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Violent intervention in the economy

Robert Higgs opens his libertarian classic Crisis and Leviathan with the assertion, "We must have government. Only government can perform certain tasks successfully." [1] He then spends the next 260 pages explaining in lurid detail how our necessary State has successfully mushroomed into a voracious intervener.

Most people have long believed that only the State can protect our legitimate rights -- yet no society has succeeded in keeping the State confined to the role of protector. Should we be surprised?

Not according to Murray Rothbard. In his 1970 seminal study, Power and Market: Government and the Economy, he tells us "the State's built-in monopoly of aggression and inherent absence of free-market checks has enabled it to burst easily any bonds that well-meaning people have tried to place upon it." [2] Higgs' Crisis explains how flimsy those bonds are when state policies trigger war, economic calamity, or terrorist attacks.

Rothbard's study is a frightening survey of the seemingly endless ways government intervenes in our lives. Frightening, not only because of the harm the State causes, but because government rolls on without significant opposition. In the 33 years since Power and Market first appeared, the State has reached a point where the only real challenges it encounters are within its own operations.

Rothbard bases his analysis on a fundamental distinction: economic action, in which wealth is produced and freely exchanged with others, and political action, in which wealth is seized from others. That this distinction is rarely drawn outside of libertarian circles is a key to the State's success.

An intervening agency such as the government gets the bulk of its revenue from two sources, taxation and inflation. Taxation is a levy forcibly extracted from the populace, while inflation seizes wealth covertly, when the quasi-governmental Federal Reserve pumps new fiat bills into circulation. As governments tax and inflate they are like criminals who rob and counterfeit -- both intervene coercively in the market and benefit one set of people at the expense of another.

Clearly, without the ability to tax and inflate, the State would either cease to exist or be forced to rely on voluntary funding. People opposed to State policies should take this simple truth to heart.

The Logic of Taxation

Many people acknowledge the burden of taxation and have set about looking for a "just tax." Rothbard reminds us that people once looked for a "just price" before the science of economics came along. Most gave up when they figured out that the market price set the just price, given the pattern of consumer preferences. But they haven't surrendered the quest for a just tax. Can the market help them out? Plainly, a just tax based on a market tax would be no tax, something interventionists won't consider.

The beneficiaries of taxation are those who live full-time off the proceeds -- the politicians and the bureaucrats -- as well as net recipients, those who receive more from the government than they pay to the government. Because wealth expropriation is crucial to its growth, the State ensures it funds enough people to garner the votes it needs to sustain its activities. [3] This will usually not be a majority. It counts on the apathy and ignorance of the remainder of the public to win majority backing.

Some people object by saying this is the way a democratic republic like ours works. When a majority approves of government intervention, it cannot be considered wrong because they voluntarily voted for it.

Leaving aside the immorality of coercion per se, Rothbard argues that the nonvoters and the voters for the losing side usually constitute the majority. And those who do vote often select the lesser of two evils. When people buy a new suit or a refrigerator, they base their selection on positive attributes, not some lesser bad. "Why do [voters] have to vote for any evil at all?" he asks. [4] Why not give people a chance to vote on the State itself, or other issues, like the income tax? When voting consists of a choice between pro-intervention candidates, the State is asking us to choose our masters.

Intervention and command posts

Free markets create a harmony of interests, but when government intervenes it creates conflict, setting those who benefit against those who bear the burden. As state subsidies become common, people neglect productive activities and divert their energy in a scramble for the loot. The subsidy system thus promotes the predatory skills of its participants while penalizing their productive ones.

Aside from taxation, the State's most critical interventions are the command posts it has seized to retain control of our lives. [p.90] These are: (1) police and military protection - - the defense function, (2) judicial protection, (3) monopoly of the mint and monopoly of defining money (legal tender laws), (4) rivers and coastal areas, (5) urban streets and highways, and land generally, including unused land and the power of eminent domain, and (6) the post office. [5] It also exercises strong control of education, election procedures, and mainstream media, and hungers for control of the internet.

By far the most important command post is defense. The State needs a monopoly on force to extract taxes from its citizens. A disarmed citizenry would make matters even easier.

Rothbard concludes that "every coercive intervention in human affairs brings about further problems that call for the choice: repeal the initial intervention or add another one." [6] This is why the middle road or mixed economy we have had for generations is inherently unstable -- we tend to move toward statism or toward freedom.

He leaves us with a stark comparison of the consequences of the two kinds of politico- economic systems:

The Market Principle versus the Political (Hegemonic) Principle is

1. Individual freedom versus coercion
2. General mutual benefit versus exploitation (benefit of one group at expense of another)
3. Mutual harmony versus caste conflict; war of all against all
4. Peace versus war
5. Power of man over nature versus power of man over man
6. Most efficient satisfaction of consumer wants versus disruption of want-satisfaction
7. Economic calculation versus economic chaos
8. Incentives for production versus destruction of incentives
9. Advance in living standards versus capital consumption and regression of living standards

Which do we want?

References

1, Higgs, Robert, Crisis and Leviathan: Critical Episodes in the Growth of American Government, Oxford University Press, New York, 1987. P. 3

2. Rothbard, Murray N., Power and Market: Government and the Economy, Institute for Humane Studies, Menlo Park, CA, and Cato Institute, San Francisco, 1970. P. 9 (Note: Version referenced is PDF file available at http://praxeology.net/anarcres.htm)

3. Rothbard, p. 46

4. Rothbard, p. 13

5. Rothbard, p. 90

6. Rothbard, p. 127