DemocracyThe God That Failed (13 page)

In contrast, with a publicly owned government the control over the government apparatus lies in the hands of a trustee, or caretaker. The caretaker may use the apparatus to his personal advantage, but he does not own it. He cannot sell government resources and privately pocket the receipts, nor can he pass government possessions onto his personal heir. He owns the
current
use
of government resources, but not their capital value. Moreover, while entrance into the position of a private owner of government is restricted by the owner's personal discretion, entrance into the position of a caretaker-ruler is open. Anyone, in principle, can become the government's caretaker.

From these assumptions two central, interrelated predictions can be deduced: (1) A private government owner will tend to have a systematically longer planning horizon, i.e., his degree of time preference will be lower, and accordingly, his degree of economic exploitation will tend to be less than that of a government caretaker; and (2), subject to a higher degree of exploitation the nongovernmental public will also be comparatively more present-oriented under a system of publicly-owned government than under a regime of private government ownership.

(1) A private government owner will predictably try to maximize his total wealth; i.e., the present value of his estate
and
his current income. He will
not
want to increase his current income at the expense of a more than proportional drop in the present value of his assets, and because acts of current income acquisition invariably have repercussions on present asset values (reflecting the value of all future—expected—asset earnings discounted by the rate of time preference), private ownership in and of itself leads to economic calculation and thus promotes farsightedness. In the case of the private ownership of
government,
this implies a distinct moderation with respect to the ruler's incentive to exploit his monopoly privilege of expropriation, for acts of expropriation are by their nature parasitic upon prior acts of production on the part of the nongovernmental public. Where nothing has first been produced, nothing can be expropriated; and where everything is expropriated, all future production will come to a shrieking halt. Accordingly, a private
government owner will want to avoid exploiting his subjects so heavily, for instance, as to reduce his future earnings potential to such an extent that the present value of his estate actually falls. Instead, in order to preserve or possibly even enhance the value of his personal property, he will systematically restrain himself in his exploitation policies. For the lower the degree of exploitation, the more productive the subject population will be; and the more productive the population, the higher will be the value of the ruler's parasitic monopoly of expropriation. He will use his monopolistic privilege, of course. He will not
not
exploit. But as the government's private owner, it is in his interest to draw parasitically on a growing, increasingly productive and prosperous nongovernment economy as this would effortlessly also increase his own wealth and prosperity—and the degree of exploitation thus would tend to be low.

Moreover, private ownership of government implies moderation and farsightedness for yet another reason. All private property is by definition exclusive property. He who owns property is entitled to exclude everyone else from its use and enjoyment; and he is at liberty to choose with whom, if anyone, he is willing to share in its usage. Typically, he will include his family and exclude all others, except as invited guests or as paid employees or contractors. Only the ruling family—and to a minor extent its friends, employees and business partners—share in the enjoyment of the expropriated resources and can thus lead a parasitic life. Because of these restrictions regarding entrance into government and the exclusive status of the individual ruler and his family, private government ownership stimulates the development of a clear "class consciousness" on the part of the nongovernment public and promotes the opposition and resistance to any expansion of the government's exploitative power. A clear-cut distinction between the (few) rulers on the one hand and the (many) ruled on the other exists, and there is little risk or hope of anyone of either class ever falling or rising from one class to the other. Confronted with an almost insurmountable barrier in the way of upward mobility, the solidarity among the ruled—their mutual identification as actual or potential victims of governmental property rights violations—is strengthened, and the risk to the ruling class of losing its legitimacy as the result of increased exploitation is heightened.
³

In distinct contrast, the caretaker of a publicly owned government will try to maximize not total government wealth (capital v
alues and
current income) but current income (regardless, and at the expense, of capital values). Indeed, even if the caretaker wishes to act differently, he
cannot,
for as public property government resources are unsaleable, and without market prices economic calculation is
impossible.
Accordingly, it must be regarded as unavoidable that public government ownership will result in continual capital consumption. Instead of maintaining or even enhancing the value of the government estate, as a private owner would tend to do, a government's temporary caretaker will quickly use up as much of the government resources as possible, for what he does not consume
now,
he may
never
be able to consume. In particular, a caretaker—as distinct from a government's private owner—has no interest in not ruining his country. For why should he
not
want to increase his exploitation, if the advantage of a policy of moderation—the resulting higher capital value of the government estate—
cannot
be reaped privately, while the advantage of the opposite policy of increased exploitation—a higher current income—
can
be so reaped? To a caretaker, unlike to a private owner, moderation has only disadvantages.
⁴

³
See also Bertrand de Jouvenel,
On
Power:
The
Natural
History
of
its
Growth
(New York: Viking, 1949), esp. pp. 9-10.

In addition, with a publicly owned government anyone in principle can become a member of the ruling class or even the supreme power. The distinction between the rulers and the ruled as well as the class consciousness of the ruled become blurred. The illusion even arises that the distinction no longer exists: that with a public government no one is ruled by anyone, but everyone instead rules himself. Accordingly, public resistance against government power is systematically weakened. While exploitation and expropriation before might have appeared plainly oppressive and evil to the public, they seem much less so, mankind being what it is, once anyone may freely enter the ranks of those who are at the receiving end. Consequently, not only will exploitation increase, whether openly in the form of higher taxes or discretely as increased governmental money "creation" (inflation) or legislative regulation. Likewise, the number of government employees ("public servants") will rise absolutely as well as relatively to private employment, in particular attracting and promoting individuals with high degrees of time preference, and limited farsightedness.

⁴
See Rothbard,
Power
and
Market,
pp. 188-89; also
Managing
the
Commons,
Garret Hardin and John Baden, eds. (San Francisco: W.H. Freeman, 1977); and Mancur Olson, "Dictatorship, Democracy, and Development,"
American
Political
Science
Re
view
87, no. 3 (1993).

(2) In contrast to the right of self-defense in the event of a criminal attack, the victim of government violations of private property rights may not legitimately defend himself against such violations.
⁵

The imposition of a government tax on property or income violates a property owner's and income producer's rights as much as theft does. In both cases the owner-producer's supply of goods is diminished against his will and without his consent. Government money or "liquidity" creation involves no less a fraudulent expropriation of private property owners than the operations of a criminal counterfeiting gang. As well, any government regulation as to what an owner may or may not do with his property—beyond the rule that no one may physically damage the property of others and that all exchange and trade be voluntary and contractual—implies the "taking" of somebody's property, on a par with acts of extortion, robbery, or destruction. But taxation, the government's provision for liquidity, and government regulations, unlike their criminal equivalents, are considered legitimate, and the victim of government interference, unlike the victim of a crime, is
not
entitled to physically defend and protect his property.

Owing to their legitimacy, then, government violations of property rights affect individual time preferences in a systematically different and much more profound way than does crime. Like crime, all government interference with private property rights reduces someone's supply of present goods and thus raises his effective time preference rate. However, government offenses—unlike crime—simultaneously raise the time preference
degree
of actual and potential victims because they also imply a reduction in the supply of
future
goods (a reduced rate of return on investment). Crime, because it is illegitimate, occurs only intermittently—the robber disappears from the scene with his loot and leaves his victim alone. Thus, crime can be dealt with by increasing one's demand for protective goods and services (relative to that for nonprotection goods) so as to restore or even increase one's future rate of investment return and make it less likely that the same or a different robber will succeed a second time. In contrast, because they are legitimate, governmental property rights violations are continual. The offender does not disappear into hiding but stays around, and the victim does not arm himself but must (at least he is generally expected to) remain defenseless. The actual and potential victims of government property rights violations—as demonstrated by their continued defenselessness
vis-a-vis
their offenders—respond by associating a permanently higher risk with all future production and systematically adjusting their expectations concerning the rate of return on all future investment downward. By simultaneously reducing the supply of present
and
expected future goods, governmental property rights violations not only raise time preference
rates
(with given schedules) but also time preference
schedules.
Because owner-producers are (and see themselves as) defenseless against future victimization by government agents, their expected rate of return on productive, future-oriented actions is reduced all-around, and accordingly, all actual and potential victims become more present-oriented.
⁶

⁵
In addition to the works quoted in note 1 above, see Lysander Spooner,
No
Treason:
The
Constitution
of
No
Authority
(Larkspur, Colo.: Pine Tree Press, 1966), p. 17.

Moreover, because the degree of exploitation is comparatively higher under a publicly owned government, this tendency toward present-orientation will be significantly more pronounced if the government is publicly owned than if it is owned privately.
⁷

Application:

The
Transition
From
Monarchy
To
Democracy
(1789-1918)

Hereditary monarchies represent the historical example of privately owned governments, and democratic republics that of publicly owned governments.

Throughout most of its history, mankind, insofar as it was subject to any government control at all, was under monarchical rule. There were exceptions: Athenian democracy, Rome during its republican era until 31 B.C., the republics of Venice, Florence, and Genoa during the Renaissance period, the Swiss cantons since 1291, the United Provinces from 1648 until 1673, and England under Cromwell from 1649 until 1660. Yet these were rare occurrences in a world dominated by monarchies. With the exception of Switzerland, they were short-lived phenomena. Constrained by monarchical surroundings, all older republics satisfied the open entry condition of public property only imperfectly, for while a
republican form of government implies by definition that the government is not privately but publicly owned, and a republic can thus be expected to possess an inherent tendency toward the adoption of universal suffrage, in all of the earlier republics, entry into government was limited to relatively small groups of "nobles."

⁶
On the phenomenon and theory of time preference see in particular Lud wig von Mises,
Human
Action:
A
Treatise
on
Economics,
Scholar's Edition (Auburn, Ala.: Ludwig von Mises Institute, 1998), chaps. 18 and 19; also William Stanley Jevons,
The
ory
of
Political
Economy
(New York: Augustus M. Kelley, 1965); Eugen von Bohm-Bawerk,
Capital
and
Interest,
3 vols. (South Holland, Ill.: Libertarian Press, 1959); Frank Fetter,
Capital,
Interest,
and
Rent
(Kansas City: Sheed Andrews and McMeel, 1977); Murray N. Rothbard,
Man,
Economy,
and
State,
2
vols. (Auburn, Ala.: Lud wig von Mises Institute, 1993).

⁷
See also chaps. 1,3, and 13.