In 1954 The Foundation for Economic Education published a book entitled Government: An Ideal Concept, by its founder and president, Leonard E. Read. In the book, which was critical of the anarchy paradigm, Read pointed out that the only force that a government can legitimately exercise is defensive force, which necessarily encompasses the three functions of government that I set forth in part 1 of this essay: (1) to punish people who initiate force against others, such as murderers, robbers, rapists, thieves, burglars, and the like; (2) to provide a judiciary for people to resolve disputes; and (3) to defend the nation in the event of a foreign invasion.]\
As I explained in part 1, these three functions do not violate the libertarian nonaggression principle, the principle that holds that people should be free to live their lives any way they want, making any choices they want, so long as their conduct is peaceful.
In his book, Read supported taxation to fund those limited functions of government. He maintained that taxation to fund limited government was different from taxation to fund a welfare state. In the first instance, he said, everyone is receiving the benefits of limited government and, therefore, has no real cause to complain that his rights are being violated. In the welfare-state instance, the money is being taken from one person and given to another person and, therefore, is clearly legalized theft.
Read’s defense of taxation for the purposes of limited government drew criticism from some of his supporters. They pointed out that taxation necessarily involves the initiation of force against people even if the money is only funding limited government.
In my opinion, Read’s critics were clearly right. For example, if a person refused to pay his taxes under a tax-supported limited government, officials would place a lien on his property, foreclose the lien and sell the property, and then initiate force against the tax resister by forcibly evicting him from his home in order to deliver possession of the property to the person who purchased it at the foreclosure sale.
So, does that mean that the concept of limited-government is fatally flawed because it requires taxation to fund it, as anarchists maintain? Not at all! The solution is voluntarily funded limited government. If people are free to decide for themselves whether or not to fund limited government, no one’s rights are being infringed.
Anarchists respond that voluntarily funded limited government is an impossibility. They say that government inherently involves taxation. If there is no taxation, they say, there can be no government.
But a close analysis shows that their assertion is without foundation. That’s because the existence of government, as well as its specific powers, is separate and distinct from how it is funded.
Consider a hypothetical community that has a government whose powers are limited to punishing murderers, rapists, and thieves. Its annual budget is $5 million, which it collects every December for use in the coming year.
One day, a multi-millionaire gives $50 million in trust to the city government, on the condition that it suspend all tax collections for 10 years. The city agrees to the deal. Every December, the trustee sends the city $5 million, the same amount that would have been collected in taxes. No one has to pay any taxes.
The city government remains intact. Its powers to punish violent people who infringe on the rights of others remain the same. The only difference is that the money that is funding the government is coming from a source other than taxation.
The principle is no different with respect to any other form of voluntary funding of government. Lotteries. Raffles. Donations. Fees. The manner in which the government is being funded is separate and distinct from what its powers are.
Anarchists respond, “But people might not fund government and if they don’t, the government would not be able to exercise its powers. Therefore, it’s not really government.” Anything is possible but the fact is that most people believe that government is important. When people believe that something is important, most of them are usually willing to fund it.
Consider churches, for example. Lots of people believe they are important and many, but certainly not all, of them, fund them. Churches are usually open to the public, even to those who don’t donate to the church. The “free rider” problem obviously doesn’t stop people from continuing to donate to churches. There is every reason to believe that the same principle would apply to government.
In his book, Leonard Read expressed skepticism for the concept of voluntarily funded limited government. He suggested that big donors would have a disproportionate influence in how government would be operated.
But such is not necessarily the case. While big donors to churches, for example, might receive some preferential treatment on relatively small things, it is rare that ministers and church committees run their operations in accordance with the dictates of big donors. Moreover, with government powers limited to those three essential functions, there isn’t a whole lot that political influence can accomplish.
Moreover, it would not be difficult to divide government into separate branches — one that collects the money and the other that distributes it.
In its June 1993 issue, a publication called The Public Interest published a fascinating and thought-provoking essay entitled “The End of Taxation?” by James L. Payne, research fellow at the Independent Institute and the author of several books on government. Payne received his Ph.D. in political science from the University of California at Berkeley and has taught at Yale, Wesleyan, Johns Hopkins, and Texas A&M. He writes,
For a people so ready to cast off ancient customs, Americans have been strangely reluctant to question the practice of taxation…. There are signs that this intellectual free ride is coming to an end. Sophisticated new research has begun to document what common sense long suggested, namely that taxation, far from being an efficient money machine, is an extremely wasteful way to raise money.
Have there been many societies in history that have foresworn taxation and relied on voluntary support? The answer is not a surprise: no. Of course, under the Articles of Confederation, which lasted for more than a decade, the federal government had no power to tax (which gives us a pretty good idea of how our American ancestors viewed taxation). Nonetheless, that’s not a perfect example because the federal government relied on contributions from the state governments, which derived their revenue from taxation.
In his book Power and Market, the libertarian Austrian economist Murray Rothbard recounts a fascinating, real-life story of voluntarily funded government:
A few writers, disturbed by the compulsion necessary to the existence of taxation, have advocated that governments be financed, not by taxation, but by some form of voluntary contribution. Such voluntary contribution systems could take various forms. One was the method relied on by the old city-state of Hamburg and other communities — voluntary gifts to the government. President William F. Warren of Boston University, in his essay, “Tax Exemption the Road to Tax Abolition,” described his experience in one of these communities: “For five years it was the good fortune of the present writer to be domiciled in one of these communities. Incredible as it may seem to believers in the necessity of a legal enforcement of taxes by pains and penalties, he was for that period … his own assessor and his own tax-gatherer. In common with the other citizens, he was invited, without sworn statement or declaration, to make such contribution to the public charges as seemed to himself just and equal. That sum, uncounted by any official, unknown to any but himself, he was asked to drop with his own hand into a strong public chest; on doing which his name was checked off the list of contributors…. Every citizen felt a noble pride in such immunity from prying assessors and rude constables. Every annual call of the authorities on that community was honored to the full.”
A footnote in the book states in part,
Dr. Warren’s article appeared in the Boston University Year Book for 1876. The board of the Council of the University endorsed the essay in these words: “In place of the further extent of taxation advocated by many, the essay proposes a far more imposing reform, the general abolition of all compulsory taxes. It is hoped that the comparative novelty of the proposition may not deter practical men from a thoughtful study of the paper.” (See the Boston University Year Book III (1876), pp. 17–38.)
Rothbard, who himself was an anarchist, was opposed to the idea of voluntarily supported limited government. Nonetheless, the example he provided gives us a glimpse of the practicality of voluntarily funded government.
Finally, let’s not forget the instances in recent history in which people, rich and poor alike, have voluntarily made contributions, both large and small, to government, including donations to help defray expenses in public (i.e., government) schools, to help reduce the size of the national debt, and even to alleviate the financial crisis in Greece.
Referring to the Greek crisis, an article in Fortune stated that “thousands of people rushed to contribute towards the 1,600,000,000 Euros goal, causing the Indiegogo page to crash under the wave of donations.” Mark Zuckerberg made a $220 million donation to public (i.e., government) schools, and Bill and Melinda Gates’s public-school donations are in the billions of dollars. Last year a donor donated $2.2 million to help pay down the national debt.
Let’s also not forget that with the abolition of taxation, including the income tax, people would have lots more money at their disposal to make donations to what they consider to be worthy causes.
Let’s now move on to another critique that some anarchists make about limited government — that it prohibits people from competing in the provision of private police forces and judicial services.
Yet nothing could be further from the truth. In the United States today, anyone is free to provide any private police forces and judicial services he wants and, in fact, many do.
That’s what private security services are all about. They serve as a supplement to the government’s police forces. Private businesses and homeowners hire private security services all the time. A search for “security services” on the Internet shows that there is a vibrant, competitive market for private police services. And it’s all legal.
It’s the same with judicial services. Arbitration is a good example. People often voluntarily agree to provisions in their contracts for arbitration in the event of a dispute. An arbitration agreement means that the parties intend to avoid the state’s judicial system to resolve their dispute. If a conflict arises, the parties appear before the arbitrator and make their case, and the arbitrator enters judgment for one side or the other. A search on the Internet for “arbitration services” reveals that it too is a dynamic, competitive market. And it’s all legal.
In fact, there are even services on the Internet that provide for private jury trials, where litigants try their cases outside the state’s judicial system. One service I saw advertised, “less expensive, out of the public eye, speedy resolution, random selection of potential jurors, and over 100 years of collective judicial and legal experience.” And it’s all legal.
Within the federal court system, we have district courts all across the land. While they have certain jurisdictional and venue rules as to what types of cases can be brought to each federal district court, plaintiffs in civil suits often have a choice of which district court to file their suit in.
It’s no different in state courts. Each state has a wide range of district courts across the states. Again, there are rules on jurisdiction and venue, but even then plaintiffs often have a choice among more than one district court in which to file their suit. Sometimes there is even overlapping jurisdiction between state and federal courts and the plaintiff is free to file his suit in both. This competitive phenomenon is sometimes known as “forum-shopping,” a process in which litigants seek the court in which they are most likely to prevail.
There are also ecclesiastic courts. For example, there are tribunals within the Catholic Church that operate independently of the state system and actually annul marriages, even though Church annulments have no legal standing.
It sometimes befuddles me as to why anarchists disfavor the idea of voluntarily limited government, at least here in the United States, especially since the U.S. system is the evolutionary outgrowth of the very system that anarchists often praise and extoll — i.e., the development of the common law and the development of the law merchant, both of which arose within the governmental system of England, a system in which the state had a monopoly over the use of force.
That brings us to a related critique that some anarchists make of limited government: that under limited government the state will not permit private judicial systems to use force in the enforcement of their judgments. What they are getting at is that while people are free to use arbitration or private jury trials to resolve their disputes, if a litigant loses and refuses to comply with the judgment, the prevailing party must file suit in a government court to enforce the judgment. That’s because under limited government, the state wields a monopoly over the use of force in society. The state decides when force is justified and under what circumstances.
Although they praise the common-law and law-merchant systems that arose and developed under the English governmental system, where the state had a monopoly over the use of force, anarchists say that a government system violates principles of individual liberty and the free market.
In actuality, however, as we will see as we progress through this essay, it does the opposite — it protects individual liberty and the free market and maintains peace in society. We will examine how the state’s monopoly over the use of force in society is actually one of the greatest attributes of limited government, while, at the same time, analyze a fatal flaw in the anarchist paradigm.
This article was originally published in the April 2016 edition of Future of Freedom.