DemocracyThe God That Failed (57 page)

Second, it is necessary to offer a positive and inspiring alternative to the present system.

While it is important that the memory of America's past as a land of pioneers and an effective
anarcho-capitalist
system based on self-defense and popular militias be kept alive, we cannot return to the feudal past or the time of the American Revolution. Yet the situation is not hopeless. Despite the relentless growth of statism over the course of the past two centuries, economic development has continued and our living standards have reached spectacular new heights. Under these circumstances a completely new option has become viable: the provision of law and order by freely competing private (profit and loss) insurance agencies.
²⁰

¹⁹
In fact, any such protection-contract is not only empirically unlikely, but logically-praxeologically impossible. By "agreeing-to-be-taxed-and-legislated-in-order-to-be-protected" a person would in effect surrender (alienate) all of his property to the taxing authority and submit himself into permanent slavery to the legislative agency. Yet any such contract is from the outset impermissible, and hence null and void, because it contradicts the very nature of protection-contracts, namely the
self
ownership
of
someone
to
be
protected
and the existence of
something
owned
by
the
pro
tected
(rather than his protector), i.e., private—separate—property.

Interestingly, despite the fact that no known state-constitution has ever been agreed upon by everyone falling under its jurisdiction and despite the apparent impossibility that this fact could ever be different, political philosophy, from Hobbes over Locke on down to the present, abounds with attempts to provide a contractual justification for the state. The reason for these seemingly endless endeavors is obvious: either a state can be justified as the outcome of contracts, or it cannot be justified at all. Unsurprisingly, however, this search, much like that for a squared circle or a perpetual mobile, has come up empty and merely generated a long list of disingenuous, if not fraudulent, pseudo-justifications by means of
semantic
fiat:
"no contract" is
really
an "implicit," or "tacit," or "conceptual" contract. In short, "no"
really
means
"yes." For a prominent modern example of this Orwellian "newspeak" see James M. Buchanan and Gordon Tullock,
The
Calculus
of
Consent
(Ann Arbor: University of Michigan Press, 1962); James M. Buchanan,
The
Limits
of
Liberty
(Chicago: University of Chicago Press, 1975); idem,
Freedom
in
Constitutional
Contract
(College Station: Texas A and M University Press, 1977). For a critique of Buchanan and the so-called Public Choice School see Murray N. Rothbard,
The
Logic
of
Action
Two
(Cheltenham, U.K.: Edward Elgar, 1997), chaps. 4 and 17; Hans-Hermann Hoppe,
The
Economics
and
Ethics
of
Private
Property
(Boston: Kluwer, I 993), chap. 1.

²⁰
See on the following also chap. 12; Morris and Linda Tannehill,
The
Market
for
Liberty
(New York: Laissez Faire Books, 1984), esp. chap. 8.

While hampered by the state, even now insurance agencies protect private property owners upon payment of a premium against a multitude of natural and social disasters, from floods and hurricanes to theft and fraud. Thus, it would seem that the production of security and protection is the very purpose of insurance. Moreover, people would not turn to just anyone for a service as essential as that of protection. Rather, as de Molinari noted,

before striking a bargain with (a) producer of security, . . . they will check if he is really strong enough to protect them (and) whether his character is such that they will not have to worry about his instigating the very aggressions he is supposed to suppress.
²¹

In this regard insurance agencies also seem to fit the bill. They are "big" and in command of the resources— physical and human—necessary to accomplish the task of dealing with the dangers, actual or imagined, of the real world. Indeed, insurers operate on a national or even international scale, and they own substantial property holdings dispersed over wide territories and beyond the borders of single states and thus have a manifest self-interest in effective protection. Furthermore, all insurance companies are connected through a complex network of contractual agreements on mutual assistance and arbitration as well as a system of international reinsurance agencies representing a combined economic power which dwarfs most if not all contemporary governments, and they have acquired this position because of their reputation as effective, reliable, and honest businesses.

While this may suffice to establish insurance agencies as a possible alternative to the role currently performed by states as providers of law and order, a more detailed examination is needed to demonstrate the principal superiority of such an alternative to the
status
quo.
In order to do this, it is only necessary to recognize that insurance agencies can neither tax nor legislate; that is, the relationship between the insurer and the insured is consensual. Both are free to cooperate or not to cooperate, and this fact has momentous implications. In this regard, insurance agencies are categorically different from states.

The advantages of having insurance agencies provide security and protection are as follows. First off, competition among insurers for paying clients will bring about a tendency toward a continuous fall in the price of protection (per insured value), thus rendering protection more
affordable. In contrast, a monopolistic protector who may tax the protected will charge ever higher prices for his services.
²²

²¹
De Molinari,
The
Production
of
Security,
p. 12.

Second, insurers will have to indemnify their clients in the case of actual damage; hence, they must operate efficiently. Regarding social disasters (crime) in particular, this means that the insurer must be concerned above all with effective prevention, for unless he can prevent a crime, he will have to pay up. Further, if a criminal act cannot be prevented, an insurer will still want to recover the loot, apprehend the offender, and bring him to justice, because in so doing the insurer can reduce his costs and force the criminal—rather than the victim and his insurer—to pay for the damages and cost of indemnification. In distinct contrast, because compulsory monopolists states do not indemnify victims and because they can resort to taxation as a source of funding, they have little or no incentive to prevent crime or to recover loot and capture criminals. If they do manage to apprehend a criminal, they typically force the victim to pay for the criminal's incarceration, thus adding insult to injury.
²³

22
As Rothbard has explained, even

if government is to be limited to "protection" of person and property, and taxation is to be "limited" to providing that service only, then
how
is the government to decide
how
much
protection to provide and how much taxes to levy? For, contrary to the limited government theory, "protection" is no more a collective, one-lump "thing" than any other good or service in society. . . . Indeed, "protection" could conceivably imply anything from one policeman for an entire country, to supplying an armed bodyguard and a tank for every citizen—a proposition which would bankrupt the society posthaste. But who is to decide on how much protection, since it is undeniable that every person would be
better
protected from theft and assault if provided with an armed bodyguard than if he is not? On the free market, decisions on how much and what quality of any good or service should be supplied to each person are made by means of voluntary purchases by each individual; but what criterion can be applied when the decision is made by
government?
The answer is none at all, and such governmental decisions can only be purely arbitrary.
(The
Ethics
of
Liberty,
pp. 180-81)

See also Murray N. Rothbard,
For
A
New
Liberty
(New York: Collier, 1978), pp. 215ff.

²³
Comments Rothbard:

The idea of primacy for restitution to the victim has great precedent in law; indeed, it is an ancient principle of law which has been allowed to wither away as the State has aggrandized and monopolized the institutions of justice In fact, in the Middle Ages generally, restitution to the victim was the dominant concept of punishment; only as the State grew
more powerful... the emphasis shifted from restitution to the victim,... to punishment for alleged crimes committed "against the State." . . . What happens nowadays is the following absurdity: A steals $15,000 from B. The government tracks down, tries, and convicts A, all at the expense of B, as one of the numerous taxpayers victimized in this process. Then, the government, instead of forcing A to repay B or work at forced labor until that debt is paid, forces B, the victim, to pay taxes to support the criminal in prison for ten or twenty years' time. Where in the world is the justice here?
(The
Ethics
of
Liberty,
pp. 86-87)

Third and most importantly, because the relationship between insurers and their clients is voluntary, insurers must accept private property as an ultimate "given" and private property rights as immutable law. That is, in order to attract or retain paying clients, insurers will have to offer contracts with specified property and property damage descriptions, rules of procedure, evidence, compensation, restitution, and punishment as well as intra- and interagency conflict resolution and arbitration procedures. Moreover, out of the steady cooperation between different insurers in mutual interagency arbitration proceedings, a tendency toward the unification of law—of a truly universal or "international" law—will emerge. Everyone, by virtue of being insured, would thus become tied into a global competitive effort to minimize conflict and aggression; and every single conflict and damage claim, regardless of where and by or against whom, would fall into the jurisdiction of exactly one or more specific and innumerable insurance agencies and their contractually agreed to arbitration procedures, thereby creating "perfect" legal certainty. In striking contrast, as tax-funded monopoly protectors states do not offer the consumers of protection anything even faintly resembling a service contract. Instead, they operate in a contractual void that allows them to make up and change the rules of the game as they go along. Most remarkably, whereas insurers must submit themselves to independent third party arbitrators and arbitration proceedings in order to attract voluntary paying clients, states, insofar as they allow for arbitration at all, assign this task to another state-funded and state-dependent judge.
²⁴

²⁴
Insurance agencies, insofar as they enter into a bilateral contract with each of their clients, fully satisfy the ancient and original
desideratum
of "representative" government of which Bruno Leoni has noted that "political representation was closely connected in its origin with the idea that the representatives act as agents of other people and according to the latter's will"
(Freedom
and
the
Law,
pp. 118-19; see also note 8 above). In distinct contrast, moder n democratic government involves the complete perversion—indeed, the nullification—of the original idea of representative government. Today, a person is deemed to be politically "represented" no matter what, i.e., regardless of his own will and actions or that of his representative.

Further implications of this fundamental contrast between insurers as contractual versus states as noncontractual providers of security deserve special attention.

Because they are not subject to and bound by contracts, states typically outlaw the ownership of weapons by their "clients," thus increasing their own security at the expense of rendering their alleged clients defenseless. In contrast, no voluntary buyer of protection insurance would agree to a contract that required him to surrender his right to self-defense and be unarmed or otherwise defenseless. To the contrary,
insurance agencies would encourage the ownership of guns and other protective devices among their clients by means of selective price cuts, because the better the private protection of their clients, the lower the insurers' protection and indemnification costs will be.

A person is considered represented if he votes, but also if he does not vote. He is considered represented if the candidate he has voted for is elected, but also if another candidate is elected. He is represented, whether the candidate he voted or did not vote for does or does not do what he wished him to do. And he is considered politically represented, whether "his" representative will find majority support among all elected representatives or not. "In truth," as Lysander Spooner has pointed out,

voting is not to be taken as proof of consent On the contrary, it is to be considered that, without his consent having even been asked a man finds himself environed by a government that he cannot resist; a government that forces him to pay money, render service, and forego the exercise of many of his natural rights, under peril of weighty punishments. He sees, too, that other men practice this tyranny over him by use of the ballot. He sees further, that, if he will but use the ballot himself, he has some chance of relieving himself from this tyranny of others, by subjecting them to his own. In short, he finds himself, without his consent, so situated that, if he uses the ballot, he may become a master, if he does not use it, he must become a slave. And he has no other alternative than these two. In self-defense, he attempts the former. His case is analogous to that of a man who has been forced into battle, where he must either kill others, or be killed himself. Because, to save his own life in battle, a man attempts to take the lives of his opponents, it is not to be inferred that the battle is one of his own choosing, (p. 15)... [Consequently, the elected government officials] are neither our servants, agents, attorneys, nor representatives ... [for] we do not make ourselves responsible for their acts. If a man is my servant, agent, or attorney, I necessarily make myself responsible for all his acts done within the limits of the power that I have entrusted to him. If I have entrusted him, as my agent, with either absolute power, or any power at all, over the persons or properties of other men than myself, I thereby necessarily make myself responsible to those other persons for any injuries he may do them, so long as he acts within the limits of the power I have granted him. But no individual who may be injured in his person or property, by acts of Congress, can come to the individual electors, and hold them responsible for these acts of their so-called agents or representatives. This fact proves that these pretended agents of the people, of everybody, are really the agents of nobody.
(No
Treason,
p. 29)