Fallacies of state: 1 - only states can establish, maintain and defend property

As they say, a fool and his money are soon parted.  So, fool that I am, the day it came out at Amazon I went and bought a copy of Richard Murphy's "The Courageous State " (I wouldn't bother, but it's worth buying from Amazon if you do want it as it upsets him and some of his fans to have to do business via tax avoiders).  At least it was a Kindle version so no trees died to sate my curiosity, though if they had I suppose it might have had its uses (appropriately enough for Murphy I seem to recall from RAF Cadet camps in my youth that they had some printed with "property of HM Government" on each sheet).

Anyway, this is not a book review, not least because I could only get about half-way through before I started wanting to apply hot irons to my eyes and inject mind-destroying chemicals through my ear-drums, and I had far more interesting things I wanted to read in pursuit of my economics course, which would likely piss him off even more if he knew I was studying the subject he hates and misrepresents so much (even if my academic advisor is one of those - actual economists - that support him and his ideas).  But there is one fallacy in particular (of far too many) in the book that underpins his entire argument that I want to take issue with: that only an entity like a state, with a territorial monopoly of ultimate arbitration in disputes (Hoppe, 2011 etc), can define what is and is not property and also defend it.

It is this ability, or, as Murphy claims, unique right of governments to "establish, maintain and defend these property rights" (Murphy, 2011: ch 7) that confers the right to make laws, and to levy tax.  Indeed taxation is, he claims, simply rightful payment for that very service of establishing and defending property rights.  And because of that, the money governments collect in taxes based on that right to define property are not, as often claimed, "taxpayers' money" entrusted to governments but entirely and unqualifiedly governments' money to do with as they please.

On this basis, he says that governments do not need to be accountable to taxpayers, qua taxpayers, because it is no longer taxpayers' money: just as if you pay anyone else for a good or service you don't have any continuing right as a customer to tell that person what they can and can't do with what is now their money.  He does concede, of course (he's a democrat, of sorts, even if he brooks little criticism of his ideas), governments ought to be accountable to citizens qua voters who put the politicians into power to run governments according to their policy wishes.  But his entire argument that governments could and should be the underpinning of "The Courageous State" depends on this core role as sole guarantor of property rights: it gives politicians the right to be "courageous" (i.e. for him, actively interventionist) without having to look over their shoulder to see that taxpayers are approving.

The alternative, says Murphy, is that if you do not have a government with a monopoly on the right to define and defend property rights, you can only ever have a set of competing property claims, not rights, that are, ultimately, enforced at the point of a gun such as we see in the one example of a country without a functioning government, Somalia.  If we don't want that, he says, we must support the state, its government and its right to behave "courageously" (i.e. to implement interventionist policies advocated by Murphy).

Now, let's humour him for a minute.  If the only way of establishing a right to property is to have a single agency with a monopoly deciding what is and is not property, and who owns it; if the only way of peacefully resolving disputes over that property once established is to have the same monopoly agency enforce those property rights on owners' behalf; if the only alternative to this is indeed violence, ultimately at the end of a gun, then Murphy's right, you have, de facto, a state, that territorial - and coercive - monopoly of ultimate decision making.  And who could argue with that?  In fact, if these propositions are all true then, trade would be impossible without the state: nobody would ever know whether the person they were trying to trade with had the right to sell whatever it was they were trying to buy, nor the seller know whether the money they were being offered was worth something.

However, if these propositions are not true, if there are ways of "establishing, maintaining and defending" property other than through a monopoly state setting its own monopolistic terms for doing so that, if you do not pay you lose your property rights, then the state is nothing but a protection racket claiming sole jurisdiction itself at the point of a gun, or the threat of imprisonment at least.  As it is commonly stated: a monopoly of violence.  Indeed, the state would be a destroyer of property by expropriating it by force as payment for supposedly defining and defending it.

Interesting as it may be for some of us to rehearse the arguments of people like Murray Rothbard on the origin and nature of property rights (1982: ch 9 etc) or the long history of thought on how law to protect property can be established and enforced privately and competitively, from Molinari (1849) to Hoppe (2006, 2008 et al) or David Barker (2011), I suspect that Murphy and his followers would simply dismiss these as the theoretical ravings of the "rabid right" - even if people seen traditionally as on the "left" like Pierre-Joseph Proudhon shared similar concerns (1840).  Fortunately we don't need to get into such theory at all.  We just need to look at the world as it is around us to see that we do not actually have a monopoly "provider" of property rights.  We live in a world with many nation states, admittedly each claiming a monopoly of such a function within their own territories.  But when we trade with someone from a different territory we leave Murphy's cosy world of monopoly protection behind.

If we trade with someone in China, say, we take it on trust that they have a protection system guaranteeing they have a right to sell us the goods we are buying, and they take it on trust that we have a protection system guaranteeing the money we are offering them is worth what we say it is: we happen, usually, to call these our respective governments, though each is not accountable to the other party and neither is a monopoly guarantor to both sides of the transaction.  If we don't trust these absolutely, we may choose to take out some form of private insurance or escrow (occasionally this is done through governments, via bodies like the Export Credit Guarantee Department in the UK).  If we do have a dispute, we have to decide in which of the two jurisdictions we want to try and obtain legal redress and so on.

And if this can work passably well at this macro, inter-national, level of trade, where we have much less likelihood of actually knowing the counterparty enough to trust them implicitly from the other side of the world, there is absolutely no reason why such a system of competitive property and trading guarantees should not work even better at closer range within an individual territory, even between people in the same town or street.  All that is required is for the agencies we each choose to be our own property guarantor to have arrangements with each other on how to resolve any disputes.  Indeed, unbeknownst to most of us probably, we in fact do use a form of this all the time.  Dispute resolution between parties to a transaction involving the VISA payment system agree that all disputes can only go through the VISA dispute resolution system with no appeal to "higher" authority (Caplan & Stringham, 2007).

So, a core assumption of "Courageous State" is both wrong in theory and doesn't occur in practice.  Does this matter?  Well yes, of course it does.  Such artificial monopolies, enforced by the monopoly provider itself and brooking no competition, have no way of proving to their users whether they are in fact the best arrangement.  And this particular monopoly is especially pernicious.  This leads us on to a much bigger debate for which there is not the space here.  I will simply end, therefore, with this extended quote from one of Hoppe's pieces already mentioned which neatly describes the potential problems with this result of Murphy's fallacy:

Among political economists and political philosophers it is one of the most widely accepted proposition that every "monopoly" is "bad" from the viewpoint of consumers. Here, monopoly is understood as an exclusive privilege granted to a single producer of a commodity or service, or as the absence of "free entry" into a particular line of production. For example, only one agency, A, may produce a given good or service, X. Such monopoly is "bad" for consumers because, shielded from potential new entrants into a given area of production, the price of the product will be higher and its quality lower than under competitive conditions. Accordingly, it should be expected that state-provided law and order will be excessively expensive and of particularly low quality.

However, this is only the mildest of errors. Government is not just like any other monopoly such as a milk or a car monopoly that produces low quality products at high prices. Government is unique among all other agencies in that it produces not only goods but also bads. Indeed, it must produce bads in order to produce anything that might be considered a good.

As noted, the government is the ultimate judge in every case of conflict, including conflicts involving itself. Consequently, instead of merely preventing and resolving conflict, a monopolist of ultimate decision-making will also provoke conflict in order to settle it to his own advantage. That is, if one can only appeal to government for justice, justice will be perverted in the favor of government, constitutions and supreme courts notwithstanding. Indeed, these are government constitutions and courts, and whatever limitations on government action they may find is invariably decided by agents of the very same institution under consideration. Predictably, the definition of property and protection will be altered continually and the range of jurisdiction expanded to the government's advantage. The idea of eternal and immutable law that must be discovered will disappear and be replaced by the idea of law as legislation — as flexible state-made law.

Even worse, the state is a monopolist of taxation, and while those who receive the taxes — the government employees — regard taxes as something good, those who must pay the taxes regard the payment as something bad, as an act of expropriation. As a tax-funded life-and-property protection agency, then, the very institution of government is nothing less than a contradiction in terms. It is an expropriating property protector, "producing" ever more taxes and ever less protection. Even if a government limited its activities exclusively to the protection of the property of its citizens, as classical liberals have proposed, the further question of how much security to produce would arise. Motivated, as everyone is, by self-interest and the disutility of labor but equipped with the unique power to tax, a government agent's goal will invariably be to maximize expenditures on protection, and almost all of a nation's wealth can conceivably be consumed by the cost of protection, and at the same time to minimize the production of protection. The more money one can spend and the less one must work to produce, the better off one will be.

In sum, the incentive structure inherent in the institution of government is not a recipe for the protection of life and property, but instead a recipe for maltreatment, oppression, and exploitation. This is what the history of states illustrates. It is first and foremost the history of countless millions of ruined human lives.

(Hoppe, 2011)

^{Barker, D., 2011. "Welcome to Free America". Lulu.com}

^{Caplan, B & Stringham, E.,  2007. "Privatizing the Adjudication of Disputes", Independent Institute Working Paper Number 69, October 2007, available online at http://www.independent.org/pdf/working_papers/69_private.pdf (retrieved 05-01-2012)}

^{Hoppe, H-H., 2006. "The Idea of a Private Law Society".  Essay at the Mises Institute, July 2006 available online at http://mises.org/daily/2265 (retrieved 05-01-2012) or speech given at Libertarian Alliance Conference October 2008, available online at http://vimeo.com/20696431 (retrieved on 05-01-2012)}

^{Hoppe, H-H., 2011. "State or Private-Law Society".  Speech given at the Mises Institute Brasil, 2011 available online at http://mises.org/daily/5270 (retrieved 04-01-2012)}

^{de Molinari, G., 1849.  "The Production of Security". Ed. cited tr. 1977 by J. Huston McCulloch.  Available online at http://praxeology.net/GM-PS.htm (retrieved 05-01-2012)}

^{Murphy, R. 2011., "The Courageous State: Rethinking Economics, Society and the Role of Government". London: Searchlight Finance.}

^{Proudhon, P-J., 1840 "What is Property? An Inquiry into the Principle of Right and of Government." tr. Benjamin R Tucker and published New York, Humboldt Publishing Company, 1890.  Text used taken from the University of Virginia Electronic Text Center at http://etext.virginia.edu/toc/modeng/public/ProProp.html (retrieved 05-01-2012)}

^{Rothbard, M. N., 1982. "The Ethics of Liberty", edition cited New York: New York UP, 1998 available online at http://mises.org/rothbard/ethics/ethics.asp (retrieved 05-01-2012)}