DemocracyThe God That Failed (25 page)

However, there is a highly important indirect relationship between size and economic integration. A central government ruling over largescale territories—and even less so a single world government—cannot come into existence
ab
ovo.
Instead, all institutions with the power to tax and regulate owners of private property must start out small. Smallness contributes to moderation, however. A small government has many close competitors, and if it taxes and regulates its own subjects visibly more than its competitors, it is bound to suffer from the emigration of labor and capital and a corresponding loss of future tax revenue. Consider a single household, or a village, as an independent territory, for instance. Could a father do to his son, or a mayor to his village, what the government of the Soviet Union did to its subjects (i.e., deny them any right to private capital ownership) or what governments all across Western Europe and the U.S. do to their citizens (i.e., expropriate up to 50 percent of their productive output)? Obviously not. There would either be an immediate revolt and the government would be overthrown, or emigration to another nearby household or village would ensue.
⁷

⁶
See on this ibid.

⁷
Political competition, then, is a far more effective device for limiting a government's natural desire to expand its exploitative powers than are internal constitutional limitations. Indeed, the attempts of some public choice theorists and of "constitutional economics" to design liberal model constitutions must strike one as hopelessly naive. For constitutional courts, and supreme court judges, are part and parcel of the government apparatus whose powers they are supposed to limit. Why in the world should they want to constrain the power of the very organization that provides them with jobs, money, and prestige? To assume so is not only theoretically inconsistent, i.e., incompatible with the assumption of self-interest. The assumption is also without any historical foundation. Despite the explicit limitation of the power of the central government contained in the Tenth Amendment of the U.S. Constitution, for instance, it has been the interpretation by the U.S. Supreme Court, which has rendered the amendment essentially null and void. Similarly, despite the constitutional guarantee of private property by the (West) German constitution, for
instance, the German supreme court, after the German reunification in 1990, declared all communist expropriations prior to the founding of the East German state in 1949 "valid." Thus, more than 50 percent of former East Germany's land used for agriculture were appropriated by the (West) German state (rather than being re- turned to the original private owners, as required by a literal interpretation of the constitution).

Contrary to orthodoxy, then, precisely the fact that Europe possessed a highly decentralized power structure composed of countless independent political units explains the origin of capitalism—the expansion of market participation and of economic growth—in the Western world.
⁸
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 (Netherlands).

The competition among small states for taxable subjects brings them into conflict with each other. As a result of interstate conflicts, historically drawn out over the course of 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 on many factors, of course, but in the long run, the decisive factor is the relative amount of economic resources at a government's disposal.
⁹
Through taxation and regulation, 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. Other 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 (due to internal reasons as well as immigration factors), 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 progressive. States which tax and regulate their domestic economies little—liberal states—tend to defeat and expand their territories at the expense of nonliberal ones.
¹⁰
This accounts for the outbreak of the "Industrial Revolution" in centralized England and France. It explains why in the course of the nineteenth century Western Europe came to dominate the rest of the world (rather than the other way around), and why this colonialism was generally progressive. Furthermore, it explains the rise of the U.S. to the rank of superpower in
the course of the twentieth century.

⁸
The importance of international "anarchy" for the rise of European capitalism has been justly emphasized by Jean Baechler. Thus, he writes in
The
Origins
of
Capi
talism:

"The constant expansion of the market, both in extensivene
ss and in intensity, was the result of an absence of a political order extending ove
r the whole of Western Europe." (p. 73) "The expansio
n of capitalism owes its origin and
raison
d'etre
to political anarchy. . . . Collectivism a
nd state management have only succeeded in school textbooks." (p.
77)

All power tends toward the absolute. If it is not absolute, this is because some kind of limitations have come into play. . . . those in the position of power at the center ceaselessly tried to erode these limitations. They have never succeeded, and for the reason that also seems to me to be tied to the international system: a limitation of power to act externally and the constant threat of foreign assault [the two characteristics of a multi-polar system) imply that power is also limited internally and must rely on autonomous centers of decisionmaking and so may use them only sparingly, (p. 78)

⁹
See on this Paul Kennedy,
The
Rise
and
Fall
of
the
Great
Powers:
Economic
Change
and
Military
Conflict
from
1500
to
2000
(New York: Vintage Books, 1987).

However, the further the process of more liberal governments defeating less liberal ones proceeds—i.e., the larger the territories, the fewer and 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 approaches the limit of a One World state, all possibilities of voting with one's feet against a government disappear. Wherever 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. This explains developments of the twentieth century: with World War I, and even more so with World War II, the U.S. attained hegemony over Western Europe and became heir to its vast colonial empires. A decisive step in the direction of global unification was taken with the establishment of a
pax
Americana.
And indeed, throughout the entire period the U.S., Western Europe, and most of the rest of the world have suffered from a steady and dramatic growth of government power, taxation, and regulatory expropriation.
¹¹

¹⁰
See on this Hans-Hermann Hoppe, "Marxist and Austrian Class Analysis," in idem,
The
Economics
and
Ethics
of
Private
Property;
idem, "Banking, Nation States, and International Politics"; on the requirement of a liberal market economy, i.e., domestic laissez-faire, for the successful conduct of war see Ludwig von Mises,
Nationalok
onomie.
Theorie
des
Handelns
und
Wirtschaftens
(Munich: Philosophia Verlag, 1980), part 6, chap. 9; idem,
Interventionism:
An
Economic
Analysis
(Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1998), chap. 6; on the contrary tendency of states to use wars as pretexts for the destruction of domestic laissez-faire and the implementation of increasingly interventionist or socialist economic systems see Robert Higgs,
Crisis
and
Leviathan
(New York: Oxford University Press, 1987).

ⁿ
On this theme see also Paul Johnson,
Modern
Times
(New York: Harper and Row, 1983); Robert Nisbet,
The
Present
Age
(New York: Harper and Row, 1988).

In light of social and economic theory and history, then, a case for secession can be made.
^'2

Initially, secession is nothing more than a shifting of control over the nationalized wealth from a larger, central government to a smaller, regional one. Whether this leads to more or less economic integration and prosperity depends largely on the new regional government's policies. However, the act of secession in itself has a positive impact on production, for one of the most important reasons for secession is typically the belief on the part of the secessionists that they and their territory are being exploited by others. The Slovenes felt, and rightly so, that they were being robbed systematically by the Serbs and the Serbian-dominated central Yugoslavian government; the Baltic people resented the fact that they had to pay tribute to the Russians and the Russian-dominated government of the Soviet Union.
¹³
By virtue of secession, hegemonic domestic relations are replaced by contractual—mutually beneficial—foreign relations. Instead of forced integration there is voluntary separation. Forced integration, as also illustrated by measures such as busing, rent controls, affirmative action, antidiscrimination laws and, as will be explained shortly, "free immigration," invariably creates tension, hatred, and conflict. In contrast, voluntary separation leads to harmony and peace.
¹⁴
Under forced integration any mistake can be blamed on a "foreign" group or culture and all success claimed as one's own; hence, there is little reason for any culture to learn from another. 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. If a secessionist people wishes to improve or maintain its position
vis-a-vis
a competing one, nothing but discriminative learning
will help. It must imitate, assimilate, and, if possible, improve upon the skills, traits, practices, and rules characteristic of more advanced societies, and it must avoid those characteristic of less advanced societies. Rather than promoting a downward leveling of cultures as under forced integration, secession stimulates a cooperative process of cultural selection and advancement.
¹⁵

¹²
On the following see also Secession,
State,
and
Liberty,
Gordon, ed.; Robert McGee, "Secession Reconsidered,"
Journal
of
Libertarian
Studies
11, no. 1 (1994); Ludwig von Mises,
Liberalism:
In
the
Classical
Tradition
(Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1985), esp. pp. 108-10.

¹³
Similarly, one of the decisive reasons for the attempt by the Southern Confederacy to secede from the American Union was the Morrill Tariff Act of 1861, which imposed a 47 percent tax on the value of all imported goods. At the time, the American South exported three-fourths of its agricultural output and imported in turn most of its manufactured goods from abroad. In effect, the tariff meant that the South was forced to pay higher taxes that went to the North to subsidize inefficient northern manufacturers and industrial workers.

¹⁴
See on this Murray N. Rothbard, "Nations by Consent: Decomposing the Nation-State," in
Secession,
State,
and
Liberty,
David Gordon, ed.; Ludwig von Mises,
Nation,
State,
and
the
Economy
(New York: New York University Press, 1983), esp. pp. 31-77; also chap. 7below.

Moreover, while everything else depends on the new regional government's domestic policies and no direct relationship between size and economic integration exists, there is an important indirect connection. Just as political centralization ultimately tends to promote economic disintegration, so secession tends to advance integration and economic development. First, secession always involves the breaking away of a smaller from a larger population and is thus a vote against the principle of democracy and majoritarian rule in favor of private, decentralized ownership. More importantly, secession always involves increased opportunities for interregional migration, and a secessionist government is immediately confronted with the threat of emigration. To avoid the loss in particular of its most productive subjects, it comes under increased pressure to adopt comparatively liberal domestic policies by allowing more private property and imposing a lower tax and regulation burden
than its neighbors." Ultimately, with as many territories as separate households, villages, or towns, the opportunities for economically motivated emigration is maximized and government power over a domestic economy minimized.

¹⁵
Egalitarian propaganda notwithstanding, enormous differences with respect to the degree of cultural advancement exist, for instance, in former Yugoslavia between Slovenes, Croats, Serbs, and Kosovo-Albanians and/or Catholics, Orthodox, and Muslims; or in the former Soviet Union between Latvians, Estonians, Lithuanians, Germans, Poles, Ukrainians, Russians, Georgians, Rumanians, Armenians, Chechens, Aszerbaijanis, Turkmenis, Kazaks, and so on. The immediate result of the political separation of these culturally distinct people will simply be an increased variety of governments and forms of social organization. It will have to be expected further, however, that some of these newly independent governments and their social policies will be worse (from the point of view of economic integration and prosperity) than those that would have prevailed if the former central government had remained in power, while others will turn out to be better. For instance, it may well be worse for Aszerbaijanis to be ruled by a native government than by one made up of Russians, or for Kosovo-Albanians to fall into the hands of some of their own rather than those of a Serbian government. At the same time, the social policies in Estonia, Latvia, and Lithuania, for instance, will be likely better than what a Russian government would have had in store, and Croatians will prosper more under home-rule than if they had remained under Serbian control. Secession, then, will not eliminate cultural differences and rank orders; and indeed, it may well accentuate them. And yet, precisely in laying bare the cultural differences and different ranks of socio-economic development of various people secession will in time provide the best stimulus for the cultural and economic advancement of all people, developed and undeveloped alike.