After a few years of studying Austrian economics, one question continues to puzzle us: why would anyone who understands free markets still believe the state is necessary? Free markets require that each person be secure in his person and property, a condition that can never be attained under a state.
It is often argued that a constitution is the appropriate means for restraining state power.
LRC readers will be familiar with arguments that the federal state became unconstitutional with the New Deal, or in 1913, or during the Civil War, or perhaps the Louisiana Purchase or the War of 1812.
However, a constitution does not in any way restrain the state. Empirical evidence, including American and Soviet history, shows this clearly. Logically, if a constitution exists to limit state power, this means it aims to limit the power of those officials, bureaucrats and others within the state. Therefore, it is in the self-interest of everyone in the state to simply ignore constitutional limits in order to enhance their own power.
The state is always operated by individual human beings with their own private self-interests to consider. Any constitution is, as President George W. Bush said, "Just a [blasphemous expletive] piece of paper" with no power at all to enforce the rules written into it, as Bush himself worked so hard to prove.
If the constitution does not restrain the state, perhaps the people restrain it through voting. However, there is little evidence of this. To sell themselves to voters, politicians promise benefits to voters during the election campaign. They must then make a show of trying to provide these benefits using the state, thereby enhancing the spending and activity of the state.
The only way voting could begin to restrain the state would be if a majority of voters were dedicated to liberty above any other political issue. Even then, the politician need only give lip service to liberty at election time. Once in office, he will do as he chooses. Even if a vigilant libertarian populace then votes him out at the next election, he will have had time to do a little looting while he wielded state powers, perhaps enough to secure a comfortable retirement.
Those who believe the state should be nothing but a "night watchman" will have nothing to do while in power, and so have little reason to seek power in the first place, unless it is an attempt to shrink the state. If they do seek and gain office, they will be tempted by a host of potential bribes to wield their power on behalf of special interests, usually in ways that involve increased state spending and power. They must be principled enough to resist this.
Therefore, voting is only a check on the growth of the state if 1) a majority of voters care more about liberty than any other issue, and 2) a majority of elected politicians are also dedicated to liberty, and are morally strong enough to resist the many rewards available if they will simply abuse their power.
Even if attained, such a system would still not be a reliable protector of liberty. It depends on an “ever-vigilant-ever-libertarian” majority of voters. A simple shift in majority opinion would allow the state to grow again. Popular sentiment helped Andrew Jackson abolish the Bank of the United States, but the central bank later returned as the Federal Reserve. Since there are always many people who desire to use power for their own benefit, they would constantly push to change public opinion about the proper role of government, to influence politicians, and to promote politicians that will serve their interests.
Constitutions and elected government have both failed to keep states within the modest bounds of protecting life and property. If there is a state anywhere in the world that limits itself solely to these functions, we would be surprised to learn of it.
Hoppe has written about how monarchical government was actually much more limited than democratic government. The king saw the country as the private property of himself and his descendants, and often thought in terms of generational dynasties. It was not in his interest to squander all of his country's resources, since he would be passing them on to his heirs. The democratic politician, on the other hand, can dispose of the nation's resources immediately but cannot pass his control of them to his grandchildren. This encourages tremendous waste and profligate spending by the elected politician, whose time in power is limited.
However, monarchy does not protect liberty. The king and nobility have special legal privileges, including taxation and the use of force, simply because they were born into the "right" families. We can hardly fault our ancestors for fighting bloody revolutions to abolish this caste system.
Monarchy does not, democracies and republics do not, constitutions do not. By definition, military dictatorship does not protect liberty. Neither do fascism, socialism or communism, obviously, in which the state owns or controls all property. (If the reader needs an argument against these, we recommend the “Search” button at mises.org.)
A state claims a monopoly on the use of force in its territory. Who, then, can protect the other people in that territory against state aggression? No one, to the extent the state has successfully imposed its “rule of law.” The state, heavily armed and ruling defenseless people, is perpetually tempted to use aggression to enforce its will, rather than limit itself to merely responding to offenses against individuals and property.
A state uses this monopoly to finance itself through coercive taxation. As long as people are forced to fund the state, the state is free to do anything it chooses. Taxpayers cannot stop funding the state if they object to its actions, as they would with a private business, charity, or other voluntary organization. Once the state has established its power to tax, it can continue increasing taxes. The only check on its actions is the population's desire and ability to resist, but again, no one is permitted to defend himself or anyone else against state aggression. Even violent revolution always leads to another, often more tyrannical, state.
The only system that seems possibly capable of securing every individual's person and property is one in which every individual is free to choose among competing providers of protection, in a free market. The competing providers must not be territorial monopolists, but must be at peace with the fact that there are other security providers in the area. They must be willing to settle disputes between their customers in a peaceful manner.
This situation is already found in the private security market, where many companies operate in the same territorial area but do not get into violent conflicts with each other. They are hired only for defensive purposes, to protect person and property. They are the true "night watchman," a term that itself seems to imply a private security guard rather than a state law enforcer.
If customers can choose among providers, the providers have every incentive to provide better protection at a lower cost, to beat the competition. They have no incentive to carry out aggressive actions that will raise their costs, damage their reputation among customers and potential customers, and get them into dangerous and expensive conflict with other security agencies. In the event of a rogue, aggressive firm, the other, peaceful security firms would have every incentive to protect their clients and even share costs by banding together against the aggressor.
Market competition, with security offered by multiple private firms, would provide the incentives to keep the peace (lower cost, higher profits) and the checks and balances necessary to restrict the power of any one firm (consumers can choose to withdraw funding and seek protection from other firms; firms can fight back against aggressors).
Despite the presence of numerous private security companies in today's market, we observe no tendency for these companies to get into any sort of conflict with each other, violent or otherwise. Each company wants to appear efficient and professional to attract customers. They do not tend towards becoming roving bands of thugs in the streets.
We also observe no tendency toward territorial monopoly in the private security industry. A single customer, such as a large office building, may have multiple security suppliers: one to provide security officers, another to install and maintain video surveillance, a third to install and maintain a keycard access system, a fourth to monitor burglar alarms, etc. These different, specialized firms must collaborate in the service of their common client. Different companies within the office building might have their own, additional security providers, who would at times interact with building security. While states compete violently with other states for territory, private security firms compete peacefully for customers. They may even operate on the same physical territory.
A society built on a free market in protection could last indefinitely, invulnerable to the problems that eventually destroy all states. There would be no apparatus of aggression to build empires (doomed to overextend and collapse, and potentially bring foreign retaliation), enforce arbitrary laws and regulations (hampering the market, inhibiting innovation, reducing living standards, attacking civil liberties), or cause the boom-and-bust business cycle through its central bank and legal tender monopolies.
Some people might still wish to wield power, but there would be no coercive institutions for such people to manipulate, no politicians to bribe, no legislative authority. Nor could anyone push the costs of their actions onto others through taxation. Law would be established through an ongoing process of security contracts and private arbitration, all of it centered on protecting customers and their property against aggression.
A free market in security is the only way to arrive at a situation where person and property are protected, without the ever-present threat of the state itself becoming aggressive against people or property. (This is usually not a threat, but an ongoing condition.) The freedom to defend one's person and property against aggression, and by extension to choose one's own protectors to assist with that defense, is the one and only condition that can bring about an enduring free society.
April 30, 2009