Major Interests of the State
by Michael S. Rozeff
by Michael S. Rozeff
Importance of interests
States too often get a free pass from people who think they try to do good for society. How can we show that states do not act out of a merciful concern for humanity? One method is to show that the nature of the state demands a very different type of behavior.
In this article I ask: Why do states behave as they do? Why do they select the interests or concerns that they exhibit? How do we prove that their interests are not humanitarian? Economists have answered these questions by suggesting that politicians act out of self-interest. I take a different tack. I seek answers to these questions by asking: What interests of the state are implied by its very nature as an organization?
The answers are simple and obvious, which makes them no less true and powerful. Yet I doubt that they are fully and widely realized or appreciated. One implication, also simple, is well-known among libertarians: The state is not a humanitarian institution.
I will stress that the state naturally is an organization whose members' acts are designed to keep the state going with its powers intact so as to maintain the benefits that flow to members of the state. While free market organizations also wish to survive and benefit their members, the difference is that they can't lawfully achieve those aims without benefiting society; while the state can't achieve its aims without harming society.
Maintenance of state power
To begin at the beginning, the state is the top and unique political organization ruling over a nation or a society who live in a given area. As such it has the final power to enforce law; it has the legal power of taxation; and within limits that are often very broad, it has the power to say what is lawful and unlawful. Where there are subsidiary state, province, regional, or local governments that have powers, the (national) state usually possesses distinctive and unique powers that reach to the individual citizens and other political units under its administration.
As is true of most organizations, the prime concern or interest of any state is to maintain its existence — to survive. Only by surviving can benefits flow to the state's members. This interest in surviving, I now show, implies a necessarily strong interest in maintaining its unique powers intact. To see why this is so, I start by contrasting the state with the business firm.
Business concerns in free markets survive in one way only: by satisfying customers without going broke, for they cannot exclude other firms from luring customers away. In addition, free market firms have no power to make suppliers of capital contribute resources to the firm.
Since a state has official monopoly powers, it has far more latitude in not satisfying its "customers," primarily the citizens or sub-governments under its jurisdiction. Since the state can tax those citizens, it can obtain capital at its command. These powers in and of themselves facilitate the state's survival as compared with business enterprises. They allow the state to create a system of rewards and punishments that helps the rulers maintain political control; and they help finance this system. Furthermore, these powers are essential attributes of what the state is, and, most importantly they are the wellsprings of the rewards that the members of the state garner for themselves. Were the state to face competition, its members would suffer. As a matter of fact, the state would disappear since its essence is this set of monopoly powers. Therefore, directly derived from its interest in survival, the state has an exceedingly important and overwhelming interest in maintaining its powers intact.
The argument is very simple, but it has interesting implications that I explore in what follows. From it, we deduce that to interpret a state's actions, we should always look first and foremost to their relation to the survival of the state and the maintenance of its powers.
For instance, many states throughout the world have social security programs. We know that these impose net costs on society, but the costs are often hidden and deferred. At the same time, the financial burden of such programs need not be excessive if the citizens both pay in and receive most of the money. This recycling itself perhaps suggests that there is nothing humanitarian about social security programs. The political rhetoric, however, emphasizes their wise kindness. At the signing of the Social Security Act in 1935, Franklin Delano Roosevelt idolized the law as "a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the Government against the necessity of going deeply into debt to furnish relief to the needy...in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness." The Social Security system, of course, does none of these things. It is well known that its effects undermine society. Why then do states enact such programs? The reasons why states love these programs are that these programs enmesh vast numbers of people, create state dependency, and are hard to dismantle. In turn and more fundamentally, these factors help ensure the state's survival and maintenance of its powers.
State survival is a balancing act
Because of its interest in maintaining its powers, it follows that ordinarily the state will not willingly give up or cede any of its powers of taxing, law-making, law-interpreting, law-enforcement, etc. to either the citizens or the sub-governmental units under its control. All such cessions diminish the state and represent threats to its survival. This does not mean that we will never observe such cessions. There will be circumstances when the state has made itself too burdensome and/or grown too large such that citizens or provinces under its control grow restive and make demands for retrenchment. At such times, the central government may choose to make concessions so as to forestall rebellion and prolong its existence. Or it might elect to use overwhelming force to secure its power and suppress discontent. In either event, the goal will still be to maintain itself and its powers intact insofar as possible.
No matter how clever it is, the state's survival is not 100 percent assured. As it always imposes costs upon its subjects through its taxes, laws and regulations and by increases in its powers, they are always more or less discontented and prone to throw off their shackles. Their discontent rises as the costs imposed on them rise. Historically, the time it takes for a movement to culminate in a radical revamping of the state (hopefully to reduce it but not always succeeding at that objective) varies greatly depending on factors that are not difficult to recount and whose details are the specialty of historians. It took 73 years for the Soviet Union (1917 to 1990). In that dreadful empire, the costs borne by citizens were very high, but the state's strength and repression were also high. The American Revolution occurred after 155 years (1620 to 1775), the colonists being exceptionally sensitive to impositions that today do not look heavy. The Ottoman Empire lasted for 620 years or so (1299—1920) by using enlightened policies. It was known for its policy of avoiding military rule and relying upon local rule in which religious and ethnic minorities managed their own affairs via their own customs, laws, and courts. It held the Balkans for a long time by introducing improvements in land tenure and property rights that benefited the peasants. Although its taxes may not have been especially low, they were fixed and held constant between censuses, making them easier to bear. Its demise was associated with its defeat in World War I.
The further the state goes in increasing discontent, the more that it increases the chance of struggle against its power. Naturally, the state takes many steps to prevent discontent from arising and crystallizing into serious challenges to its authority; indeed the modern state pro-actively attempts to stimulate demand for its redistributions in such a way as to consolidate its existence. Nevertheless, the state faces basic problems that lead to errors on its part. It cannot gauge discontent perfectly. If it over-estimates it and clamps down too much or too soon, it creates further unhappiness. If it under-estimates it and lets it grow, the forces of rebellion can become costly to contain. The state cannot control shifts in the levels of discontent psychologically perceived by its subjects. If Americans became as sensitive today to loss of freedom as they apparently were 200 years ago, the current state would have to retrench drastically. The state cannot completely control migration and exit. It can't completely control thought. It can't control organizations determined to change the state or even rebel. It cannot completely control communications, tax evasion, and guerilla tactics. It cannot control infiltration and subversion.
Great Britain and other European states lost their colonies. Scotland and England, joined in union for 300 years, are close to parting. The Soviet Union is gone, replaced by 15 separate states. These breakups frequently occur when enough "customers" or subjects of the state abandon it. In other cases, external forces contribute. Being aware of these possibilities, states have an overwhelmingly important interest in foreclosing scenarios that threaten their survival.
Continuity and permanency
States will, of course, seek to legitimize themselves and prevent opposition from arising in a myriad of ways, many of which I have recounted here. An important method, going rather unnoticed, is for the state to represent itself as a permanent and continuously operating organization, or at least an organization that does not routinely contemplate its own willing dissolution. By emphasizing its continuity and the virtues of such, the state seeks to assure a continued life for itself even if it undergoes transformation. It wants its subjects to envision their lives as impossible if they are not being ruled by the state.
It may be that a state's Constitution, if there is one, contains procedures for altering the state; but the usual unstated assumption is that there will always be a state and that it will largely retain its present form. "Empire and liberty, one and inseparable, now and forever." To be sure, states dissolve peacefully at times. The confederation of Serbia and Montenegro ended in 2006 with the establishment of two separate republics. Other states are peaceably contested: The Vlaams Belang party seeks separation of Flanders from Belgium. Yet other states have wars of secession, as between the Tamils and the state of Sri Lanka. Overall, the lengthy, difficult, and often bloody process of ending a state or even seceding from one suggests that states do not go quietly into the night. As a general matter, they vigorously contest being dissolved, dissected, or dismembered. This is because their prime interest is in surviving with their powers intact.
Making the most of taxes
As compared with the overall population of the society they govern, a tiny number of men and women comprises the state. Being vastly outnumbered by the nation's population, their most critical aim, above all other aims, must be to continue to retain their control over the people under them. They can only do that using the state's unique powers, which is why their every act has to take into consideration how it affects the maintenance of those powers.
Chief among these powers is the power to tax. The level of taxes imposed upon a population by a state is therefore by no means random. The state selects the level of taxes so as to maximize its survival and maintenance of its powers. The use of the taxing power is dual-edged, bringing both costs and benefits to the state. Taxes that are too high crimp productivity and create unrest. They raise the probability that the state will be destroyed or diminished. However, higher taxes have a benefit for the state. They can be used for purposes that prolong the state and cement its control. Despite the net losses to society, a state might raise taxes to build a highway system if it believes that the high visibility and constant use of the system might endear the state to enough citizens while the losses that are felt by society are not attributed to the system. A state might raise taxes to fight wars on poverty and drugs, even if these impose net losses on society, if those losses are not tied back to these wars and enough citizens applaud the state's actions. A state might use taxes to make war if it expects that making war causes the citizens to embrace the state, overlook its defects, and allow the state to expand its powers.
The level of taxes is therefore ultimately determined by the state's perceptions of the costs it is imposing on citizens as weighed against the benefits the state receives in terms of citizen approval that allow the state to survive and maintain its powers. The never-ending rhetoric of the state glorifying its service to humanity as it recycles tax revenues is strictly to cement citizen approval. The fundamental reasons for programs are to ensure the state's survival and maintain its powers intact.
Corruption and waste by states are certainly noticeable, as are its inefficiencies in everything it attempts. Yet citizens rarely rebel on account of them. That is because (a) the state usually keeps corruption and waste within bounds, (b) the state persuades citizens that these problems are necessary and in any event are being mitigated, and (c) corruption and waste are kept hidden most of the time. Point (a) is not always appreciated. I explain it as follows.
The key feature of any modern state is its ability to tax the population under its control. Without the power to enforce tax collections, the modern state can't function. The taxes they collect amount to enormous sums of money compared with what leaders are paid. It is true that in many states, the leaders simply steal large amounts of money through taxes and bribes, which they then siphon off to their personal Swiss bank accounts and such. It is also true that in other states, the leaders obtain personal wealth in other devious ways, as through pensions, campaign contributions, and high-paying positions after they leave office. But no matter how the leaders feather their personal nests, the main body of tax monies serves another purpose than personal theft. The state recycles the tax monies to selected groups and persons in the society or undertakes foreign ventures so as to maintain the general compliance of those whom it controls. Once the state has the power to tax, it will, if clever, use the tax revenues to enhance its own stability and survival. If it is clever, it will choose projects that impress many of its subjects as being important and useful; while at the same time choosing projects whose losses either go unnoticed or cannot easily be attributed to the state's inflictions.
If the state openly steals and/or wastes tax revenues, brazenly confronting the citizens with its knavery and improvidence, this can only undermine its standing in the people's eyes and raise the chances of losing its unique position and powers. It therefore has incentives to keep corruption and waste within bounds and to use the tax revenues with some degree of care. That it invariably fails to accomplish these objectives efficiently has to do with organizational problems that I have outlined before.
The story told here is relatively simple, but it sheds a good deal of light on the major state interests and what they entail. The state's major interests are two-fold: its survival as an organization and its maintenance of its powers. These derive directly from the nature of the state.
Looking at the state's activities through this lens, we better understand that the state's rhetoric is offered merely to persuade its citizens that the state is a beneficial and necessary institution with noble and humanitarian concern for its subjects. This rhetoric could not be further from the truth, which the state obviously wishes to conceal. If the state aimed for benefits, it would fold up its welfare/warfare/regulatory tent and fade away to a watchman state; for we know praxeologically that the welfare/warfare/regulatory state's acts by and large inflict harm.
The analysis tells us that because the state has a monopoly on its powers that benefits its members, it necessarily seeks to survive as an organization and maintain its powers intact. Every act of the state, from the level of its taxes to its programs and to its level of corruption, therefore can be measured against those objectives so as better to understand them.
January 3, 2007
Michael S. Rozeff [send him mail] is a retired Professor of Finance living in East Amherst, New York.
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