Leithner Letter No. 75
March 26, 2006

...Our hopes, however, of sudden tranquillity ought not to be too sanguine. Fanaticism and superstition will still be selfish, subtle, intriguing, and, at times, furious. Despotism will still struggle for domination; monarchy will still study to rival nobility in popularity; aristocracy will continue to envy all above it, and despise and oppress all below it; democracy will envy all, contend with all, endeavour to pull down all, and when by chance it happens to get the upper hand for a short time, it will be revengeful, bloody, and cruel. These and other elements of fanaticism and anarchy will yet for a long time continue a fermentation, which will excite alarms and require vigilance.

John Adams
Letter to Thomas Jefferson (16 July 1814)

Probably no other belief is now so much a threat to liberty in the United States and in much of the rest of the world as the one that democracy, by itself alone, guarantees liberty. ... Strange is a concept of liberty which [compels you] to pay the costs of promoting acts of which you disapprove or ideas with which you disagree, or which forces you to subsidise that which you consider as slothfulness and negligence.

F.A. Harper
Liberty : A Path to Its Recovery (1993)

Civil disobedience is not our problem. Our problem is civil obedience. Our problem is that people all over the world have obeyed the dictates of the leaders of their government and have gone to war, and millions have been killed because of this obedience. ... Our problem is that people are obedient whilst the gaols are full of petty thieves, and all the while the grand thieves are running the country. That’s our problem.

Howard Zinn
The Problem is Civil Obedience (1970)

Resolve to serve no more, and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break into pieces.

Etienne de la Boétie
The Politics of Obedience:
The Discourse of Voluntary Servitude

Down With Democracy!

In 1989, an academic and middle-ranking officer in the U.S. State Department, Francis Fukuyama, published an article entitled The End of History. His subsequent book, The End of History and the Last Man (Harper, 1992), extended and elaborated the article’s premises, evidence and reasoning. So too, apparently, does his just-published book America at the Crossroads: Democracy, Power and the Neoconservative Legacy (Yale UP, 2006). According to Fukuyama, a particular kind of state, the liberal democracy, is the final resting point of ideological evolution. More specifically, when the Cold War ended the progression of human history concluded. “What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind’s ideological evolution and the universalisation of Western liberal democracy as the final form of human government.” Fukuyama is a determinist. He believes liberal democracy will not just prevail but also predominate. Believing that democracy normatively should sweep all before it, he is also moralist and perhaps an idealist. But he is in no particular hurry, and a few reversals along the way will not faze him. As he confided to an interviewer in 1990, if the democratic upheavals that occurred the previous year in Eastern Europe and the soon to be ex-Soviet Union were subsequently overturned, he “would still believe my theory is true.”

Fukuyama’s thesis comprises three main strands. First, there is an empirical assertion. At the beginning of the 20th century, democracy was merely one among several types of state and democracies were rather few and far between. Today, however, a plurality (and probably a majority) of the world’s states are, to varying extents, democratic. Fukuyama also says that in the minds of most people democracy’s main alternatives (which in his mind are various kinds of dictatorship) have been discredited. Secondly, he advances a Hegelian philosophical argument. History is the dialectic between two classes: Master and Slave. This thesis (Master) and its antithesis (Slave) eventually form a synthesis (Democracy). At history’s terminus, the wolf slumbers with the lamb. Finally, and perhaps most importantly, permeating Fukuyama’s writings is a simple but powerful normative claim. Not only is democracy good: it is as good as it gets.

These contentions have catapulted Fukuyama to prominence and great influence. Even more than it already was, they have also made democracy the irreproachable standard of domestic affairs and the immaculate objective of foreign policy. In Australia, nothing passes muster unless it is democratic, and the epithet “undemocratic” is the kiss of political death. And in external affairs, the objective of more and more states is that non-democratic or insufficiently democratic states become properly democratic. Further, if these laggards won’t transform themselves, then a self-selected clique of democratic states, infused with Wilsonianism, stands ready to do it for (to?) them. These days, Western politicians and their academic and journalistic mascots would rather eat babies in public than forsake or even criticise democracy. As The Australian (24 February) exhorted its readers, “realism has to temper idealism, but democracy has to be our ultimate goal.”

The trouble is that the contemporary fetish with democracy rests upon false foundations. Logic and evidence demonstrate that its triumph does not mark the culmination of history. Quite the contrary: it signals moral and material calamity. Since the late 1960s, real incomes in the major democracies, the U.S. and Western Europe, have stagnated and in some instances fallen. On both continents – and in Australia too – CPI and rates of unemployment have ratcheted inexorably upwards and presently exceed 7% and 10% respectively. (Yes, that’s right: official government statistics are routinely manipulated and biased such that – surprise, surprise – they invariably flatter governments. See in particular Shadow Government Statistics).

Helped by these fiddles, debt in most Western countries has reached astronomical heights. It also continues merrily to grow. As a result, and according to Standard & Poor’s (In The Long Run, We Are All Debt: Aging Societies and Sovereign Ratings, 22 March 2005), on current form the sovereign debt of major Western countries will plummet to “junk” status within twenty-five years. State-run medical and educational establishments are in disarray, and social welfare systems are approaching bankruptcy. Gregory Mankiw, until recently one of the Bush Administration’s most senior economic advisors, summarised the situation in these words: “the [American] federal budget is on an unsustainable path. I know that when the baby-boom generation retires and becomes eligible for Social Security and Medicare, all hell is going to break loose. I know the choices aren’t pretty – either large cuts in promised benefits or taxes vastly higher than anything ever experienced in U.S. history” (The Toronto Star 5 February).

The collapse of the Soviet Empire was superficially a victory of democracy. Much more profoundly, however, it culminated the moral and material bankruptcy of Communism. As such, it should have been regarded as a harbinger of the eventual demise of Western, liberal and democratic socialism. Communism abolished private property; democratic socialism bastardises it. In Communist states, economic calculation was impossible; in Western democracies, it is ever more constrained by and dependent upon governments. Communism collapsed. For identical reasons – namely, the futile attempt to suspend the laws of economics – Western liberal democracy stands on shaky legs. The Soviet Empire’s breakdown, in other words, might foreshadow that of the American Empire (see in particular William Bonner and Addison Wiggin, Empire of Debt: The Rise of an Epic Financial Crisis, John Wiley & Sons, 2005 and its review by Doug French). As Hans-Hermann Hoppe demonstrates in Democracy, the God That Failed: The Economics and Politics of Monarchy, Democracy and the Natural Order (Transaction Books, 2002), democracy is incompatible with private property – and hence with liberty and civilisation. To ponder these two books is to realise that the proponents of democracy are either misguided or malevolent. Either way, investors beware: democracy is evil.

Let’s Define Our Terms

Monopoly, Aggression, the State and Its False Basis

As a first link in the chain of reasoning that yields this conclusion, let us assume that in order to create and maintain “collective security” individuals require a distinct party, S, to act as their protector and guarantor (see also Letter 63). These days, not only do individuals require defence against foreigners; they also need indemnity from a long and ever-expanding list of Bad Things (such as poverty, unemployment, poor health, bad habits, “offensive” words, ideas, pictures, etc.). Assume further that S is not just another individual or collection of individuals. Rather, he is (or they are) a Sovereign, i.e., a State. Agents of the state arrogate to themselves two unique powers. First, S compels its subjects to seek protection from nobody except S. The Sovereign, in other words, is the exclusive provider of “security” to everybody who resides within the territory it monopolises. Second, S is the sole determinant of (a) how much money subjects must pay and (b) how this money will (allegedly) beget security.

The Sovereign, in other words, has the exclusive power to tax, formulate and execute “public policy.” But Taxation Is Robbery and hence those who tax are thieves (see also Letter 59). Accordingly, a state is a monopolist of “public violence” within some specified territory. As such, S’s agents undertake systematic and continuous violations of its subjects’ property rights. These assaults take myriad forms. Outright confiscations and expropriations, such as taxation, are obvious and direct; and others, such as regulation, the central bank’s creation of inflation, etc., are obscure and indirect.

As an aside, we acknowledge the assumption that individuals require a state to protect them against various bogeymen is demonstrably false. In particular, Murray Rothbard (Power and Market: Government and the Economy and For a New Liberty) and Hans-Hermann Hoppe (The Private Production of Defense) have demonstrated from first principles that individuals require no exclusive and privileged agent to produce peace and security. Yes, Virginia, the state rests upon incorrect premises. But we adopt this assumption because 99.99% of people have long believed, most of them fervently, that a monopolist must provide this “protection” through violent means. People routinely criticise the state’s particular actions, but virtually nobody questions its existence. Regardless of the question, people cling desperately to the belief that more and bigger government is always the answer (see also The 7 Never-to-be-Forgotten Principles of Government by Harry Browne and The State and Its Five Rationales by Llewellyn H. Rockwell, Jr.).

“Public” States and “Private” States

Next, let us acknowledge that S, the state, takes many forms. To simplify matters, assume that we can place any state, in an abstract sense, at some point along a continuum. At one end, entry from the ranks of subjects into S and vice versa is completely open and fluid. In principle, in other words, any subject can become the Sovereign. How does this occur? Continuing to simplify, let us assume that there exists a periodic process, called an election, whereby all subjects may freely choose from among several candidates vying to assume the privileges of sovereignty. The winning candidate(s) becomes Sovereign for some pre-agreed period, i.e., until the next regularly scheduled election. Let us label this kind of state a democracy. At the other end of the continuum, entry into the State is hermetically sealed. In this state, no subject can ever become the Sovereign. Why? Because it is an hereditary position that passes automatically over the generations from the incumbent to (say) his eldest child. Let us dub this kind of state a monarchy.

From this conception it follows that the “parliamentary” or “constitutional” monarchies in the British Commonwealth (i.e., Australia, Britain, Canada, New Zealand, etc.), Scandinavia (i.e., Denmark, Norway, Sweden) and other parts of Europe (i.e., Belgium, Holland, Spain) are much closer to the democratic than the monarchical end of the continuum. In these countries, the privileges of the Sovereign – that is, decisions about compulsion and the policies that implement it – reside in the elected rather than in the hereditary executive. In these countries, the hereditary monarch is, with few exceptions, a symbolic and ceremonial figurehead. Hence debates in Australia over the past decade among “monarchists” and “republicans” are utterly misconceived. They are pointless and usually idiotic shouting matches, bereft of logic and evidence, between democrats of varying degrees of rabidity. From this conception it is also clear that these days the ranks of monarchies are very thin. Today, most countries are (albeit to varying degrees) democracies. In that respect, at least, Fukuyama is correct.

Given that they are monopolists, the behaviour of all Sovereigns, whether they are democratic or monarchical, conforms to three iron laws. As a monopolist, the Sovereign will (1) take any and all steps required to protect its privileges. It will also (2) strive to extend these privileges into new fields. Finally, over time it will (3) require more and more inputs in order to produce outputs of progressively poorer (compared to the goods and services of producers who face competitors in markets) quality. The State, in other words, will inevitably fail to create and maintain the very “security” that allegedly necessitates its existence. The power to tax is ethically unacceptable not just because a monopolist of “public” violence produces ever fewer and shoddier goods. Adding insult to injury, it also produces more and more “bads” (i.e., injustice and aggression). In Australia, politicians and what they have wrought are roughly one-third dreadful, two-thirds (more or less) laughable and precisely three-thirds contemptible. No matter what task they remove from individuals and arrogate to themselves, they have done and will do it improperly, inefficiently and ineffectively. They are a disgrace to all that is good and true, and their activities constitute an unreformable axis of plunder. To protest this iron law is akin to criticising the “unfairness” of the tides or bewailing the “injustice” of the periodic table of elements.

All States Are Failed States

Why is S innately incapable of providing protection and promoting peaceful co-operation among his subjects? Why does it necessarily increase violence? If people in general are predisposed towards violence, as statists assume, then S must also be so inclined. Whether he is an hereditary monarch, elected president or self-appointed dictator, S is still a man; and given any realistic view of human nature, there are no grounds to believe that men who become agents of the state thereby become angels. Quite the contrary: there is every reason to believe that they will remain scoundrels. Indeed, they will become even worse villains because the privileges of sovereignty provide irresistible temptations to prey upon people on a scale that is unavailable to private criminals.

Given these premises, it is immediately obvious that in any practical sense the “democratic” end of this abstract continuum is more illusion than reality. Elections are opiates of the masses because there can be no completely free entry into the sordid business of systematic and institutionalised pillage. If there were, then the shelves would soon be empty and nothing would remain to ransack. Under the assumption of self-interest, agents of the state will use their monopoly privileges to feather their nests. Hence every government has an inherent tendency to grow. But this growth conforms to a particular logic: the state’s most senior and powerful henchmen will invariably benefit first and foremost from the state’s activities. Similarly, they will be the last to feel the effects of any retaliation from their subjects. For this reason, entry into the state’s most senior echelons, even in a “democracy,” is far from unrestricted – and hence far from democratic.

Accordingly, is not the relation between S on the one hand and its subjects on the other simply an extortion racket on a scale vastly greater than private sector organised crime? Will not S enforce peace between a, b, c, et al. simply because that arrangement enables him to plunder all of them more conveniently? If so, then S’s privileges protect him from his subjects. But the more S is protected from his subjects, the less these subjects are protected against S. “Collective security” is thus a dangerous delusion. It is a mechanism whereby S obtains its own security by first disarming and then subduing its subjects. In reality, collective security is a fair-sounding euphemism that disguises the collective punishment of subjects by their rulers.

The “Private” State: Bad But Hardly Worst

Despite these similar general patterns of behaviour, divergent incentives confront specific Sovereigns at opposite ends of this continuum. Accordingly, they will tend to act in distinct and roughly predictable ways. To see this, let us introduce two insights into the analysis. The first is the concept of time preference. The second is Hoppe’s insight (see Democracy: The God That Failed) that a monarchy is a “private” state and that a democracy is a “public” state. From these insights, two consequences follow.

First, if an hereditary monarch privately owns a state, then the Sovereign’s time preference will tend to be relatively low. The monarch, in other words, will tend to plan and conduct his plunder from a long-term point of view. Conversely, in a democracy the state’s agents will tend to have high time preferences. Elected politicians will have short-term time horizons – which seldom extend beyond the next election – and will don the balaclavas, stuff their pockets, reward their mascots and drive the getaway cars as quickly as they can. Accordingly, the hereditary monarch will tend to exploit subjects less oppressively than will the agents of a democratic state. Second, the subjects of a monarch will also tend to have relatively low time preferences; that is, left in relative peace by their ruler, they will tend to be oriented towards the future and thus towards the accumulation of savings and capital. The situation in a democracy is very different. Like their rulers, subjects will fixate upon the present and upon hedonistic rather than disciplined pursuits.

Given that politicians have little incentive to restrain their looting (they tax today because they may not survive the next election), their subjects have correspondingly little incentive to constrain consumption and to save and invest. Their incentive is to spend sooner rather than later, i.e., before politicians tax, regulate or expropriate their property. In short, when the state is privately owned, civilisation can take root and flourish; but in a democracy, civilisation suffers. The privately owned state, in short, creates incentives akin to those of a farmer who possesses unrestricted, freehold title to a forest. His incentive is to maintain the land and harvest the trees sustainably and indefinitely. The democratic state, on the other hand, in which time horizons are short ultimately because property is insecure, creates incentives to “mine” the land. Strip the trees and make merry with the proceeds today, for who knows what tomorrow may bring?

Private Government Tends Towards Small and Frugal Government

Why should an hereditary monarch tend to have a relatively low time preference (compared, say, to private sector criminals, ne’er do wells and democratic politicians)? Why should he act prudently, focus upon the future and strive to accumulate capital? Why, in short, should this monarch act like an intelligent investor? Because, Hoppe demonstrates, the monarch personally owns the monopoly privilege of expropriation – and hence the plunder it has generated in the past and will yield in the future. L’état, c’est lui: the state’s property is his personal property. He therefore adds to his private estate what he loots from his subjects, and he treats the proceeds as his private property because it is. Like any other property owner, this monarch bequeaths his estate – the state – to his heir. More generally, he may sell, rent or donate part of his estate, and pocket the receipts from any sale or rental; and he may appoint and dismiss the administrators and employees of his estate. Significantly, they are not civil servants: they are his personal and private employees. The privately owned state, in short, bears a surprising resemblance to a family firm.

The monarch’s status as the state’s private owner profoundly shapes his incentives – and thus strongly influences his conduct of the affairs of state. Assuming that he is self-interested, the monarch will strive to maximise his total wealth – that is, the present value of his assets (including the monopoly privilege of plunder) and the stream of income it generates over time. He has no incentive knowingly to consume his capital, i.e., to increase his current income at the expense of a more-than-proportional decrease of his assets’ present value. This is true of owners of property more generally. Indeed, it permeates the actions of anybody who properly understands what it means to be an investor. In the special case of private ownership of government, it implies a moderation of a ruler’s exploitation of his monopoly privilege of expropriation.

If the state is privately owned, then the Sovereign will tend to avoid taxing his subjects so oppressively that he reduces their incentive to work and earn. If he does so he impairs his future potential takings, and thereby harms himself. If he taxes too severely, in other words, the present value of his estate will fall. To be sure, this Sovereign will tax; but he taxes subject to the objective that he at least maintains and, if possible, enhances the present value of his personal property. For this reason, self-interest will tend to restrain his tax policies. He will “save” today, i.e., restrain his present appetite for plunder, in order to “invest” in his realm and thus reap more booty in the future. The hereditary monarch who properly understands his own self-interest recognises that the lower the degree of taxation, the more productive his subjects will be; and the more productive the subject population, the higher will be the present value of the ruler’s monopoly of expropriation.

Government Is Constrained Government

Hoppe provides another reason why the private ownership of the state will tend towards relatively (that is, compared to a democracy) moderate and enlightened government. By definition, the ownership of private property implies either its exclusive use or the use by others on the owner’s terms. It follows that entrance into the ruling family will be severely restricted. The larger the ruling family, the smaller each member’s present and future share of the proceeds derived from raiding their subjects. Self-interest thus implies a relatively small and cohesive ruling family. Further, if the distinction between the few rulers and the many ruled is clear, and if there is virtually no chance that a subject can enter the ruling family, then the private ownership of the state creates an unmistakable division between the Sovereign and his subjects. This rigid divide, in turn, stimulates the development of clear “class consciousnesses.” One infuses the privileged Sovereign and the ruling family, and the other permeates his plundered subjects.

Central to the subjects’ self-perception is the level-headed recognition that they are exploited and that their rulers are plunderers and parasites. The very logic of the privately owned state, in short, immunises subjects against the delusion that the Sovereign and his actions are of, by and for the people. Under these conditions subjects are very unlikely to develop a psychological attachment or identification to “their” state because even the dullest subject understands that it simply isn’t. They regard themselves not as the citizens of state X but rather as the subjects of King Y. The private ownership of the state thus contains a vital self-regulating mechanism. The ruler and the ruled are suspicious of one other, and each is sensitive to his property rights vis-à-vis the actions of the other. Specifically, the privately owned state tends to generate hostility, opposition and resistance among the ruled to any expansion of the Sovereign’s privileges.

Private Government Gives Peace a Chance

These two moderating incentives in domestic affairs also extend to external affairs. Every state, monarchical or democratic, will pursue an expansionist foreign policy if it can. The larger the territory and the population over which its monopoly of confiscation extends, the more numerous and rewarding the opportunities for – and, in all likelihood, the bigger the proceeds of – plunder. In a privately owned state, the Sovereign’s attempt to enlarge the geographic size of his realm is by definition the ruler’s private business. Given the inherent exclusivity of a privately owned state, and the resultant resentments, suspicions and clear-headedness of the ruled, subjects will tend – correctly – to regard the Sovereign’s foreign policy adventures as things that might well cost but cannot benefit them. They will be rightly suspicious of the Sovereign’s territorial ambitions, distrust any rationale for them (such as military glory, religious redemption, threats from foreigners, etc.) and resent the taxes they will likely be compelled to pay in order to finance such boondoggles. Consequently, of the possible methods of enlarging his realm – namely plunder (warfare), purchase or inheritance – a private owner of the state who knows what’s good for him tends to prefer the latter. Instead of conquest, he will advance his expansionist desires through land purchases and a policy of intermarriage between members of different ruling families. In a privately owned state, foreign policy is a relatively peaceful game of monarchical scheming, negotiation and manoeuvre. Why risk your estate in battle when you might defend and even enlarge it in the boudoir?

The “Public” State: The Bloodthirsty God That Has Utterly Failed

Why, in sharp contrast to an hereditary monarch, should the agents of democratic states tend almost invariably to have high time preferences? Why, in other words, do they act and spend recklessly, obsess about today, ignore tomorrow and thereby squander and dissipate capital? Why, in short, should politicians – including “fiscal conservatives” – resemble nothing so much as drunken, spoilt and obnoxious teenagers? Hoppe shows that they are innately unruly because, unlike the monarch, they do not personally own the monopoly privilege of expropriation – and hence the plunder it has yielded in the past and will generate in the future. The agents of democratic states merely control the proceeds of the expropriation that occurs today.

Democracy Begets Socialism

In a “public” state, the ability to bully, coerce and intimidate lies temporarily (until the next election) in the hands of a particular set of “trustees” selected by subjects. In this asylum, the voter can choose candidate X or party Y. She can select a package of coercion such that her surrender of property is somewhat lessened (this occurs far less frequently than people seem to think), or she can vote to rob her neighbours and help herself to some of the booty. Critically, however, she cannot completely reject or exempt herself from this criminality. Like a resident of a mental institution, she can select among trivial alternatives. She can choose either more pudding at dinner or more time to watch TV or a later bedtime; and if her choice “empowers” her, then so much the better. But make no mistake: the agents of the democratic state remove fundamental decisions from her hands. Most importantly, she cannot under any circumstances elect to leave the asylum.

A critical ambiguity and source of resultant calamity thus lies at the very core of the “public” state. It is unclear who, if anyone, owns the democratic state’s “property” – that is, what its agents have robbed from their subjects. As a result, insoluble problems of “corporate governance” bedevil it. Clearly, however, this plunder does not belong personally to the state’s agents. They cannot bestow it or their privileged positions on their heirs. More generally, eyebrows are raised when these agents sell or rent the state’s property and personally pocket the receipts. Civil servants – the servants of the state – thus control the current income derived from plunder, but they do not personally own the underlying assets or capital base.

The politician’s status as the temporary hand at the criminal syndicate’s helm profoundly shapes his incentives. It thereby determines how he conducts his incursions upon his subjects. Assuming that he is self-interested, the politician will strive to maximise the state’s current income – that is, to dispense as many favours as he can upon himself, his followers and mascots. He must live and spend for today because he may not survive the next election. Better, therefore, to plunder his subjects now rather than risk leaving booty for his political opponents. They, after all, will use the state’s income to entrench themselves and thereby exclude him and his henchmen from the levers of privilege. The politician in the democratic state therefore has every incentive, knowingly or otherwise, to consume and impair his country’s capital. He cares little or nothing if he boosts the state’s current income at the expense of a more-than-proportional decrease of his subjects’ assets. To expect a politician to act prudently in the present, and to believe that he can plan sensibly for the future, is utterly to misunderstand the nature of the beast and its habitat. It is to believe, in effect, that a Tasmanian devil can become a docile vegetarian.

If the state is “publicly” owned, then the “successful” Sovereign – the one who (or the coalition that) repeatedly wins elections – must maximise the State’s current income such that he pleases the majority of his subjects. As a result, he will invariably undertake a policy of divide and rule. He will attempt to focus his plunder upon the relatively few (i.e., rob Peter) and use the proceeds to generate electoral support from the relatively many (i.e., pay Paul). The “redistribution” of income, both overt (through taxes) and indirect (i.e., via regulations, deficit spending and the central bank’s inflation, etc.), is thus an inherent and inescapable curse of democracy. Because the incumbent Sovereign must constantly outbid wannabe Sovereigns, the extent of redistribution-by-plunder – and hence the burden of taxation and regulation – will inexorably rise. Elections thereby become beauty pageants contested by artful dodgers and ugly liars. They are, as H.L. Mencken knew, auctions on the redistribution-in-advance of stolen goods.

The successful politician, then, is necessarily disingenuous and duplicitous. He is also cunning: he will tend to avoid taxing so heavily and overtly that he raises his supporters’ ire. (His opponents, on the other hand, can go to Hell). Indeed, he may even champion “tax cuts.” But draconian cuts of expenditure – that is, the relaxation of pillage and the move towards compassion and justice – are taboo. Instead, the winning politician will gravitate towards indirect, less visible and thus more insidious forms of assault such as deficit finance and inflation.

Democracy Means Massive Debt and Malinvestments

The democratic state, in other words, is very likely to accumulate a large and ever-expanding load of debt. A monarch by no means eschews debt, but as the realm’s personal owner he faces a significant constraint: he and his heirs are personally liable for the repayment of their debts. Because they are his (or his heirs’) debts, he can be – and, as history shows, occasionally has been – forced by his creditors to liquidate assets. In diametric contrast, because the agents of the democratic state do not personally own the state’s property, they are not personally liable for any of the debts they incur (or, more generally, for any of the monumental wastage and loss of property that routinely occurs) during their tenure. In a democracy, unlike a monarchy, the ownership of the state’s property is indeterminate; accordingly, the personal economic responsibility of politicians simply does not exist. In a democracy, the “responsible” politician is simply a figment of the imagination.

The debts that politicians incur are “public debts” that will allegedly be repaid by future (and equally unliable and hence irresponsible) politicians. If you bear no personal liability for any debts you incur, then the temptation to abandon prudence and indulge yourself and your mates becomes irresistible. What better way to boost consumption today? And who cares if this consumption comes at the expense of investment today and thus consumption tomorrow? Similarly, who cares (or even knows) that an orgy of debt-financed consumption tonight necessitates a hangover of rising direct taxes (or indirect taxes like the central bank’s inflation) in the morning? The logic of a “public” state, for both rulers and ruled, is therefore to spend today and hang tomorrow. As time preferences rise, present consumption and short-term speculation flourish and long-term saving and investment flounder.

The agents of the democratic state, then, inevitably distort the country’s structure of production and erode its base of capital. Over the decades they crimp – and in some democracies have destroyed – standards of living. But the democratic politician has little incentive to know about the long-term destruction his policies wreak; and if he does know, he has not much reason to care. These things are problems for politicians well beyond the next election; as such, they are utterly irrelevant for today’s politicians (and most voters).

Unlike the monarch, then, self-interest provides no incentive for the democratic Sovereign to restrain his predations upon his subjects. Quite the contrary: he will intensify plunder in the present in order to secure his popularity and reputation for “compassion.” In the democratic state, the politician recognises that the less obvious the taxation and the more visible its redistribution, the more grateful and unified his supporters will be; and the stronger his coalition, the greater the chance he will carry the next election. Accordingly, the constant consumption of capital and consequent erosion of the country’s capital base is an unavoidable consequence of democracy. Unlike a monarch, for a politician a policy of prudence and moderation offers only disadvantages. Destruction and extremism, on the other hand, promise popularity and victory at the polls.

Democracy Bastardises Property Rights

Some of democracy’s most sinister characteristics are so subtle that they are almost completely unrecognised. When a state moves from the monarchical towards the democratic end of the continuum, its interpretation of its monopoly of “public” violence changes initially imperceptibly but ultimately dramatically. Assuming self-interest, a monarch will (notwithstanding his exceptional status) seek to enforce pre-existing body of property law. As a property owner, he has an incentive to assume, accept and encourage private ownership. That, after all, is the basis of his rule. Critically, therefore, he does not create new law; he merely occupies a privileged position within an existing and all-encompassing system of private property law. With one exception, namely the monarch’s privileges, in the “private” state property rights tend to be clear and secure.

In diametric contrast, when the state is “publicly” owned and administered, a new type of “law” – that is, legislation and regulation – necessarily emerges. “Public” law makes de jure something that the indeterminate ownership of the state’s property creates de facto. It exempts the agents of the state from any personal liability for the consequences of their actions. It also excuses “publicly owned” resources from the same standard demanded of private resources. Accordingly, “public law” such as constitutional and administrative law is “higher” law in the sense that it subsumes, and thus erodes, private law in general and private property law in particular. In a democracy, in other words, private rights are increasingly subordinated to and eventually displaced by the state’s privileges.

This development – and the redistribution of property, profits and incomes more generally – has a subtle but profound effect upon subjects. In Hoppe’s words, “the mere effect of legislating – of democratic lawmaking – increases the degree of uncertainty. Rather than being immutable and hence predictable, law becomes increasingly flexible and unpredictable. What is right and wrong today may not be so tomorrow. The future is thus rendered more haphazard. Consequently, all-around time-preference degrees will rise, consumption and short-term orientation will be stimulated, and at the same time the respect for all laws will be systematically undermined and crime promoted (for if there is no immutable standard of ‘right’ then there is also no firm definition of ‘crime’).”

Democracy Promotes Sloth and Undermines Morals

Any redistribution of income or wealth among subjects necessarily means two things. First, recipients of largesse do not produce more or better goods or services, but nonetheless benefit. Second, the victims of redistribution do not produce quantitatively or qualitatively less, but they still suffer. To abstain from production thus becomes relatively more attractive. As a result, the logic of democracy encourages more people to produce less and to display poor foresight; and it penalises people who strive to produce more and to anticipate consumers’ demands for goods and services. In the democratic state, no vice goes unsubsidised and no virtue goes unpunished.

As a result, the policy endemic to democratic states – which invariably entail greater expenditure and more impenetrable regulation – will inexorably create more poor, unemployed, uninsured, uncompetitive, hapless, homeless and otherwise idle people than would otherwise exist. That is, the very “problem” that the redistribution is supposed to cure will inevitably grow bigger. Accordingly, and in the sense that the ratio of able-bodied and productive people to the total population will constantly fall, the cost of maintaining the existing level of redistribution will relentlessly grow. In order to finance this growing burden, ever-higher taxes and more extensive confiscation of wealth (usually indirect and hidden) must be imposed upon the remaining producers. The tendency, then, is to corrupt incentives, and hence subjects’ focus, from production to idleness. Entitlement and subsidisation, in turn, beget infantilisation and demoralisation – what Hoppe has called “decivilisation.”

Democracy Breeds Collectivism and Nationalism

A democracy takes two to tango: no politician, in other words, can succeed without the active and often enthusiastic connivance of voters, bureaucrats and judges. For this reason, too, the “public” ownership of the state tends towards relatively (i.e., compared to an hereditary monarchy) extreme, erratic, arbitrary and regressive rule. In a democracy, entry into the political class is not completely open, but the class barrier is much more permeable than in the privately owned state. And anyone, in theory, can become the Sovereign. It is true that the larger the political class, the smaller the average member’s share of the proceeds derived from pillaging subjects. At the same time, however, the larger this class the more likely it is that any particular individual who seeks to enter it will do so. The calculus of democracy thus mandates a relatively large, growing and amorphous political class. In a democracy, the distinction between the not-so-few rulers and the many ruled is hazy, and there is a reasonable-to-good chance that a sufficiently determined (i.e., sociopathic) individual can enter the political class. Hence a “class consciousness” tends to be present within the political class but absent among the subjects it ransacks.

For these reasons, central to subjects’ self-perception as “citizens” is the delusion that democracy means the rule of the people, by the people and for the people. Equally delusional is the universal – and usually fervent – belief that in a democracy the “leaders” create “rights” and enact “policies” that benefit the people (particularly poor people). The very logic of the democratic state distracts its subjects from the central reality that their rulers are grafters, scoundrels, brigands and leeches. The “public” state, in short, creates a mass Stockholm Syndrome: almost without exception, not only do subjects worship the very state that marauds them; they also denounce any opposition and resistance to the expansion of the Sovereign’s monopoly of “legitimate” coercion and violence. The democratic state thus lacks any self-regulating and moderating mechanism. Most dangerously, it tends to stifle opposition and resistance among the ruled to any expansion of the Sovereign’s desire to plunder.

Under these conditions, subjects eventually develop a psychological attachment or emotional identification to “their” state – and hence a distrust of the state’s critics and a dislike of other states’ subjects. Collectivism and nationalism, in other words, either accompany or follow quickly in democracy’s footsteps. The consequences are catastrophic (see in particular Anthony Gregory’s Nationalism and Anti-Americanism and Amerika Über Alles vs. America, Land of the Free). The fanatical nationalism prevalent in “red” parts of the U.S. and the chardonnay anti-Americanism that contaminates dinner parties in upscale parts of Australia, Britain and Canada, for example, relies upon an identical – that is, collectivist – impulse. To the American jingoist and the leftie anti-American, the U.S. is a single, homogeneous entity – not a variegated collection of roughly 300 million individuals. To both types of collectivist, the U.S. Government is a mirror image and perfect microcosm of that allegedly uniform country and its supposedly monochrome economy.

Accordingly, to the hyper-nationalist, the U.S. Government and particularly its military embody all that is good in the American people; and to oppose the invasion of Iraq or Afghanistan, or the U.S. military or the political class of Washington more generally, is to “hate America.” And to chardonnay anti-Americans, the U.S. Government and particularly its foreign relations encapsulate all that is reprehensible in the American people. As far as they are concerned, to admire America’s Jeffersonian heritage, the vigour of its innovators and the warmth, decency and generosity of the vast majority of its inhabitants is automatically to support holus-bolus the incumbent régime’s foreign and domestic policies.

The hyper-Americans and the anti-Americans agree that America’s essential character is synonymous with the Leviathan in Washington and its aggressively interventionist policies. Their only disagreement is whether these policies are good or bad. Only somebody who believes – fervently – that the U.S. Government is America and vice versa could entertain such idiotically confused views. But that’s collectivism for you.

Democracy Foments Total War

The malign incentives that facilitate economic warfare in domestic affairs extend to foreign affairs. In a “public” state, everything – including the Sovereign’s attempt to enlarge the geographic size and external power of the realm – is by definition everybody’s business. In a democracy, subjects will tend to regard the Sovereign’s foreign policy adventures as things in which they have every interest – after all, “national security” and “national pride” are at stake. Accordingly, subjects will cheer “their” Sovereign’s territorial ambitions and will blindly embrace any rationale, no matter how absurd, used to justify them. Further, surprisingly few peaceful means of enlarging the realm are available to the agents of the democratic state. Because they cannot bequeath the state to their heirs, intermarriage with agents of other states is pointless. That leaves plunder (warfare) and purchase. But when subjects’ blood is boiling, and national honour and security are allegedly at stake (which in a democracy they often seem to be), purchase at any price, let alone a reasonable one, is simply not an option. Democracies, in short, resort to war much more quickly than monarchies; more generally, “public” states are inherently more belligerent than “private” ones.

Even worse, democracy not only increases the likelihood but also the intensity of war. Monarchical wars are characterised by dynastic objectives; and given the monarchy’s basis, these objectives are usually private and territorial. Because the monarch’s subjects lack any emotional attachment to the state, his quarrels are seldom ideologically motivated: they are usually simple disputes over specific properties. Moreover, because the monarch’s subjects rightly recognise that they have nothing to gain but much to lose from his foreign interventions, they expect (and monarchs feel compelled to recognise) a clear distinction between combatants and non-combatants. The democratic state, on the other hand, blurs the distinction between rulers and ruled, and thereby fosters subjects’ emotional identification with “their” state. It also encourages subjects to regard themselves as a distinct and righteous “people” with particular “interests” and a glorious destiny – which, of course, only the state can protect and advance.

Itself an aggressive ideology, democracy breeds another aggressive ideology: nationalism. Hence the wars of democratic states are nationalistic and ideological wars. No longer merely private haggles over particular pieces of property, democratic wars become zero-sum crusades between antagonistic linguistic, ethnic, or religious groups. As such, they cannot be resolved through negotiation but only by means of ideological, cultural, linguistic or religious domination – or extermination. In the wars that democracies wage, it thus becomes more and more difficult for members of the general public (whether they reside within a combatant or non-combatant country) to remain neutral. Resistance against the higher taxes required to finance a war – or to war itself – is regarded as treachery or even treason. Conscription of labour and property, a euphemism for slavery, becomes the rule rather than the exception. The wars democracies wage, in short, take masses of human cannon fodder and then back them with the economic resources of the shackled nation-state. Democratic wars, in short, tend to be ideological, collectivist, nationalistic and hence total wars. In fights to the death for national supremacy (or against national suppression), all distinctions between combatants and non-combatants disappear. Wars among many “public” states are thus indescribably more destructive and cruel than are wars between two “private” states.

Do You Love Liberty? Then Denigrate Democracy

Austrian School economics begins with a handful of elementary, a priori and hence unarguable axioms. Most notably, nobody can purposefully refrain from action; the intention of every action is to improve the actor’s subjective well being; production must precede consumption, and so on. From these axioms, an extensive body of knowledge – the laws of human action – have been deduced. More clearly than two of its giants of the twentieth century (namely Ludwig von Mises and Murray Rothbard), Hans-Hermann Hoppe has deduced one of these laws: private property (i.e., individual ownership and rule) and democracy (i.e., collective ownership and majority rule) are incompatible. It’s either one or the other. Why prefer private property? Answer: it – and not democracy – is the ultimate source of capital, its accumulation, prosperity, peace and therefore civilisation (see also Hoppe’s new book The Economics and Ethics of Private Property).

Because it pierces the fog and cauterises the delusions that presently envelope us, Hoppe’s conclusion is fundamental. But as he recognises and emphasises, it is hardly new. America’s Founders knew it well, and Canada’s Founders arguably understood it even better. Accordingly, they attempted – vainly, as many of them feared – to build bulwarks against it. Albeit through distinct paths, these countries’ greatness is not that they have become democracies: it is that they successfully resisted democracy so long. The last-ditch defences were overrun during the Great Depression and the Second World War. But well into the twentieth century, leading people in both countries viewed democracy – and the state more generally – through clear and unsentimental lenses.

In “The Smart Set” (1922), for example, H.L. Mencken sagely observed “democracy does not promote liberty; it diminishes and destroys liberty.” In “Last Words” (1926), he added “all the great tribunes of democracy ... convert themselves, by a process as simple as taking a deep breath, into despots of an almost fabulous ferocity.” Democracy, Mencken concluded, “is incomparably idiotic, and hence incomparably amusing. Does it exalt dunderheads, cowards, trimmers, frauds, cads? Then the pain of seeing them go up is balanced and obliterated by the joy of seeing them come down. Is it inordinately wasteful, extravagant, dishonest? Then so is every other form of government: all alike are enemies to laborious and virtuous men.”

During these twilight years, even a few of the agents of the state possessed a coherent conception of democracy. Perhaps most notably, the U.S. Army Training Manual of 1929 defined “democracy” in these words: “a government of the masses, authority derived through mass meetings or any other form of direct expression; results in mobocracy; attitude toward property is communistic negating property rights; attitude toward law is that the will of the majority shall regulate whether it is based upon deliberation or governed by passion, prejudice, and impulse, without restraint or regard to consequences; its result is demogogism [sic]. ...”

It is therefore utterly absurd to contend, as Francis Fukuyama and the swarming legions of neoconservatives do, that liberal democracy is the best conceivable social-political system. It neither fosters “freedom” nor augurs “the end of history.” This, the neocons’ central assertion, reveals their capacity for mendacity or self-delusion rather than insight (see in particular Neo-CONNED! by Ron Paul). When applied to the topsy-like spread of democracy, the Whig conception of history, by which mankind marches erratically towards ever-higher levels of progress, is flatly wrong. For people who prefer less exploitation rather than more, who value farsightedness and individual responsibility and eschew shortsightedness and irresponsibility, and above all who love peace and loathe war, the transition from private to public government provides grounds for mourning rather than celebration.

“Whoever wishes peace among peoples must fight statism,” said Mises. Consequently, whoever fights statism must also fight democracy. As his life demonstrates, it is entirely possible to struggle peacefully as well as successfully. What To Do? Nothing. Or, rather, disengage. How to disengage? A good first step is the denigration and delegitimisation in the marketplace of ideas of democracy – and therefore of high taxes, growing debt, socialist government and total war. Perhaps the growing revulsion against the neoconservatives’ wicked deeds in Afghanistan, Iraq, Guantánamo and who knows where else will increase the likelihood that they become history rather than terminate it.

Chris Leithner


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