The Market for Security

Antony — July 23, 2012

Our book club’s current book The Market For Liberty makes the point that the source of the state’s power ultimately rest on its monopoly on use of force. It is not the fact that the state imposes taxes, or controls the money supply, that gives it power, but the fact that it prohibits competition in the areas of security, defence and justice. Even under a “voluntary government” with “voluntary taxation”, a monopoly on security still entrenches power in the state. The monopoly on force is what allows the state to initiate aggression. Without this monopoly, individuals could hire other security firms to protect themselves from taxes and other state interventions. The state would then have to compete for their business, becoming effectively just another firm in the market.

The more of a market there is in the provision of security, the more free people can be to choose alternatives that are better for them. This is why the decentralization of political power should be favoured by libertarians. Smaller independent states give people more freedom to move to better jurisdictions. Within states, moving policing under the control of local municipalities or communities allows for more options to live in areas with better policing, and to keep their budgets in check.

In the book Guns Germs and Steel, Jared Diamond speculates as to why Europe became a dominant empire, whereas in China, which had been much more advanced earlier, progress stagnated. He speculates that the reason was the fractured nature of the European nation states. This allowed persecuted groups to move from one country to another, fleeing tyrannical rulers for freer jurisdictions. Merchants could also move around to avoid taxes and regulation, leading to the flourishing of trade and prosperity in a succession of small European nations. This prevented a single ruler from completely shutting down progress and trade, as happened in China.

This “Atlas Shrugged” effect, in which businessmen and entrepreneurs flee stifling jurisdictions, can also be seen occurring today with record numbers of wealthy Americans renouncing U.S. citizenship, as Facebook co-founder Eduardo Saverin recently did in relocating to Singapore.

This idea also explains why the concept of parallel institutions could be a path towards a more free society. This is the concept of creating private institutions to provide services currently monopolized by the state. Some examples would be FedEx competing with the post office, or competing with the state court system. These parallel institutions give people real options to choose better services, and reduce their dependence on the state. These parallel institutions not only improve people’s lives immediately, they also demonstrate that these services can be provided on the free market, without needing a government to furnish them. In the longer run, these institutions could take on an increasingly large role in the economy while the state apparatus fades into the sunset of history.

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