Introduction
The Marxian theory of history is largely correct because it sees the state as exploitative. Marx plagiarized this idea from the classical liberals who emphasized the conflict between producers and exploiters. However, Marx bastardized the exploitation theory with an absurd labor value theory so that he could defend aggression.
The traditional, correct pre-Marxist view on exploitation was that of radical laissez-faire liberalism as espoused by, for instance, Charles Comte and Charles Dunoyer. According to them, antagonistic interests do not exist between capitalists as owners of factors of production and laborers, but between, on the one hand, the producers in society, i.e., homesteaders, producers and contractors, including businessmen as well as workers, and on the other hand, those who acquire wealth nonproductively and/or noncontractually, i.e., the state and stateprivileged groups, such as feudal landlords.
This distinction was first confused by Saint-Simon, who had at some time been influenced by Comte and Dunoyer, and who classified market businessmen along with feudal lords and other stateprivileged groups as exploiters. Marx took up this confusion from Saint-Simon and compounded it by making only capitalists exploiters and all workers exploited, justifying this view through a Ricardian labor theory of value and his theory of surplus value. Essentially, this view on exploitation has remained typical for Marxism to this day despite Böhm-Bawerk’s smashing refutation of Marx’s exploitation theory and his explanation of the difference between factor prices and output prices through time preference (interest). (Hans-Hermann Hoppe. Great Fiction. p. 96)
The Marxian and Libertarian theories of history can be made logical with the Classical Liberal exploitation theory and the Radical Austrian theory of the state.
I. Interventionism
The most common deviation from property rights is interventionism. It allows aggressions, i.e. violations of property rights. Aggression takes place whenever any deviation from the self-ownership and homesteading principle occurs. For example, an aggressor hits an innocent man out of spite and steals his car out of jealousy. Aggression leads to exploitation.
Exploiter expropriates from people whose property claims are based on work and contract. Exploiters parasitically disregard each others work, property and contracts. However, the situation gets even worse when interventionism and consequent exploitation is institutionalized with a state.
II. Structure of the state
1. Ruling elite
In each human group there is always a voluntary hierarchy and on the top are the most respected individuals. In natural order the members of the natural elite lead by example and are rewarded with economic and social benefits. For example, a member of the natural elite can function as an educator, arbitrator, leading businessman and a military leader. However, the competition between the members of natural elite for leadership positions can turn into conflicts were lies, fraud and violence are used. This takes place especially during civil wars or wars of conquest. A successful war, pillage and other fruits of victory are so sweet that the soldiers develop a loyalty to their military leaders. In these situations some members of the natural elite might create a military council and create military rule over the population.
Usually the war council is led by a warlord for the simple reason that military operations are more efficient when there is one leader. Soldiers and especially military officers also develop more loyalty for one man than for a council. There is always a tendency for military and other political power to concentrate power into one hands.
2. Monopoly of arbitration
The warlord tries to protect his power and spoils by controlling a certain territory from other competing rulers. He needs an army that will protect the borders of his state. Naturally at the same time he has to socialize many lands including the border area, coast, roads, rivers and castles. Only then can he control the physical integrity of his state.
Now more secure in his military rule the warlord starts to control the ruled. No more can the soldiers kill, steal, rape and pillage at will. The warlord creates his own courts were his judges will decide over conflicts between the subjects of the warlord. If there are already private courts with private arbitrators they will be subordinated to the public courts. The public sheriffs and police will enforce the decisions of the courts. The state is born and becomes separate from the warlord. Even if he dies the state will continue to function and serve the ruling elite who choose someone else to lead the state.
With the creation of the state public law surpasses private law. The public judges will have immunity even when they allow aggressions. The agents of the state are now legally superior to the subjects. In practice subjects become slaves who are under the jurisdiction of the state. The state might not use its power but it still has the power of life and death over its subjects. Judicial monopoly has created the state.
The definition of a State assumed here is rather uncontroversial: A State is an agency which possesses the exclusive monopoly of ultimate decision-making and conflict arbitration within a given territory. In particular, a State can insist that all conflicts involving itself be adjudicated by itself or its agents. Implied in the power to exclude all others from acting as ultimate judge, as the second defining element of a State, is its power to tax: to unilaterally determine the price justice seekers must pay to the State for its services as the monopolistic provider of law and order.
Certainly, based on this definition it is easy to understand why there might be a desire to establish a State. It is not, as we are told in kindergarten, in order to attain the “common good” or because there would be no order without a State, but for a reason far more selfish and base. For he who is a monopolist of final arbitration within a given territory can make and create laws in his own favor rather than recognize and apply existing law; and he who can legislate can also tax and thus enrich himself at the expense of others. …
Assume a group of people, aware of the possibility of conflicts between them. Someone then proposes, as a solution to this human problem, that he (or someone) be made the ultimate arbiter in any such case of conflict, including those conflicts in which he is involved. Is this is a deal that you would accept? I am confident that he will be considered either a joker or mentally unstable. Yet this is precisely what all statists propose. (Hans-Hermann Hoppe. The Great Fiction. pp. 104, 8.)
3. Ruling class
Even the most intelligent and strongest war council and especially warlord is almost powerless alone. Therefore he acquires allies by dividing the spoils among his most important supporters. Usually these are his military officers, religious advisers and judges. They fulfill the commands of the war council/warlord and are protected by class justice. Society is now divided into rulers and the ruled, tax-payers and tax-eaters.
The necessary result, then, of the unequal fiscal action of the government is to divide the community into two great classes: one consisting of those who, in reality, pay the taxes and, of course, bear exclusively the burden of supporting the government; and the other, of those who are the recipients of their proceeds through disbursements, and who are, in fact, supported by the government; or, in fewer words, to divide it into tax-payers and tax-consumers.
But the effect of this is to place them in antagonistic relations in reference to the fiscal action of the government—and the entire course of policy therewith connected. For the greater the taxes and disbursements, the greater the gain of the one and the loss of the other, and vice versa. . . . The effect, then, of every increase is to enrich and strengthen the one, and impoverish and weaken the other. (John C. Calhoun, Disquisition on Government, pp. 16–18.)
This creates a hierarchical power pyramid where the warlord is on top and below are his soldiers and other important supporters. Together they create the ruling class. Below them are the ruled. The power pyramid of the state stays even when the king turns into a president, aristocrats into bankers and clergy into Big Media. The individual exploiters change but the exploitation machinery, state always stays as long as there is a monopoly of arbitration. The history of all hitherto existing society is the history of class struggles.
4. Forms of exploitation
The judicial monopoly now makes the subjects largely powerless against the state. As long as the subject is in the jurisdiction of the state he is in practice a slave. He is at the mercy of the state because it is allowed to use aggression and exploit its subjects. This fact is not changed by the excuse that it is supposedly just upholding “law and order”.
Praxeologically there are three ways a state can exploit its subjects. Autistic, binary and triangular. Autistic exploitation takes place when the subject’s control over his own body is restricted. For example, he can be conscripted and killed in a war. Binary exploitation takes place when the state steals from its subjects with taxation. Triangular exploitation takes place when the state regulates interaction by giving privileges to certain individuals and groups by either forcing or forbidding voluntary interaction. For example, the state grants monopoly and cartel privileges to its favorite allies and supporters.
… restricts the subject’s use of his property when exchange is not involved. This may be called an autistic intervention, for any specific command directly involves only the subject himself. Secondly, the intervener may enforce a coerced exchange between the individual subject and himself, or a coerced “gift” to himself from the subject. Thirdly, the invader may either compel or prohibit an exchange between a pair of subjects. The former may be called a binary intervention, since a hegemonic relation is established between two people (the intervener and the subject); the latter may be called a triangular intervention, since a hegemonic relation is created between the invader and a pair of exchangers or would-be exchangers.
The market, complex though it may be, consists of a series of exchanges between pairs of individuals. However extensive the interventions, then, they may be resolved into unit impacts on either individual subjects or pairs of individual subjects. All these types of intervention, of course, are subdivisions of the hegemonic relation—the relation of command and obedience—as contrasted with the contractual relation of voluntary mutual benefit. (Murray Rothbard. Power and Market. p. 12-13)
5. Exploitation firm
Since the ruling class wants to maximize its income the state functions like a firm but in reverse. A propertarian firm operates on the market and can only gain income by selling products and services. State is an interventionist firm that does not have to give anything but can just exploit the people. It is in the interest of the state firm to make exploitation ever more pervasive and institutionalized. However, exploitation is always risky because of the possibility of passive or active resistance. Thus there is the need for political entrepreneurship where exploitation is increased in ways that create as little opposition as possible. In this way the exploitation profits can be maximized.
Political entrepreneurs in the ruling class also gradually realize the benefits of monopolies and cartels especially in the field of money. First the state obtains a monopoly of minting which then makes it easy to create fiat labels and debase the money. With the help of Gresham’s law the debased state currency takes over and the people are stuck with currency that is periodically debased further.
The state grows fastest during economic depression and other real, imaginary or manufactured emergencies and crises such as wars, drug wars, war against terrorism, environmental and virus crises, etc. because it acquires extraordinary emergency powers. After the worst emergency only part of the emergency powers or the machinery to enforce them is given up. In other words, the state contracts but hardly ever to the same level as before the crises. This is called the Ratchet effect. Thus emergencies tend to help the state to grow into an ever bigger state and finally into a mega-state, Leviathan.
6. Class consciousness
Faced with aggression an individual not only is scared of his health and life but feels horror on the injustice of aggression. He cannot understand why an another individual would violate the universal rule of reason and justice. He feels alienated from orderly just universe. Depending on the psychological structure the victim he either freezes in horror or starts to defend himself.
Alienation is further increased with statist aggression because it has larger social acceptance. It is not anymore an individual aggressor but a large group of aggressors out to get you. This undermines the victims belief in natural order and humanity itself. It makes himself doubt reason and rationalism thereby undermining his sense of orientation and self-worth.
The victim starts to believe that universe is an evil place where only might is right. Consequently he starts to steel himself not only against continuous statist aggressions but also in order to start aggressing himself whenever there is a chance to get away from it. This kills his humanity and gradually turns him into a hyena-like person.
The ruling class also creates a class consciousness. They see themselves as superior beings who have the right to rule and manipulate the society for the “common good”. The rulers see themselves as masters who have to keep their ungrateful hyena-like subjects subjugated for their own good. The subjects become ants who really have not human worth. The rulers develop a master ethics that destroys their belief in just universe. They become militarists who believe that might is right.
The exploited realize that they are ruled and exploited by the ruling elite. Depending on the biological and cultural qualities of the ruled there develops a class consciousness. This can be passive or active. However, other things being equal, increase in exploitation increases class consciousness. This can lead to rebellions where alienated subjects can create very violent rebellions. This is very dangerous to the ruling class because the ruled are the great majority who could easily crush the state and its elite. This fact was lucidly noted already in 1577 by Etienne de la Boetie in his Discourse on Voluntary Servitude (Discours de la Servitude Volontaire):
Shall we call subjection to such a leader cowardice? … If a hundred, if a thousand endure the caprice of a single man, should we not rather say that they lack not the courage but the desire to rise against him, and that such an attitude indicates indifference rather than cowardice? When not a hundred, not a thousand men, but a hundred provinces, a thousand cities, a million men, refuse to assail a single man from whom the kindest treatment received is the infliction of serfdom and slavery, what shall we call that? Is it cowardice? …
When a thousand, a million men, a thousand cities, fail to protect themselves against the domination of one man, this cannot be called cowardly, for cowardice does not sink to such a depth. . . . What monstrous vice, then, is this which does not even deserve to be called cowardice, a vice for which no term can be found vile enough . . . ?11 …
Resolve to serve no more, and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break in pieces.16
7. Breaking class consciousness
The political entrepreneurs realize the danger of rebellions and start changing the class consciousness with diveda et impera policies. They start with statist propaganda. They claim that the state is absolutely necessary to create law and order. State is actually contractual because it provides external and internal security in exchange for taxation. Taxes and regulations are necessary to stop dog-eat-dog free market exploitation. Euphemism are developed: State agents are actually civil servants. Aggression is called public law, jurisdiction slavery is called citizenship, robbery is called taxation and privilege is called regulation. At the same time exploitation is made more predictable. This also decreases the opposition because now the citizens do not have to live in fear of sudden unpredictable aggressions.
Propaganda can also be intensified by claiming that the state and its ruler represent God. Rebellions are mortal sins. Depending on the genetics and culture at least part of the subjects will believe these arguments or at least become confused enough to decrease their opposition.
Since mere propaganda is usually not enough to neutralize the opposition the state also offer bribes, i.e. bread and circuses. However, this usually is not enough for the most intelligent opponents such as high IQ universities, professionals and journalists who must be bribed with public employment and cartel privileges such as licensing and degree quotas which substantially raise their salaries also in the private sector. Even more important is to bribe the bankers by allowing them to practice fraudulent fractional reserve banking even if it destabilizes the economy by creating the business cycle. The alliance with the highly intelligent and rich bankers secures the power of the ruling elite. Soon the bankers essentially become part of the ruling elite.
Propaganda and bribes usually are not enough to break to opposition of the middle class because they suffer most from exploitation as net tax-payers. Therefore it is imperative to decrease their opposition by giving them an illusion of power through democratization. At the same time the most intelligent of them has now a possibility to gain subsidies and privileges through the political process. This breaks the opposition of the most intelligent subjects of the state.
The basic norm of the state is power. That is, seen from the side of its origin: violence transformed into might. Violence is one of the most powerful forces shaping society, but is not itself a form of social interaction. It must become law in the positive sense of this term, that is, sociologically speaking, it must permit the development of a system of “subjective reciprocity,” and this is only possible through a system of self-imposed restrictions on the use of violence and the assumption of certain obligations in exchange for its arrogated rights; in this way violence is turned into might, and a relationship of domination emerges which is accepted not only by the rulers, but under not too severely oppressive circumstances by their subjects as well, as expressing a “just reciprocity.” (Franz Oppenheimer. System der Soziologie. Vol. II. pp. 322–234)
8. False consciousness
Propaganda, bribes and especially democratization breaks most of the opposition to the state and starts brainwashing subjects into a false consciousness. This is done with a stick and carrot -method. First the ruler claims that resistance is both futile and sinful. This usually breaks the will of the people. Then the rulers claim that the people actually benefit from the protection and care provided by the state. This is why the rulers also give the people bread and circuses. Gradually both subsidies and democratization are increased and the people are divided into taxeaters and net-taxpayers. This creates a sort of Ponzi scheme where not only the ruling class but also the ruled are trying to live at the expense of everybody else. All subjects hope to gain subsidies, monopolies and cartels privileges. Instead of fighting the state people join with it.
Now most of the exploited see their own exploitation as normal and are even grateful for it. They develop state fetisism where they starts to see the state as a benefactor and even a God. The feeling of alienation changes into belief in interventionism. It transforms the subjects psychologically so that they become schizophrenic. On the one hand they are lambs who accept state rule but on the other hand they are still hyenas who try to attack other through the state. The individual becomes an obedient slave to the state. He still understands that other are trying to exploit him but now he sees the state as his ally and other subjects as the exploiters. The most intelligent subjects realize that this creates an inexorable conflict but instead of demanding a return to propertarianism they see communism as the only solution. False consciousness is now complete and the greatest threat to the state is removed.
As an exploitative firm, the state must at all times be interested in a low degree of class consciousness among the ruled. The redistribution of property and income—a policy of divide et impera—is the state’s means with which it can create divisiveness among the public and destroy the formation of a unifying class consciousness of the exploited.
Furthermore, the redistribution of state power itself through democratizing the state constitution and opening up every ruling position to everyone and granting everyone the right to participate in the determination of state personnel and policy is a means for reducing the resistance against exploitation as such.
Second, the state is indeed, as Marxists see it, the great center of ideological propaganda and mystification: Exploitation is really freedom; taxes are really voluntary contributions; noncontractual relations are really “conceptually” contractual ones; no one is ruled by anyone but we all rule ourselves; without the state neither law nor security would exist; and the poor would perish, etc. All of this is part of the ideological superstructure designed to legitimize an underlying basis of economic exploitation. (Hans-Hermann Hoppe. Great Fiction. p. 131)
The false consciousness starts the second round of brainwashing. It is not only enough that subjects accept, obey and revere the state. They must also change their way of life. After all, state power is hindered if people cling to their religion, property rights, traditional family values, small businesses, local self-rule and nationalism. It is in the interest of the ruling elite and the state to institute a Culture of Critique against traditional ideas and values. People are gradually brainwashed into relativism, individual atomism and cultural Marxism. The more centralization and the closer the world state the more intensive will be the Culture of Critique. This process can be further intensified by the Jewish bankers who have a vested interest to turn the Culture of Critique into a Philo-Semitic religion where anti-Semitism is the greatest sin.
9. Intrastate competition
9.1. Anacyclosis
The ruling elite is never stable. There is always competition not only from new entrants but also between the members of the ruling elite. However, unlike market competition which tends to stabilize and decentralize political competition tends to destabilize and centralize. This creates an unstable political cycle. Cartel theory explains how political competition creates a political cycle from the rule of the few (oligarchy) to rule of the one (tyranny) to rule of the many (mobocracy) until society disintegrates and reverts to one of the earlier stages. This process is illustrated in the classical theory of anacyclosis where aristocracy turns into monarchy which then turns to democracy that destroys the social order and the cycle starts again.
The classical theory could not explain the process fully because it lacked understanding of the laws of economics and politics. Only by applying these laws it is easy to see how the process unfolds. The first step in the process is the creation of the state by the ruling elite. At this stage the war council usually divides the land among the council members. This creates a landed aristocracy which starts to protect its property rights to land. In the long run this private landownership protects freedom because it allows people to vote with their feet into lands with better landowners. However, those less successful landowners who loose people to more successful landowners usually try to stop the emigration of people with force. They try to institute serfdom. Gradually the cartel of inefficient landowners becomes a cartel of parasitical aristocrats who convene in a council and decree various laws protecting serfdom.
Aristocratic cartel is usually unstable because the more successful aristocrats want to break the political cartel. They even encourage the development of towns on their lands. Now even more people want to flee the less successful aristocrats who soon choose among the aristocrats a king to uphold serfdom. The leader of an aristocratic cartel of parasites becomes the head parasite, a king. At the same time the king also gains more power over the aristocrats by gradually becoming the ultimate monopoly judge in disputes between the aristocrats. Gradually kings become more powerful and monarchy becomes hereditary. The king tries to turn the cartel of aristocratic parasites into an absolutist monarchy.
The aristocrats often rebel against the king who then allies with commoners. He creates a higher chamber for the aristocrats and a lower chamber of parliament for various representatives of clergy, merchants and eventually even commoners. At the same time he organizes with them various monopolies and cartels which guarantee the king income while at the same time protects the merchants from economic competition. The support of the merchants and people makes the king an absolutist monarch but only in name because he is now alone against everybody else. If he tries to behave like a despot then not only the aristocrats but also the merchants and the people will rebel.
In time parliament will try to increase its power by extending the vote. Gradually the suffrage is extended so that more and more people and interest groups are represented in the parliament. Soon parliament becomes so powerful that a democracy is declared. This makes the government very short-sighted. Democratic governments can usually stay in power only few years so they are in a hurry to grant various subsidies and cartel privileges for their supporters. Even if these politicians understand that the privileges for special interest groups are not good for the nation as a whole they do not care. They have to reward their own supporters because their competitors would do the same. A politician who thinks only about the interests of the nation is soon an ex-politician. It is steal as much as you can or be pushed to the side. Taxes, debt and regulations raise until the people suffer under neo-serfdom and finally the whole society descends into economic depression and civil war.
The political doctrine of anacyclosis (or anakyklosis from Greek: ἀνακύκλωσις) is a cyclical theory of political evolution. The theory of anacyclosis is based upon the Greek typology of constitutional forms of rule by the one, the few, and the many. Anacyclosis states that three basic forms of “benign” government (monarchy, aristocracy, and democracy) are inherently weak and unstable, tending to degenerate rapidly into the three basic forms of “malignant” government (tyranny, oligarchy, and ochlocracy).
According to the doctrine, “benign” governments have the interests of all at heart, whereas “malignant” governments have the interests of a select few at heart. However, all six are considered unworkable because the first three rapidly transform into the latter three due to political corruption.
The idea of anacyclosis influenced theorists of republicanism. Some of them, including Aristotle, Cicero, Machiavelli, Vico and Kant suggested that mixed government might help to stabilize republics and prevent permanent anacyclosis. (Wikipedia)
The ancients realized that there was something profoundly wrong with the politics but they could not find a cure because they believed in the stat. They believed in a state where life was politics and most of the work was done by slaves. Only with the development of stoicism and Christianity was it possible to develop a detailed theory of liberty and the parasitic state.
9.2. Militarist to Corpocratic dynasties
Anacyclosis describes the political cycle. However, it is a parasitical cycle that feeds off the linear development of the economy. When the state was born out of civil or territorial war the ruling elite was composed mostly of military officers and economy was a primitive barter economy. The land was divided between the militarist elite which gradually turned into landowning aristocratic dynasties. The competition between landowners encouraged the development of the money economy which made it easier for the king to collect taxes and grant cartel privileges. Just like barter economy allows aristocratic parasitism so money economy allows monarchist parasitism. With the development of the banking economy the situation changes by giving much power to bankers and business leaders. At first the monarch periodically taxes and confiscates money from the banks but gradually bankers propose an alliance with the state if it helps to develop fraudulent fractional reserve banking.
The fraud starts when the state gives money substitutes (usually paper tickets to gold) the support of legal tender laws. At the same time banks are allowed to practice fractional reserve banking provided they buy state bonds. In this way the banks can issue more tickets to gold (and silver) money than they have in their vaults. In other words, the banks create money out of nothing and use part of the profits to buy state bonds thereby also enriching the state. Gradually people get used to paper money and it is relatively easy to suspend specie payments and create a paper currency. Now both the banks and the state have their money machine.
The money machine enables bankers to gradually cartellize the economy and take over Big Business. Economic power concentrates into fewer and fewer hands until only the state and a few globalist mega-corporations control the economy. This process is speeded by the fact that the fractional reserve banking automatically leads to the intensification of inflation and the boom-bust business cycle that creates periodic economic depressions. Economy becomes ever more unstable. However, with the help of their money machine the bankers and their business allies can always better whether depressions. Each depression makes the corpocracy more powerful.
The state alliance with the bankers and Big Business is mutually beneficial. However, the state would benefit more if it just eliminated fractional reserve banking. Then only the state could create money out of nothing. Many politicians realize this and start to lobby for 100% reserves. Now the bankers fear that the state might completely take over the banking system. This is why they start to manipulate not only the media and economics profession but also infiltrate the ruling elite. This is relatively easy since bankers are on average much more intelligent and long-sighted than politicians. Gradually the bankers manage to join the ruling elite and even control it. The members of the ruling elite naturally want to pass their membership to their children. This also includes bankers and thus ruling banking dynasties develop. The composition of the ruling elite has changed from militarists into politicians and finally into bankers. Barter economy was ruled by militarists, money economy by politicians while the banking economy is ruled by the bankers.
10. Interstate competition
10.1. Political anarchy
No matter how powerful the state it still always has competitors: Other states. This interstate competition creates a predictable process. First, each state wants to increase its exploitation profits and thus would like to expand its territory. State competition is always eliminative competition. There is thus a tendency toward war. However, war is costly and risky so the ruling elite often wants to avoid war until it has decisive military superiority. In the meantime the competition between states allows many people and especially the merchants to vote with their feet and move to less exploitative state. This competition between the states limits exploitation. The more states there are the more competition between the states and the more freedom there is for the people. This is one of the secrets of the European Miracle as professor Ralph Raico notes in his The Struggle for Liberty lecture series and especially in his famous essay The European Miracle:
The “miracle” in question consists in a simple but momentous fact: It was in Europe — and the extensions of Europe, above all, America — that human beings first achieved per capita economic growth over a long period of time. In this way, European society eluded the “Malthusian trap,” enabling new tens of millions to survive and the population as a whole to escape the hopeless misery that had been the lot of the great mass of the human race in earlier times. The question is: why Europe? …
Although geographical factors played a role, the key to western development is to be found in the fact that, while Europe constituted a single civilization — Latin Christendom — it was at the same time radically decentralized.7 In contrast to other cultures — especially China, India, and the Islamic world — Europe comprised a system of divided and, hence, competing powers and jurisdictions.
After the fall of Rome, no universal empire was able to arise on the Continent. This was of the greatest significance. Drawing on Montesquieu’s dictum, Jean Baechler points out that “every political power tends to reduce everything that is external to it, and powerful objective obstacles are needed to prevent it from succeeding” (Baechler 1975, 79). In Europe, the “objective obstacles” were provided first of all by the competing political authorities. Instead of experiencing the hegemony of a universal empire, Europe developed into a mosaic of kingdoms, principalities, city-states, ecclesiastical domains, and other political entities.
Within this system, it was highly imprudent for any prince to attempt to infringe property rights in the manner customary elsewhere in the world. In constant rivalry with one another, princes found that outright expropriations, confiscatory taxation, and the blocking of trade did not go unpunished. The punishment was to be compelled to witness the relative economic progress of one’s rivals, often through the movement of capital, and capitalists, to neighboring realms. The possibility of “exit,” facilitated by geographical compactness and, especially, by cultural affinity, acted to transform the state into a “constrained predator” (Anderson 1991, 58).
Decentralization of power also came to mark the domestic arrangements of the various European polities. Here feudalism — which produced a nobility rooted in feudal right rather than in state-service — is thought by a number of scholars to have played an essential role (see, e.g., Baechler 1975, 78). … In the end, even within the relatively small states of Europe, power was dispersed among estates, orders, chartered towns, religious communities, corps, universities, etc., each with its own guaranteed liberties.
10.2. Paradox of imperialism
Competition between states also creates the Paradox of Imperialism. Relatively more free states will have better economies and thus more taxes and thus also bigger and better armed militaries. Thus it is not the most warlike and exploitative states that become empires but on the contrary those states that are more politically and economically more free and thus possess the economic resources and popular support for imperialism. This is the reason why for example ancient Athens was more imperialist than Sparta.
In the banking economy stage the relatively more free states gain much of their income from their money machine. Thus it is in their interest to expand this money machine by forcing other states to use its currency. In time this leads to monetary imperialism where a hegemonic power subordinates and forces other states to use its currency.
Victory or defeat in interstate warfare depend on many factors, of course, but other things such as population size being the same, in the long run the decisive factor is the relative amount of economic resources at a state’s disposal. In taxing and regulating, states do not contribute to the creation of economic wealth. Instead, they parasitically draw on existing wealth.
However, state governments can influence the amount of existing wealth negatively. Other things being equal, the lower the tax and regulation burden imposed on the domestic economy, the larger the population will tend to grow and the larger the amount of domestically produced wealth on which the state can draw in its conflicts with neighboring competitors. That is, states which tax and regulate their economies comparatively little — liberal states — tend to defeat and expand their territories or their range of hegemonic control at the expense of less-liberal ones. (Hans-Hermann Hoppe. The Paradox of Imperialism.)
10.3. Monetary imperialism
The modern imperialist state has a strong military power but unlike the classical imperial state it usually does not directly annex other countries but instead creates a hegemony that exploits them indirectly by forcing them to use its currency as a reserve currency. With this monetary imperialism the imperial power can create even more money out of nothing. Just like money economy created the military imperialism the banking economy created monetary imperialism.
This is exactly what America did after Second World War by making the dollar an international reserve currency. However, during Vietnam War it printed so much money that the value of dollar was sinking and threatening to crash the fractional reserve banking system. But then it created the petrodollar system together with Israel and Saudi Arabia. This created a further artificial demand for American dollars. Now it was possible to finance the hugely expensive military machine of U$Srael. If any country such as Iraq or Libya attempted to exit the petrodollar system and stop using dollars then it was destroyed.
In the first step a dominant state (a state, that is, which could crush another militarily and is perceived as capable of doing so, in particular by the dominated government) will use its superior power to enforce a policy of internationally coordinated inflation. Its own central bank sets the pace in the counterfeiting process, and the central banks of dominated states are ordered to inflate along with the dominating state. In practical terms, the dominating state’s paper currency is imposed as a reserve currency on foreign central banks, and they are pressured to use it as a basis for their own inflationary actions. …
The government itself will be satisfied with this solution. For once its own currency is employed as a reserve currency by foreign banks on which they then pyramid their various national paper monies, then it becomes possible for it to engage in an almost costless expropriation of foreign property owners and income producers without having to fear contractive consequences. …
And the general public in the dominated territories, which through arrangement is subject to a double layer of exploitation of foreign states’ elites on top of a national state and elite, is again largely unaware of all this and fails to identify it as one important cause of its own prolonged economic dependency and relative stagnation vis-à-vis the dominant nation. (Hans-Hermann Hoppe. The Great Fiction. pp. 107-108.)
10.4. Globalism
Monetary imperialism can be upheld only by eliminating economic competition. No other country can be allowed to be much more economically successful than the imperial state or its reserve currency and banking system might collapse. This is why the empire state creates economic and political unification (USA, EU) and an hegemonic order (U$Srael) that will create a world currency and a central bank controlled by ruling elite banking dynasties.
All this has taken place during the last few decades. The petrodollar system did save American imperialism in the 70s and 80s but the strong economies of Europe and Asia threatened it. Especially the German Mark was a threat since the dollar was loosing its value compared to the German Mark. Thus the European Union and the euro currency was created to eliminate this threat. Now it was easy to inflate the dollar and euro in tandem.
There is an inexorable drive toward ever bigger hegemonies and ultimately world state. However, more and more interest groups will try to enter into the ruling elite. At some point the world hegemony becomes a democratic world state unless it breaks down before that.
And even if a dominated central bank willingly inflates along with the dominating central bank, other factors (such as a lower level of taxation and regulation, for instance) can still make its currency appreciate against that of the dominant state. …
Thus, in order to assure its dominant position and maximize exploitatively appropriated income, in a second step a dominant state will invariably try to institute an international—and ultimately universal—currency monopolistically controlled and issued either directly by its own central bank or indirectly by an international or world bank dominated by its central bank. …
A new currency with a new name must be created and defined in terms of existing national monies in order not to arouse nationalistic or anti-imperialist sentiments. This new currency must only be somewhat overvalued against the various national monies (which in turn are defined in terms of the new currency) in order to drive all national monies out of circulation (in accordance with Gresham’s law). …
And with a world money and world bank in place, and controlled by the dominant state’s central bank, a decisive step is taken toward reaching its ultimate goal of establishing itself as a full-scale world government, with world-wide control not only over counterfeiting, but also over taxation and legal regulation. (Hans-Hermann Hoppe. The Great Fiction. pp. 110-111.)
10.5. Global secessionism
Once the monetary imperialism has reached global rule it has no more competitors. This will increase inflation, taxation, regulations, censorship and other interventionism. The economy will slow down and at the same time business cycle boom-bust will become global. The next depression will be global and completely destroy trust in the government that has already been falling a long time because of alternative media.
False consciousness will be destroyed. This creates a secessionist wave that will break up the monetary imperialism and usher in a global wave of nationalism and decentralism. Depending on the class consciousness of the people the result will be strong militarist states warring with each other or peaceful decentralist process that kills the state and creates world peace and prosperity.
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