Could The State Exist If Property Rights Were Impossible To Violate?

In a hypothetical world where it is impossible to take another person’s property through force or coercion, could a State exist?

The obvious answer to this question is no.

At least not as we know it today. There could necessarily be no coercively funded State since all transactions would have to be through voluntary trade.

If we refine our question again, only limiting it simply to currency, could the modern State still exist?

I think the answer to this question is also no.

While a hypothetical world where violent and coercive looting could not exist is outside the realm of the possible, a situation where an “unlootable” currency exists is entirely within the realm of possibility.

Modern cryptographic technology has recently made anonymous peer-to-peer currencies a reality. Currencies such as Bitcoin make mass theft through taxation an impossibility for any government entity. While it may be possible for a government to disrupt or shutdown a peer-to-peer currency like Bitcoin, it can not institute a coerced system of taxation upon the currency. Given that we know such currencies now exist, it seems like it is only a matter of time until one is devised that can withstand even the most ardent government attacks against it.

Eventually a digital currency will emerge that is completely unstoppable and untaxable because the markets have deemed such a currency to be highly desirable. Thus, individual entrepreneurs will expend effort to produce such a currency in order to meet market demands.

Since we can say with a fairly high degree of certainty that a completely unstoppable and untaxable digital currency will come into existence, what does this portend for the modern coercively funded State?

I am personally very excited about what the future holds for us. Clearly humanity will eventually be forced to shed itself of State violence and coercion as the free markets drive lootable currencies out of existence. If we have a situation where the product of people’s labor can be stored in a manner that cannot be coercively taken, war and the welfare State will come to an abrupt end.

But there is more to consider about the implications of a world without coercively funded States.  Consider that without the State, the institution of slavery becomes an impossibility.  If we look at US history, it becomes clear that the Southern states were provoked to secession because the Northern states had nullified the fugitive slave act.  This left the South with very little incentive to remain in the union.

The Southern slave states originally agreed to sign on to the Constitution after the return of fugitive slaves had been negotiated as part of the bargain.  The South was quite clear about their reasons for leaving the union when they drafted their articles of secession:

Georgia:

A similar provision of the Constitution requires them to surrender fugitives from labor. This provision and the one last referred to were our main inducements for confederating with the Northern States. Without them it is historically true that we would have rejected the Constitution.

The articles of secession from all the Southern States go on to talk at great length about the North nullifying fugitive slave laws as the primary motivation for secession.

Slavery is a State enforced institution that can not exist outside of the State.  If one takes a moment to consider the lengths that an individual plantation owner would have to take in order to secure his slaves from fleeing, it should become immediately apparent that it would become economically unfeasible to maintain slaves.  One simply needs to look at the costs it takes to run modern prison to see how economically impossible it would be for a private property owner to make a profit from slavery if he had to personally bear the costs of keeping all his slaves secured to his plantation.

Obviously as I mentioned earlier, war also becomes an impossibility.  If one takes a moment to consider what war actually entails, it should become apparent that a State must first wage war against its own population before it can wage war against an external population.  A State must coercively loot its own people in order to acquire the necessary military hardware to wage an offensive war.  This requires threats, violence, and propaganda on a mass scale that can only be attained through the use of coercive taxation.

If a State could not use coercion to fund its military apparatus, it would render offensive wars impossible.  Very few right minded citizens would willingly fork over monies to be put to use in an offensive war.  While at the same time defensive wars would still remain entirely within the realm of possibility, because people would willingly volunteer monies for defensive purposes if they felt their lives and property were in direct threat from an external attack.

Corporate welfare, no-bid contracts, bailouts, and other various flavors of cronyism would also be dissolved under a monetary system that could not be coercively looted through taxation.  The obvious benefits to humanity this would bring need no clarifications on my part.  However, welfare for the poor would still exist on a rather grand scale.  If we look at the history of charitable giving in the United States, we can see that as a percentage of GDP, the public is capable of giving a tremendous amount in the absence of government services.

In 2007 US citizens contributed 2.2% of GDP to charitable causes.  This ratio is also consistent with the 1960s, but declined during the following period of depressed economic growth.   The point being that in the absence of State welfare, private citizens can be expected to donate at least 2% of GDP to charities, which would more than cover the expenses of the poorest US citizens.

It should be noted that costs for specific services such as colleges and healthcare were dramatically lower during the period of the 1960s as a percentage of GDP, which translates in charitable monies providing far greater benefits to the poor.  Under a system that prohibits the coercive funding of healthcare and education, we could expect prices for such services to drop precipitously to their pre-welfare State ratios as percentages of GDP.

Prior to the inception of Fannie Mae, FAFSA, Medicare, etc.. the poorest in the US were not dying in the streets for lack of medical care, housing, education, or food.  When the currency is stable and State welfare is absent, the public does a fine job of taking care of those most in need without having to resort to coercion.  Competition and productive growth make the goods and services necessarily for survival abundant and affordable for all.

So where does all of this leave us?

I think it leaves us with hope for the future and a better sense of how evil the State is.

When the State is prohibited from using coercion to fund its monstrous levels of violence and cronyism, the people of the world prosper while those who making their living on the misery of war and the hard work of others will be left to rot in the dust bin of history.

 

Related articles I have authored on this subject:

How To Use Bitcoin – The Most Important Creation In The History Of Man

The Economics Of Bitcoin – Doug Casey Gets It Wrong

Libertarian Goldbugs Hating On Bitcoin – Free Market Money

The Economics Of Bitcoin – Why Mainstream Economists Lie About Deflation

The Economics Of Bitcoin – How Bitcoins Act As Money

Against The Gold Standard

The Ridiculousness Of Demanding Government Return To A Gold Standard

 

  • http://www.economicsandliberty.com Anthony Freeman

    +1

  • Anonymous

    I long for the day when this happens.  I only hope I live to see it.

  • Bitman

    ???

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  • Mark L

    I absolutely love the idea, but my initial thought is that the devil is in the details.
     
    First, couldn’t the Government still force most parties to use fiat Government currency, under penalty of law?  For example, couldn’t they force employers to pay salaries (which would have taxes withheld) in USD, force businesses to sell only in USD, etc.?  Sure, I could probably go online and buy much of what I want or need using Bitcoin or similar, but much I would also have to get from the local supermarket or hardware store which is forced to accept only USD.  I’m having trouble envisioning how this would work in actual practice. 
     
    Second, what about security of the new digital currency?  Sure, the Government might not be able to tax it, but if, as you acknowledge, they can shut it down, or make it’s use very difficult, or somehow track my transactions, isn’t that almost as good for them, since we’d have to default back to something that is taxable (commodities or USD)?
     
    Third, what about third parties cracking the system and creating millions of dollars in digital wealth for themselves, inflating the money supply, or causing similar disruptions?  Might this make the system just “not worth the trouble) for users, who would then default back to a taxable medium of exchange?

    • Mark L

      …my apologies for the typos.

    • http://www.libertariannews.org/ Michael Suede

      1. The government can’t force people to use US dollars in lieu of Bitcoins any more than it can force people to quit doing drugs.  ie. they can make it illegal, but that isn’t going to make it impossible to do business in Bitcoins.

      2.  The Bitcoin network would immediately know if someone was creating bogus coins.  All the coins ever created are tracked and part of the public ledger.  Steps could be taken to mitigate this, but the reality is the encryption algo used to create the coins has never been broken.   The worst case scenario is a double spending attack by someone who manages to gain more than 50% of the processing power of the entire network.  The network would see such an attack occurring.

      3. In relation to the second claim, the computing power necessary to break the Bitcoin encryption does not exist yet.  It is simply impossible for someone to hack the system and inflate the currency.  Even if they did, the network would see such an attack occurring.

      A sophisticated double spending attack is possible with a tremendous amount of computing power, but actual inflation of the currency by creating bogus coins is simply not possible.

  • Anonymous

    “…in the absence of State welfare, private citizens can be expected to donate at least 2% of GDP to charities, which would more than cover the expenses of the poorest US citizens…”  

    That should be correct, and may indeed be correct except we first need to have a public discussion about who is truly indigent and should be entitled to help and who is sufficiently well of they should be required to carry their own weight.  The political-dependency-monger industry has steadily ratcheted upwards the definition of who is “poor”, and we now have children receiving free meals at school because we politically define them as being “at risk” when their parents have incomes far in excess of the poverty level. 

    Even the “poverty level” itself is so high as to give us poor people who are likely to live in air conditioned comfort in the summer, who have a color TV, a microwave oven, a washer and at least one automobile.  At this level their health care, rent, food and even cell phone use is either fully or partially subsidized.  The National Center for Policy Analysis even showed that the average “poor” person in the US has more living space in their homes than the average middle class person in Europe.

    In each of the last three tax years, Americans donated about $300 billion to “charity” as the tax code defines it.  That is roughly $1,000 per capita.  If we limit our definition of who is “poor” to the lower 10%, that equates to about $10,000 per person, or $40,000 per family of four, in pure cash.  It all pivots around a simple question of humanity and civics: what do we owe a person who cannot earn enough to feed, clothe and house themselves?  If we owe them anything above an amount to cover the bare necessities of life, can their be any consideration to the broader economic and social consequences?  In particular, I refer to what happens to the general willingness to work, and conduct ones self in a careful and prudent manner when government stands by to give us too many things for free when we claim we cannot work?   I see this as an employer when applicants for clerical positions tell me they would rather continue to collect their unemployment than to come to work for me. 

    Lastly, State-run welfare disconnects the recipient of the aid from the person providing it.  The “benefit” becomes a right as defined in the rules.  A person who really needs more due to some unique issue cannot get more and a person who doesn’t need as much gets the same as everyone else.  When is the last time anyone receiving aid said thank you to the people who paid his bills?  Worse, the politician gets to position himself as a broker between the parties.  Vote for me and I will see that your benefits are not cut.  Vote for me and I will not raise your taxes as much as my opponent promises to do.   Our present system invites corruption at many levels.  Its fruit is mostly rotten, at least if you judge by how many young black women have children without the benefit of being married, and how many of those children later end up in jail.

  • masculineffort

    If someone comes with a Digital currency, say DigCoin where the government cannot find out who is transacting in it, then yes! I agree that the state is doomed as even law abiding people will start using DigCoin. But until that point, the state can always limit the use of Digital currency by imposing draconian penalties on people caught transacting in it.

  • personX

    brilliant piece! Since the advent of Bitcoin – my eyes have been opened and now I openly reject the institution of taxation because of its extortionary nature and the fact that preventative measures against over-taxation are virtually non-existent. What a sorry state the world is in. I agree that the world is capable of being prosperous and equitable without governments (either in their current form or altogether abolished).