Hans-Hermann Hoppe: “Democracy: The God That Failed”

by James Wentworth

This is a book of two halves. The first half is about the problems of democracy, and the second half argues for anarchism.

The first half is very good. Hoppe explains the concept of time preference, or the degree of future orientation someone has. For each person, one can draw a schedule which describes, for any given level of income, what percentage of their income they will consume and what percentage they will invest. For a given person, the more they earn, the more likely they are to invest a greater percentage of their income. But two different people can have different time preferences: with the same income, one might invest more than the other.

For Hoppe, a reduction in general rates of time preference is identical with civilisation. As people become richer, they can invest more, which makes them richer…

The problem with democracy is that it is inherently socialist. The majority of people vote for redistribution from the rich to themselves. As Hoppe has said elsewhere, “Democracy is a soft variant of communism, and rarely in the history of ideas has it been taken for anything else.”

Democracy is anti-civilisation. The redistribution from richer to poorer that is an inherent feature of all democracies leads to an increase in time preference and short-termism. Rich people have less incentive to invest (and work) because they do not get to keep all their profits, and poor people have less incentive to invest (and work) because they receive money from the rich instead, without having to do anything for it. Hoppe makes the distinction between movements along a time preference curve as your income changes, and a shift in the curve itself. Redistribution actually shifts the curve inwards (bad) because rich and poor alike will invest less for a given level of income.

Monarchy does not suffer from these problems. Under monarchy, redistribution is from the poor to the rich (the King and his family), so is likely to reduce average time preference and increase the total proportion of the economy devoted to future production. The King is richer, so he can invest a greater proportion of his income. He may decide to “leave it invested in the economy” by taxing less. There are only so many productive investments one individual or organisation can find, and leaving other people with capital enables them to find investments that you would not have found yourself. The King would want to avoid the error of the Russian communists who wanted the state to own all the capital instead of the land. Why try to run all the businesses when you can just tax them? Similarly, there is a trade-off between taxing now and taxing more later. (The total rents in any given time period would not be reduced if the King chose not to collect them all. The difference would simply be collected by someone else, just as reducing land taxation does not benefit the tenant, only the landlord.)

The second half of the book, in which Hoppe argues for anarchy over monarchy, is less good. Hoppe is an economist in the Austrian tradition, and relies mostly on deductive arguments. Unfortunately, while some of his deductions in the first half are flawed, some of his deductions in this half are terrible, and obviously so. At one point Hoppe claims that unowned property is not valuable, because nothing is valuable until it has been owned. The fact that something was unowned supposedly demonstrates that nobody valued it. While I agree with Hoppe on the subjectivity of value, it is possible for several people to be aware of something yet unable to appropriate it. Hoppe also claims that people appropriating land do not make anyone worse off, since everyone else demonstrated they did not value the land by not appropriating it. Tell that to people born after the land was appropriated. He also claims that original appropriation of land gains one not just property rights to it, but exclusive property rights. He doesn’t say why this follows.

Hoppe addresses some weak objections to anarchy. However, he does not deal with strong objections to anarchy. Hoppe proposes that insurance companies become private protection agencies, à la David Friedman. Hoppe never adequately explains why they would not become extortion agencies (i.e. states). Hoppe says that they would not because they would lose customers. But this begs the question, because having chosen this path they would not need customers. Nick Szabo defeats Friedman’s (and Hoppe’s) anarcho-capitalism in “The Coase Theorem is false”. Hoppe claims that, under anarcho-capitalism, parties will negotiate to resolve disputes. For example, if person A wants to operate a noisy business, but peace and quiet is worth more to his neighbour B, then B will pay A not to operate the business. However, as Szabo points out, this assumes pre-existing property rights and a way to enforce them. In the absence of a higher authority to prevent it, if A can generate externalities (large costs to B) at little cost to himself, he can extort money out of B.

The major problem with this book is Hoppe’s theoretical shortcoming regarding property and taxation. Hoppe makes an arbitrary distinction between taxation and rent. In reality taxation is just a type of rent. He does not distinguish between different types of rent on grounds of deadweight costs. In Hoppe’s terminology, taxes are bad and rents are OK (except when the rents are collected by the state). In reality, different taxes have different dead-weight costs — income tax is worse than land tax — but the dead-weight costs are the same regardless of who collects the rent. Income tax collected by a private landlord would be just as damaging as income tax collected by the state. Land tax collected by a private landlord is just as (not) damaging as land tax collected by the state.

Hoppe endorses Spencer Heath’s anarchism, towns and cities are owned by single landlords. This solves several collective action problems. However, Hoppe makes a false distinction between “private” landlords and states. Heathian landlords have all the powers of a state. Under Hoppe’s property absolutism they would actually have more powers than many states have today, even if they were bound by contracts. If a private landlord is able to control everything that occurs on his property, he can ban abortion, marijuana, certain styles of dress, certain haircuts, certain religions, certain books… Heathian landlords are states. Hoppe makes the bizarre distinction that “there will be what one might call governance in the city, but there will be no government.” In reality, the landlord that does the governing is the government, whatever you call it.

The problem is that Hoppe treats property as a moral matter. He explicitly eschews the fiction of morality elsewhere, but does not realise that morality is a fiction where property is concerned as well. For Hoppe, the state’s property is illegitimate (immoral). He is misled by names. For example, he thinks that if he “owns” some land in the state of Nevada, subject to a property tax of 50% of the rental value of the land, then he owns the whole property and the state is imposing an immoral tax. In reality, he effectively owns a 50% interest in the land and the state owns a 50% interest. As a matter of fact, the state also has the ability to unilaterally change the tax percentage (it is not a contractual matter). Changes may have effects an economist would consider bad, but they are not immoral.

Taxation by a Heathian landlord is just as voluntary as taxation by a state. It could even be contractual. Immigrants would sign a rental agreement, which would specify a rent, and might specify conditions about what hairstyle they could have, for example. If they wanted a different hairstyle, they could leave. Children born in the territory would be bound by these conditions without signing a contract, just as children in real life who live in a rental apartment with their parents are bound by the rules of the apartment (concerning, say, noise), even though the children did not sign any agreement. Once a child grows up, he will continue to be bound by these rules if he continues living in the same place. If he wants to move to a different house within the territory, he would have to sign an agreement.

Heathian “anarchism” is extremely attractive to neoreactionaries:

“As soon as mature members of society habitually express acceptance or even advocate egalitarian sentiments, whether in the form of democracy (majority rule) or of communism, it becomes essential that other members, and in particular the natural social elites, be prepared to act decisively and, in the case of continued nonconformity, exclude and ultimately expel these members from society. In a covenant concluded among proprietor and community tenants for the purpose of protectingtheir private property, no such thing as a right to free (unlimited) speech exists, not even to unlimited speech on one’s own tenant-property. One may say innumerable things and promote almost any idea under the sun, but naturally no one is permitted to advocate ideas contrary to the very purpose of the covenant of preserving and protecting private property, such as democracy and communism. There can be no tolerance toward democrats and communists in a libertarian social order. They will have to be physically separated and expelled from society.”

Landlords would admit “only those immigrants whose presence adds to a lower crime risk and increased property values and in excluding those whose presence leads to a higher risk and lower property values. That is, rather than eliminating discrimination, insurers would rationalize and perfect its practice… Indeed, in cooperation with one another, insurers would want to expel known criminals not just from their immediate neighborhood but from civiliszation altogether, into the wilderness or open frontier of the Amazon jungle, the Sahara, or the polar regions.” He quotes Spencer Heath MacCallum quoting anthropologist Raymond Firth about the Pacific island of Tikopia: “Inasmuch as all land was owned by the chiefs, an exiled person had no recourse but to canoe out to sea — to suicide or to life as a stranger on other islands. The expression for a person who is exiled translates that such a person ‘has no place on which to stand.'”

As a libertarian, Hoppe is against capital punishment, but it is surely justified in the case of Hakim Benmakhlouf, an Algerian thief who was deported from Britain five times, once returning from Algeria within 24 hours.

The problem with Heathian landlords is the same as with states: how to bind them to their contracts? Hoppe does not address this problem.

Hoppe argues that law should be voluntary. If law is voluntary, property is voluntary. Hoppe thinks property should not be voluntary, but he thinks law should be voluntary. This is a contradiction, Hoppe’s blather about praxeology notwithstanding. While rent may be voluntary, a landlord’s exclusive right to his property is not voluntary. But if law is voluntary, people would not necessarily agree to respect a landlord’s exclusive right to his property.

Law can never be voluntary. It is possible to avoid paying rent to a landlord by moving to a different place, but if all land is owned by landlords then you will pay rent to someone. In this sense, rent is not voluntary. Similarly, it is possible to avoid a legal system by leaving its jurisdiction, but if all land is under some jurisdiction, it is not possible to avoid law. Law is as voluntary as rent, just as rent is as voluntary as tax. Property/tort law is prior to contract law.

Finally, Hoppe has little to say about how to achieve anarcho-capitalism. He advocates secession in all circumstances, right down to the individual. He says “It is difficult to imagine how the central government would dare to invade a territory and crush a group of people who had committed no other sin than trying to mind their own business.” “No propaganda effort, however elaborate, would make the public believe that its attack was anything but an aggression against innocent victims.”

This strikes me as exceedingly naive, and ignorant of history. What need had the Mongols of good public relations?

Available in paperback.

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