A state is a monopoly by nature. In the popular culture, which cannot be said to be friendly to free market economy and individual freedom, monopoly has been defined as the domination of the market in a good or service by a single producer. This definition is both wrong and misses some basic components of true monopoly. First, it excludes political and bureaucratic kinds of monopoly. Second, by doing so, it creates the myth that state as a whole, or different parts/apparatuses of the state are the only tool that we can employ to fight monopoly. And, third, it presents the result of a phenomenon as its essence.
In sound economic theory, a monopoly means exclusive privilege, granted to a single producer of a commodity or service. This prevents other actual or potential producers from entering into that field of commodity or service production. In other words, when there is monopoly somewhere, “free entry” must have been forbidden and only one producer must be allowed to produce the commodity or service in question.(1) It is of great importance to underline this definition of monopoly as often as possible so that more common definition of monopoly espoused and defended by those who are against free market economy is not confused with the right definition. As I briefly summarized in the beginning, those people omit the basic condition to appear a monopoly of the absence of “free entry” and instead concentrate on the scale or size of production under free market conditions of a commodity or service. To repeat it again, a monopoly exists when free entry is not allowed.
Modern states perfectly fit into this definition of monopoly. We live in a world of nation-states today. In addition to the incredible amount of interventions into our daily lives by modern states, the mentality of the majority of human beings also have been shaped by the existence, activities, performance, and commands of states. There is also a large literature available that presents us the nation-state as a god capable of doing anything and everything. People in the streets today in any country firmly and sincerely believe that the state can and should feed, educate, protect, entertain, socialize us. To them the state can solve all social problems, make economy grow, and remedy poverty forever.
In some parts of the world, like my country, people go far ahead to accept that the state has the right to tell its citizens what to believe, how to live. And what is worse is that they think this has always been the case during the history of humanity and will stay on for the foreseeable future.
We have plenty of proof that the state as understood and functioned today did not exist in all parts of human history. Nor did people always believe and trust such an entity. Several centuries ago, in the era of feudalism, there was not such a political centralization. Up to 19th century, people did not expect a centralized political power to solve all their problems.(2)
This is why statist philosophers like J. Bodin, N. Machiavelli, T. Hobbes, and later on J. J. Rousseau yearned for and devised unhealthy but sophisticated theories for the creation of a centralized state.
As you would remember, Bodin employed the term sovereignty to prove the need for a centralized political authority and to legitimize the existence and activities of such a power. Machiavelli felt quite unhappy that Italian unity had not been achieved. The creation and integration of free markets, that caused unseen prosperity and civilization in city-states in Northern Italy, did not interest him. Thus, he, by freeing politics from ethics, tailored the prince a special, unquestionable position whose (main) duty was to suppress political competition, including the one coming from the Catholic Church, and create a politically united Italy. Hobbes never trusted human beings except those in power. Terrified by the violence and terror of English civil war – another political creature –, he called his fellowmen to submit themselves to the state for their safety and happiness. And Rousseau, later on, laid down the roots of modern totalitarianism through the concept of “general will” which meant, in reality, the subservience of dissenting minorities to the “popular will”…
These philosophers were happily followed by others in next centuries. Hegel and Marx were the most prominent ones among those who proceeded in their footsteps. However, oppressive approaches did not stay limited to philosophers and their ideas. By mid 19th century, the philosophy of limited government has already been in decline, and collectivist movements calling for a big state were in rise. As Hayek and Popper pointed out nothing is inevitable in history. As a matter of fact, if ideas and climate of opinion have any effect in the course of events it was almost inevitable to experience unbounded, unlimited authoritarian systems that we call today totalitarian regimes.
It is not unfair to label the 20th century as the age of totalitarianism. During the 20th century humanity witnessed fascist, national socialist, and socialist totalitarianism in Europe and religious totalitarianism in Iran.(3)
In many corners of the world, states killed, indeed, massacred millions of human beings. In his admirable work Death by Government, Rudolph Rummel tries to give an inventory of the people killed by governments in wars or other forms. He estimates that in the 20th century there are 170 millions deaths caused by government.(4) I do not want to dig into details on this as I am sure all of you are familiar with great works dealing with atrocities committed by governments especially by totalitarian regimes. However, while passing, I can’t help point to a terrible double standard of western intellectuals in distinguishing between fascist and communist crimes. As Alan Kors puts it, many Western intellectuals never forget what national socialists did to Jews and other peoples. They rightly remind the crimes of the national socialists, but as to crimes of communism, they rather keep quiet.(5)
Good for humanity that those monstrous regimes disappeared, some by World War II and some peacefully. However, terrible crimes committed by totalitarian regimes should not mislead us to believe that states perished their subjects only in totalitarian regimes and there was not any or serious infringements upon the rights and freedom of people in the non-totalitarian world or so called free-democratic world. The growing collectivist tide, and statism also exhibited themselves in other parts of the world. The collapse of “devil regimes” on earth left democratic regimes without negative reference, which had been used by the elites of democratic regimes as proof of how good they were. When eyes turned into the inside of democratic countries, problems became more visible. And we awakened to a so-called “free world” where our freedom has been in decline for decades.
The best way to understand how the rising statist/collectivist tide influenced the free world is to glance what has happened in the USA in the last century. The USA is considered a country founded on sound grounds to protect basic human rights – namely life, liberty, and the right to pursue happiness. Hence it might serve here as a test case, i.e. as an indicator to measure to what extent Americans are free of arbitrary governmental interventions. The Founding Fathers were fully aware of dreadful danger excessive centralization of political power could create to freedom and individual rights. Therefore, they crafted the first modern written constitution (1787) that aimed to divide and balance political power.(6) Indeed the American federal system has been relatively successful and achieved its aim at last for some time. Unfortunately, within the system there was a tendency to promote centralization that quite affectively transferred the system over time.(7) In 160 years America has become more centralized. States lost their power to the federal state. As the process has been quite slow and developed through indirect methods not many people comprehended what has been happening. Helped by some other events, upon which I shall touch later, the USA has evolved to an unpredictable, excessively centralized political system.
This process and the current situation it created have been well analyzed and documented in a book, published by the Cato Institute and written by Carlotte A. Twight : Dependent on DC. The subtitle of the book speaks for itself: The rise of federal control over the lives of ordinary Americans.(8) Ms. Twight convincingly shows that, in the last century, the Federal State progressed step by step to control lives of ordinary American citizens. It is still progressing in this way. American Federal State uses social security system, income tax system, education system, health care system as tools in achieving the aim to wholly control the lives of Americans. She claims no American citizen can escape from Federal control. The federal state, namely politicians and bureaucrats, adapt very subtle, covert ways not to awaken the people to what is done to them. Professor Twight, inspired from Douglas North’s work, calls the universal tactic to disguise the growth of government as to hide or distort political transaction costs. This happens in different forms indeed. For example, there are so many and so extremely detailed legal rules and administrative regulations that almost nobody, even experts, can fully know. The power of federal government in a specific area is not made grow over night or in a short period of time. It is done step by step and in years. So that no one can detect the accumulated and cumulative effect of the governmental growth process. A special language, like the new Speak in Orwell’s famous novel / black utopia 1984, has been devised in which bad things are given good names. For example, in this new speak ‘tax increases’ become ‘resource finding’. All so-called ‘measures’ are supposedly taken for the well-being of Americans. What is more interesting in the American case is that, the judicial system, especially the Supreme Court, which was originally created to curb the state power, collaborates with politicians and bureaucrats in enlarging state power and infringing upon the rights and freedoms of American citizens.(9)
What has happened in the USA shows that states constitute a real threat to human freedom. It is true that there are differences in the ways states get organized and the tactics / methods they employ. And, in this respect authoritarian and totalitarian regimes appear much more brutal and inhuman than democratic regimes. However, this does not change the fact that the state is a real danger to our freedom in every form of political regimes.
There must be various reasons for this. First and foremost, many authors agree that no government is liberal by nature.(10) Governments in all forms have a natural tendency to get bigger.(11) In other words, political authority holders are naturally inclined to expand their powers. This is one of the main reasons why liberty is the exception and tyranny the norm in human history. It would be very illuminative to make a comparison between economic and political power in this respect. In a market economy, rival economic powers can coexist and live peacefully side by side and no monopoly can appear or once appeared, keep its monopolistic position for long if free entry right remains.(12) Things are completely different in the political area. As I indicated in the beginning of my presentation, the state is a political monopoly that excludes all sort of political rivals from its jurisdiction. In one country you cannot have two states at the same time. In other words, in the market place all economic powers are limited and curbed by competition whereas there is no competition in governmental jurisdiction. As proved by the evolution of federal systems, including that of USA, towards more centralization, in political arena there is not a competition similar to market competition. Therefore states always get bigger. To some authors, the tendency of the state to grow is even bigger in democracies than monarchies, because time preference rate is much higher in democracies. Hans Herman Hoppe defends this view effectively in his interesting book Democracy: The God that Failed.(13)
Having said this, I want to turn to whether there is a difference between small states and big states in this respect. In other words, from a classical liberal point of view, to have more freedom what we should stand for: Big state or small state? Let me start by making some conceptual clarification. I want to use three conceptions: Super state, big state, and small state. There must be differences between big state and super state. By big state I mean excessive centralization, oversized bureaucracy, capture of quite high percentage of GDP, by the government, growing regulation and governmental inferences in individual and social life. Taken like this, we can have a big state even in a relatively small country. Super state is a state that has the desire, ability, and capacity to play a world role, to interfere almost every corner of the world through diplomacy and a strong military organization. And I mean two things by small state. The first is literally and actually less government, and the second is a small-in-land and world interest-country.
Going back to the question, I think the response is clear enough for everybody who cares for liberty. The small state must be better for liberty. Not because power holders in small states believe more in the merit of freedom than power holders in super states. Rather, structural reasons should make it that small states have to adapt a more friendly position to liberty.
Super state means big bureaucracy and a close alliance between bureaucratic and political holders of power. In political science, experts very often refer to the tension between politicians and bureaucrats. According to liberal democratic theory, politicians should have the upper hand in running a country because they are, unlike bureaucrats, accountable to the public. This is true.(14) However, it should not be forgotten that in exploiting the power bureaucrats and politicians are allies rather than rivals. They are very keen to unite their power and ability to dominate over the people. The conflict they sometimes exhibit is not on how to limit the power but on whom to use it. Therefore, when we say state we should understand a united block of politicians and bureaucrats. And when a government gets bigger, political and bureaucratic machines get bigger. Growing state structure inevitably implies more interference in social and economical life.
Not every big government is a super state, but, for sure, every super state means big government. Super state has another natural inclination to get bigger and therefore to harm the freedom of its subjects: to play a world role, to attempt to mold the world, through every means including military force. To put it in other words, the attempt to play God. This again can be observed in 20th century history of the USA.
War is harmful for every country, for whole humanity in terms of human lost and material destruction. But there are extra costs to which we rarely pay attention. Robert Higgs expresses them as the growth in state and the spread of mixed economy. Indeed, in this respect, as Randolph Bourne said “war is the health of state”.(15) There are many studies showing how the state’s power grew in particular countries during the war. War means conscription, heavy taxation, rigid economic regulation and suppression of dissent. Higgs shows this for the USA in his extremely important book Crisis and Leviathan.(16) The same is of course true for England. As Hoppe points out, wartime position and activities of states can also influence the mental codes and behavior of the people. War is the food of big state.(17)
The term national defense (you can also read as national interest) is used as an effective tool to manipulate people towards the aims of state in war. Mises refers to two meanings of national defense: The protection of people and protection of the state apparatus and territorial integration of the state. In many cases, war which is claimed to have been conducted for the first is in fact conducted for the second.
Thus, war becomes one of the main causes for the states to get bigger.(18) And super states stand closer to conducting war than small ones. This is so because those who have power naturally tend to exaggerate their power. They buy the dream that through power they can achieve every goal.
Small states have more chance to have less bureaucracy, less regulation. They are expected to capture smaller proportions of the income of their subjects. Small states may have more reasons to understand why they should cooperate with other states rather than warring with them. In a world occupied by small states, one might expect more competition. Another indicator that shows that people in small states have more freedom is economic freedom indexes. In two major indices small countries rank on top.
Let me conclude by a few remarks about the EU.
What have we been witnessing in the EU process? The appearance of a super state? I think so. To be a super state in order to counterbalance the USA has been one of the aims of EU, regardless of whether or not stated in public. And one can easily see the seeds of tendencies to limit freedom in the EU. It would not be fair to go as far as Vladimir Bukovski who claims that the EU will be the new Soviet Union.(19) However, we should not blind ourselves to some main problems. We have been witnessing in the EU excessive centralization, strengthening of the Brussels bureaucracy, disappearance of legal competition, introduction of new and subtle ways of economic protectionism, eradication of local cultures in the name of harmonization etc. None of these can be conducive to liberty. Therefore, as the dream to create a politically integrated Europe comes closer, the peoples in EU countries might expect to have less and less freedom.
* Presented at the MPS Regional Meeting, Hamburg, Germany April 3 – 6, 2004.
(1) Hans-Hermann Hoppe, “The Private Production of Defense”, Journal of Libertarian Studies, 14:1 (Winter-1998-1999) 27-52.
(2) David Green explains in his Community Without Politics: A Market Approach to Welfare Freedom (London: IEA, 1996) in some detail how civil society cared for itself long before the birth of welfare state.
(3) Totalitarianism in theory dates back to Plato in Ancient Greece. First models of modern totalitarianism appeared in the form of religious totalitarian systems in Central Europe in the 16th century. Especially important in this respect was the regime that appeared in Munster, North West Germany, under religious leaders in 1532. For this religious – communist experiment of totalitarianism, see: Murray N. Rothbard, “Karl Marx : Communist as Religious Eschatologist”, The Review of Austrian Economics , vol. 4, 1999, pp. 123 – 79.
(4) R. J. Rummel, Death by Government, New Brunswick: Transaction Publishers, 1996.
(5) Alan Charles Kors, “Can There Be an ‘After Socialism’”, Social Philosophy and Policy, Vol. 20, No: 1, Winter 2003.
(6) In a recent book published by the Cato Institute and edited by John Samples, some 12 authors debates Madison’s role in creating supposedly limited government for the American political system and its future. (James Madison and the Future of Limited Government, Washington, D.C., Cato Institute, 2002 ). However, not everybody agrees that Madison was successful in espousing the theoretical foundations of limited government. Norman Barry, for example, claims that he could not see the channels through which excessive centralization would progress. Barry thinks that Anti-federalists were right in their opposition to Federalists. (“Constitutionalism, Federalism and the European Union,” in Economic Affairs, vol. 24, March, 2004, pp. 5-10.)
(7) Barry, ibid, pp. 6-7.
(8) Charlotte A. Twight, Dependent on D.C: The Rise of Federal Control Over the Liver of Ordinary Americans, New York : Palgrave, 2002.
(9) Barry, p. 3-4.
(10) Lewellyn H. Rockwell, Jr., “How States Fall and Liberty Triumphs”, http://www.lewrockwell.com/ rockwell/states-fall.html (posted on October 27, 2003)
(11) In a small but comfortingly optimistic piece, Stephen Davies rejects somehow persuasively the conviction that state has always to grow: “Does Government Always Have to Grow?”, http://www.fee.org/views.php ?
(12) Nathan Rosenberg, L.E ; Jr. Bridzell, How the West Grew Rich: The Economic Transformation of the Industried World , New York: I. B. Tauris and Company, 1987, p. 105 – 6.
(13) Hans Hermann Hoppe, Democracy: The God That Failed: The Economics and Politics of Monarchy, Democracy, and Natural Order, New Brunswick (USA) and London (U.K); Transaction publishers, 2002.
(14) Anthony de Jasay is surely right in saying that bureaucracy constitutes a class in its own. (State, Indianapolis: Liberty Fund , 1998, see especially the chapter “State as a Class”.
(15) Jeffrey Rogers Hummel, “National Goods versus Public Goods; Defense, Disarmament, and Free Readers”, The Review of Austrian Economics , vol. 4, 1990, s. 95 .
(16) Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government , New York: Oxford University Press, 1987. See also his “Wartime Curbs on Liberty Are Costless ?”, Ideas on Liberty, March 2002, p. 6-7.
(17) Hans Hermann Hoppe, “Introduction” (to the Myth of National Defense: Essay on the Theory and History of Security Production, ed. By H.H Hoppe, Mises Institute, 2003.
(18) Ludwig von Mises, Liberalism: A Socio – Economic Exposition, trans. by Arthur Goddard, Kansas City: Sheed Andrews and Memeel, Inc. p. 143.
(19) Vladimir Bukovski, “Is the European Union the New Soviet Union”, http://www.fre-europe.org/eu/english.php ? itemed (posted on 02.09.2003) .
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