DemocracyThe God That Failed (3 page)

According to the approach adopted here, theoretical propositions like the ones just cited are accepted for what they apparently are: as statements about
necessary
facts
and
relations.
As such, they can be
illus
trated
by historical data, but historical data can neither
establish
nor
refute
them.
¹³
To the contrary. Even if historical experience is necessary in order to initially grasp a theoretical insight, this insight concerns facts and relations that extend and transcend logically beyond any particular historical experience. Hence, once a theoretical insight has been grasped it can be employed as a constant and permanent standard of "criticism," i.e., for the purpose of correcting, revising, and rejecting as well as of accepting historical reports and interpretations. For instance, based on theoretical insights it must be considered impossible that higher taxes and regulations can be the cause of higher living standards. Living standards can be higher only despite higher taxes and regulations. Similarly, theoretical insights can rule out reports such as that increased consumption has led to increased production (economic growth), that below-market-clearing (maximum) prices have resulted in unsold surpluses of goods, or that the absence of democracy has been responsible for the economic malfunctioning of socialism as nonsensical. As a matter
of theory, only more saving and capital formation and/or advances in productivity can lead to increased production, only guaranteed abovemarket-clearing (minimum) prices can result in lasting surpluses, and only the absence of private property is responsible for the economic plight under socialism. And to reiterate, none of these insights requires further empirical study or testing. To study or test them is a sign of confusion.

¹³
To avoid any misunderstanding: To say that something is "necessary" (and can be recognized as such
"a
priori"),
is
not
to claim that one is infallible. Mathematicians and logicians, too, claim to be concerned with necessary relations, and yet they do not claim to be infallible. Rather, what is claimed in this regard is only that in order to refute a
theoretical
proposition (in contrast to a hypothetical one)
another,
even more fundamental theoretical argument is required, just as another mathematical or logical proof or argument is required (and
not
"empirical evidence") in order to refute a mathematical or logical theorem.

When I noted earlier that this is not the work of a historian but of a political economist and philosopher, I obviously did not believe this to be a disadvantage. Quite to the contrary. As has been indicated, historians
qua
historians cannot rationally decide between incompatible interpretations of the same set of data or sequence of events; hence, they are unable to provide answers to most important social questions. The principal advantage that the political economist and philosopher has over the mere historian (and the benefits to be gained from the study of political economy and philosophy by the historian) is his knowledge of pure—
a
priori
—social theory, which enables him to avoid otherwise unavoidable errors in the interpretation of sequences of complex historical data and present a theoretically corrected or "reconstructed," and a decidedly critical or "revisionist" account of history.

Based on and motivated by fundamental theoretical insights from both, political economy and political philosophy (ethics), in the following studies I propose the revision of three central—indeed almost mythical—beliefs and interpretations concerning modern history.

In accordance with elementary theoretical insights regarding the nature of private property and ownership versus "public" property and administration and of firms versus governments (or states), I propose first a revision of the prevailing view of traditional hereditary monarchies and provide instead an uncharacteristically favorable interpretation of monarchy and the monarchical experience. In short, monarchical government is reconstructed theoretically as privately-owned government, which in turn is explained as promoting future-orientedness and a concern for capital values and economic calculation by the government ruler. Second, equally unorthodox but by the same theoretical token, democracy and the democratic experience are cast in an untypically unfavorable light. Democratic government is reconstructed as publiclyowned government, which is explained as leading to present-orientedness and a disregard or neglect of capital values in government rulers, and the transition from monarchy to democracy is interpreted accordingly as civilizational decline.

Still more fundamental and unorthodox is the proposed third revision.

Despite the comparatively favorable portrait presented of monarchy, I am not a monarchist and the following is not a defense of monarchy. Instead, the position taken toward monarchy is this: if one must have a state, defined as an agency that exercises a compulsory territorial monopoly of ultimate decisionmaking (jurisdiction) and of taxation, then it is economically and ethically advantageous to choose monarchy over democracy. But this leaves the question open whether or not a state is necessary, i.e., if there exists an alternative to both, monarchy
and
democracy. History again cannot provide an answer to this question. By definition, there can be no such thing as an "experience" of counterfactuals and alternatives; and all one finds in modern history, at least insofar as the developed Western world is concerned, is the history of states and statism. Only theory can again provide an answer, for theoretical propositions, as just illustrated, concern necessary facts and relations; and accordingly, just as they can be used to rule certain historical reports and interpretations out as false or impossible, so can they be used to rule certain other things in as constructively possible, even if such things have never been seen or tried.

In complete contrast to the orthodox opinion on the matter, then, elementary social theory shows, and will be explained as showing, that no state as just defined can be justified, be it economically or ethically. Rather, every state, regardless of its constitution, is economically and ethically deficient. Every monopolist, including one of ultimate decisionmaking, is "bad" from the viewpoint of consumers. Monopoly is hereby understood in its classical meaning, as the absence of free entry into a particular line of production: only one agency, A, may produce X. Any such monopolist is "bad" for consumers because, shielded from potential new entrants into his line of production, the price for his product will be higher and the quality lower than otherwise. Further, no one would agree to a provision that allowed a monopolist of ultimate decisonmaking, i.e., the final arbiter and judge in every case of interpersonal conflict, to determine unilaterally (without the consent of everyone concerned) the price that one must pay for his service. The power to tax, that is, is ethically unacceptable. Indeed, a monopolist of ultimate decisionmaking equipped with the power to tax does not just produce less and lower quality justice, but he will produce more and more "bads," i.e., injustice and aggression. Thus, the choice between monarchy and democracy concerns a choice between two defective social orders. In fact, modern history provides ample illustration of the
economic and ethical shortcomings of
all
states, whether monarchic or democratic.

Moreover, the same social theory demonstrates positively the possibility of an alternative social order free of the economic and ethical shortcomings of monarchy and democracy (as well as any other form of state). The term adopted here for a social system free of monopoly and taxation is "natural order." Other names used elsewhere or by others to refer to the same thing include "ordered anarchy," "private property anarchism," "anarcho-capitalism," "autogovernment," "private law society," and "pure capitalism."

Above and beyond monarchy and democracy, the following is concerned with the "logic" of a natural order, where every scarce resource is owned privately, where every enterprise is funded by voluntarily paying customers or private donors, and where entry into every line of production, including that of justice, police, and defense services, is free. It is in contrast to a natural order that the economic and ethical errors of monarchy are brought into relief. It is before the backdrop of a natural order that the still greater errors involved in democracy are clarified and that the historic transformation from monarchy to democracy is revealed as a civilizational decline. And it is because of the natural order's logical status as the theoretical answer to the fundamental problem of social order—of how to protect liberty, property, and the pursuit of happiness—that the following also includes extensive discussions of strategic matters and concerns, i.e., of the requirements of social change and in particular the radical transformation from democracy to natural order.

Regardless of the unorthodox interpretations and conclusions reached in the following studies, the theories and theorems used to do so are definitely
not
new or unorthodox. Indeed, if one assumes, as I do, that a
priori
social theory and theorems exist, then one should also expect that most of such knowledge is old and that theoretical progress is painstakingly slow. This indeed appears to be the case. Hence, even if my conclusions may seem radical or extreme, as a theoretician I am decidedly a conservative. I place myself in an intellectual tradition that stretches back at least to the sixteenth-century Spanish Scholastics and that has found its clearest modern expression in the so-called Austrian School of Economics: the tradition of pure social theory as represented above all by Carl Menger, Eugen von Bohm-Bawerk, Ludwig von Mises, and Murray N. Rothbard.
¹⁴

¹⁴
See Murray N. Rothbard,
Economic
Thought
Before
Adam
Smith:
An
Austrian
Perspective
on
the
History
of
Economic
Thought
(Cheltenham, U.K.: Edward Elgar,
1995); idem,
Classical
Economics:
An
Austrian
Perspective
on
the
History
of
Economic
Thought
(Cheltenham, U.K.: Edward Elgar, 1995); also
Fifteen
Great
Austrian
Econo
mists,
Randall Holcombe, ed. (Auburn, Ala.: Ludwig von Mises Institute, 1999).

At the outset, I noted Habsburg-Austria and the United States of America as the countries associated most closely with the old monarchical regime and the new and current democratic-republican era, respectively. Here we encounter Habsburg-Austria again and discover another reason why the following studies also may be called
An
Austrian
View
of
the
American
Age.
The Austrian School of economics ranks among the most outstanding of the many intellectual and artistic traditions originating in pre-World War I Austria. As one of the many results of the destruction of the Habsburg Empire, however, the school's third generation, led by Ludwig von Mises, was uprooted in Austria and on the European continent and, with Mises's emigration to New York City in 1940, exported to the United States of America. And it would be in America where Austrian social theory has taken root most firmly, owing in particular to the work of Mises's outstanding American student, Murray N.Rothbard.

The following studies are written from the vantage point of modern Austrian social theory. Throughout, the influence of Ludwig von Mises and even more of Murray N. Rothbard is noticeable. The elementary theorems of political economy and philosophy, which are employed here for the purpose of reconstructing history and proposing a constructive alternative to democracy, have found their most detailed treatment in Mises's and Rothbard's principal theoretical works.
¹⁵
As well, many of the subjects discussed in the following have also been dealt with in their many applied works. Furthermore, the following studies share with Mises and especially Rothbard a fundamental and robust antistatist and pro-private property, and free enterprise position.

This notwithstanding, the following studies can in two regards claim originality. On the one hand, they provide for a more profound understanding of modern political history. In their applied works, Mises and Rothbard discussed most of the twentieth century's central e
conomic and political issues and events: socialism versus capitalism, monopoly versus competition, private versus public property, production and trade versus taxation, regulation, and redistribution, etc.; and both gave detailed accounts of the rapid growth of state power during the
twentieth century and explained its economically and morally deleterious consequences. However, while they have proven exceptionally perceptive and farsighted in these endeavors (especially in comparison to their empiricist-positivist counterparts), neither Mises nor Rothbard made a systematic attempt to search for a cause of the decline of classical-liberal thought and laissez-faire capitalism and the concomitant rise of anticapitalist political ideologies and statism during the twentieth century. Certainly, they did not think of democracy as being such a cause. In fact, although aware of the economic and ethical deficiencies of democracy, both Mises and Rothbard had a soft spot for democracy and tended to view the transition from monarchy to democracy as progress. In contrast, I will explain the rapid growth of state power in the course of the twentieth century lamented by Mises and Rothbard as the systematic outcome of democracy and the democratic mindset, i.e., the (erroneous) belief in the efficiency and/or justice of public property and popular (majority) rule.

"Ludwig von Mises,
Human
Action:
A
Treatise
on
Economics,
Scholar's Edition (Auburn, Ala.: Ludwig von Mises Institute, [1949] 1999); Murray N. Rothbard,
Man,
Economy,
and
State:
A
Treatise
on
Economic
Principles
(Auburn, Ala.: Ludwig von Mises Institute, [1962] 1993).