The Impossibility of Limited Government: The Prospects for a Second American Revolution

0:00In a recent survey that was published in German newspapers, people of various nationalities were asked about how proud they were to be American, German, French and so on, and to what extent they believed that the world would be a better place if other countries were just like them. The countries leading the top in terms of national pride were the United States, which was not very surprising to me, and then on the other hand, Austria, maybe at some future occasion, if God and Lew Rockwell will, I will talk about the Austrian case, but here I want to concentrate on the United States and discuss the question if and possibly to what extent the American claim can be justified or not and I want to identify three sources of American national pride and I will explain that the first two of them are sources of justified pride and that the third one is not but actually represents some fateful error and I will then go on to explain how this

1:18Error can be possibly repaired. The first source of American national pride is the memory of its not so distant colonial past as a country of pioneers and indeed the English coming to North America were the last example and illustration of the glorious power of natural Human Liberty of the ability of men to create from scratch a free and prosperous commonwealth and contrary to the Hobbesian myths of man being another man's wolf, the English settlers demonstrated not just the viability but in fact the vibrancy and the unrivaled attraction of an essentially stateless, anarcho-capitalist social order. They demonstrated how private property was naturally established by a person's original appropriation, that is, his purposeful use and transformation and cultivation of previously unowned resources, of land turned of Wilderness turned into civilization.

2:47And they demonstrated how based on the recognition of private property, the division of labor, and contractual exchange, men were capable of effective protection against anti-social aggressors and aggression first and foremost by means of self-defense, and one should recall that there existed less crime then in the United States in the old days than there exists nowadays and they also demonstrated that as a society grew more prosperous and more complex, how this task can be achieved by specialization, that is by special institutions and agencies such as property registries, notaries, lawyers, judges, courts, sheriffs, juries, mutual defense associations and popular militias. In particular, the American colonists demonstrated the sociological importance of the institution of covenants for the maintenance of law and order, that is of associations or neighborhoods of groups of linguistically, ethnically, religiously and culturally homogeneous settlers led by and subject to the internal adjudication of a particular founder.

4:20Now onto the second legitimate source of American pride that is the original American Revolution. In Europe, the colonization experience lay far back and the open frontier had been closed a long time ago, often many centuries ago, and with the growth of the population, European societies had assumed an increasingly hierarchical social structure of freemen and lords and and vassals and overlords and kings. And although these European societies were distinctly more stratified and aristocratic than colonial America, however, these so-called feudal societies of Europe, too, were typically stateless social orders.

5:18A state, in accordance with some generally accepted terminology, is defined as a compulsory territorial monopolist of law and order and of ultimate decision making. But feudal lords and kings did not typically fulfill the requirement of a state. They could not tax without the consent of the taxed ones and on his own land every free man, every free holder was as much of a sovereign as an ultimate decision maker as the feudal king was on his own property. However, in the course of many centuries, these originally stateless European societies had been gradually transformed into statist absolutist monarchies.

6:12Kings, even if they had been initially voluntarily acknowledged as protectors and judges, had at long last resisted in this attempt by the aristocracy and helped along by the so-called common people, succeeded to establish themselves as hereditary heads of state and become absolute monarchs, and of ultimate decision making regarding the property of free men. These European developments and events exercised a two-fold effect on America. On the one hand, England too was of course ruled by an absolute king and when the English settlers arrived on the new continent, and, at the same time, the King's rule was also extended to America.

7:12Unlike the settlers' founding of private property and their private cooperative production of security and administration of justice, however, the establishment of the royal colonies and Royal administrations was not the result of original appropriation by the king or his administrators, and not the result of contract, but of usurpation and imposition. On the other hand, the settlers brought with them something else from Europe. There, the development from feudalism to royal absolutism had not only been resisted by the aristocracy, It was also opposed theoretically by recourse to the theory of natural rights as it originated within scholastic philosophy.

8:09According to this doctrine, government was supposed to be contractual and every government agent, including even the king, was held to be subject to the same universal rights and laws as everyone else. If this had been the case in earlier times, it was certainly no longer true for modern absolute monarchs. Absolute kings were usurpers of human rights and hence illegitimate. And accordingly, then, insurrection was not only permitted, but it was in fact a duty sanctioned by natural law. The American colonists were not only familiar with the doctrine of natural rights, but in light of their own direct and fresh experience of the effects of natural liberty and as religious dissenters who had left their mother country in disagreement with the king and the Church of England, they were of course particularly receptive to this doctrine.

9:17Steeped in the doctrine of natural rights, then, and encouraged by the distance of the English king, and further stimulated by the puritanical censure of royal idleness and luxury and pomp, the American colonists rose up to free themselves of British rule, and government, as the Declaration of Independence stated, was instituted to protect life, property and the pursuit of happiness, and it drew its legitimacy from the consent of the governed, but the British king claimed that he could tax the colonists without their consent. Accordingly then, if a government failed to do what it was designed to do, then the people had the right to abolish and secede from this government and establish a new order more suitable for the provision of security and justice and protection.

10:16But what was one to do, once one had successfully succeeded? And this brings me now to the third source of American national pride, the American Constitution, and the explanation as to why, rather than a legitimate source of pride, this Constitution actually represents a fateful era. era. With hindsight, owing to the great advances in political and economic theory since then, in particular at the hands of Ludwig von Mises and Murray Rothbard, we are able to give a relatively precise answer to the question. The inflated price of protection and the perversion and of ancient law by the English king that had led the American colonists to revolt were the inevitable result of compulsory monopoly. Once there is no longer free entry into the business of protection and adjudication, the price of protection and justice will rise and their quality will fall. Rather than a protector and a judge, a monopolist will increasingly become a protection racketeer and the destroyer and invader of the people and property that

11:49he was supposed to protect, as well as a warmonger and an imperialist. Accordingly, after having Having successfully seceded from and thrown out the British occupiers, it would have been only necessary for the American colonists to let the existing and homegrown institutions of self-defense and private voluntary and cooperative protection and eudication by specialized agents and agencies take care of law and order and I will return to this subject. However, This is of course not what happened. Not only did the Americans not let the inherited royal institutions of colonies and colonial governments, not only did they not let these things wither away and fall into oblivion, but they retained and reconstituted them within the old political borders in the form of independent states, each one equipped with its own taxing power, and its own legislative power. But moreover, while this would have been bad and problematic enough, they made matters worse with the next step, that is the adoption of the American Constitution and the replacement of the confederation of independent states by a central federal

13:17government of the United States. This constitution provided for the substitution of a popularly for an unelected king, but it changed nothing regarding the power to tax and the power to legislate. To the contrary, while the king's power to tax without consent had been implicitly assumed rather than explicitly stated or granted and was thus always in dispute, the Constitution explicitly granted this very power to Congress. And while kings, in theory even absolute kings, had not been considered the makers, but rather only the interpreters and executors of pre-existing and unchanging and immutable law, that is, while they had been considered to be judges rather than legislators, the Constitution explicitly invested Congress with the power of legislation, that is of making laws, and the President and the Supreme Court with the power of executing and interpreting such legislated law.

14:39In effect, what the American Constitution did was this, instead of a king who regarded colonial America as his private property and the colonists as his tenants, temporary and interchangeable caretakers were put in charge of the country's justice and protection monopoly. These caretakers did not own the country, but as long as they were in office, they could would make use of it and its residence to their own and their own prodigy's advantage. Yet as elementary economic theory predicts, this institutional setup will not eliminate the self-interest driven tendency of a monopolist of law and order toward increased exploitation.

15:32To the contrary, it only tends to make this exploitation less calculating and rational and Increasingly Short-Sided and Wasteful. As Rothbard would explain, let me quote, While a private owner, secure in his property and owning its capital value, plans the use of his resources over a long period of time, the government officials must milk the property He has no security of ownership. Government officials own the use of resources, but not their capital value, except in the case of the private property of a hereditary monarch.

16:18When only the current use can be owned, but not the resource itself, there will quickly ensue uneconomic exhaustion of the resources, since it will be to no one's benefit to conserve it over a period of time, and to every owner's advantage to use it up as quickly as possible. The private individual, secure in his property and in his capital resource, can take the long view, for he wants to maintain the capital value of his resource. It is the government official who must take and run, who must plunder the property while he is still in command.

17:03Moreover, because the Constitution provided explicitly for open entry into state government, that is to say everyone could in principle become a member of Congress or President or Supreme Court Judge, resistance against state property invasions will decline and as a result of political competition, The entire character structure of society will become distorted and increasingly bad or even worse people and characters will rise to the top of power. Because free entry and competition is not always good.

17:50Competition in the production of goods is good, but not competition in the production of bads. Free competition in killing, stealing, counterfeiting or swindling, for instance, is not good, it is worse than bad. Yet this precisely is what is instituted by open political competition, that is, by what we call democracy. In every society, as long as mankind is what it is, people who desire another man's property exist. But normally, and in most cases, people learn not to act on this desire or even feel ashamed for entertaining it.

18:38In an anarcho-capitalist society in particular, anyone acting on such desire is considered a criminal and suppressed by physical violence. Under monarchical rule, in contrast, only one person, the king, can possibly act on his desire for another man's property. And it is this, of course, that makes him a bad and a potential danger. However, because only he can do so and everyone else is forbidden to do likewise, a king's every action will be regarded with utmost suspicion. Moreover, the selection of a king is by accident of his noble birth.

19:25His only characteristic qualification is his upbringing as the future king and preserver of the dynasty and its possessions. This does not assure that a king will not be a bad and dangerous person, of course. However, at the same time, it also does not preclude that he might actually be a harmless dilettante or even a decent person. In distinct contrast to this, in freeing up entry into government, the Constitution permitted everyone to openly express his desire for other men's property. In fact, owing to the constitutional guarantee of freedom of speech, everyone is protected in doing so.

20:15and everyone is also permitted to act on his desire provided only that he gains entry into government. Thus, under the Constitution, everyone becomes a potential dangerous person. Now, to be sure, there exist also people who are completely unafflicted by the desire of enriching themselves The Theory of Money and Credit

21:10These people will be profoundly affected and changed. Even they must become political animals and spend more and more time and energy on developing their specifically political talents and skills, if only in order to protect and defend themselves against the attacks of their property and liberty by those individuals who have less moral scruples than they themselves More over and worse, with the institution of open and free political competition, moral people, respecting other people's property rights, are placed at a permanent disadvantage as compared to those who are morally uninhibited and accordingly moral behavior and standards will decline and deteriorate all around.

22:08Under the rather unproblematic assumption that the desire among people to take other people's property or lording it over them is unequally distributed, that is, that some people are more afflicted by such antisocial sentiments than others, and that likewise the particular characteristics and skills for political success, that is, to assemble People, political majorities and win elections, the skills and characteristics of looks and oratory and demagoguery and lies and deceptions and promises, bribes, threats or even cruelty, that all of this is also unequally distributed among people.

22:58The Constitution then provides for the very mechanism of selecting for bad and in particularly Efficiently Bared People.

23:36Even outside the orbit of government, in civil society, increasingly individuals will rise are placed to the top of financial and economic success, not on account of their productive or entrepreneurial talents, but because of their superior skills as morally uninhibited political entrepreneurs and lobbyists.

24:21and entrance into and success within government itself becomes essentially impossible to anyone hampered by any moral scruples against lying and stealing. Congressmen, presidents and Supreme Court judges, unlike kings, do not acquire their position accidentally. Instead, they reach their position on account of their proven efficiency as morally uninhibited demagogues. Accordingly, the Constitution virtually assures that only bad and dangerous people will ever rise to the top of government power.

25:09Nor does the constitutionally provided separation of powers make any difference. Two or three wrongs do not make a right. To the contrary, they lead to the proliferation, accumulation and aggravation of error. The legislators cannot impose their will on their hapless subjects without the executive power of the president, and the President will employ his power to influence legislatures and legislation. And while the Supreme Court may disagree with particular acts of Congress or President, it is dependent on them for funding and enforcement and as part of the institution of government itself, it has absolutely no interest in limiting but every interest in expanding the power After more than two centuries of constitutional government, the predictable results are before our very eyes, and we have heard plenty of the results in the last two days here.

26:22Year in and year out, our alleged protectors expropriate something like 40% of the incomes of Private Producers, making even the economic burden imposed on slaves and serfs seem moderate in comparison. Every detail of private life, property, trade and contract is regulated by ever higher mountains of paper laws than is legislation, thereby creating permanent legal uncertainty and moral hazard. Law has been replaced by tyranny, and the path of And the past of every American president, member of Congress and Supreme Court justice is littered with hundreds of thousands if not millions of nameless victims of economic ruin, financial bankruptcy, emergency, impoverishment, despair, hardship and frustration.

27:16And the picture becomes even bleaker when we consider foreign affairs. Almost from its very beginning, the United States government pursued a relentless aggressive expansionism and beginning with the Spanish-American War and culminating in World War I and World War II and continuing to the present, the United States government has become entangled in hundreds of foreign conflicts and risen to the rank of the world's foremost warmonger and imperial power. Thus, nearly every president, member of Congress and Supreme Court judge has been also responsible for the murder, killing or starvation of countless innocent foreigners all over the world.

28:02Now, what are we to do then? First, critically and negatively, we must recognize that the Constitution for what it is, that is an error. As the Declaration of Independence correctly noted, government was supposed to protect life, property and the pursuit of happiness. But the American Constitution, in granting to the government the power to tax without consent and the power to make laws without consent, can never do this, but is the very means of invading and destroying our right to life property and liberty. It is simply absurd to believe that an agency that can tax without consent can be a property protector.

28:55Likewise, it is absurd to believe that an agency with legislative powers will preserve law and order. Instead, we must recognize that the Constitution itself is unconstitutional in the sense that it is incompatible with the doctrine of natural human rights which inspired the original American Revolution. No one in his right mind would submit himself to a contract that allowed one's alleged protector to determine unilaterally, without consent, how much to charge for one's protection. And no one in his right mind would submit himself to a contract that allowed one's alleged protector to make laws concerning one's own property.

29:50Secondly, and constructively, we must have an inspiring vision concerning the provision of security in a free society. And what is this vision? I can explain it only relatively shortly. I'll make you aware of the fact that I will have a paper forthcoming. Mises Institute will publish this titled Private Production of Defense and I will just give a short abstract of the main ideas. Now, while it is important that the memory of America's past as a land of pioneers and an efficient anarcho-capitalist system, that this memory is kept alive and strengthened, obviously we cannot go back to the feudal past or the situation as it existed when America reached independence from Britain.

30:46This opportunity was wasted by the following acceptance of the Constitution. But this does not make our situation in any way hopeless. To the contrary, despite the relentless growth of statism in the course of the past two centuries, economic development has continued and our living standards have reached spectacular new heights. Under these conditions, an entirely new alternative has become viable. That is, the competitive provision of law and order by private profit and loss insurance agencies. Obviously, even now, while hampered by the state, insurance agencies protect private property owners for payment of a premium against a multitude of natural and social disasters, from floods and hurricanes to theft and fraud.

31:45Protection is, so to speak, the natural business of insurance companies. Unlike states, however, insurers can neither tax nor can they legislate. The relationship between the insurer and the insured is consensual and contractual. Both are free to cooperate or not to cooperate, and this has momentous implications of which I want to mention a few. First, competition among insurers for voluntarily paying clients would bring about a tendency toward a continuous fall in the price of protection per insured value, Thus making protection ever more affordable. In contrast, a protector who can tax the protected will charge ever higher prices for his services.

32:44Second and more importantly, insurers must indemnify their clients in the case of any actual damage. and, accordingly, they must operate efficiently. Regarding social disasters, such as crime in particular, that means that the insurer must above all be concerned about effective prevention of crime, for unless he can prevent a crime, he will have to pay up. And if a criminal act cannot be prevented, an insurer will still want to be effective regarding the recovery of loot and the apprehension and adjudication of the offender, because in so doing he can reduce the cost and force the criminal rather than the victim and his insurer to pay for the damages and the cost of indemnification.

33:42In contrast, 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, to recover loot or apprehend criminals. In fact, if they do capture criminals at all, they typically force the victim to pay once again for the criminal's incarceration and entertainment, to play table tennis, study law and sue the government for not getting the right Wheaties. So insult is added to injury. Third and most importantly, well, as I have already explained, the relationship between the state and its clients is non-contractual and the state can make up and change the rules of the game as it goes along.

34:42The relationship between insurers and their clients is contractual. That is, insurers must accept private property as pre-existing law and cannot change this law. Protection insurance contracts with specified property and property damage descriptions would come into existence and out of the steady cooperation between different insurers in mutual arbitration proceedings, A tendency toward the standardization and unification of international or inter-agency law, that is, of the rules of procedure, evidence, compensation, restitution and punishment would quickly emerge.

35:27Everyone, by virtue of being insured, would become tied into a global competitive enterprise of striving to minimize conflict and aggression. And every single conflict and damage claim, regardless of where and by or against whom, would always fall into the adjudication of exactly one or more specific and in any case innumerable insurance agencies and their contractually agreed upon arbitration procedures, thereby creating perfect legal certainty. Now let me just point out a few implications of this contractual nature of the relationship of clients and insurers.

36:14For one, states, because they are not subject to and bound by contracts, Contracts typically tend to disarm and outlaw the ownership of weapons by their clients, thereby increasing their own protection at the expense of rendering their alleged clients defenseless. Contrast this to the operation of insurers. No buyer of protection insurance would agree to a contract that required him to surrender his right to self-defense or be unarmed or otherwise defenseless. To the contrary, insurance agencies would actually encourage the ownership of guns and other protective devices among its clients by means of selective price cuts.

37:07In addition, states, because they operate in a contractual void and are not dependent on voluntary payments, can and do arbitrarily define and redefine what is an aggression and what counts as victimization. By legislating a proportional or progressive income tax and redistributing income from the rich to the poor, for instance, states actually define the rich as aggressors and the poor as their victims. Or, by passing affirmative action laws, states define whites and males as aggressors and blacks and women as their victims.

37:57Now, no such thing would be possible for insurers for two fundamental reasons. First, every insurance involves the pooling of particular risks into classes. It implies that to some of the insured more will be paid out than what they paid in and to others less. However, and this is decisive, no one of those taking out insurance, no one knows in advance who the winners and who the losers will be. Winners and losers and any income redistribution among them will be random and unsystematic. Otherwise, if this would not be the case, losers would not want to pool their risks with winners, but only with other losers, because this would lower their own insurance premium.

38:55The second reason, it is not possible to insure oneself against any possible risk. It is possible to insure oneself only against accidents, that is, against risks over whose outcome the insured has no control and to which he contributes nothing. Thus it is possible, for instance, to insure oneself against the risk of death or fire, but it is not possible to insure oneself against the risk of committing suicide or setting one's own house on fire. With regard to social disasters, this means that one cannot insure oneself against damages, which are the result of a prior aggression or provocation on one's own part.

39:44Rather, every insurer must restrict the actions of its insured, so as to exclude all aggression and provocation on their part. Insurance is then always contingent on submitting to specified norms of non-aggressive or civilized conduct, including of course the exercise of defensive violence. Thus, while states can and do protect aggressors and punish victims, insurers can only insure victims and every known aggressor and provocateur will, as a bad insurance risk, have to be systematically excluded from any insurance coverage whatsoever and accordingly every Every such person would tend to be economically isolated, vulnerable and extremely weak.

40:39Now last but by no means least, as regards foreign and international affairs, states because they can externalize the cost of their own actions onto others, that is the hapless Taxpayers are constantly prone to become aggressors and warmongers and accordingly will tend to fund and develop weapons of aggression and mass destruction. In distinct contrast, insurers will be prevented from engaging in any form of foreign aggression because any Any such aggression is costly and requires higher insurance premiums, which implies that clients will leave and go to other insurance agencies which follow a non-aggressive policy.

41:37To the contrary, then every insurer would engage only in defensive violence in order to reduce its own operating cost, and rather than developing weapons of aggression and mass destruction, it would fund and develop in particular weapons designed for the purpose of defense and designed for the purpose of specific targeted retaliation without any damage happening to non-combatants, so to speak. Now, even if all of this is then clearly understood, how can we ever succeed in implementing such a fundamental constitutional reform?

42:24Insurance agencies are currently obviously burdened by all forms of regulations which prevent them from doing what they could and what they naturally would do. How can we free them from these regulations? Fundamentally, the answer to this question is the same as that given by the American revolutionaries more than 200 years ago, by the session, by the creation of free territories. Yet how is the cession possible given the widespread moral degeneration of the population as a result of democracy and the likely crackdown of the federal government against the cessionist movements?

43:15Now in this respect it is necessary to first remember that neither the original American Revolution nor, in fact even less so, the American Constitution were the result of the will of the majority of the population. A third of the American colonists were actually Tories and another third were occupied with daily routines and did not care either way. are either way. No more than at the most a third of the American colonists were actually committed to and supportive of the first American Revolution. And yet it was they who carried the day. And as far as the Constitution is concerned, the overwhelming majority of the American public was actually opposed to its adoption, and its ratification represented more of a coup d'etat by a teeny minority rather than the general will.

44:14Thus, first off, revolutions, whether good or bad, are made by minorities. And second, underscores the same basic insight, it is necessary to recognize that the power of every government, whether it is kings or caretakers, rests ultimately on nothing else but opinion rather than physical force. The agents of government are always only a small proportion of the total population under their control. But this implies that a government cannot possibly enforce its will upon the entire population unless it finds widespread support and voluntary cooperation within the non-governmental public.

45:07And it applies likewise, negatively, that every government can be brought down by a mere change in public opinion. That is, by the mass withdrawal of that consent and cooperation. And although it is true that after more than two centuries of democracy the American public has become so degenerate morally and intellectually There appears to be no insurmountable difficulty in winning such a secessionist-minded majority in sufficiently small districts or regions of the country, in fact, given some energetic minority of intellectual elites inspired by the vision of a free society in which law and order is provided by commons.

46:01There seems to be nothing unrealistic in assuming that such secessionist majorities exist at hundreds or even thousands of locations dispersed all over the country. And indeed it is essential for a successful secessionist movement, that is, in order to avert a government crackdown, to have secessionist movements springing up at many different and in widely dispersed locations. That is, it is strategically advisable not to attempt again what was unsuccessfully tried in 1861, that is for contiguous states or the entire South trying to break away from the Washington tyranny.

46:49Rather the model that should be adopted is that of the European middle ages where we had a multitude of free and independent cities.