From the libertarian perspective democratic state is a cartel machine. It is run by ruling elite bankers who buy support with cartel privileges from three major corporate interest groups: Big business, Big Labor and Big Agro. How to break this corporate cartel especially since it buys support from the ordinary people with statist subsidies, i.e. income transfers?
Classical liberals made a big mistake by trying to attack the most strongest part of the corporate cartel, the labor and agricultural unions. In many European states they have huge numbers of very well organized members. When liberals understood the popular appeal of the unions they became afraid. The changed their focus by starting to complain about the income transfers. This further marginalized them in the eyes of the people. After all, both subsidies and unions can be seen as defensive safety net in the face of unstable capitalism. Is it wonder that people are afraid of becoming unemployed or sick? It is perfectly natural to worry about such things especially since capitalism does suffer from rising prices and almost regular economic depressions.
This raises the crucial question: Why did the classical liberals attack the taxes and not the cartel economy? Why attack the effect and not the cause? And why not attack the most dangerous part of the cartel economy: Big Banks and Big Business? After all, they have always had a bad reputation. They are the weakest link in the cartel economy since their cartels are much more difficult to justify than the more self-defensive union cartels of ordinary people.
Freeing up the economy from business cartels would improve employment levels and lower prices. This alone would make both taxation and unions much less necessary. Achieving full employment with lowering prices and increasing wage rates would also make it easier to persuade the unions to become more flexible. Obviously the eradication of the cartels of the Big Banks and the Business are the key to freedom. The classical liberals and libertarians were blind to this because they were bought off by the banks and businessmen.
So let us look at how the removal of the cartels of the Big Banks and Big Business could easily stabilize the economy and create liberty.
1. Instituting 100% bank reserves would destroy the money machine of the ruling elite that cartellizes the whole economy
2. Voucher system for schools would destroy much of the propaganda machinery of the state
3. Privatizing state media and breaking up private media cartels would decrease socialist propaganda
4. Privatizing and deregulating the health care system would make it both cheaper and better quality
5. Privatizing the pension system would ensure flexible and high pensions
6. Private arbitration for ordinary people would create freedom and destroy the heart of the totalitarian state
7. Totally private land ownership would make it easier to reward pro-social and discriminate anti-social behaviour
8. Privatize all government property and transfer part of the stock to a national fund that would fund government
But how to do all that in practice short of a military coup? Naturally Big Business, Big Banks and the state would refuse to relinquish their power over money, legislation, movement, health, pensions and media/minds of the people. Especially the government employee unions would oppose the dismantling of the welfare state. Fortunately there is a way to side step this opposition to reform. All that is needed is the creation of guaranteed basic income through a basic universal account system. Such a program would be very popular. It would also make it easy to realize the above mentioned eight steps.
The basic account system would function as a forced savings, insurance and loan system. You are forced to do something that a rational person would do anyway! You automatically save a certain minimum percentage (say 10%) from your salary to the tax free basic account. The tax freedom of the basic account encourages to save and make investments. In addition it also forces you to buy various insurances. But any rational person would do that anyway! Furthermore, if your income drops below a certain minimum level you can get monthly loans from your basic account. You loan money to yourself! Even if you have not yet enough savings you can still take the loan because the government puts money into your basic account, say 2000 per month for one year. Then later you gradually and automatically pay back the loan from your salary when your income rises again above the minimum level. Only if after one year you still need money then the government will start to check your income and expenses like it now does to welfare recipients.
With the basic account system you practically pay taxes to yourself! It just stabilizes your income streams over the duration of your life. In this way there is hardly any need to finance income transfers with taxation. The financially biggest reason and justification for taxation is removed. Taxes can be drastically reduced because the loan and insurance system is vastly more efficient than the tax financed subsidy system. The basic account system is something that could develop in a free market anyway. It can even later be privatized but under a cartel economy and mass unemployment it must first be run by the state.
The basic universal account makes it possible to remove mass unemployment, cartels, taxation and the state altogether with these simple steps:
1. Guaranteed student loans
The basic account system solves the student loan problem. In effect the government guarantees the student loan so that one can take monthly payments from the basic account. The payback will happen automatically when you are employed and your income reaches a certain amount. The system does not even have to cost the state anything because of two reasons. First, the government can set quotas so that only those with the best university entrance test results receive the guaranteed student loan. This guarantees that practically all loans are payed back. Second, it can sell individual student loans to investors and let them follow all the test results which will then determine the monthly loan payments. Gradually a private student loan market will develop.
2. Schools and universities privatized
Guaranteed student loans make it easy to privatize all schools and universities. The teachers will not anymore receive salaries from the government. Instead the students will study for the tests. They can buy lessons from chosen teachers and their education companies. The money comes from the basic account after a test is taken. Good test results can be rewarded with bonuses. This system would make it very easy to privatize all universities and high schools. The same principle applies to kindergartens and basic schools except that the students and parents decide together. Only the smallest children would receive government subsidies and even these can be gradually transferred to the localities. Government expenses would be drastically reduced because schooling is one the biggest and ever increasing expenses in the government budget.
Even more importantly the professional cartels would be broken. There would be no more quotas for doctors, lawyers, teachers and other professionals. This would make their services cheaper and quality much higher. Their education and work would also greatly improve because insurance companies would have a vested interest in ensuring that their work would be satisfying to the customers.
3. Mandatory insurance system
The basic account would automatically buy all the necessary insurances including health, pension, unemployment and arbitration insurance. It would automatically deduct insurance payments from the salary. In the beginning the government could regulate the quality of the insurances but otherwise the individual could freely choose between different insurance companies and insurance plans. There should be a detailed insurance plan not only for health but also for unemployment, pension, arbitration and the purchase of various products and services. This would make it easy to privatize almost all government services and break the cartels once and for all.
4. Pension system privatized
The basic account can also automatically deduce minimum pension payments from the salary. The individual can choose between different insurance companies and pension plans. Gradually this privatizes the whole pension system.
5. Brokerage account
The basic account could also include a brokerage account with shares from privatized government properties and companies. This would create strong support for privatization. First the brokerage account would include shares in school, university and hospital companies but later it could include many other privatized government property. Privatization should be partly syndicalist, i.e. the employees of the hospitals, schools, etc. should receive a significant amount of shares when their place of employment is privatized.
The rest of the shares could be divided between citizens. For example, older people would receive more than the younger because the old have payed taxes a longer time. For the same reason native citizens should receive more than new citizens. Those citizens that had never been net tax payers would receive less than others. However, all citizens would still receive a substantial amount since they have all suffered from the cartel economy and economic exploitation. Giving shares to all would also increase support for privatization. The brokerage account could in the beginning limit the sale of some of the shares until the market stabilizes.
6. National fund
Government property would be privatized partly by syndicalist method to the workers and partly by transferring part of the shares to a national fund which could function as an investment fund and issue shares of its own. Part of these national fund shares could be transferred to the basic brokerage account of every citizen. The national fund would be very valuable since it would partly own most hospitals, schools, universities, buildings, infrastructure, banks, etc. Gradually the national fund could finance from its investment income all remaining government expenditures. Eventually this would eliminate the need for taxation.
7. Government hospitals privatized
Privatization of hospitals would be easy since everybody would have a private health insurance that would cover health costs. Competition between hospital companies would guarantee low prices and high quality health care. The workers of the hospitals would get more shares than other citizens. That would also increase the support of the hospital employees for privatization.
8. Government offices and buildings privatized
Virtually all government offices and buildings could be privatized. Even regulatory offices could be privatized because the regulatory services can be bought from the private sector. Gradually they can then be sold and merged with insurance companies. Government has also virtually no need to own buildings. They all can be privatized. The value of government offices and buildings is huge and so both the national fund and the people would receive valuable shares into the brokerage accounts.
9. Government courts privatized
Since each person would have an automatic arbitration insurance the insurance companies would offer various arbitration services. There is already a thriving arbitration court system working in the business sector. The arbitration insurance would allow and encourage small businesses and common people to use them in all conflicts. If one of the parties in a conflict refuses arbitration then the case can be taken to a government court. Since it is not in the interest of the insurance agencies to let the case go to inefficient government courts they will probably incentivise their clients to accept and choose private arbitration court networks before they sign the insurance contract. Even if one party in the conflict breaks the contract and demands to be judged by a government court he loses his bonuses and people will be more wary of having interactions with him. In this way the justice system can become vastly more efficient and just.
Most government judges will have to transfer to the private sector. The few remaining government judges can receive their salaries directly from the guilty parties and their insurance. Government expenses will be greatly reduced. Even more importantly business and other contractual relations become much more safe and de facto cartels will fall.
10. Land privatization
All public land and roads could be privatized. Public land can be sold and the ownership of roads can be transferred to new neighborhood companies. Their stock could be divided between the local people, the local property owners and the national fund. By giving part of the stock to renters would be fair because they also payed taxes to build the infrastructure. It would also ensure their support for privatization. By giving part of the stock to the national fund would ensure that the interests of the nation are taken into account.
Depending on the situation 30-60 % of the shares could be divided between the local property owners who have a big incentive to run the neighborhood company as well as possible in order to increase their property values. Competition between the neighborhood companies would make it even more certain that the safety and quality of life in the neighborhoods would increase.
Each local neighborhood would in effect be turned into a propertarian community that would own all roads, parks and other public infrastructure. If infrastructure such as power and telephone lines and major highway roads cannot be divided then they can be owned by province level infrastructure companies that would together be owned by the neighborhood companies.
The neighborhood company would receive monthly utility payments from the local property owners but it could also receive income by selling or developing its lands, roads and infrastructure companies. The neighborhood companies could therefore become highly valuable and their shares would increase the value of the basic brokerage accounts of the people living in the neighborhood. This would further increase support for privatization.
Privatizing whole neighborhoods would avoid the problem that a single private road owner would start misusing his power. On the other hand the local community could now easily discriminate against anti-social behaviour. However, if the discrimination would go too far in some neighborhoods the national fund could in practice veto such plans because it would possess a sizeable part of the stock of the neighborhood company. This would create a balance of power that would ensure as pleasant neighborhoods as possible.
11. Big Media and Big Tech broken and privatized
In many countries the state media is a statist propaganda machine. It should be regionalized and privatized so that the shares should be divided between provincial neighbourhood associations and the people. The possibility of receiving valuable shares would also increase the demand for privatization.
In addition it could also be possible to do the same to Big Media and Big Tech especially if they are highly cartellized as is now the situation. In practice only a dozen companies possess a global media monopoly that functions as the arm of the police state. Thus it is imperative to nationalize and then reprivatize them in small pieces so that they stay decentralized and serve the local people. This would also give the people valuable shares.
If nationalization would be difficult in the case of Big Tech then they can be forced to allow freedom of speech by pressuring them with taxes and regulations. The main point is to destroy the media monopoly that brainwashes people to socialism and statism.
12. Nationalize all banks
The Big Banks and the Big Businesses they finance will never accept that their own personal money machine, the fractional reserve banking system would be ended by 100% bank reserves. Even if 100% reserves were forced upon them the banks would try to circumvent the rule. They are too used to committing fraud and buying politicians. Their whole business model is based on fraud, corruption and the cartellization of the economy. This is why it is imperative to nationalize all the banks and then reprivatize them in small honest pieces. Depending on the situation some insurance companies connected with fractional reserve banking could be nationalized as well as Big Business controlled pension funds. After making sure they are again honest they can be reprivatized.
When privatizing the honest parts of the financial system it is important to divide part of the shares between 1. original stock holders, 2. the citizens and 3. the national fund. For example, the banks could be broken and privatized so that each province would have a 100% reserve bank and part of the shares would be owned by the citizens of the province. This would increase support for nationalization and reprivatization. Part of the shares would also go to the national fund. With the freeing up of the economy the value of these financial shares could sky rocket.
In connection with the reorganization of the financial system it could also be possible to monetize gold and silver. This would create parallel monetary standards. In addition to paper money there would not only exist gold and silver money but also cryptocurrencies. All these currencies could be used with a digital bank card. Parallel currencies would increase competition between the currencies and also decrease the dependence of the nation on any one currency.
If necessary it would also be possible to semi-privatize the central bank if it would start issuing paper money a la Hayek. This paper money issuing bank could become enormously valuable especially since it could increase the amount of money in tandem with the increase of national production. Such a currency could also be very interesting to investors and foreigners. Part of the shares of this bank could be divided between the citizens and the national fund. Support for privatization would be increased since people could expect to receive very valuable shares into their brokerage accounts.
12. End taxation
After all this privatization most cartels would be eliminated and the economy would get a big boost. At the same time the expenses of the government would be radically reduced and it would be possible to drastically reduce taxation. This would give another boost to the economy and lead to full employment with raising wages. Government expenses and taxes would continuously decrease and give further boost to the economy. This would create a virtuous circle for the economy.
The national fund would now have huge quantity of valuable shares which would create ever increasing income. The national fund could finance ever increasing part of the government budget. Every year the income would increase while the government expenditures would decrease. Eventually there would be no more need for taxation. After this the parliament could continuously invent new subsidies for the people but the money would not come from taxes. This would make it easy to have a very strong army and subsidize families with many children.
Almost all cartels have now been eliminated but labor and agricultural unions have not been touched. In fact, they have become even stronger. Both can be given shares from the national fund so they too would have an interest to support privatization. Labor unions would still maintain minimum wages but under full employment they would not seriously disrupt the economy. Gradually the unions would become close partners with the employers who would compete for scarce employees especially if the unions help to keep the borders closed from foreign labor. In fact, the businesses would do their best to open up the borders. Only with the help of the labor unions is it possible to keep the borders closed to mass immigration.
Farmers would not get any more subsidies from the government but they would be protected by high agricultural tariffs. In this way the agricultural sector could be totally freed from cartels and taxes. The productivity of the farms would greatly rise while the price of food could even gradually decrease. The exports of organic and other special capital intensive foods would continuously increase.
Both the agricultural and labor unions would have an incentive to maintain the borders of the country. Labor unions want to defend the workers from competition and the agricultural unions want to defend the agricultural tariffs. Both would have an incentive to protect the independence of the country. The national fund would be controlled by representatives elected in Swiss style decentralized direct democracy. The fund would subsidize nationalist culture through the media, unions and neighborhood companies. It would also finance border controls and a strong army. The state would gradually wither away but the nation would be more unified and stronger than ever before.
All taxes and most cartels eliminated there would be full employment with lowering prices and rising wages. The basic account would be positive for practically all especially since the shares in the brokerage account would generate ever increasing income. Living standards would rise to new heights for all. Politicians would only fight over national fund profit sharing. People would be free at last.
The basic account system is very flexible. It can be used in a limited manner by creating a mere loan and forced saving system. It can then be expanded into an automatic insurance system and finally into a brokerage account system which incentives people to support privatization. However, the big business will realize that it presents a great threat to them and will probably oppose the system. So will many government labor unions who are happy with the present system and afraid to change it.
In practice there are two ways to create the basic account system. One is during an economic depression when government is close to bankruptcy and has practically no other alternative. The other is through secession when a part of the country becomes either independent or autonomous but is practically bankrupt and does not dare to increase taxes or create new ones.
Probably the basic account system is instituted when there is both a great depression and provinces want more independence. Before that moment it is important to spread the word. The present cartel economy will crash and the basic account system is the key to prosperity and freedom.