DemocracyThe God That Failed

by Hans-Hermann Hoppe

  (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 values 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

  3See 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.

  4See 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 Review 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

  5In 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."

  6On 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, Theory 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).

  7See also chaps. 1,3, and 13.

  With the end of World War I, mankind truly left the monarchical age.8 In the course of one and a half centuries since the French Revolution, Europe, and in its wake the entire world, have undergone a fundamental transformation. Everywhere, monarchical rule and sovereign kings were replaced by democratic-republican rule and sovereign "peoples."

  The first assault of republicanism and the idea of popular sovereignty on the dominating monarchical principle was repelled with the military defeat of Napoleon and the restoration of Bourbon rule in France; and as a result of the revolutionary terror and the Napoleonic wars, republicanism was widely discredited for much of the nineteenth century. However, the democratic-republican spirit of the French Revolution left a permanent imprint. From the restoration of the monarchical order in 1815 until the outbreak of World War I in 1914, all across Europe popular political participation and representation was systematically expanded. The franchise was successively widened and the powers of popularly elected parliaments increased everywhere.9

  From 1815 to 1830, the right to vote in France was still severely restricted under the restored Bourbons. Out of a population of some 30 million, the electorate included only France's very largest property owners—about 100,000 people (less than one-half of one percent of the population above the age of twenty). As a result of the July Revolution of 1830, the abdication of Charles X and the coronation of the Duke of Orleans, Louis Philippe, the number of voters increased to about 200,000. As a result of the revolutionary upheavals of 1848, France again turned republican, and universal and unrestricted suffrage for all male citizens above the age of twenty-one was introduced. Napoleon III was elected by nearly 5.5 million votes out of an electorate of more than 8 million.

  8See on thisGuglielmo Ferrero, Peaceand War (Freeport, N.Y.: Books for Libraries Press, 1969), esp. chap. 3; idem, Macht (Bern: A. Francke, 1944); Erik von KuehneltLeddihn, Leftism Revisited (Washington D.C.: Henry Regnery, 1990); Reinhard Bendix, Kings or People (Berkeley: University of California Press, 1978).

  9For a detailed documentation see Peter Flora, State, Economy, and Society in Western Europe 1815-1975 (Frankfurt/M.: Campus, 1983), vol. 1, chap. 3; also Robert R. Palmer and Joel Colton, A History of the Modern World (New York: Alfred Knopf, 1992), esp. chaps. 14 and 18.

  In the United Kingdom, after 1815 the electorate consisted of some 500,000 well-to-do property owners (about 4 percent of the population above age 20). The Reform Bill of 1832 lowered the property owner requirements and extended the franchise to about 800,000. The next extension, from about 1 million to 2 million, came with the Second Reform Bill of 1867. In 1884 property restrictions were relaxed even further and the electorate increased to about 6 million (almost a third of the population above age 20 and more than three-fourths of all male adults).

  In Prussia, as the most important of the thirty-nine independent German states recognized after the Vienna Congress, democratization set in with the revolution of 1848 and the constitution of 1850. The lower chamber of the Prussian parliament was hence elected by universal male suffrage. However, until 1918 the electorate remained stratified into three estates with different voting powers. For example, the wealthiest people—those who contributed a third of all taxes—elected a third of the members of the lower house. In 1867 the North German Confederation, including Prussia and twenty-one other German states, was founded. Its constitution provided for universal unrestricted suffrage for all males above the age of twenty-five. In 1871, after the victory over Napoleon III, the constitution of the North German Confederation was essentially adopted by the newly founded German Empire. Out of a total population of around 35 million, nearly 8 million people (or about a third of the population over twenty) elected the first German Reichstag.

  After Italy's political unification under the leadership of the Kingdom of Sardinia and Piedmont in 1861, the vote was only given to about 500,000 people out of a population of some 25 million (about 3.5 percent of the population above age twenty). In 1882, the property requirements were relaxed, and the minimum voting age was lowered from twentyfive to twenty-one years. As a result, the Italian electorate increased to more than 2 million. In 1913, almost universal and unrestricted suffrage for all males above thirty and minimally restricted suffrage for males above twenty-one was introduced, raising the number of Italian voters to more than 8 million (more than 40 percent of the population above twenty).

  In Austria, restricted and unequal male suffrage was introduced in 1873. The electorate, composed of four classes or curiae of unequal voting powers, totaled 1.2 million voters out of a population of about 20 million (10 percent of the population above twenty). In 1867a fifth curia was added. Forty years later the curia system was abolished, and universal and equal suffrage for males above age twenty-four was adopted, bringing the number of voters close to 6 million (almost 40 percent of the population above twenty).

  Russia had elected provincial and district councils—zemstvos —since 1864; a
nd in 1905, as a fallout of its lost war against Japan, it created a parliament—the Duma—which was elected by near universal, although indirect and unequal, male suffrage. As for Europe's minor powers, universal or almost universal and equal male suffrage has existed in Switzerland since 1848, and was adopted between 1890 and 1910 in Belgium, the Netherlands, Norway, Sweden, Spain, Greece, Bulgaria, Serbia, and Turkey.

  Although increasingly emasculated, the monarchical principle dominated until the cataclysmic events of World War I. Before 1914, only two republics existed in Europe—France and Switzerland. And of all major European monarchies, only the United Kingdom could be classified as a parliamentary system; that is, one in which supreme power was vested in an elected parliament. Only four years later, after the United States—where the democratic principle implied in the idea of a republic had only recently been carried to victory as a result of the destruction of the secessionist Confederacy by the centralist Union government10 —had entered the European war and decisively determined its outcome, monarchies had all but disappeared, and Europe turned to democratic republicanism.11

  In Europe, the defeated Romanovs, Hohenzollerns, and Habsburgs had to abdicate or resign, and Russia, Germany, and Austria became democratic republics with universal—male and female—suffrage and parliamentary governments. Likewise, all of the newly created successor states—Poland, Finland, Estonia, Latvia, Lithuania, Hungary, and Czechoslovakia (with the sole exception of Yugoslavia)—adopted democratic-republican constitutions. In Turkey and Greece, the monarchies were overthrown. Even where monarchies remained nominally in existence, as in Great Britain, Italy, Spain, Belgium, the Netherlands, and the Scandinavian countries, monarchs no longer exercised any governing power. Universal adult suffrage was introduced, and all government power was invested in parliaments and "public" officials.12 A new world order—the democratic-republican age under the aegis of a dominating U.S. government—had begun.