The Political Economy of Centralization and Secession

0:00The most famous words of political philosophy ever penned were Thomas Jefferson's and the Declaration of Independence. Whenever any form of government becomes destructive, he said, it is the right of the people to alter or to abolish it and to institute a new government, laying its foundation on such principles and organizing its powers in such form as to them shall seem most likely to affect their safety and happiness. 219 years after those words landed on King George's desk, they are still red hot. They still inspire fear in the hearts of tyrants everywhere. They still raise the possibility that no government is permanent.

0:47Those who threw off the yoke of socialist tyranny in the last decade frequently cited Mr. Jefferson as their moral authority. Some of these movements, as in Russia and Romania, toppled one government and replaced it with another. The more successful anti-socialist revolutions, like the American Revolution, were also secessions, as in Estonia, Latvia, Lithuania, Ukraine and the Czech Republic. The term secession derives from the Latin word for withdraw. It is an appropriate term for our era. The call for secession is the equivalent of saying we want out. Stop taxing us. Stop expropriating us. Stop oppressing us. And finally, stop governing us. The plea for withdrawal for secession is the plea for self-government and self-determination. As Mises wrote, no people or part of a people shall be held against Stateism, Centralism and Genocide have defined this century. But if all goes well, the struggle for individual and community liberty and devolution from central power will define the next. Despite every effort of the power elite, states are devolving into smaller and smaller units. If our concern is human freedom, self-government, a free-market economy, the autonomy of the people,

2:18and the economy of the family and the security of private property, we must celebrate this trend away from big government and towards what our founders called free government. Celebrating a trend is great, but understanding it is more important. And understanding is precisely what has been lacking. Few in the media could comprehend that socialism had not worked or why. They were certainly in no position to grasp The subject is complex and contemporary as secession, much less the political, economic and cultural forces that have given rise to it. If we aspire to think more seriously than Dan Rather or Bill Buckley, and more importantly if we strive to be custodians of a rich and vibrant intellectual tradition, we must grapple with the trends of our time.

3:09If we choose to ignore them out of concern for political correctness, we shirk our responsibility. It is not surprising that so few academics have applied themselves to understanding modern secessionism. Most professors are as cautious and as stale as government bureaucrats. They don't like to think about new subjects. They don't like to change their theories about the world. They don't like to admit error. Far safer to teach and write about the significance of Maya Angelou's profound poem, A Rock, A Tree, A River. Most of all, modern academics don't want to admit that what their theory of history says is impossible, history itself is making possible. With their Marxian paradigm, liberal intellectuals view secessionism as a reversal of history and therefore were the only of being ignored or denounced.

3:59They say secessionism takes history off its predetermined path, away from what they call progress and towards what they call reaction. Reaction. Rather than scrap their outmoded Hegelian notions, they continue to preach the doctrine of socialism and planning. But those with intellectual integrity must look beyond such failed doctrines. Ludwig von Mises, for example, reexamined socialism when the entire world of ideas thought it irrefutable. His treatise shocked his contemporaries and wrecked his career. Murray and Rothbard took up the subject of statism in the broadest sense and hammered about a theory of liberty, the state and the conflict between the two. He too was marginalized. Yet the defiance of fashion by these two great men produced a body of work that has remarkable explanatory power today.

4:49They are personal examples as well. It is morally necessary to pursue truth as they did, although more so when prevailing opinion says it cannot and should not be done. This is why we must examine the economics, history and philosophy behind this devolution away from central power. All experience hath shown, wrote Mr. Jefferson, that mankind are more disposed to suffer while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. We are here to discover why so many have recently decided to put an end to their suffering, Why they have abolished old forms, why they have erected new ones, and why this trend will and should continue.

5:36As one of the few independent sources of ideas in the country, the Mises Institute has chosen to sponsor this conference because we believe in the power of ideas. As the first modern public academic meeting on the subject of secession, this gathering is already the source of much controversy. Yet our call for papers on secession netted some of the best academic work on the subject I've seen, and I'm sure you will agree. We will hear from some of the best minds working in the social sciences today. At the conclusion of this conference, you will have become familiar not only with the cutting edge in secession scholarship, but also with the bulk of existing scholarship on this crucial topic. Our heartfelt thanks go out to the wonderful donors who made this all possible, some of whom are here with us today.

6:22We begin with Hans-Hermann Hoppe. Professor Hoppe teaches economics at the University of Nevada Las Vegas, where he was Murray Rothbard's close friend and colleague. He is a senior fellow of the Mises Institute, co-editor of our Review of Austrian Economics, author of a number of books, many papers, The Theory of Socialism and Capitalism, The Economics and Ethics of Private Property, just two of his books. And Professor Hoppe is going to A State is a territorial monopolist of compulsion, an agency which may engage in continual, institutionalized Property Rights Violations and Exploitation in the form of expropriation, taxation and regulation.

7:25Assuming no more than self-interest on the part of government agents, all states or all governments must be expected to make use of this monopoly and thus exhibiting a tendency toward increased exploitation. On the one hand, this means increased domestic exploitation and internal taxation. On the other hand, and it is this aspect in particular that will be of interest, it means, of course, territorial expansionism. States will always want to enlarge their exploitation and tax base. In trying to do so, however, they will come into conflict with other competing states.

8:12The competition between states as territorial monopolists of compulsion is by its very nature an eliminative competition. That is, there can be only one monopolist of exploitation and taxation in any given area and thus the competition between different states can be expected as promoting a tendency toward increased political centralization and, ultimately, one single world state. A glance at Western history suffices to illustrate the validity of this conclusion. At the beginning of this millennium, for instance, Europe consisted of thousands of independent political units.

9:01Now only several dozen such units remain in existence. To be sure, there existed also some decentralizing forces. There was the progressive disintegration of the Ottoman Empire from the 16th century until after World War I and the establishment of modern Turkey. The discontinuous Habsburg Empire was gradually dismembered from the time was at the time of its greatest expansion under Charles V until it disappeared and modern Austria was founded in 1918. And only recently, before our very eyes, the former Soviet Empire has disintegrated.

9:48However, the overriding tendency in history was in the opposite direction. For instance, during the second half of the 17th century, Germany consisted of some 234 countries, 51 free cities and 1,500 independent nightly manors. By the early 19th century, the total number of all three units had fallen to below 50 and by 1871, unification had been achieved. The scenario in Italy was essentially the same. And even the small states, currently small states, have a history of expansion and centralization.

10:35Switzerland for instance began in 1291 as a confederation of three independent cantonal states and by 1848 it was a single federal state with some two dozen cantonal provinces. Moreover, from a global perspective, mankind has come closer than ever before to the establishment of a world government. Even before the dissolution of the Soviet Union, the United States had attained hegemonical status over Western Europe, most notably over West Germany, and over the Pacific Rim countries, and most notably over Japan. This is indicated by the presence of American troops and military bases, by the NATO and Seattle Pact, by the role of the American dollar as the ultimate international reserve currency and of the United States Federal Reserve System as the lender or counterfeiter of last resort, as well as by institutions such as the International Monetary Fund, the World World Bank and the recently established World Trade Organization.

11:48In addition, under American hegemony, the political integration of Western Europe has steadily advanced, and with the establishment of a European central bank and a European currency unit, the European community will likely be complete before the turn of the century. At the same time, with the so-called North American Free Trade Agreement, a significant step toward the political integration of the American continent has been made. In the absence of the Soviet Empire and its military threat, the United States has emerged as the world's sole and undisputed military superpower and its top cop. According to the orthodox view, centralization is generally good and a progressive movement, whereas disintegration and secession, even if sometimes unavoidable, represents anachronism.

12:48It is assumed that larger political units and ultimately a single-world government imply And as evidence of this, it is pointed out that economic prosperity has indeed dramatically increased with increased centralization. However, rather than reflecting a truth, this orthodox view is more illustrative of the fact that history is typically written by its victors. Correlation or temporal coincidence do not prove causation. In fact, the relationship between economic prosperity and centralization is very different and in fact almost the opposite of what orthodoxy alleges.

13:38Political integration or centralization and economic or market integration are two completely different phenomena. Political integration involves the territorial expansion of a state's power of taxation and property regulation. Economic integration, on the other hand, is the extension of the interpersonal and interregional division of labor and of market participation. In principle, in taxing and regulating private property owners and market income earners, all governments are counterproductive. They reduce market participation and the formation of economic wealth.

14:23Once the existence of a government has been assumed, however, no direct relationship between territorial size and economic integration exists. Centralization can go hand in hand with either economic progress or with economic retrogression. Progress would result whenever a less taxing and regulating government expands its territory at the expense of a more exploitative one, and if the opposite occurs, then centralization would obviously imply economic disintegration and retrogression. However, a highly important indirect relationship exists between size and economic integration.

15:08A central government ruling over large-scale territories and even less a single-world government cannot come into existence up over from the very beginning. Instead, all institutions with the power to tax and regulate owners of private property must start out small, territorially small. A small government has many close competitors, and if it taxes and regulates its own subjects visibly more than these competitors do, it is bound to suffer from the emigration of labor and capital and a corresponding loss of future tax revenue.

16:01Contrary to what orthodoxy alleges then, it is precisely because Europe possessed a highly decentralized power structure composed of countless independent political units that explains the origin of capitalism in Europe. That is the expansion of market participation and of economic growth in the western world. It is not by accident that capitalism first flourished under conditions of extreme political decentralization in the northern Italian city-states, in southern Germany and in the secessionist low-countries, that is nowadays the Netherlands. The competition among small states for taxable subjects brings them into conflict with each other.

16:52As a result of interstate conflicts, historically drawn out over the course of several centuries, a few states succeed in expanding their territories, while others are eliminated or incorporated. Which states win in this process of eliminative competition depends of course on various factors, In the long run, the decisive factor is the relative amount of economic resources at a government's disposal. In taxing and in regulating, governments do not positively contribute to the creation of economic wealth. Instead, they parasitically draw on existing wealth. However, they can influence the amount of existing wealth negatively.

17:41Other things being equal, the lower the tax and regulation burden imposed by a government on its domestic economy, the larger its population tends to grow for internal reasons, as well as for immigration into its territory, and the larger the amount of domestically produced wealth on which it can draw in its conflicts with neighboring competitors. For this reason, centralization is frequently, economically speaking, progressive. States that tax and regulate their domestic economies little, that is, liberal states in the European sense of the word liberal, tend to defeat and expand their territories at the expense of non-liberal states. This accounts, for instance, for the outbreak of the Industrial The Revolution in Centralized England and in Centralized France.

18:40It explains why in the course of the 19th century Europe, Western Europe, came to dominate the rest of the world rather than the other way around, the rest of the world dominating Europe, and why this colonialism of the European nations was generally progressive. Furthermore, it explains also the rise of the United States to the rank of superpower in the course of the 20th century. However, the further the process of more liberal governments defeating less liberal ones proceeds, that is, the larger the territories, the fewer and the more distant the remaining competitors, and thus the more costly international migration, the lower a government's incentive to continue in its domestic liberalism will be. As one When one approaches the limit of a one-world state, all possibilities of voting with one's feet against a government disappear.

19:42Wherever one goes, the same tax and regulation structure applies. Thus relieved of the problem of emigration, a fundamental rein on the expansion of governmental power is gone as well. This explains then the course of the 20th century. With World War I and even more so with World War II, the United States attained hegemony over Western Europe and became the heir to its vast colonial empires. A decisive step in the direction of global unification was taken and a Pax Americana was established. and in fact throughout the entire period of the 20th century the United States and Western Europe and most of the rest of the world have suffered from steady and dramatic growth of government power, taxation and regulatory expropriation.

20:41In light of these theoretical considerations then what would follow seems to be a plea for the session. Now, initially, the session is of course nothing more than a shifting of control over the nationalized wealth from a larger central government to a smaller regional one. Whether this will lead to more or less economic integration and prosperity depends largely on the new regional government's policies. However, the sole fact of this session has already a positive impact on production insofar as it reduces or eliminates forced integration. As a result of centuries of centralization, not only were hundreds of distinct cultures literally wiped out, The process of centralization has also led to the superstratification, that is, the economic exploitation and cultural domination of one ethnic, linguistic, religious or cultural group by another, of the Irish, Scots and Welsh by the English, the Slovenes and the Croats by the Serbs, the Estonians, Lithuanians and Latvians by the Russians.

22:00Forced integration, as it is also illustrated by measures such as busing, affirmative action and anti-discrimination laws, forced integration invariably creates tension, hatred and conflict. In contrast, voluntary separation leads to social harmony and peace. Under forced integration, any mistake can be blamed on a foreign group or culture, and all success can be claimed as one's own, and hence there is no or little reason for any culture to learn from any other. Under a regime of separate but equal, one must face up to the reality not only of cultural diversity, but in particular of visibly different ranks of cultural advancement.

22:56If, as a sessionist, people wish to improve or maintain its position vis-à-vis a competing one, nothing but discriminative learning will help. It must initiate, imitate, assimilate, and, if possible, improve upon the skills, traits, practices and rules characteristic of more advanced cultures, and it must avoid those characteristics of less advanced societies. Rather than promote a downward leveling of cultures as under forced integration, the session stimulates a cooperative process of cultural selection and advancement. In particular, the session can also eliminate the immigration problem increasingly plaguing the countries of Western Europe and the United States.

23:48Now, whenever a central government permits immigration, it allows foreigners to proceed, literally on government-owned roads, to any of its residents' doorsteps, regardless of whether these residents desire such proximity to foreigners or not. Free immigration is thus to a large extent forced integration. The session solves this problem by letting smaller territories have their own admission standards and determine independently with whom they will associate on their own territory and with whom they prefer to cooperate from a distance. moreover, although everything else depends on the new regional government's domestic policies and also no direct relationship between size and economic integration exists, there is again an important indirect connection. Just as political centralization ultimately tends to promote economic disintegration, so the session tends to advance integration and Economic Development. First, the Cession always involves increased opportunities for interregional migration, and the Cessionist government is immediately confronted with the spectre of emigration. To avoid the loss in particular of its most productive subjects, it is under increased pressure to adopt comparatively liberal, in the European sense, liberal domestic

25:26policies and is forced to allow more private property and imposing a lower tax and regulation burden than its neighbors do. Ultimately, with as many territories as separate households, villages or towns, the opportunities for economically motivated emigration would be maximized and and government power over a domestic economy minimized. Secondly, the smaller the country, the greater will be the pressure to opt for free trade rather than protectionism. All government interference with foreign trade forcibly limits the range of mutually beneficial interterritorial exchanges and thus leads to relative impoverishment at home as well as well as abroad. But the smaller a territory and its internal markets, the more dramatic will this effect be. A country with the size of the United States, for instance, might attain comparatively high standards of living even if it renounced all foreign trade, provided that it possesses an unrestricted internal capital and consumer goods market. In contrast, We are a single household as a conceivably smallest secessionist unit. By engaging in unrestricted free trade, even the smallest territory can be fully integrated into the world market and partake of every advantage of the division of labor, and its owners may well become the wealthiest people on earth.

27:12The existence of a single wealthy individual anywhere is living proof of this. On the other hand, if the same household owners decided to forego all interterritorial trade, abject poverty or death would result. Accordingly, the smaller a territory and its internal markets, the more likely is it that it will opt for free trade. Lastly, the session also promotes monetary integration. I think that is a topic that Professor Salerno will speak in more detail about tomorrow. The process of centralization has resulted not only in the formation of an international, American-dominated government cartel of managed trade and migration, ever more invasive and burdensome governments, Alliance, Globalized Welfare-Warfare Statism and finally Economic Stagnation or even declining standards of living. It has also resulted in monetary disintegration, that is the destruction of the former international commodity gold standard and its replacement with the dollar A popular dominated system of freely fluctuating government paper moneys, that is a global US led counterfeiting cartel. However, a system of freely fluctuating paper currencies, that

28:43is the Friedmanite monetary ideal, is strictly speaking no monetary system at all. It is a is a system of partial barter, dysfunctional of the very purpose of money, of facilitating rather than complicating exchange. This becomes obvious once it is recognized that from the point of view of economic theory, no special significance attaches to the way that national borders are being drawn. Yet if one then imagines a proliferation of ever smaller national territories, ultimately to the point where each household forms its own country, Friedman's proposal is revealed for what it is, that is an outright absurdity.

29:30Because if every household were to issue its own paper currency, the world would be back squarely at barter. No one would accept anyone else's paper, economic calculation would be impossible, and trade would come to a virtual standstill. It is only because of the fact that, due to centuries of political centralization, there exists actually only a relatively small number of countries and national currencies, Currencies, and hence that this integrative consequences and calculational difficulties are far less severe that it could have been overlooked that this proposal is actually absurd. Each country cannot but abandon the current fiat money system, which has been responsible for the greatest worldwide inflation in all of human history, and adopt once again an and international commodity money standard, such as the gold standard, which historically led to the opposite, that is a gradual appreciation increase in the value of money.