Sunday, September 21, 2014

Anatomy of state...or not

In “Anatomy of the State” Rothbard attempts to challenge the conventional thinking that surrounds the way we see the State aka the government. Unfortunately, his argument is riddled with holes, and what one hopes are lies on the part of the author and not expressions of his ignorance of real world events.

Take for example his assertion that “[the State] is the only organization in society that obtains its revenue not by voluntary contribution or payment for services rendered but by coercion”.  Taking for a second as true his premise that the State relies on coercion, we can still prove his statement wrong. In Naples all businesses are obliged to pay - under the threat of violence - protection money to the Cosa Nostra (an organized crime gang). In Sicily the racket money is paid to the Mafia. In parts of Los Angeles, protection money is paid to the various gang organizations, which have thousands of members and trans-national links. Every country has such an organization.

We should now analyze the idea that the State always uses intimidation and bullying to collect taxes. While this is undoubtedly true in certain countries, it is not universally so. Oftentimes democratic countries with strong institutions and robust legal systems have low levels of corruptions and are able to deliver services in what is perceived by their population as being efficient. Examples of these services are universal health care, free public schooling, unemployment benefits and so on. Countries such Germany, Finland, Denmark, Sweden and Canada meet this criteria. In these countries, culture plays a bigger role in the payment of taxes than the threat of judicial penalties as paying taxes is considered one’s duty. This point is further proven at voting time when changes to the system are rejected. In my experience, locals speak proudly of their system, and perceive it as making society more egalitarian.

Finally, we should mention that taxes make sense from an economic point of view. A society full of inequity and inequality comes at a cost to all. For example, numerous reports and papers have shown that the previous absence of universal health care in the United States cost the country billions in medical bills. These estimates did not take into account lost revenue, lost production and other economic costs. In general, assuming strong institutions with low rates of corruption, taxes are a proven method of wealth redistribution.

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