfare, and the herd coupling with finance and commerce has begotten new realms of war. For when once the whole nation fights, then is the whole national credit available for the purpose of war. [War and Western Civilization, 26–27]

And William A. Orton thus summarized matters:

Nineteenth-century wars were kept within bounds by the tradition, well recognized in international law, that civilian property and business were outside the sphere of combat. Civilian assets were not exposed to arbitrary distraint or permanent seizure, and apart from such territorial and financial stipulations as one state might impose on another, the economic and cultural life of the belligerents was generally allowed to continue pretty much as it had been. Twentieth-century practice has changed all that. During both World Wars limitless lists of contraband coupled with unilateral declarations of maritime law put every sort of commerce in jeopardy, and made waste paper of all precedents. The close of the first war was marked by a determined and successful effort to impair the economic recovery of the principal losers, and to retain certain civilian properties. The second war has seen the extension of that policy to a point at which international law in war has ceased to exist. For years the Government of Germany, so far as its arms could reach, had based a policy of confiscation on a racial theory that had no standing in civil law, international law, nor Christian ethics; and when the war began, that violation of the comity of nations proved contagious. Anglo-American leadership, in both speech and action, launched a crusade that admitted of neither legal nor territorial limits to the exercise of coercion. The concept of neutrality was denounced in both theory and practice. Not only enemy assets and interests, but the assets and interests of any parties whatsoever, even in neutral countries, were exposed to every constraint the belligerent powers could make effective; and the assets and interests of neutral states and their civilians, lodged in belligerent territories or under belligerent control, were subjected to practically the same sort of coercion as those of enemy nationals. Thus "total war" became a sort of war that no civilian community could hope to escape; and "peace loving nations" will draw the obvious inference. [The Liberal Tradition: A Study of the Social and Spiritual Conditions of Freedom, 251–52]

Excursus: The Doctrine of Democratic Peace

I have explained how the institution of a state leads to war; why, seemingly paradoxical, internally liberal states tend to be imperialist powers; and how the spirit of democracy has contributed to the de-civilization in the conduct of war.

More specifically, I have explained the rise of the United States to the rank of the world's foremost imperial power; and, as a consequence of its successive transformation from the early beginnings as an aristocratic republic into an unrestricted mass democracy which began with the War of Southern Independence, the role of the United States as an increasingly arrogant, self-righteous and zealous warmonger.

What appears to be standing in the way of peace and civilization, then, is above all the state and democracy, and specifically the world's model democracy: the United States. Ironically if not surprisingly, however, it is precisely the United States, which claims that it is the solution to the quest for peace.

The reason for this claim is the doctrine of democratic peace, which goes back to the days of Woodrow Wilson and World War I, has been revived in recent years by George W. Bush and his neo-conservative advisors, and by now has become intellectual folklore even in liberal-libertarian circles. The theory claims:

• Democracies do not go to war against each other.
• Hence, in order to create lasting peace, the entire world must be made democratic.

And as a – largely unstated – corollary:

• Today, many states are not democratic and resist internal – democratic – reform.
• Hence, war must be waged on those states in order to convert them to democracy and thus create lasting peace.

I do not have the patience for a full-blown critique of this theory. I shall merely provide a brief critique of the theory's initial premise and its ultimate conclusion.

First: Do democracies not go to war against each other? Since almost no democracies existed before the 20th century the answer supposedly must be found within the last hundred years or so. In fact, the bulk of the evidence offered in favor of the thesis is the observation that the countries of Western Europe have not gone to war against each other in the post–World War II era. Likewise, in the Pacific region, Japan and South Korea have not warred against each other during the same period. Does this evidence prove the case? The democratic-peace theorists think so. As "scientists" they are interested in "statistical" proof, and as they see it there are plenty of "cases" on which to build such proof: Germany did not war against France, Italy, England, etc.; France did not war against Spain, Italy, Belgium, etc.. Moreover, there are permutations: Germany did not attack France, nor did France attack Germany, etc.. Thus, we have seemingly dozens of confirmations – and that for some 60 years – and not a single counterexample. But do we really have so many confirming cases?

The answer is no: we have actually no more than a single case at hand. With the end of World War II, essentially all of – by now: democratic – Western Europe (and democratic Japan and South Korea in the Pacific region) has become part of the US Empire, as indicated by the presence of US troops in practically all of these countries. What the post World War II period of peace then "proves" is not that democracies do not go to war against each other but that a hegemonic, imperialist power such as the United States did not let its various colonial parts go to war against each other (and, of course, that the hegemon itself did not see any need to go to war against its satellites – because they obeyed – and they did not see the need or did not dare to disobey their master).

Moreover, if matters are thus perceived – based on an understanding of history rather than the naïve belief that because one entity has a different name than another their behavior must be independent from one another – it becomes clear that the evidence presented has nothing to do with democracy and everything with hegemony. For instance, no war broke out between the end of World War II and the end of the 1980s, i.e., during the hegemonic reign of the Soviet Union, between East Germany, Poland, Czechoslovakia, Romania, Bulgaria, Lithuania, Estonia, Hungary, etc. Was this because these were communist dictatorships and communist dictatorships do not go to war against each other? That would have to be the conclusion of "scientists" of the caliber of democratic-peace theorists! But surely this conclusion is wrong. No war broke out because the Soviet Union did not permit this to happen – just as no war between Western democracies broke out because the United States did not permit this to happen in its dominion. To be sure, the Soviet Union intervened in Hungary and Czechoslovakia, but so did the United States at various occasions in Middle-America such as in Guatemala, for instance. (Incidentally: How about the wars between Israel and Palestine and Lebanon? Are not all these democracies? Or are Arab countries ruled out by definition as undemocratic?)

Second: What about democracy as a solution to anything, let alone peace? Here the case of democratic-peace theorists appears even worse. Indeed, the lack of historical understanding displayed by them is truly frightening. Here are only some fundamental shortcomings:

First, the theory involves a conceptual conflation of democracy and liberty (freedom) that can only be called scandalous, especially coming from self-proclaimed libertarians. The foundation and cornerstone of liberty is the institution of private property; and private – exclusive – property is logically incompatible with democracy – majority rule. Democracy has nothing to do with freedom. Democracy is a soft variant of communism, and rarely in the history of ideas has it been taken for anything else. Incidentally, before the outbreak of the democratic age, i.e., until the beginning of the 20th century, government (state) tax-expenditures (combining all levels of government) in Western European countries constituted somewhere between 7–15% of national product, and in the still young United States even less. Less than a hundred years of full-blown majority rule have increased this percentage to about 50% in Europe and 40% in the United States.

Second, the theory of democratic peace distinguishes essentially only between democracy and non-democracy, summarily labeled dictatorship. Thus not only disappear all aristocratic-republican regimes from view, but more importantly for my current purposes, also all traditional monarchies. They are equated with dictatorships a la Lenin, Mussolini, Hitler, Stalin, Mao. In fact, however, traditional monarchies have little in common with dictatorships (while democracy and dictatorship are intimately related).

Monarchies are the semi-organic outgrowth of hierarchically structured natural – stateless – social orders. Kings are the heads of extended families, of clans, tribes, and nations. They command a great deal of natural, voluntarily acknowledged authority, inherited and accumulated over many generations. It is within the framework of such orders (and of aristocratic republics) that liberalism first developed and flourished. In contrast, democracies are egalitarian and redistributionist in outlook; hence, the above-mentioned growth of state power in the 20th century. Characteristically, the transition from the monarchical age to the democratic one, beginning in the second half of the 19th century, has seen a continuous decline in the strength of liberal parties and a corresponding strengthening of socialists of all stripes.

Third, it follows from this that the view democratic-peace theorists have of conflagrations such as World War I must be considered grotesque, at least from the point of view of someone allegedly valuing freedom. For them, this war was essentially a war of democracy against dictatorship; hence, by increasing the number of democracies, it was a progressive, peace-enhancing, and ultimately justified war.

In fact, matters are very different. To be sure, pre-war Germany and Austria may not have qualified as democratic as England, France, or the United States at the time. But Germany and Austria were definitely not dictatorships. They were (increasingly emasculated) monarchies and as such arguably as liberal – if not more so – than their counterparts. For instance, in the United States, anti-war proponents were jailed, the German language was essentially outlawed, and citizens of German descent were openly harassed and often forced to change their names. Nothing comparable occurred in Austria and Germany.

In any case, however, the result of the crusade to make the world safe for democracy was less liberal than what had existed before (and the Versailles peace dictate precipitated World War II). Not only did state power grow faster after the war than before. In particular, the treatment of minorities deteriorated in the democratized post–World War I period. In newly founded Czechoslovakia, for instance, the Germans were systematically mistreated (until they were finally expelled by the millions and butchered by the tens of thousands after World War II) by the majority Czechs. Nothing remotely comparable had happened to the Czechs during the previous Habsburg reign. The situation regarding the relations between Germans and southern Slavs in pre-war Austria versus post-war Yugoslavia respectively was similar.

Nor was this a fluke. As under the Habsburg monarchy in Austria, for instance, minorities had also been treated fairly well under the Ottomans. However, when the multicultural Ottoman Empire disintegrated in the course of the 19th century and was replaced by semi-democratic nation-states such as Greece, Bulgaria, etc., the existing Ottoman Muslims were expelled or exterminated. Similarly, after democracy had triumphed in the United States with the military conquest of the Southern Confederacy, the Union government quickly proceeded to exterminate the Plains Indians. As Mises had recognized, democracy does not work in multi-ethnic societies. It does not create peace but promotes conflict and has potentially genocidal tendencies.

Fourth and intimately related, the democratic-peace theorists claim that democracy represents a stable "equilibrium." This has been expressed most clearly by Francis Fukuyama, who labeled the new democratic world order as the "end of history." However, overwhelming evidence exists that this claim is patently wrong.

On theoretical grounds: How can democracy be a stable equilibrium if it is possible that it be transformed democratically into a dictatorship, i.e., a system which is considered not stable? Answer: that makes no sense!

Moreover, empirically democracies are anything but stable. As indicated, in multi-cultural societies democracy regularly leads to the discrimination, oppression, or even expulsion and extermination of minorities – hardly a peaceful equilibrium. And in ethnically homogeneous societies, democracy regularly leads to class warfare, which leads to economic crisis, which leads to dictatorship. Think, for example, of post-Czarist Russia, post-World War I Italy, Weimar Germany, Spain, Portugal, and in more recent times Greece, Turkey, Guatemala, Argentina, Chile, and Pakistan.

Not only is this close correlation between democracy and dictatorship troublesome for democratic-peace theorists; worse, they must come to grips with the fact that the dictatorships emerging from crises of democracy are by no means always worse, from a classical liberal or libertarian view, than what would have resulted otherwise. Cases can be easily cited where dictatorships were preferable and an improvement. Think of Italy and Mussolini or Spain and Franco. In addition, how is one to square the starry-eyed advocacy of democracy with the fact that dictators, quite unlike kings who owe their rank to an accident of birth, are often favorites of the masses and in this sense highly democratic? Just think of Lenin or Stalin, who were certainly more democratic than Czar Nicholas II; or think of Hitler, who was definitely more democratic and a "man of the people" than Kaiser Wilhelm II or Kaiser Franz Joseph.

According to democratic-peace theorists, then, it would seem that we are supposed to war against foreign dictators, whether kings or demagogues, in order to install democracies, which then turn into (modern) dictatorships, until finally, one supposes, the United States itself has turned into a dictatorship, owing to the growth of internal state power which results from the endless "emergencies" engendered by foreign wars.

Better, I dare say, to heed the advice of Erik von Kuehnelt-Leddihn and, instead of aiming to make the world safe for democracy, we try making it safe from democracy – everywhere, but most importantly in the United States.