DemocracyThe God That Failed (29 page)

Moreover, our syndicalist proposal is economically more efficient than the only conceivable privatization alternative in line with the basic requirement of justice (the recognition that the government does not legitimately own the socialized economy; hence, selling or auctioning it off should be out of the question). According to the latter alternative, the entire population would receive equal shares in all of the country's assets not reclaimed by an original, expropriated owner. Aside from the questionable moral quality of this policy,
¹⁸
it would be extremely inefficient. For one thing, in order for such countrywide distributed shares to become tradeable property titles, they must specify to which particular resource they refer. Therefore, to implement this proposal, first a complete inventory of all of the country's assets would be required, or at least an inventory of all its distinctively separable production units. Second, even if such an inventory were finally assembled, the owners would consist by and large of individuals who knew next to nothing about the assets they owned. In contrast, under the nonegalitarian syndicalist-privatization scheme no inventory is necessary. Furthermore, initial ownership comes to rest exclusively with individuals who, because of their productive involvement with the assets owned by them, are by and large best informed to make a first realistic appraisal of such assets.

In conjunction with the privatization of all assets according to the principles outlined, the government should adopt a private property constitution and declare it to be the immutable basic law for the entire country. This constitution should be extremely brief and lay down the following principles in terms as unambiguous as possible: Every person, apart from being the sole owner of his physical body, has the right to
employ his private property in any way he sees fit so long as in so doing he does not uninvitedly change the physical integrity of another person's body or property. All interpersonal exchanges and all exchanges of property titles between private owners are to be voluntary (contractual). These rights of a person are absolute. Any person's infringement on them is subject to lawful prosecution by the victim of this infringement or his agent, and is actionable in accordance with the principles of the proportionality of punishment and of strict liability.
¹⁹

¹⁷
For the most consistent and complete Lockean property rights theory see Rothbard,
The
Ethics
of
Liberty;
idem, "Law, Property Rights, and Air Pollution," in, idem,
The
Logic
of
Action
Two
(Cheltenham, U.K.: Edward Elgar, 1997); for the theoretical justification of the homesteading principle in particular, as the indisputable axiomatic foundation of ethics see Hoppe,
Eigentum,
Anarchie
und
Staat,
chap. 4; idem,
A
Theory
of
Socialism
and
Capitalism,
chaps. 2 and 7; idem,
The
Economics
and
Ethics
of
Private
Property,
chaps. 8-11, and Appendix.

¹⁸
How can one justify that ownership of productive assets be assigned without considering a given individual's actions or inactions in relation to the owned asset? More specifically, how can it be justified that someone who has contributed literally nothing to the existence or maintenance of a particular asset—and who might not even know that such an asset exists—own it in the same way as someone else who actively and objectifiably contributed to its existence or maintenance?

As implied by this constitution, then, all existing wage and price controls, all property regulations and licensing requirements, and all import and export restrictions should be immediately abolished and complete freedom of contract, occupation, trade and migration introduced. Subsequently, the government, now propertyless, should declare its own continued existence unconstitutional—insofar as it depends on noncontractual property acquisitions, that is, taxation—and abdicate.
²⁰

III

The result of this complete abolition of socialism and the establishment of a pure private property society—an anarchy of private property owners, regulated exclusively by private property law—would be the quickest way to economic recovery for Eastern Europe. From the outset, by and large the population would be amazingly rich, for although the economies of Eastern Europe are in shambles, the countries are not destroyed. Real estate values are high, and despite all of the capital consumption of the past there are still massive amounts of capital goods in existence. With no government sector left and the entire national wealth in private hands, the people of Eastern Europe could soon become objects of envy among their West European counterparts.

¹⁹
On the proportionality principle of punishment see Rothbard,
The
Ethics
of
Liberty,
chap. 13; Hoppe,
Eigentum,
Anarchie
und
Slaat,
pp. 106-28; Stephan Kinsella, Punishment and Proportionality: The Estoppel Approach,"
Journal
of
Libertarian
Studies
12, no. 1 (1996); idem, "Inalienability and Punishment,"
Journal
of
Libertarian
Studies
14, no. 1 (1999); on the principle of strict liability also, Richard A. Epstein, "A Theory of Strict Liability,"
Journal
of
Legal
Studies
2 (January 1973); also idem,
Medical
Malpractice:
The
Case
for
Contract
(Burlingame, Calif.: Center for Libertarian Studies, Occasional Paper Series No. 9,1979); Judith J. Thomson,
Rights,
Restitution,
and
Risk
(Cambridge, Mass.: Harvard University Press, 1986), esp. chaps. 12 and 13.

²⁰
On the ethics and economics of stateless societies see Murray N. Rothbard, "Society Without a State," in
Anarchism
(Nomos
XIX);
Roland Pennock and John W. Chapman, eds. (New York: New York University Press, 1978); idem,
For
A
New
Liberty
(New York: Collier, 1978); Bruce Benson,
The
Enterprise
of
Law:
Justice
Without
the
State
(San Francisco: Pacifie Institute, 1991).

Moreover, releasing factors of production from political control and handing them over to private individuals who are allowed to use them as they see fit as long as they do not physically damage the resources owned by others provides the ultimate stimulus for future production. With an unrestricted market for capital goods, rational cost-accounting becomes possible. With profits as well as losses individualized, and reflected in an owner's capital- and sales-account, every single producer's incentive to increase the quantity and/or quality of his output and to avoid any over or under-utilization of his capital is maximized. In particular, the constitutional provision that only the physical integrity of property (not property values) be protected guarantees that every owner will undertake the greatest value-productive efforts—efforts to promote favorable changes in property values and to prevent and counter any unfavorable ones (as might result from another person's actions regarding his property).

Specifically, the abolishment of all price controls eliminate almost instantaneously all present shortages, and output would begin to increase immediately, both quantitatively as well as qualitatively. Unemployment would drastically increase temporarily, yet with flexible wage rates, without collective bargaining, and without unemployment subsidies it would quickly disappear. Initially, average wage rates would remain substantially below Western rates, but this, too, would soon change. Lured by comparatively low wages, by the fact that East Europeans will expectedly show a great need for cashing in (liquidating) their newly acquired capital assets so as to finance their current consumption, and above all by the fact that East Europe would be a no-tax, free-trade haven, large numbers of investors and huge amounts of capital would begin to flow in immediately.

The production of security—of police protection and of a judicial system—which is usually assumed to lie outside the province of free markets and be the proper function of government, would most likely be taken over by major Western insurance companies.
²¹
Providing insurance for personal property, police-action—the prevention and detection of crime as well as the exaction of compensation—is in fact part of
this industry's "natural" business (if it were not for governments preventing insurers from doing so and arrogating this task to itself, with all the usual and familiar inefficiencies resulting from such a monopolization). Likewise, being already in the business of arbitrating conflicts between claimants of competing insurers, insurance companies would naturally assume the function of a judicial system.

²¹
On the economics of competitive, private security production see Gustave de Molinari,
The
Production
of
Security
(New York: Center for Libertarian Studies, 1977); Rothbard,
Power
and
Market,
chap. 1; idem,
For
A
New
Liberty,
chap. 12; Morris and Linda Tannehill,
The
Market
For
Liberty
(New York: Laissez Faire Books, 1984); HansHermann Hoppe,
The
Private
Production
of
Defense
(Auburn, Ala.: Ludwig von Mises Institute, 1998); see also Benson,
The
Enterprise
of
Law.

Yet more important than the entrance of big business, such as insurance companies into the field of security production, would be the influx of large numbers of small entrepreneurs, in particular from Western Europe. Facing a heavy tax burden in the welfare states of Western Europe as well as being stifled there by countless regulations (licensing requirements, labor protection laws, mandated working and shopopening hours), an unregulated private property economy in Eastern Europe would be an almost irresistible attraction. Soon the large-scale influx of entrepreneurial talent and capital would begin to raise real wage rates, stimulate internal savings, and lead to a rapidly accelerating process of capital accumulation. Rather than leaving the East, migration would quickly take place in the opposite direction, with increasing numbers of Western Europeans abandoning welfare socialism for the unlimited opportunities offered in the East. Finally, faced with increasing losses of productive individuals, which would put even more pressure on their welfare budgets, the power elites of Western Europe would be forced to begin desocializing Western Europe as well .
²²

²²
It hardly needs to be mentioned that the actual course of desocialization in Eastern Europe since 1989 has proceeded along rather different lines from those proposed here (see also note 9 above). Nor should this come as a surprise.

Notwithstanding the dramatic convulsions that have occurred since 1989, the size of Eastern European governments in terms of personnel and resource ownership is still overwhelming, even by the already high Western standards. Furthermore, government personnel at local, provincial, and federal levels still consists largely of the same individuals as before 1989, and many of the post-communist political leaders of Eastern Europe were already prominent, and had risen to eminent positions, under communist rule. To most of them, classical-liberal and libertarian ideas were simply unheard of, but they were all too familiar with welfare-statist notions. Moreover, if the liberal-libertarian prescriptions of instant and complete privatization of all collective property outlined above had been put into effect, all government jobs would have disappeared immediately. Government employees would have been left to the vagaries of the market and forced to find new, productive occupations. Alternatively, if the familiar Western European welfare-state model were accepted as exemplary, and if the Eastern bureaucracies took charge of the irreversible trend toward desocialization, and thereby controlled and regulated the privatization of "nonvital" parts of their massive resource holdings (down to—but not below—Western levels), most bureaucratic
jobs not only could be secured, but government revenue and the salaries of bureaucrats could actually increase. In addition, because of Western governments'interests in an "orderly" transition from socialism to welfare statism, Eastern bureaucracies and leaders adopting such a reform course could expect that at least part of the risks associated with it would be assumed, or financed, by their Western counterparts. Furthermore, during the communist era, cooperation between East and West was extremely limited. As a result of the inefficiencies of socialist production, Eastern Europe was incapable of selling anything to the West except raw materials and basic consumer goods, and Western transactions with the East bloc typically accounted for less than five percent of foreign trade. Foreign ownership in Eastern Europe was essentially outlawed. Not a single Eastern currency was freely convertible to Western currencies, and even political contacts were comparatively rare. However, with the collapse of communism, the Eastern European governments had something to offer. To be sure, West-East trade is still low, and in the immediate wake of the revolutionary upheavals across Eastern Europe it has even fallen. But without the dogma that "social" means the collective ownership of factors of production, some of the nationalized wealth of Eastern Europe has suddenly come up for grabs; and with the Eastern governments in control of the denationalization process, Western political leaders—and government-connected bankers and big businessmen—have immediately increased the contacts with their Eastern counterparts. In exchange for Western aid during the transition phase, Eastern governments now had real assets to sell. In addition, the East could assure eager Western buyers that from the outset the tax-and-regulation structure of the newly emerging economies of Eastern Europe would be harmonized with European Community standards. Most importantly, Eastern governments could sell the assurance that Eastern Europe's new banking system would be set up along familiar Western lines, with a governmentally controlled central bank, a fractional-reserve banking cartel of privately-owned commercial banks, and a convertible fiat money backed by reserves of Western fiat currencies, thereby allowing the Western banking system to initiate an internationally coordinated credit expansion, and thus, to establish monetary and financial hegemony over the newly emerging Eastern European economies.