What the State Is
Man is born naked into the world, and needing to use his mind to learn how to take the resources given him by nature, and to transform them (for example, by investment in “capital”) into shapes and forms and places where the resources can be used for the satisfaction of his wants and the advancement of his standard of living. The only way by which man can do this is by the use of his mind and energy to transform resources (“production”) and to exchange these products for products created by others. Man has found that, through the process of voluntary, mutual exchange, the productivity and hence, the living standards of all participants in exchange may increase enormously. The only “natural” course for man to survive and to attain wealth, therefore, is by using his mind and energy to engage in the production-and-exchange process. He does this, first, by finding natural resources, and then by transforming them (by “mixing his labor” with them, as Locke puts it), to make them his individual property, and then by exchanging this property for the similarly obtained property of others. The social path dictated by the requirements of man’s nature, therefore, is the path of “property rights” and the “free market” of gift or exchange of such rights. Through this path, men have learned how to avoid the “jungle” methods of fighting over scarce resources so that A can only acquire them at the expense of B and, instead, to multiply those resources enormously in peaceful and harmonious production and exchange.
The great German sociologist Franz Oppenheimer pointed out that there are two mutually exclusive ways of acquiring wealth; one, the above way of production and exchange, he called the “economic means”. The other way is simpler in that it does not require productivity; it is the way of seizure of another’s goods or services by the use of force and violence. This is the method of one-sided confiscation, of theft of the property of others. This is the method which Oppenheimer termed “the political means” to wealth.
This is the basic idea behind a free market, also called capitalism. The exchange between two people in a free market will only benefit the two participants that are engaged in this transaction. In the same way, anyone that is not involved in this transaction are not prejudiced, since this exchange does not affect them. In modern day society, this is not always the case. Interactions between two people might hurt a bystander. The victims of polution might not get compensated for the inflicted damage. This is a true market failure which might be solved with government intervention. The question is whether a possible government failure might be worse than the problem it tries to solve.
One example of a huge government failure is the recent bailout of financial institutions because they were irresponsible. Furthermore, parties that cause problems might be protected by law. This is not a failure of capitalism, but by government who grants the offender immunity, which he would not have otherwise. This kind of scheme is called corporatism or crony capitalism, which is often confused with true anarcho-capitalism.
Pure free market capitalism itself isn’t flawless. But the flaws related to capitalism are not related to the existense of contracts of this matter, but rather to the lack of contracts.
It should be equally clear that the coercive, exploitative means is contrary to natural law; it is parasitic, for instead of adding to production, it subtracts from it. The “political means” siphons production off to a parasitic and destructive individual or group; and this siphoning not only subtracts from the number producing, but also lowers the producer’s incentive to produce beyond his own subsistence. In the long run, the robber destroys his own subsistence by dwindling or eliminating the source of his own supply.
We are now in a position to answer more fully the question: what is the State? The State, in the words of Oppenheimer, is the “organization of the political means”; it is the systematization of the predatory process over a given territory.1There are two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. These are work and robbery, one’s own labor and the forcible appropriation of the labor of others… I propose in the following discussion to call one’s own labor and the equivalent exchange of one’s own labor for the labor of others, the “economic means” for the satisfaction of need while the unrequited appropriation of the labor of others will be called the “political means”. The State is an organization of the political means. No State, therefore, can come into being until the economic means has created a definite number of objects for the satisfaction of needs, which objects may be taken away or appropriated by warlike robbery. (Franz Oppenheimer, The State) For crime, at best, is sporadic and uncertain; the parasitism is short, and the coercive, parasitic lifeline may be cut off at any time by the resistance of the victims. The State provides a legal, orderly, systematic channel for the predation of private property.
Since production must always precede predation, the free market is anterior to the State. The State has never been created by a “social contract”; it has always been born in conquest and exploitation. The classic paradigm was a conquering tribe pausing in its time-honored method of looting and murdering a conquered tribe, to realize that the timespan of plunder would be longer and more secure, and the situation more pleasant, if the conquered tribe were allowed to live and produce, with the conquerors settling among them as rulers demanding a steady annual tribute.2What, then, is the State as a sociological concept? The State, completely in its genesis… is a social institution, forced by a victorious group of men on a defeated group, with the sole purpose of regulating the dominion of the victorious group of men on a defeated group, and securing itself against revolt from within and attacks from abroad. (Oppenheimer, The State)