Hoppe (Part 2): Private vs Public Government

This is a continuation of my notes on Hans Hermann Hoppe's Democracy: The God That Failed. For part 1, see here.

Theory of Government and Exploitation

A government is a territorial monopoly on compulsion. In other words, the government is the only agency that can engage in repeated, institutionalized violation of property rights in the form of taxation, expropriation, and regulation. Naturally, we would fully expect that the government takes advantage of this power. But the manner in which the government uses its power depends on the characteristics of the government. Of these, the primary distinction is that of public vs private government.

Private Government

Private government is where the monopoly of violence is held by an individual and can be passed on to his/her heirs. In this case, the government not only is the owner of the current proceeds of exploitation, it is also the owner of the "capital value" of the monopoly (in other words, all future proceeds). On theoretical grounds, we should expect that such a government takes a long time horizon on its exploitation. Sure, it is interested in exploiting, but it also has an interest in continual exploitation in the future.

Government exploitation is the expropriation of the fruits of past productivity. If it is excessive, future productivity will grind to a halt. Therefore, we can expect that a private government will keep its current exploitation in check, in the interest of continued future exploitation.

Additionally, under private government, special positions are generally reserved for those close to the owner (ie. a royal family). Those who are not in those circles generally cannot aspire to enter the court. As such, there is a clear delineation between the exploiter and the exploited, creating a strong sense of vigilance against over-exploitation.

Public Government

Public government is collectively owned and the control of its apparatus lies in the hands of a trustee or caretaker. This caretaker, since he does not own the government, cannot sell its assets, and cannot pass it on to his heirs, is incentivized to make the maximum use of the monopoly on exploitation while control rests in his hands. In other words, the caretaker owns the current use of government but not its capital value.

As such, on theoretical grounds, we can expect that the caretaker will take a much more shortsighted approach to exploitation than the private government. And since we would expect greater exploitation under a public government system, we can similarly expect more present-orientedness amongst the population, since they're far more accustomed to regular and excessive exploitation.

In contrast to private government, public government creates an illusion that it is owned by everyone and that anyone can aspire to reach the position of the caretaker. This illusion creates a sense of legitimacy in the exploitation of government and delegitimizes any resistance against its excess. This is yet another reason for which we can expect greater exploitation under a public government.

Application of the Theory

Now that we have a theoretical framework, we can evaluate the history to see to what extent it conforms to the theory. Spoiler alert: According to Hoppe, a LOT.

To do this, Hoppe basically uses hereditary monarchies of Europe prior to 1918 (end of WWI) as examples of private government, and democracies post-1918 as examples of public government. The 19th century is seen as a bit of a transition period. Insofar as we had republics or constitutional monarchies prior, they were limited in all aspects, specially the right to vote. Suffrage was gradually expanded during the late 19th century and by 1918, universal male suffrage was more or less the norm across Europe.

During the transition period in the latter half of the 19th century and even more after the full adoption of public government, Hoppe shows that indicators of government exploitation trend upward sharply, as we would expect from the theory above. These indicators are as follows.

Amount of taxes

According to the data that Hoppe cites, the monarchical age in Europe saw increasing taxation. However, it is generally accepted the portion of income that was taxed, remained low. Hoppe cites economic historian Carlo Cipolla:

One must admit that the portion of income drawn by the public sector most certainly increased from the eleventh century onward all over Europe, but it is difficult to imagine that, apart from particular times and places, the public power ever managed to draw more than 5 to 8 percent of national income.

These low figures were not exceeded until the late 19th century, and after WWI, most democratic governments were routinely expropriating up to 50% of national incomes.

When a king ascended the throne, he came into an estate, and he was expected to sustain himself and his court from the proceeds of this state. In our modern parlance, we might think of this as "state owned entreprises" on whose profits the government was meant to run. For additional revenue (for example, when required in times of war), according to one source that Hoppe cites, the king might go on a "begging tour" to solicit subsidies (as opposed to impose taxes). These subsidies might have been granted by his subjects of their own free will and often came with conditions attached.

Government employment

Similarly, government employment remained at less than 3% of the population during the monarchical age, and what's more, royal ministers and parliamentarians were expected to support themselves from private incomes. In contrast, here are some examples of government employment in democracies:

• Austria: <3% in 1900; >8% during the 1920s; ~15% by mid-1970s.
• France: 3% in 1900; 4% in 1920; ~15% in the mid-1970s.
• Germany: 5% in 1900; 10% in mid-1920s; ~15% in the mid-1970s.

Similar patterns exist in other countries, with Switzerland being the notable exception, where government employment in the mid-1970s was still less than 10% of the labor force.

Money Supply

During the monarchical age, commodity money was in use (based on gold or silver). There were isolated experiments in fiat currency but none endured. And while kings often tried to short-change the public with the amount of gold they would use when minting coins, this was incredibly difficult to do without detection.

During the democratic age, however, we have managed to put the entire world on a fiat currency, which has led to a permanent state of inflation and currency devaluation.

In the monarchical age, the prices had often fallen. The price indices that we have for this period generally indicate the purchasing power of money increased over one hundred year periods. In contrast in just two decades of iredeemable fiat currency, the CPI in the US increased from 40 in 1971 to 136 in 1991.

Debt

In line with the other metrics above, Hoppe shows that during the monarchical age, debt was seldom used by the state. It was usually reserved for war time and during peace time, it was quickly paid off. In contrast, since the onset of democratic-republicanism, debt has consistently increased in both war and peace.

Legislation and Regulation

Hoppe asserts that sovereigns were held to be under the law in monarchies. Their job was not to make law but to act as a judge for existing, universal laws. And they were expected to abide by the same laws. He cites Bertrand de Jouvenel again:

The sovereign's right was also a freehold. It was a subjective right as much as the other rights, though of a more elevated dignity, but it could not take the other rights away.... Indeed, there was a deep-seated feeling that all positive rights stood or fell together; if the king disregarded (a private citizen's) title to his land, so might the king's title to his throne be disregarded.

During this age, according to Hoppe, the law was seen as fixed and immutable, which is a notion that I'm struggling to understand.

In contrast, during the democratic age, government caretakers and parliaments, have become creators of laws. Our rights can be made or modified by the decision of sovereign legislators. Similar to the inflation caused by fiat currency, the democratization of law has led to an inflation of legislation. We now have laws governing every aspect of life. US federal government regulations occupy 26 feet of library shelf space and include everything from production and sale of celery to sexual offenses to the cooking of onion rings.