Economics of Political Centralization (lecture 30 of 32)
These notes are from the lecture Economics of Political Centralization, given at the Mises University. Any errors are mine, feel free to point them out so that I can correct them. This lecture was given by Prof. Hoppe.
Introduction: History
- Soviet Union collapsed.
- Attempt to create nations out of regions with no historical similarity has failed. These attempts at creating nations have dissolved.
- With the collapse of the USSR, we are closer than ever in history to a situation where we can say we have one world order:
- US controls Japan, Germany, and even Europe.
- European Union.
- US controls Europe to the extent that European Central Banks uses the USD as their reference points, so we can inflate without immediate consequence.
- Europe had been composed of hundreds or thousands of units, but now it is a just a few doen. However, there are some small trends of decnetralization, such as the Austro-Hungarian empire. Over-riding tendency, however, is centralization:
- After the 40-year war, what we now call Germany consisted of many many subunits; by 1871, they were "unified".
- Likewise for Italy, which was "unified" in 1860.
- Even small countries such as Switzerland were only unified around then. Switzerland started out with "12 cantons".
- Internal centarlization -- central parts of the government have grown relative to localized parts.
Interpretation
- Orthodox position:
- Centralization is good.
- Decentralization is bad.
- Hoppe's view:
- Centralization is bad.
- Decentralization is good.
- An assumption by the orthodoxy is that centralizations creates a more globalized economy, thus wealth.
- We have gotten wealth.
- This does not show that it is because of centraliation: we could be richer if not for it.
- Political centralization is not thesame as economic centralization/unification.
- Political centralization is the expansion of the central authorities taxing power.
- Economic unification is just world-wide trade.
- Political centralization hinders economic unificatio. States are actually anti-productive, and promote the disintegration of the free market:
- Taxes.
- Inflation.
- Tariffs.
- Quotas.
- Regulations.
- Political size and economic unification are systematically unrelated.
- The USSR was larger than teh US; yet, the USSR was not economically united.
- Switzerland is very small, yet it is very integrated.
- If a less taxing State expands, this causes economic progress; if a more taxing state expands, this causes economic regress.
- There is an indirect relationship betwene hte size of the State and economic unity:
- Modern States emerged from small States.
- When there were many small States, the States were more moderated:
- Many "competitors" nearby.
- Thus, it was easy for people to "vote with their feet".
- Less moderated States tended to lose their most productive individuals.
- Less moderated STates tended to keep the least productive individuals.
- Such is why capitalism appeared first in such highly decentralized places as:
- Italy.
- Germany.
- Etc.
- The uniqueness of Europe is what was responsible for the flourishing of capitalism.
- States compet with eachother for subjects. One States' subjects run to other States, creating conflict:
- Capitalistic competition allows for unending coexistance.
- State competition is eliminative, because of the territorial monopoly. States with more resources tend to win conflicts; that is, ceteribis paribus, the State with more resources will win a conflict with other States.
- States that tax less will have more resources, because their peoples will be richer.
- States that tax more will have less resources, because their people will be the poorest.
- Thus, most liberal STates internally tend to be the most aggressive externally, because they know that they can win; States that are the most oppressive internally tend to be the least aggressive externally, because they know they won't win.
- This explains why Europe tends to dominate the world, and why its imperialist foreign policy has been liberalizing.
- Diallectic process -- this can't go on forever; the more we approach One World State, the less reason there will be for the remaining States to remain liberal:
- E.g., in European countries, the rise of socialist parties has begun.
- The US started out very liberal, with low taxes. Then, there was the Civil War and the Spanish War:
- Liberalism makes rise.
- Then enter into imperialism.
- Increasingly, less reason for US to keep stay liberal, because in a way we've almost expanded over the entire world.
- The so-called "free trade" networks are just mountains of paper. If you want free trade, you only need two sentences:
- You can import freely.
- You can export freely.
Liberals and their Problems
- Because wanted to expand liberalization, they always supported centralized government and opposed small States.
- Opposed the Catholic Church.
- Combined with democracy over monary, because they considered monarchs illegitimate.
Internal Problems With Democracy
- Not valueable in and of itself:
- Majority could abolish democracy.
- Majority wipe out the minority until only two left -- then no such thing.
- A Constitution doesn't solve any problems, because it admist some higher value than democracy.
- Secession is "anti-democracy".
- Monarchy:
- Incentive to preserve value.
- Clear distinction between the ruler and the ruled.
- Democracy:
- Distinction between the ruler and the ruled is blurred.
- Less resistance to State power.
- False idea that we rule ourselves.
Secession
- Eliminates unwanted integration; allows for people to be separate but equal; e.g., satellites of the USSR.
- In the US, busing, rent control, etc forces people who don't want to live together to live together:
- Not conductive to harmony.
- Conductive to discord and hate.
- Other regions will then have to immitate these successful regions.
- Everything after secession depends on what is done within the territory.
State Size vs. Economic Integration
- There is an important indirect relation between the size of the State and economic integration.
- Integration is easier in smaller States.
- Small States have to compete.
- Much more necessity of free trade in small States.
- The smaller the unit, the greater the pressure you face to adopt free trade.
- The smaller the unit, the more likely it is that we have international money, based on gold, and the more pressure on the little States to adopt the international commodity (the standard).
- Goette: "I do not fear that Germany will not be united; she is united, because my coin is accepted everywhere, and I can go from here to there."
