• The Stateless Society An Examination of Alternatives

    Email Print
    Share

    If
    the Twentieth Century proved anything, it is that the single greatest
    danger to human life are the thugs of the centralized political
    State, who extinguished more than 170 million souls during the bloodiest
    rampage in recorded history. By any rational standard, modern States
    are the last and greatest remaining predators — and that the danger
    has not abated with the demise of communism and fascism. All Western
    democracies currently face vast and accelerating escalations of
    State power and centralized control over economic and civic life.
    In almost all Western democracies, the State chooses:

    • where
      children go to school, and how they will be educated
    • the interest
      rate citizens can borrow at
    • the value
      of currency
    • how employees
      can be hired and fired
    • how more
      than 50% of their citizens' time and money are disposed of
    • who a
      citizen's doctor is
    • what kinds
      of medical procedures can be received — and when
    • when to
      go to war
    • who can
      live in the country
    • …just
      to touch on a few.

    Most
    of these amazing intrusions into personal liberty have occurred
    over the past 90 years, since the introduction of the income tax.
    They have been accepted by a population helpless to challenge the
    endless expansions of State power — and yet, even though most citizens
    have received endless pro-State propaganda in government schools,
    a growing rebellion is brewing. State predations are now so intrusive
    that they have effectively arrested the forward momentum of society,
    which now hangs before a fall. Children are poorly educated, young
    people are unable to get ahead, couples with children fall ever-further
    into debt, and the elderly are finding State medical systems collapsing
    under the weight of their growing needs — and State debts continue
    to grow.

    Thus,
    these early years of the twenty-first century are the end of an
    era, a collapse of mythology comparable to the fall of fascism,
    communism, monarchy, or political Christianity. The idea that the
    State is capable of solving social problems is now viewed with great
    skepticism — which foretells a coming change. As soon as skepticism
    is applied to the State, the State falls, since it fails at everything
    except increasing its power, and so can only survive on propaganda,
    which relies on unquestioning faith.

    Yet
    while most people are comfortable with the idea of reducing the
    size and power of the State, they become distinctly uncomfortable
    with the idea of getting rid of it completely. To use a medical
    metaphor, if the State is a cancer, they prefer medicating it into
    an unstable remission, rather than eliminating it completely.

    This
    can never work. A central lesson of history is that States are parasites
    which always expand until they destroy their host population. Because
    the State uses violence to achieve its ends — and there is no rational
    end to the expansion of violence — States grow until they destroy
    civilized interaction through the corruption of money, contracts,
    honesty, family, and self-reliance. As such, the cancerous metaphor
    is not misplaced. People who believe that the State can somehow
    be contained have not accepted the fact that no State in history
    has ever been contained.

    Even
    the rare reductions are merely temporary. The United States was
    founded on the principle of limited government; it took little more
    than a century for the State to break the bonds of the Constitution,
    implement the income tax, take control of the money supply and the
    educational system, and begin its catastrophic expansion. There
    is no example in history of a State being permanently reduced in
    size. All that happens during a tax or civil revolt is that the
    State retrenches, figures out what it did wrong, and plans its expansion
    again. Or provokes a war, which silences all but fringe dissenters.

    Given
    these well-known historical facts, why do still people believe that
    such a deadly predator can be tamed? Surely it can only be because
    they consider a slow strangulation in the grip of an expanding State
    somehow better than the quick death of a society bereft of a State.

    Why,
    then, do most people believe that a society will crumble without
    a coercive and monopolistic social agency at its core? There are
    a number of answers to this question, but generally they tend to
    revolve around three central points:

    • dispute
      resolution;
    • collective
      services; and,
    • pollution.

    Dispute
    Resolution

    The
    fact that people still cling to the belief that the State is required
    to resolve disputes is amazing, since modern courts are out of the
    reach of all but the most wealthy and patient, and are primarily
    used to shield the powerful from competition or criticism. In this
    writer's experience, to take a dispute with a stockbroker to the
    court system would have cost more than a quarter of a million dollars
    and taken from five to ten years — however, a private mediator settled
    the matter within a few months for very little money. In the realm
    of marital dissolution, private mediators are commonplace. Unions
    use grievance processes, and a plethora of other specialists in
    dispute resolution have sprung up to fill in the void left by a
    ridiculously lengthy, expensive and incompetent State court system.

    Thus
    the belief that the State is required for dispute resolution is
    obviously false, since the court apparatus is unavailable to the
    vast majority of the population, who resolve their disputes either
    privately or through agreed-upon mediators.

    How
    can the free market deal with the problem of dispute resolution?
    Outside the realm of organized crime, very few people are comfortable
    with armed confrontations, and so generally prefer to delegate that
    task to others. Let's assume that people's need for such representatives
    produces Dispute Resolution Organizations (DROs), which promise
    to resolve disputes on their behalf.

    Thus,
    if Stan is hired by Bob, they both sign a document specifying which
    DRO they both accept as an authority in dispute resolution. If they
    disagree about something, and are unable to resolve it between themselves,
    they submit their case to the DRO, and agree to abide by that DRO's
    decision.

    So
    far so good. However, what if Stan decides he doesn't want to abide
    by the DRO's decision? Well, several options arise.

    First
    of all, when Stan signed the DRO agreement, it is likely that he
    would have agreed to property confiscation if he did not abide by
    the DRO's decision. Thus the DRO would be entirely within its right
    to go and remove property from Stan — by force if necessary — to
    pay for his side of the dispute.

    It
    is at this point that people generally throw up their arms and dismiss
    the idea of DROs by claiming that society would descend into civil
    war within a few days.

    Everyone,
    of course, realizes that civil war is a rather bad situation, and
    so it seems likely that the DROs would consider alternatives to
    armed combat.

    What
    other options could be pursued? To take a current example, small
    debts which are not worth pursuing legally are still regularly paid
    off — and why? Because a group of companies produce credit
    ratings on individuals, and the inconvenience of a lowered
    credit rating is usually greater than the inconvenience of paying
    off a small debt. Thus, in the absence of any recourse to force,
    small debts are usually settled. This is one example of how desired
    behaviour can be elicited without pulling out a gun or kicking in
    a door.

    Picture
    for a moment the infinite complexity of modern economic life. Most
    individuals bind themselves to dozens of contracts, from car loans
    and mortgages to cell phone contracts, gym membership, condo agreements
    and so on. To flourish in a free market, a man must honour his contracts.
    A reputation for honest dealing is the foundation of a successful
    economic life. Now, few DROs will want to represent a man who regularly
    breaks contracts, or associates with difficult and litigious people.
    (For instance, this writer once refrained from entering into a business
    partnership because the potential partner revealed that he had sued
    two previous partners.)

    Thus
    if Stan refuses to abide by his DRO's ruling, the DRO has to barely
    lift a finger to punish him. All the DRO has to do is report Stan's
    non-compliance to the local contract-rating company, who
    will enter his name into a database of contract violators. Stan's
    DRO will also probably drop him, or raise his rates considerably.

    And
    so, from an economic standpoint, Stan has just shot himself in the
    foot. He is now universally known as a man who rejects legitimate
    DRO rulings that he agreed to accept in advance. What happens when
    he goes for his next job? What if he decides to eschew employment
    and start his own company, what happens when he applies for his
    first lease? Or tries to hire his first employee? Or rent a car,
    or buy an airline ticket? Or enter into a contract with his first
    customer? No, in almost every situation, Stan would be far better
    off to abide by the decision of the DRO. Whatever he has to pay,
    it is far cheaper than facing the barriers of existing without access
    to a DRO, or with a record of rejecting a legitimate ruling.

    But
    let's push the theory to the max, to see if it holds. To examine
    a worst-case scenario, imagine that Stan's employer is an evil man
    who bribes the DRO to rule in his favour, and the DRO imposes an
    unconscionable fine — say, one million dollars — on Stan.

    First
    of all, this is such an obvious problem that DROs, to get any business
    at all, would have to deal with this danger up front. An appeal
    process to a different DRO would have to be part of the contract.
    DROs would also rigorously vet their own employees for any unexplained
    income. And, of course, any DRO mediator who corrupted the process
    would receive perhaps the lowest contract rating on the planet,
    lose his job, and be liable for damages. He would lose everything,
    and be an economic pariah.

    However,
    to go to the extreme, perhaps the worst has occurred and Stan has
    been unjustly fined a million dollars due to DRO corruption. Well,
    he has three alternatives. He can choose not to pay the fine, drop
    off the DRO map, and work for cash without contracts. Become part
    of the grey market, in other words. A perfectly respectable choice,
    if he has been treated unjustly.

    However,
    if Stan is an intelligent and even vaguely entrepreneurial man,
    he will see the corruption of the DRO as a prime opportunity to
    start his own, competing DRO, and will write into its base contract
    clauses to ensure that what happened to him will never happen to
    anyone who signs on with his new DRO.

    Stan's
    third option is to appeal to the contract rating agency.
    Contract rating agencies need to be as accurate as possible, since
    they are attempting to assess real risk. If they believe that the
    DRO ruled unjustly against Stan, they will lower that DRO's
    contract rating and restore Stan's.

    Thus
    it is inconceivable that violence would be required to enforce all
    but the most extreme contract violations, since all parties gain
    the most long-term value by acting honestly. This resolves the problem
    of instant descent into civil war.

    Two
    other problems exist, however, which must be resolved before the
    DRO theory starts to becomes truly tenable.

    The
    first is the challenge of reciprocity, or geography. If Bob has
    a contract with Jeff, and Jeff moves to a new location not covered
    by their mutual DRO, what happens? Again, this is such an obvious
    problem that it would be solved by any competent DRO. People who
    travel prefer cell phones with the greatest geographical coverage,
    and so cell phone companies have developed reciprocal agreements
    for charging competitors. Just as a person's credit rating is available
    anywhere in the world, so their contract rating will also
    be available, and so there will be no place to hide from a broken
    contract save by going u2018off the grid' completely, which would be
    economically crippling.

    The
    second problem is the fear that a particular DRO will grow in size
    and stature to the point where it takes on all the features and
    properties of a new State.

    This
    is a superstitious fear, because there is no historical example
    of a private company replacing a political State. While it is true
    that companies regularly use State coercion to enforce trading restrictions,
    high tariffs, cartels and other mercantilist tricks, surely this
    reinforces the danger of the State, not the inevitability
    of companies growing into States. All States destroy societies.
    No company has ever destroyed a society without the aid of the State.
    Thus the fear that a private company can somehow grow into a State
    is utterly unfounded in fact, experience, logic and history.

    If
    society becomes frightened of a particular DRO, then it can simply
    stop doing business with it, which will cause it to collapse. If
    that DRO, as it collapses, somehow transforms itself from a group
    of secretaries, statisticians, accountants and contract lawyers
    into a ruthless domestic militia and successfully takes over society
    — and how unlikely is that! — then such a State will then be imposed
    on the general population. However, there are two problems even
    with this most unlikely scare scenario. First of all, if any
    DRO can take over society and impose itself as a new State, why
    only a DRO? Why not the Rotary Club? Why not a union? Why
    not the Mafia? The YMCA? The SPCA? Is society to then ban all groups
    with more than a hundred members? Clearly that is not a feasible
    solution, and so society must live with the risk of a brutal coup
    by ninja accountants as much as from any other group.

    And,
    in the final analysis, if society is so terrified of a single group
    seizing a monopoly of political power, what does that say about
    the existing States? They have a monopoly of political power.
    If a DRO should never achieve this kind of control, why should existing
    States continue to wield theirs?

    Collective
    Services

    Roads,
    sewage, water and electricity and so on are also cited as reasons
    why a State must exist. How roads could be privately paid for remains
    such an impenetrable mystery that most people are willing to support
    the State — and so ensure the eventual and utter destruction of
    civil society — rather than cede that this problem just might
    solvable. There are many ways to pay for roads, such as electronic
    or cash tolls, GPS charges, roads maintained by the businesses they
    lead to, communal organizations and so on. And if none of those
    work? Why, then personal flying machines will hit the market!

    The
    problem that a water company might build plumbing to a community,
    and then charge exorbitant fees for supplying it, is equally easy
    to counter. A truck could deliver bottled water, or the community
    could invest in a water tower, a competing company could build alternate
    pipes and so on. None of these problems touch the central rationale
    for a State. They are ex post facto justifications made to
    avoid the need for critical examination or, heaven forbid, political
    action. The argument that voluntary free-market monopolies are bad
    — and that the only way to combat them is to impose compulsory monopolies
    — is obviously foolish. If voluntary monopolies are bad, then how
    can coercive monopolies be better?

    Due
    to countless examples of free market solutions to the problem of
    u2018carrier costs', this argument no longer holds the kind of water
    it used to, so it must be elsewhere that people must turn to justify
    the continued existence of the State.

    Pollution

    This
    is perhaps the greatest problem faced by free-market theorists.
    It's worth spending a little time on outlining the worst possible
    scenario, and see how a voluntary system could solve it. However,
    it's important to first dispel the notion that the State currently
    deals effectively with pollution. Firstly, the most polluted resources
    on the planet are State-owned, because State personnel do not personally
    profit from retaining the value of State property (witness the destruction
    of the Canadian cod industry through blatant vote-buying). Secondly,
    the distribution of mineral, lumber and drilling rights is directly
    skewed towards bribery and corruption, because States rarely sell
    the land, but rather just the resource rights. A lumber company
    cannot buy woodlands from the State, just the right to harvest trees.
    Thus the State gets a renewable source of income, and can further
    coerce lumber companies by enforcing re-seeding. This, of course,
    tends to promote bribery, corruption and the creation of u2018fly-by-night'
    lumber companies which strip the land bare, but vanish when it comes
    time to re-seed. Auctioning State land to a private market easily
    solves this problem, because a company which re-seeded would reap
    the greatest long-term profits from woodland, and so would be able
    to bid the most for the land.

    Also,
    it should be remembered that, in the realm of air pollution, governments
    created the problem in the first place. In 19th century
    England, when industrial smokestacks began belching fumes into the
    orchards of apple farmers, the farmers took the factory-owners to
    court, citing the common-law tradition of restitution for property
    damage. Naturally, the capitalists had gotten to the State courts
    first, and had more money to bribe with, employed more voting workers,
    and contributed more tax revenue than the farmers — and so the farmers'
    cases were thrown out of court. The judge argued that the u2018common
    good' of the factories took precedence over the u2018private need' of
    the farmers. The free market did not fail to solve the problem of
    air pollution — it was forcibly prevented from doing so through
    State corruption.

    The
    State, then, is no friend of the environment — but how would the
    free market handle it? One egregious example often cited is a group
    of houses downwind from a new factory which works day and night
    to coat them in soot.

    When
    a man buys a new house, isn't it important to him to ensure that
    it won't be subjected with someone else's pollution? People's desire
    for a clean and safe environment is so strong that it's a clear
    invitation for enterprising capitalists to sweat bullets figuring
    out how to provide it.

    Fortunately,
    since we have already talked about DROs and their role in a free
    market, the problem of air pollution can be solved quite easily.

    If
    the aforementioned group of homeowners is afraid of pollution, the
    first thing they will do is buy pollution insurance, which
    is a natural response to a situation where costs cannot be predicted
    but consequences are dire. Let's say that a homeowner named Achmed
    buys pollution insurance which pays him two million dollars if the
    air around or in his house becomes polluted in some predefined manner.
    In other words, as long as Achmed's air remains clean, the insurance
    company makes money.

    One
    day, a plot of land upwind of Achmed's house comes up for sale.
    Naturally, his insurance company would be very interested in this,
    and would monitor the sale. If the purchaser is some private school,
    all is well (assuming Achmed has not bought an excess of noise pollution
    insurance!). If, however, the insurance company discovers that Sally's
    House of Polluting Paint Production is interested in purchasing
    the plot of land, then it will likely spring into action, taking
    one of the following actions:

    • buying
      the land itself, then selling it to a non-polluting buyer;
    • getting
      assurances from Sally that her company will not pollute;
    • paying
      Sally to enter into a non-polluting contract.

    If,
    however, someone at the insurance company is asleep at the wheel,
    and Sally buys the land and puts up her polluting factory, what
    happens then?

    Well,
    then the insurance company is on the hook for $2M to Achmed (assuming
    for the moment that only Achmed bought pollution insurance). Thus,
    it can afford to pay Sally up to $2M to reduce her pollution and
    still be cash-positive. This payment could take many forms,
    from the installation of pollution-control equipment to a buy-out
    to a subsidy for under-production and so on.

    If
    the $2M is not enough to solve the problem, then the insurance company
    pays Achmed the $2M and he goes and buys a new house in an unpolluted
    neighbourhood. However, this scenario is highly unlikely, since
    the insurance company would be unlikely to insure only one single
    person in a neighbourhood against air pollution — and a single person
    probably could not afford it!

    So,
    that is the view from Achmed's air-pollution insurance company.
    What about the view from Sally's House of Polluting Paint Production?
    She, also, must be covered by a DRO in order to buy land, borrow
    money and hire employees. How does that DRO view her tendency to
    pollute?

    Pollution
    brings damage claims against Sally, because pollution is by definition
    damage to persons or property. Thus Sally's DRO would take a dim
    view of her polluting activities, since it would be on the hook
    for any property damage her factory causes. In fact, it would be
    most unlikely that Sally's DRO would insure her against damages
    unless she were able to prove that she would be able to operate
    her factory without harming the property of those around
    her. And without access to a DRO, of course, she would be hard-pressed
    to start her factory, borrow money, hire employees etc.

    It's
    important to remember that DROs, much like cell phone companies
    and Internet providers, only prosper if they cooperate. Sally's
    DRO only makes money if Sally does not pollute. Achmed's insurer
    also only makes money if Sally does not pollute. Thus the two companies
    share a common goal, which fosters cooperation.

    Finally,
    even if Achmed is not insured against air pollution, he can use
    his and/or Sally's DRO to gain restitution for the damage her pollution
    is causing to his property. Both Sally and Achmed's DROs would have
    reciprocity agreements, since Achmed wants to be protected against
    Sally's actions, and Sally wants to be protected against Achmed's
    actions. Because of this desire for mutual protection, they would
    choose DROs which had the widest reciprocity agreements.

    Thus,
    in a truly free market, there are many levels and agencies actively
    working against pollution. Achmed's insurer will be actively scanning
    the surroundings looking for polluters it can forestall. Sally will
    be unable to build her paint factory without proving that she will
    not pollute. Mutual or independent DROs will resolve any disputes
    regarding property damage caused by Sally's pollution.

    There
    are other benefits as well, which are almost unsolvable in the current
    system. Imagine that Sally's smokestacks are so high that her air
    pollution sails over Achmed's house and lands on Reginald's house,
    a hundred miles away. Reginald then complains to his DRO that his
    property is being damaged. His DRO will examine the air contents
    and wind currents, then trace the pollution back to its source and
    resolve the dispute with Sally's DRO. If the air pollution is particularly
    complicated, then Reginald's DRO will place non-volatile compounds
    into Sally's smokestacks and follow them to where they land. This
    can be used in a situation where a number of different factories
    may be contributing pollutants.

    The
    problem of inter-country air pollution may seem to be a sticky one,
    but it's easily solvable. Obviously, a Canadian living along the
    Canada/US border, for instance, will not choose a DRO which refuses
    to cover air pollution emanating from the US. Thus the DRO will
    have to have reciprocity agreements with the DROs across the border.
    If the US DROs refuse to have reciprocity agreements with the Canadian
    DROs — inconceivable, since the pollution can go both ways — then
    the Canadian DRO will simply start a US branch and compete.

    The
    difference is that international DROs actually profit from
    cooperation, in a way that governments do not. For instance, a State
    government on the Canada/US border has little motivation to impose
    pollution costs on local factories, as long as the pollution generally
    goes north. For DROs, quite the opposite would be true.

    Finally,
    one other advantage to DRO's can be termed the u2018Scrabble-Challenge
    Benefit'. In Scrabble, an accuser loses his turn if he challenges
    another player's word and the challenge fails. Given the costs of
    resolving disputes, DROs would be very careful to ensure that those
    bringing false accusations would be punished through their own premiums,
    their contract ratings and by also assuming the entire cost
    of the dispute. This would greatly reduce the number of frivolous
    lawsuits, to the great benefit of all.

    The
    idea that society can only survive in the absence of a centralized
    State is the greatest lesson that the grisly years of the Twentieth
    Century can teach us. Our choice is not between the free market
    and the State, but between life and death. Whatever the risks involved
    in dissolving the central State, they are far less than the certain
    destruction which will result from its inevitable escalation. Like
    a cancer patient facing certain demise, we must open our minds reach
    for whatever medicine shows the most promise, and not wait until
    it is too late.

    October
    24, 2005

    Stefan
    Molyneux [send him mail]
    has been an actor, comedian, gold-panner, graduate student, and
    software entrepreneur. His first novel Revolutions
    was published in 2004, and he maintains a
    blog
    .

    Email Print
    Share