DemocracyThe God That Failed (30 page)

IV

Postscript:
On
Privatization
In
Welfare
States

While it should be clear from the foregoing considerations why from a moral as well as an economic point of view the Western welfare states
require as thorough a reform as the former socialist countries of Eastern Europe, it is important to note that the
method
of privatization must be different in both cases. The syndicalist privatization strategy proposed for formerly socialist countries applied, as will be recalled, only in such cases where no identifiable previously expropriated private owner or heir of socialized factors of production existed. If such an owner-heir could be identified, then
he
should be again installed as private owner. If and only if no such owner-heir existed could it be considered just to install the current and/or past users of socialized production factors as their private owners, because they and only they have then an objectifiable, i.e., intersubjectively ascertainable, tie to these resources. Only they, of all people, have
de
facto
homesteaded the factors of production in question. Thus, only their ownership claim can be said to have any "real" (objective) foundation.

Thus today, a decade after the collapse of socialism, the countries of Eastern Europe are well on the way toward Western welfare-statism ("social democracy"). Because of the partial privatization and the elimination of most (although by no means all) price controls, Eastern Europe's economic performance has certainly improved beyond its former desperate showing. This improvement has in turn brought its Western payoff in the form of increased economic integration: a widening of markets, an extensification and intensification of the division of labor, and an expanding volume of mutually beneficial international trade. However, due to the limited extent of privatization and the gradualist reform strategy, the Eastern recovery process has been painfully slow, causing seemingly permanent mass
unemploymentandrapidmonetaryinflationandcurrency crises. Moreover, because the average size of government in the countries of Eastern Europe is still significantly larger than in the semi-socialist countries of Western Europe, economic progress in Eastern Europe and the stimulus thereby given to the Western economies will only be temporary, and economic recovery and expansionism will likely soon be replaced by stagnation in the West and—on a permanently lower level—East alike.

By the same token, it would be
without
any "real" foundation whatsoever—and thus utterly indefensible from a moral point of view—if private ownership in the "publicly" owned production factors of the mixed (welfare state) economies of the Western world were assigned to public sector employees, i.e., the so-called civil servants, along the line of the syndicalist slogan "the public schools to the teachers, the universities to the professors, the post offices to the postal workers, the public land to the bureaucrats of the Bureau of Land Management, the court houses and police stations to the judges and policemen, etc." Indeed, to do so would constitute nothing less than a moral outrage, even in the rather typical case where the "public" property in question is
not
the result of a prior expropriation of some formerly private owner of this property by means of the government's power of "eminent domain" (in which case the property should be simply returned to the original owner-heir). Even in this case all "public" property is still the result of some form of expropriation, and although the proper identification of the victims of this expropriation is more difficult than in the clear-cut case of "eminent domain," it is by no means impossible. In any case, it is obvious that civil servants are typically not among the victims. Hence, they of all people have the least well-founded claim to private ownership of this property.

Publicly owned buildings and structures were all financed by taxes, and as far as undeveloped public land is concerned, it is the result of a public, i.e., tax-funded and enforced, policy prohibiting the private appropriation and development of nature and natural resources. Hence, it would appear that it is taxpayers, in accordance with their amount of taxes paid, who should be given title to public buildings and structures, while undeveloped public land simply should be opened up to private homesteading. Keep in mind that civil servants are
not
taxpayers
(even though, in public discourse, they frequently fancy themselves to be so). Rather, their net income is typically paid out of taxes paid by other individuals working in the private sector of the economy. Civil servants are
tax-consumers
(just as public "welfare-recipients" are tax-consumers rather than tax-payers)
²³
; hence, civil servants as well as welfare-recipients should be excluded from private ownership in formerly public buildings and structures. Both civil servants and welfare-recipients live off other people's tax payments, and it would add insult to injury if they, instead of those who had paid their salaries and handouts as well as the public buildings and structures that they occupy and control, should be awarded ownership of these buildings and structures.
²⁴
As regards undeveloped public land available for private homesteading activities, every public land manager, ranger, etc., should be excluded for a similar reason from homesteading land currently occupied and formerly guarded by him against potential private developers. He may be permitted to homestead
other
public land that is presently occupied and formerly guarded against private development by
other
government agents. But to allow him to homestead land he currently occupies would give him an advantage over other potential homesteaders that would be manifestly unfair in light of the fact that it was he, paid in this by taxpayers, who had previously kept these taxpayers off and away from this land.

²³
See on this also chap. 4, esp. note 15.

²⁴
To be sure, a number of complications would arise in this privatization scheme. In order to determine the ownership shares granted to various individuals in buildings and structures currently "owned" by local, state, and federal governments, these individuals would have to provide documentation of their past payments of local, state, and federal taxes respectively, and in each case past welfare payments received must be deducted from taxes paid in order to arrive at a figure for the amount of
net
taxes paid. In a fully privatized market society, the task of finding a detailed solution to this problem would be typically assumed by private accountants, lawyers, and arbitration agencies, financed directly or indirectly—against a contingency free—by the individual claimants.

7

On
Free
Immigration
and
Forced
Integration

I

The classical argument in favor of free immigration runs as fol
lows: Other things being equal, businesses go to low-wage areas, and labor moves to high-wage areas, thus affecting a tendency toward the equalization of wage rates (for the same kind of labor) as well as the optimal localization of capital. An influx of migrants into a given-sized high-wage area will lower
nominal
wage rates. However, it will not lower
real
wage rates
if
the
population is below its optimum size. To the contrary, if this is the case, the produced output will increase over-proportionally, and real incomes will actually rise. Thus, restrictions on immigration will harm the protected domestic workers
qua
consumers
more
than they gain
qua
producers. Moreover, immigration restrictions will increase the "flight" of capital abroad (the export of capital which otherwise might have stayed), still causing an equalization of wage rates (although somewhat more slowly), but leading to a less than optimal allocation of capital, thereby harming world living standards all-around.
¹

¹
"The law of migration and location," explains Ludwig von
Mises, makes it possible for us to form an exact concept of relative overpopulation. The world, or an isolated country from which emigration is impossible, is to be regarded as overpopulated in the absolute sense when the optimum of population—that point beyond which an increase in the number of people would mean not an increase but a decrease in welfare—is exceeded. A country is relatively overpopulated where, because of the large size of the population, work must go on under less favorable conditions of prod uction than in other countries, so that,
ceteris
paribus,
the same application of capital and labor yields a smaller output there. With complete mobility of persons and goods, relatively overpopulated territories would give up their population surplus to other territories until this disproportion had disappeared.
(Nation,
State,
and
Economy
[New York: New York University Press, 1983], p. 58)

See also idem,
Human
Action:
A
Treatise
on
Economics,
Scholar's Edition (Auburn, Ala.: Ludwig von Mises Institute, 1998), pp. 620-24; Murray N. Rothbard,
Power
and
Market:
Govern
ment
and
the
Economy
(Kansas City: Sheed Andrews and McMeel, 1977), pp. 52-55.

In addition, traditionally labor unions, and nowadays environmentalists, are opposed to free immigration, and this should
prima
facie
count as another argument
in
favor
of a policy of free immigration.
²

II

As it is stated, the above argument in favor of free immigration is irrefutable. It would be foolish to attack it, just as it would be foolish to deny that free trade leads to higher living standards than does protectionism.
³

It would also be wrong to attack the above case for free immigration by pointing out that because of the existence of a welfare state, immigration has become to a significant extent the immigration of welfare-bums, who do not increase but rather decrease average living standards even if the United States, for instance, is below her optimal population point. For this is not an argument against immigration but against the welfare state. To be sure, the welfare state should be destroyed in its entirety. However, the problems of immigration and welfare are analytically distinct problems and must be treated accordingly.

The problem with the above argument is that it suffers from two interrelated shortcomings which invalidate its unconditional pro-immigration conclusion and/or which render the argument applicable only to a highly unrealistic—long bygone—situation in human history.

The first shortcoming will only be touched upon. To libertarians of the Austrian School, it should be clear that what constitutes "wealth" and "well-being" is
subjective.
Material wealth is not the only thing that has value. Thus, even if real incomes rise due to immigration, it does not follow that immigration must be considered "good," for one might prefer lower living standards and a greater distance to other people over higher living standards and a smaller distance to others.
⁴

²
On the counterproductive effects of labor unions see William H. Hutt,
A
Theory
of
Collective
Bargaining
(Washington, D.C.: Cato Institute, 1980); idem, "Trade Unions: The Private Use of Coercive Power,"
Review
of
Austrian
Economics
3 (1989); Morgan O. Reynolds,
Making
America
Poorer:
The
Cost
of
Labor
Law
(Washington, D.C.: Cato Institute, 1987); on the environmentalist movement see Llewellyn H. Rockwell, Jr.,
The
Anti-Environmentalist
Manifesto
(Bur\ingame,
Calif.: Center for Libertarian Studies, 1993); Larry Abraham,
The
Greening:
The
Environmentalists'
Drive
for
Global
Power
(Phoenix, Ariz.: Double APublications, 1993).

³
See on this chap. 8 below.

⁴
See on this in particular Mises,
Human
Action,
pp. 241-44; Murray N. Rothbard,
Man,
Economy,
and
State,
2
vols. (Auburn, Ala.: Ludwig von Mises Institute, 1993), pp. 183-200.

Instead, a second, related shortcoming will be the focus here. With regard to a given territory into which people immigrate, it is left unanalyzed who, if anyone,
owns
(controls) this territory. In fact, in order to render the above argument applicable, it is implicitly assumed that the territory in question is unowned, and that the immigrants enter virgin territory (open frontier). Obviously, today this can no longer be assumed. If this assumption is dropped, however, the problem of immigration takes on an entirely new meaning and requires fundamental rethinking.

Ill

For the purpose of illustration, let us first assume an anarcho-capitalist society. Though convinced that such a society is the only social order that can be defended as just, I do not want to explain here why this is the case.
⁵
Instead, I will employ it as a conceptual benchmark, because this will help explain the fundamental misconception of most contemporary free immigration advocates.

All land is privately owned, including all streets, rivers, airports, harbors, and so on. With respect to some pieces of land, the property title may be unrestricted; that is, the owner is permitted to do with his property whatever he pleases as long as he does not physically damage the property owned by others. With respect to other territories, the property title may be more or less severely restricted. As is currently the case in some housing developments, the owner may be bound by contractual limitations on what he can do with his property (voluntary zoning), which might include residential versus commercial use, no buildings more than four stories high, no sale or rent to Jews, Germans, Catholics, homosexuals, Haitians, families with or without children, or smokers, for example.

Clearly, under this scenario no such thing as freedom of immigration exists. Rather, many independent private property owners have the freedom to admit or exclude others from their own property in accordance with their own unrestricted or restricted property titles. Admission to some territories might be easy, while it might be nearly impossible to others. In any case, however, admission to the property of the admitting person does not imply a "freedom to move around," unless other property owners consent to such movement. There will be as much immigration
or nonimmigration, inclusivity or exclusivity, desegregation or segregation, nondiscrimination or discrimination based on racial, ethnic, linguistic, religious, cultural or whatever other grounds as individual owners or associations of individual owners allow.

⁵
See on this Murray N. Rothbard,
The
Ethics
of
Liberty
(New York: New York University Press, 1998); Hans-Hermann Hoppe,
The
Economics
and
Ethics
of
Private
Property
(Boston: Kluwer, 1993); also chap. 9, note 16.