My town, Tallassee, Alabama, is an old mill town. It straddles the Tallapoosa River, which is dammed at that point by the Thurlow Dam to generate electricity. On both sides of the river are the ruins of a massive complex of textile mills which employed a significant portion of the town’s population until 2005. In fact, the current mayor, Johnny Hammock, worked in the mills as a young man, and his father and grandfather also worked there. Today, the town is somewhat stagnant: some of the mills, which were burned in amassive fire in 2016, are in shambles; the bridge connecting the two sides of the town is rusty and the paint flakes off in the wind; and there are many empty storefronts and houses. Many people think that the way to restore the town is for the government to take an aggressive role, and one of the mayor’s main strategies has been to apply for grants to undertake the projects that he thinks would benefit the town most. In light of this approach, it is important to take a look at how Tallassee developed into the bustling little city it once was. Private industry had a strong hand in the town’s development.
Tallassee is one of many examples of towns that were developed by private industry. Although large landholders and small-scale businesses contributed to the town’s development, arguably the most significant changes were spurred by the cotton mills. The Tallassee Manufacturing Company built the first mill on the west side of the river in 1844.1 It constructed a larger, four-story mill nearby in 1852. In this early period, the company also built “grist and flour mills, a gin, a sawmill, a foundry, and a blacksmith shop” to serve its employees (many part-time farmers) and local people.2 These mills were powered by electricity generated by a dam that the company had built partway across the river.3
In the earliest years of the mills’ existence, before 1850, Tallassee was a hamlet with a few stores and plain, unpainted log houses.4 As the operation grew, however, the mills undertook the development of a local infrastructure. A third mill was built on the east side of the river in 1897. In the 1890s, the company created a new division and built a railroad to connect the town to the Western Railway of Alabama, which made the town less isolated than before. To power its growing operation, it also built a larger dam, this time spanning the whole river, and a new power plant, which also lit other businesses, the streets, and a few select residences.5 Unfortunately, in 1916, the Alabama Power Company, a state utility, took the mills to the Supreme Court for its rights to the land and water, seeking to build its own dam at the location, and the court ruled hydroelectric power manufacture a public use of property, opening the structure to eminent domain. Alabama Power only took over the dam in 1924, however, it and the mills having finally agreed to share the electricity generated at the Tallassee Falls the year before.6
The company also built a bridge across the river in 1896 to connect the west mills to the new mill it was going to build on the east bank of the river. Although a covered bridge had existed a mile downriver, built privately in 1845 by John H. McKenzie (in fact, he bequeathed the bridge and all toll proceeds from it to his daughter as part of her dowry), this bridge had collapsed of old age in 1863 and had not been replaced.7 For decades, the only way to cross the river to the other side of town was by a ferry that was pulled across the river by a cable. The ferry was maintained by the mills but operated by “Old George.”8 When the mills undertook to build the bridge, the State of Alabama “relieved and released [the company] from all penalties now provided by law for failing hereafter to maintain and operate said ferry.”9
The bridge, of course, was built to make it easier for the company to receive materials and transport goods, but it was also a boon to the community. The company allowed people associated with the company to cross for free, as well as people transporting cotton, the company’s key raw material. Everyone else paid a toll, and the company used the proceeds to maintain the bridge. Unfortunately, the state quickly encroached on private infrastructure. After protests that the tolls were too high, the judge probate of Tallapoosa County (where the east side of town is) claimed the power to control toll rates, and the state legislature backed him on it. Market pricing was snuffed out after an appeal before the Supreme Court of Alabama failed in 1909.10 Although the company had tried to sell off the bridge in 1908—who wouldn’t?—the county commissioners, so helpfully forcing nonsensically low toll rates on the true owners of the bridge, could not afford to purchase it outright. The tolls remained. After 1925, the company continued to maintain the bridge, but the people indirectly paid the company a rental fee to use the bridge through their counties instead.11
In the 1920s, the mills, by this time incorporated as Mount Vernon-Woodberry Mills, embarked on a new spate of updates to the mills and “the villages” (the developments on either side of the river, which were each complete with a company store, housing, and increasing amenities over time12). In 1923, a new bridge replaced the temporary 1920 bridge, which had been built after a flood damaged the old bridge in 1919.13 The mills also built “the Mt. Vernon Theater, the school buildings, the Community Hospital, and the . . . Guest House.”14 At least as late as the 1940s, the mills maintained the town’s water supply and sewage system.15 The company also built the town’s library (est. 1921) and expanded its collection over the years, donating it to the city in 1978, just after adding a new wing to it.16
The mills also built most of the houses in the town, including my own, which are referred to as mill houses. Employees initially lived in these simple pine houses rent-free, but later, probably as living standards improved and costs rose, the companysold them to employees instead.17 Initially served by wells and outhouses, and lit by carbon and kerosene, the mills’ 1920s improvements brought electricity, running water, and finally “sanitary toilets” to Tallassee homes.18 In an era of state-enforced racial segregation, the mills also maintained “a Negro village to the south of West Tallassee . . . [with] a twelve-grade school with a cafeteria, an athletic field, a lodge hall and a church building” in addition to the East and West Tallassee villages.19 Local historian W.C. Bryant, writing in the 1930s, also noted that the mills planned many cultural and entertainment events for the town, such as carnivals, circuses, parades, and patriotic celebrations. In fact, the book by Virginia Noble Golden that I’ve been citing here was published by the company in 1949, showing the depth of their investment in the town. The wealth that Tallasseeans created in the mills put money in their pockets, and consequently the town had over 150 private businesses in the 1940s.20
No benevolent motives were needed to encourage this long record of contributions. The town’s physical and social integrity benefitted the business’s operations, improving efficiency and likely encouraging the best laborers to remain with the company long term. By the same token, since the market is constantly adjusting, the west mills ceased operation in the 1960s, leaving only the newer east mills active. These mills remained open until 2005, when Mount Vernon was forced to downsize and close its Alabama mills for good (it still maintains other mills in the South).
It might seem like the market burned Tallasseeans in the end, leaving them with aging infrastructure, less jobs, and a bunch of empty buildings, but that is not the case. The market, being an aggregation of individual human choices, does not change things overnight, but people see value in the mills and not long after they closed down, other entrepreneurs moved in on them.
The west mills sat for some time, but were finallypurchased in 1991 by Montgomery speculators who wanted to take them apart gradually to sell the materials for reuse. They “removed the window sash and gutted the five-story wooden interior structural system,” but the rest of the project seems to have fallen by the wayside. The owners may be waiting for the right moment to act on the remains. (Oddly enough, I could not find a sale record for the site, and the plot is not acknowledged by the Alabama GIS.)
The east mills were purchased by Process Knowledge in 2006; they deconstructed some cotton warehouses on the site for resale and sold the property to Mount Vernon Pine in 2016. Mount Vernon Pine planned to salvage the valued long-leaf heart pine in Mill No. 2. In fact, when these mills burned down later that year, the ownersays they already “had hundreds of thousands of dollars of orders for which we received deposits. One man bought $230,000 of wood. He sent us by wire transfer $45,000 because he found the wood to be so desirable.” They had also intended to improve the other mill on the property, added in the 1920s, to lease as warehouse space and also planned to make part of it a museum. The fire was a major setback, of course. The company bought the property for $1,088,000 but only had a $1 million insurance policy on the place. There is very little reclaimable wood left in the remains, ruining the original business plan. The insurance also would not cover the cleanup, which was estimated to run $1 million.
Although the owners of the eastern mills were looking for a new use for their property (theirmost recent plan was to crush the rubble and convert it into construction aggregate), the mayor of the town was eager to purchase it to put it to the use that he and other prominent townsmen think best. Finally, not able to get the company to sell voluntarily, the city sued Mount Vernon Pine in 2019, for “public nuisance after the property was not properly cleaned up” following the fire. As a “resolution” to the case, Mount Vernon Pine “donated” the east mills to the city this year, basically coerced but at least getting a tax advantage to help defray its massive sunk costs.
Given that private industry built Tallassee and that the market was already in the process of recycling the mills, making room for new opportunity, politicians should have stood down. The process of market renewal takes time, and although it may be thwarted by unexpected events like the fire, it is inexorable given leeway. Entrepreneurs would have found a good use for the remains and the land. Instead, the city is flying blind,asking the people what they think it should do with its ill-gotten property. The result will be arbitrary, whether based on nothing but the whims of people with no financial skin in the game. Those who will inevitably be hired to do the actual work of revitalization will charge a pretty penny, knowing they’re dealing with a big spender, and will enrich themselves. Some locals may clamor for a fancy new shopping district or housing—they’ll order the caviar, because, hey, it’s not their land.
The reality is that after the fire it may not be worth moving forward in any way for the foreseeable future—it all depends on what people are willing to invest involuntarily. No one had to beg Mount Vernon Pine to drop over $1 million dollars on buildings that to some probably seemed worthless. In time, people would have identified new opportunities in the seemingly worthless rubble. They would have been willing to put their money where their mouth is to put one of those ideas to the test, and people would have voted on it with their dollars.
Bleeding local taxpayers to repurpose the area based on the decisions of people with no financial skin in the game is a bad idea and, like all central planning, will be proven a failure in time. Instead of applying for so many grants, Tallassee should place the mills, the rusty infrastructure, the schools, the “substandard” rental properties, and the other buildings it has seized back in the care of the market that sprouted them. Doing so will lead to less costly and likely quicker outcomes that are tailored to the acting preferences of the people of the town themselves.
As government seek ever larger amounts of debt to finance more spending, they're embracing huge debt levels in the way a broke consumer might embrace payday loans. In the end, we're left with nothing but a flimsy promise to pay.
Original Article: "Government Debt Is Starting to Look Almost as Sketchy as Payday Loans"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Cuba is a dictatorship that uses terror and propaganda to repress its people. It locks citizens up, strips them of the most basic human rights, silences them, and confronts families using extortion and threats. The regime’s constant practices of illegal detention, the personal ruin of political dissidents, and limitation of fundamental rights have nothing to do with any blockade or embargo but everything to do with the totalitarian Communist dictatorship.
All the propaganda that whitewashes the Cuban dictatorship is based on two lies: the nonexistent “blockade” and the allegedly excellent “public health.”
Cuba only suffers from one blockade: that of the dictatorship against its people, which limits imports of food, medicine, use of the internet, and freedom to travel. We have seen the evidence this week, when the regime “temporarily lifted” the limitation on imports of food and medicine.
Dismantling the lie of the so-called excellent Cuban public services is easy. You just have to go to Cuba to see it.
The healthcare system that the regime advertises so much is a failed and dilapidated system that only provides quality service to wealthy foreigners and to the regime’s leaders. Cuba suffers the “most expensive free healthcare in the world,” as they told me in Havana.
The myth of the quality of healthcare has been debunked on several occasions. María Werlau, from the NGO Archivo Cuba (Cuba Archive), explained that “healthcare in Cuba is terrible for the ordinary citizen. There is an apartheid that favors the ruling elite and foreigners who pay in US dollars,” and it has been shown that “the Cuban health system lacks transparency and capacity.” Its health policies not only have not yielded good results but also limit the basic rights of patients; “it is hardly a model to follow.”
Anyone who travels to Cuba can see that the often-repeated “nonexistence of child malnutrition” that some say UNICEF shows is a lie and only masks a regime that still uses ration cards and misery as tools to keep the population under its boot.
However, UNICEF never stated that Cuba had ended child malnutrition, but that the “incidence of underweight children has dropped to 4%,” a record that was broken by Costa Rica and Chile, for example, which reached 1 percent. Tracking Progress on Child and Maternal Nutrition: A Survival and Development Priority (UNICEF, November 2009, p. 102 et seq.) shows clearly how other countries have done significantly better than Cuba.
The actual data on infant mortality is twice the official figure and much worse than in countries such as Chile or Costa Rica, according to studies (for example, “Infant Mortality in Cuba: Myth and Reality,” by Roberto M. Gonzalez).
The myth of the blockade is even more hilarious. The nonexistent blockade is a lie that serves as an excuse to whitewash the dictatorship.
Cuba’s international trade over GDP was 27 percent of GDP in 2020, compared, for example, with Brazil’s, which is 32 percent. Its exports are 14.5 percent of GDP compared to 16 percent in Brazil (World Bank data).
The United States is Cuba’s ninth-largest trading partner, with 3 percent of imports. Cuba has more than twenty-seven bilateral treaties with more than ninety countries, and exports to Canada (22 percent), China (21 percent), Venezuela (13 percent), Spain (11 percent), Holland (7 percent), Germany, Belgium, Switzerland, Cyprus (2 percent each), and France (1 percent) among others (Cuban Statistical Office, 2020 ed.).
The exports of food and agricultural products from the United States to Cuba increased by 74.7 percent in March 2021, an increase of 54.3 percent annualized (Cuba Trade).
Cuba, in turn, imported in 2020 from Venezuela (crude at cost or free), China, Spain, Russia, Mexico, Italy, Argentina, Brazil, the United States, and Germany, among others. Some “lockdown.”
The only thing Cuba has is an embargo on those items that the dictatorial regime uses for military purposes.
What the Left hides about the embargo: the embargo was implemented in 1958 with the Batista regime to limit the sale of weapons. The 1960 embargo on US exports to Cuba did not include food or medicine. Since 2000, there has not been any type of embargo on US exports either in food or in medicine.
More than ninety North American multinationals have exported to Cuba since 2001. Since 2014, sixty North American companies have been operating directly in Cuba (Cuba Trade Economic Council)
Cuba exported $14.9 million worth of goods to the United States and imported $176.8 million in 2020 according to the Department of State. Imports and exports to China are also particularly important.
The United States is the largest supplier of food and agricultural products to Cuba, according to the Department of State, with exports of those goods valued at $220.5 million in 2018. The United States is also a major supplier of humanitarian goods to Cuba, including medicines and medical products, with a total value of $275.9 million in 2018. Remittances from the United States, estimated at $3.5 billion in 2017, are the dictatorship’s largest source of foreign exchange.
What has destroyed Cuba is communism. A destructive and wasteful dictatorial regime.
The Castro regime is a machine for squandering subsidies. It consumed aid from the Soviet Union between 1960 and 1990 equivalent to six Marshall Plans and failed to improve its growth pattern or take advantage of huge subsidies to improve productivity. Between 1960 and 1990, Cuba received more than $65 billion from the Soviet Union, not counting what it received from other socialist countries.
The Cuban dictatorship has also squandered subsidies and aid from China, Russia, and Venezuela.
For the Cuban medical program, Misión Barrio Adentro, alone the Havana dictatorship received $120 billion dollars in sixteen years, an official figure revealed by Nicolás Maduro in 2019 and confirmed by Julio García, head of the Cuban missions in Venezuela.
Cuba obtained more money from Venezuela for other concepts, other missions, for sales of power plants, for triangulation in food imports, and even for the sale of millions of light bulbs.
In the past eighteen years, China has forgiven nearly $5 billion in debt to Cuba, nearly half of the total debt it has forgiven its trading partners. Of course, trade with China has declined due to the constant defaults of the Cuban dictatorial regime.
Russia has donated billions of dollars to Cuba, with donations through, for example, the representation of the World Food Program (WFP) and the write-off of 90 percent of the debt contracted with Russia (2014), about $25.8 billion.
Between 2011 and 2014 alone, Mexico, Japan, China, and Russia together exempted the Cuban dictatorship from $40 billion dollars of debt, which is equivalent to 50 percent of Cuba’s current GDP, according to Forbes.
The Paris Club creditors in 2015 also canceled $8.5 billion in outstanding debt.
The Cuban dictatorship always does the same: borrow, squander money, impoverish the population, and default on its commitments. And then it complains about a nonexistent “blockade.”
If we add donations, debt cancellation, and financial support, Russia, China, Venezuela, and Cuba’s main trading partners have given financial aid and donations to the Cuban dictatorship that exceed $200 billion in the last sixteen years.
Despite all this, and with a monetary policy as destructive as that of Venezuela, printing Cuba pesos without value or demand while squandering the reserves it receives, inflation in 2021 will reach 500 percent according to Reuters.
What has the Cuban dictatorship done with all this money? Fritter it away while condemning the Cuban people to misery.
Cuba has a poverty level that, calculated independently, reaches 50 percent. According to figures from the ONEI (Oficina Nacional de Estadísticas e Información), 35.6 percent of the working-age population is unemployed or unemployed. The monetary and economic disaster would lower the Human Development Index position for Cuba from seventy-three to the last places among the countries of the world.
What is it that destroyed Cuba? Communism, not the nonexistent blockade.
The United States’s jobs recovery is extremely poor, especially if we consider the size of the monetary and fiscal stimulus and the spectacular upgrade to GDP estimates.
Original Article: "This Is a Weak Jobs Recovery"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Originally published as "European Unification as the New Frontier of Collectivism: The Case for Competitive Federalism and Polycentric Law."
Frankfurt, Bremen, Hamburg, Luebeck are large and brilliant, and their impact on the prosperity of Germany is incalculable. Yet, would they remain what they are if they were to lose their independence and be incorporated?”
— Johann Wolfgang von Goethe1
From the extent of our country, its diversified interests, different pursuits, and different habits, it is too obvious for argument that a single consolidated Government would be wholly inadequate to watch over and protect its interests; and every friend of our free institutions should be always prepared to maintain unimpaired and in full vigor the rights and sovereignty of the states and to confine the action of the General Government strictly to the sphere of its appropriate duties.” — Andrew Jackson2
One essential of a free government is that it rests wholly on voluntary support. And one certain proof that a government is not free, is that it coerces more or less
persons to support it, against their will. — Lysander Spooner3
In Europe, one of the most important contemporary debates concerns unification and the project to create a centralized state with a single currency, a democratic parliament, and a monopolistic government. In this context, the current crisis of the European Monetary Unit (EMU) becomes a good argument in favor of an even-more-accelerated path toward the transfer of powers from the old nation-states to Brussels and Strasbourg. According to many economists and political scientists, the poor performance of the European single currency is the consequence of a lack of institutional unity. Hoping for a reversal in the declining power of Western socialist ideals, they call for more political centralization and economic planning. These discussions are plagued by certain superstitions, so, in the first part of this article, I will try to show the irrationality of unifying this continent, as well as how this plan is an absurd treason of the best European liberal traditions.
Europeans seem to have accepted the project of a “European democracy” without analyzing its implications. They not only underestimate historical and extraordinary differences among European societies, they also ignore the benefits of competition between independent political structures and seem totally unaware of the distributive consequences of a massive democracy.4 They seem to ignore their history, particularly the medieval roots of their historical success, which would have been impossible if the European continent had ever been unified by a single political power. In the second part of my analysis, I will try to point out the advantages of a true federal alternative, based on institutional competition and communities by consent.5 Federalism, correctly understood, is firmly in the tradition of libertarianism. In the logic of radical and authentic federalism, political communities are “federations of individuals,” and these institutions develop new voluntary relationships establishing “federations of federations.” Thus, the term and concept of a “federal state” is a contradiction in terms, because a state always suggests the notion of a permanent chain of command incompatible with federalism and its logic of free agreements. In fact, federalism is a set of voluntary relations working within communities as well as among individuals.
American history offers us a tragic example of the failure to comprehend the true nature of federalism: the American Civil War. Political theorist John C. Calhoun considered the Union to be a federation —the “United States” were several states joined in a free compact. For this reason, he defended the Southern point of view. However, heirs of the Hamiltonian tradition, including President Lincoln, were persuaded that the “United States” was a single state: a permanent and unified democracy. The bloody struggle between Northerners and Southerners from 1861 to 1865 was the dramatic consequence of the absurd effort to link the conflicting notions of “state” and “federation.”6
Europeans have an opportunity to make good use of the lessons from this tragic American experience. In other words, Europeans must avoid the consequences of a vague definition of the federal compact. The main task is to build federal institutions and, for this reason, to coordinate a strong resistance against rising centralism.7
To pursue this objective, European peoples must elaborate a new vision of Europe—a vision based on property rights, individual liberty, the free market, local autonomies, federalism, and the right of secession. This is the glorious past of the Old Continent, and this can be—while the age that saw the triumph of the modern state and totalitarian ideologies seems to be fading—its future.
Superstition # 1: Individual liberty and juridical polycentrism cause tensions and, ultimately, wars.
For the last few centuries, European countries have engaged in many wars, chiefly caused by imperialism and statist ideologies. Yet, these tragedies are often explained with recourse to the notorious Hobbesian argument. For many contemporary intellectuals and politicians, European peoples were enemies in the past because they were separated by the frontiers of independent states. Consequently, they can achieve a peaceful future only if they build common political institutions. In this philosophy, European unification is only one step in the long path toward the political unification of the whole world.
In the seventeenth century, Thomas Hobbes, frightened by religious divisions, conceived Leviathan as the only possible apparatus capable of imposing peace. Individuals lost their freedoms through the social contract, and received peace and life in return.8 The state affirmed itself as the condition for the avoidance of chaos, wars, and anarchy. Its first justification was the individual’s fear of being killed by a fellow man. This interpretation remains well accepted, with the implicit idea that the state can be a “neutral” power, having no ideology of its own, and, thus, can be competent to nullify any religious, social, or ideological conflict.
However, these arguments are not consistent with the facts. The religion wars faded away only when a new sort of religion (statist ideology) imposed its power over civil society and traditional faiths. At the beginning of modern history, secular power became “sovereign,” losing its moral bounds after such onslaughts as Marsilius of Padua’s Defensor Pacis and Machiavelli’s Il Principe.9 But the success of this kind of “peace” marks the beginning of a more important statist aggression to free confessions. It was also the precondition for implementing contemporary totalitarian regimes.10
The Hobbesian notion that a spontaneous order (such as a free market of rules, laws, and institutions) is a theoretical impossibility must be recognized as the most important cultural factor. It is this idea that now pushes continental leaders toward the increase of political cohesion and the reduction of economic competition. Yet, there are many arguments against this view, both theoretical and empirical. Concrete experiences demonstrate that men can, and do, create cooperation and harmony in the absence of a legal monopoly.11
Besides that, the creation of a European democratic power would reduce competition. For example, if the Italian government might now cut taxes because it fears that capital and firms might want to leave the country (e.g., in order to exploit new opportunities in Germany, France, or the United Kingdom), in a European unified state, even this remote possibility will disappear. In fact, “harmonization” is the catchword most utilized by the militant unificationists.
The global economy is a space of peace and exchanges because, in the market, the relationships in which every actor participates are voluntary. Increasing political unification, however, is a sure way to generate more conflicts, since different peoples in different industries in different regions have different institutions, methods, and techniques. Political unification imposes a “one size fits all” solution on every issue, while, in a world of competition, different solutions will arise in different places.
It is also important to remember that, in Spain or Britain, the persistence of centralist policies (despite the opposition of Basque and Irish secessionists) is a relevant factor in radical conflicts. The present European situation teaches us that it is impossible to unify peoples in a coercive way and, at the same time, pretend to peaceful relationships. A compulsory Union would be the premise for all sorts of tensions.
In addition, the process of European democratization might also signify a more important presence of European armies around the world. The consequence would be a new form of imperialism, and, thus, it would copy the worst things of recent American history.
Superstition # 2: The market requires the state: it is the result of the juridical order created by the political monopoly.
James M. Buchanan is one of the scholars who have most insistently emphasized the necessity to unify Europe. His idea is that classical liberals and libertarians must encourage every effort “to move toward federalist structures in which political authority is divided between levels of government.” In Buchanan’s theory of federalism, a free-market society needs competition between separate state or provincial units. He remarks that localized politicians and coalitions are less able “to depart significantly from overall efficiency standards in their taxing, spending, and regulatory politics.”12 But he adds that the exit option must be guaranteed by the central government, an option which effectively limits the ability of state or provincial governments to exploit citizens.
As a consequence of this analysis, Buchanan says, in the U.S., “effective reform must embody devolution of power from the central government to the states,” while in Europe, “reform requires the establishment of a strong but limited central authority, empowered to enforce the openness of the economy, along with the other minimal state functions.”13 Buchanan’s underlying thesis is that individual liberty cannot be protected by a simple competition of governments; for this reason, European peoples must accept a monopolistic continental power.
The logic is clear, and Buchanan clarifies his position when he states that accepting the idea “that private and voluntary action can be efficacious over the whole social space (including basic protections to person, property, and contract)” would represent “a leap backward into the Hobbesian jungle.”14 However, this analysis is weak, because the equation between liberty and chaos is not justified.15
One does not have to share libertarian ethical principles to observe that a juridical order emerges even in societies lacking a monopolistic group of rulers. Roman Law, Lex Mercatoria, and Common Law are important examples of rules emerging in a social order rather than in a state order. For centuries, and in many different contexts, people lived together in well-defined juridical systems without a common policy fixed by a king or a parliament.16 As Bruno Leoni pointed out in Freedom and the Law, for instance,
the Romans accepted and applied a concept of certainty of the law that could be described as meaning that the law was never to be subjected to sudden and unpredictable changes. Moreover, the law was never to be submitted, as a rule, to the arbitrary will or to the arbitrary power of any legislative assembly or of any person, including senators or prominent magistrates of the state.17
One of the most important lessons of libertarian realism is that the state is not the protector of rights and liberties; rather, it is their worst enemy. Its existence is a continuous aggression against liberty, property, and autonomy. Accordingly, free-market relations exist in Western societies despite the state, rather than because of it.
Classical liberals and libertarians must become more aware that the roots of our history of freedom lie in the institutional pluralism of the Middle Ages. As Boudewijn Bouckaert wrote,
polycentric extended orders, such as Medieval Peace of God (1100–1500), do not conform with the Hobbesian intuition about power and order. . . . The Medieval order was an order without a sovereign power in the “modern” sense of the word, i.e., a central power disposing of a monopoly of a coercive power enabling it to rule a whole nation and to act as a conflict-solver of the last resort. 18
Robert Nisbet makes a similar observation:
Medieval society, from the point of view of formal authority, was one of the most loosely organized societies in history. Despite the occasional pretensions of centralizing popes, emperors, and kings, the authority that stretched theoretically from each of them was constantly hampered by the existence of jealously guarded “liberties” of town, gild, monastery, and village.19
And Leonard Liggio remarks that, after 1000 A.D.,
while bound by the chains of the Peace and Truce of God from looting the people, the uncountable manors and bar-onies meant uncounted competing jurisdictions in close proximity. . . . This polycentric system created a check on politicians; the artisan or merchant could move down the road to another jurisdiction if taxes or regulation were imposed.20
At the origin of this complexity is the failure of the Imperial design to realize a political unification of the Christian world. European capitalism grew in part because of the weakness of political power. In the second part of the Middle Ages, the Emperor was not in condition to subjugate the Catholic Church, merchants, artisans, bankers, and the countless small armies. As a consequence, the last centuries of the Middle Ages were marked by the success of a pluralist order characterized—as it had been since the ninth century A.D.— by many allodial properties, free from regal control and from every form of political (eminent) domain.21 In his Edictum Pistense (864 D.C.), Emperor Charles “The Bold” censured all those who “built castles and fortresses without any permission and in an illegal way” (castella et firmitates et haias sine nostro verbo fecerunt). But the weakness of Imperial power encouraged the diffusion of self-protection and this “form of possession free from any obligation.”22
Defenders of a libertarian European heritage must acknowledge their history of property rights, pluralism, and competition. They also have to rediscover a rational way to solve conflicts and manage quarrels without resorting to a compulsory state logic or to a central coercive power.
Superstition # 3: The existence of a European identity calls for the construction of a single state in Europe.
As there are important differences among England and Greece, Spain and Germany, or France and Poland, there are different ways to be European. While Europeans have in common many characteristics which distinguish them from, say, Africans or Asians, this fact doesn’t imply the necessity of a single European state.
On the contrary, as indicated earlier, one of the most important elements of this European identity is history, and history has not always been the nation-state’s dominion. In fact, pluralismhas been the key of European historical success, and such pluralismmeant the absence (at the end of the Middle Ages) of a powerful center of political decisions. Europe had Church, Empire, a number of kings and princes, a multitude of feudal relationships, and, in some regions, independent cities, but it never had a small group of rulers able to organize economic life and civil society. “The dark centuries have undeniably diffused a spiritual order, but also a deep disorder in politics and the economy,”23 noted Jean Baechler in his important study about the origins of capitalism and the role of medieval anarchy. This manageable chaos explains our success.
Nevertheless, the nation-state has been a compromise between the will to realize a universal political control and the resistance of the society (religion, economy, culture). The failure of the Imperial project at the end of the Investiture Contest was exploited by Norman theorists (Hugh of Fleury, for instance) who re-elaborated old concepts in relation to new “national” powers (regna).24 In Europe, the contrast opposing Church and secular institutions is a constant of the period prior to the full success of the state.
In France, Spain, or England, power began a long journey toward absolutism, but the presence of multiple state organizations was always an opportunity for the freedom of individuals, even as it reduced the capacity of the ruling classes to exploit and dominate civil society. This is another reason why the will to unify Europe shows a serious misunderstanding of what European identity is, and prepares for a subversion of its deepest heritage.
Superstition # 4: There will be harmony in a unified Europe, and political institutions will be able to support the development of poor societies (Eastern Europe, for instance).
This idea of “forced” solidarity is not compatible with libertarian principles, or with the notion that people must be respected in their dignity and liberty. The public redistribution of resources implies a strong centralized power capable of controlling society.
Recent Italian experience also teaches us that coercive solidarity creates hostility where there had been harmony and respect. Northern and Southern Italy enjoyed relatively good relations for centuries; traditional political divisions didn’t hinder cultural and economic exchanges, and there was no intolerance. Current social and cultural tensions between these regions result from a unified policy, which is a consequence of the 1861 birth of the Italian Kingdom. At the end of the nineteenth century, protectionist governments aided Northern industries and damaged Southern agricultural exports. The situation changed in the twentieth century, when the creation of an important welfare state was the cause of massive redistribution from the rich North to the poor South. In addition, the various Italian peoples were forced to live together and abide by the same rules. The first consequence of these political decisions is that there is now a considerable and widespread hatred between Northern and Southern Italy. While the free market has a tendency to bring people together, coercive politics tend to divide them. Moreover, the Italian experience of political unification shows that statist solidarity has not been a tonic for poor economies. In the last fifty years, Northern firms and families have spent a great deal of money financing programs for the South. However, the occasional encouraging changes or trends come only from local and spontaneous initiatives.
Welfare programs redistributed money to the mafia and to large firms, multiplied public employees, strengthened trade unions, and reduced incentives for work. Eastern Europeans in particular must keep this Italian lesson in mind, because they have to refuse a model of development based on political investments and bureaucratic regulation. The main source of economic and social growth is to be found in property rights, and it is quite evident that the logic of coercive solidarity is the explicit negation of this legal order.
Hernando de Soto’s most recent book offers us a useful confirmation of libertarian theses. In the analysis developed in The Mystery of Capital, poverty is seen not only as a consequence of the lack of private property rights, but also as the fatal result of a social order incapable of producing trust or of transforming concrete assets into immaterial and “abstract” capital (necessary to finance new ideas and realize capitalist growth). As de Soto points out, Third World and former communist peoples “have forgotten (or perhaps never realized) that converting a physical asset to generate capital—using your house to borrow money to finance an enterprise, for example—requires a very complex process.” The creation of capital requires a conversion process, because “capital is first an abstract concept and must be given in a fixed, tangible form to be useful.”25
This difficult evolution toward capitalism cannot be the outcome of a political economy based on state aid and regulation. Only the other path (free-market economy, competition, and individual responsibility) can present conditions to offer a future to Eastern Europe and to all countries in search of justice, wealth, and civilization. 26
Refusing European Political Unification, Defending Free Trade and Globalization
Because the creation of this cartel of monopolist rulers would reduce institutional competition and individual freedom, we must oppose the project of European political unification. In a large and politically unified country, the welfare state will find no hurdles, so redistributive policies will become the rule. Every government expenditure affects a large number of people, but the single individual usually pays only a fraction, and, thus, prefers not to bother with organizing a resistance. The consequence is an increase in taxation and the satisfaction of many lobbies.
Some economists believe that European unification would bring about the abolition of all internal barriers to free trade. However, this idea is not true. For instance, a directive adopted in 1973 allowed the United Kingdom, Ireland, and Denmark to make chocolate containing up to 5% vegetable fats, but not to sell it as chocolate in other member states. As a result, the Italian, Belgian, and French governments obtained a prohibition of chocolate imports from other member states. Through health and safety regulation, there are now similar directives against Spanish strawberries, French camembert, and so on.27
In addition, the political leaders of a unified Europe might try to build a protectionist Europe, an unassailable fortress against Asian and American competitors. To pursue this kind of policy would be impossible in a small nation (incapable of self-sufficiency), but a large area, such as Europe, can help to foster the illusion that protectionism will help the economy, protect wages, and bring about full employment. As Hans-Hermann Hoppe emphasizes, “a country the size of the U.S., for instance, might attain comparatively high standards of living even if it renounced all foreign trade, provided it possessed an unrestricted internal capital and consumer goods market.”
On the contrary, in small jurisdictions, this error is less frequent, because “the smaller the country, the greater the pressure to opt for free trade rather than protectionism.”28 Swiss Cantons, Liechtenstein, San Marino, Andorra, or Monaco never dreamed of obtaining advantages by refusing international trade. These small political communities— the true and only heirs of the great European spirit—are interested in the diffusion of libertarian and free-market principles. They want to export their specialties and buy all the goods they can’t (or won’t) produce. In fact, these small political entities are in the best position to teach an important lesson: the international division of labor is useful for individuals, families, communities, and companies.
For this reason, it is urgent to reject the project of a politically unified Europe, and to adopt an alternative model—a more flexible one based on pacts and contracts. If “Europe” exists—and a European identity is clearly in our past and our present—it can exploit the opportunity of economic integration (globalization) and free movement of information. In the international circulation of money, goods, and ideas, we don’t see a central planner: order emerges spontaneously as a result of voluntary cooperation.
In a free society, it can be easy to satisfy our need to rediscover our common historical heritage and develop institutional and economic links. In a Europe based on property rights, the wall that still divides West and East could quickly disappear and, free from the rigid constructivism of their politicians, European peoples could organize new and truly federal relationships.
Free European Relationships in a Polycentric World
For centuries, within the structure of the nation-state, the idea of sovereignty guaranteed that the King and, then, Parliament were able to control society. But this hierarchical construction was also the premise of an anarchical international order. The Kantian idea of a world federation, the distant progenitor of contemporary European unification, must be explained as the logical consequence of an international regime based on sovereign entities.29
The paradox of the nation-state is in its promise of law and order only within its borders: internal hierarchy and external autonomy (the so-called international anarchy). But if modern political culture preferred hierarchy to anarchy (and it adopted the Hobbesian framework), the result was that our international (dis)order had to be modified. If the state had the task of avoiding violence inside its borders, Kant imagined a parallel solution to the problem of law and order in the international arena. In other words, the pursuit of peace and harmony among different peoples could happen only through a “higher” (both ethically and geographically) political center able to reduce conflicts to a minimum.
The Kantian dream of “eternal peace” is the politically correct version of the projects of Napoleon and Hitler, the political leaders more seriously engaged in the construction of a European state. Present- day prophets of a united world share with these statesmen a strong preference for a society directed, more or less violently, by a small political elite. Furthermore, they have in common a similar distrust about human liberty.
One must also understand that European unification is only one step toward global unification, and that the determination to abolish political polycentrism is the most important threat to freedom. As already noted, Europe’s finest hour was characterized by a system of hundreds of semiautonomous entities with a free and open market.30
At the same time, opposing continental unification means rejecting the neo-protectionism of those media heroes, the “Seattle people.” For this reason, European peoples must defend their traditional values: openness, competitiveness, respect for their fellow men and their rights, localism, and free spontaneous commonality. But they must also be honest and acknowledge the fact that many important European values migrated to North America in ships carrying European colonists and religious dissenters to the Atlantic coast. Our hope is that these traditional values have not left the continent forever.
Federal Europe, Free Communities, and the Right of Secession
Against the pseudo-federalism of Maastricht, classical liberals and libertarians must speak up on behalf of the true federal tradition. In the West, we have a great deal of historical experience: Jewish tribes, Greek poleis, ancient German communities, Italian and Flemish medieval Communes, the Hanseatic League, the Dutch United Provinces, the Swiss Confederation, and the early republic in Jeffersonian America. We also have classical liberal and libertarian thinkers who paid attention to this topic, from Althusius to Jefferson, from Calhoun to Lord Acton, and from Spooner to Nock.
There are currently social theorists working on a correct vision of federal theory. For instance, some ideas of Bruno S. Frey can be useful in showing a possible evolution toward an increasingly free and competitive society. The project of FOCJ (functional, overlapping, and competitive jurisdictions) and the idea of a solid utilization of the “right of secession” (with the purpose of creating nations by consent and a true market for institutions, where individuals can shop for the best political arrangements) are the prerequisites for constructing federal relationships among individuals and groups.31 Despite his unjustified insistence about the role of direct democracy (and the inconsistent defense of the welfare-distributive logic), the institutional framework Frey imagined would be a good step toward a European federation.
But a federal Europe is exactly the opposite of a unified Europe. In emphasizing the need to develop negotiated connections among small political communities, I want to stress the difference between the existing Europe and the voluntary political order that European libertarians favor. In a federal institution, Roland Vaubel wrote, “each member state would have the explicit right to leave the union at any time, if a simple majority of its population voted in favor of secession.”32 The possibility for any community to dissolve the federal compact (the right of exit) is the only condition that can force the central power to respect the rights of the federation’s members (states, regions, cities, and individuals).
For this reason, it is important to support every political “devolution” of powers from the center to the separate local entities: from London to Scotland, from Rome to Lombardy, from Madrid to Catalunia. In the project of realizing a true federalist Europe, it is decisive that regions and cities can opt to secede, and that they can discuss their bond with the nation-state and the European Union.
In this sense, we must also defend the idea that federalism can be a strategy to imagine and achieve political relationships without the state (or beyondand afterthe state). In fact, federal pacts imply mutual agreements and horizontal contracts. Federalism, the theory of political pacts, demands a new elaboration of the notion of political community. In a true federal society, the right to abandon the union must be preserved; after all, this is the most important guarantee that the federal authority will respect different realities.
If European politicians and bureaucrats are, in fact, impatient to destroy our right to abandon the secular Paradise they are planning for us, the reason is that they want to be free to make it as close to Hell as possible. The Euro nightmare under construction will be a land with Italian bureaucracy, French regulation, Scandinavian taxation, German trade unions, and no right to opt out.
Human Dignity and the Spirit of Europe
Against socialist solidarity (whether nationalist or internationalist), classical liberals and libertarians must protect the dignity of human beings and their right not to become objects of political and coercive decisions. We have to defend our experience of true solidarity: in families, associations, churches, and so on. We must understand that state charity is a pretext of political rulers eager to increase their power at the expense of the people. Furthermore, we must explain that the political machine operates a redistribution that never helps the poor. In general, redistribution benefits the strongest lobbies. It helps the rich, intelligent, and sophisticated citizen; in brief, it helps only those who know how the system really works.
Even in this case, a comparison between Europe and America is useful. Because government is less invasive and property rights are more protected in the United States, there is an important net of private mutual aid associations. Our ability to attain a sense of true solidarity and community rests directly on our freedom.
Against the new socialism of Philippe van Parijs (who proposes that everyone—including California surfers—be paid a universal basic income at a subsistence level),33 and against Habermas’s idea of universal democratic integration,34 it is important that we preserve the individual’s right to reject political obligation. Honest men don’t respect unjust laws.
But, in the new millennium, only a radical change in our vision of society can bring about a rebirth of European liberties. As Étienne de la Boétie pointed out,35 the power of the political elite can be explained only by the fact that people voluntarilyobey laws (he called it the mystery of civil obedience). Consequently, when we cease to obey, unjust power will disappear, and we will have the opportunity to build a more civilized way to live together.
The Catholic Church played an important role in the great miracle of medieval Europe, It was, undoubtedly, the main hindrance that Empire found in its attempt to build an absolute power. Its moral and cultural force (and also its economic and military importance) was influential in preventing the complete triumph of the imperial design. The strong relationship between the German Emperor and the Franciscans—both averse to the wealth of the clergy and the political power of the Pope—and the struggle of Philip “The Beautiful” against the Templars are two different confirmations of the fact that the presence of a rich and influential Church was, for a long time, a restraint to any political ambition to subjugate the society.
While much in the contemporary context is radically changed from medieval Europe, religious communities can remain an obstacle for the ruling class. For this reason, every tradition, ethnic group, culture, and language (when they become the occasion for a conscious action of resistance in the face of state power and its will to standardize society) must be appreciated as instruments for the defense of everybody’s freedom.
The actual situation seems more complex, but, despite the philosophical and religious differences separating European individuals, there is a common heritage strictly related to the Christian roots of the continent: at the center of this culture, there is the idea of the infinite value of every individual. When Murray N. Rothbard developed his social ethics on the non-aggression axiom, he rediscovered an important element of European society, and suggested a hypothesis for how to overcome the present situation.
During the modern age, Europeans have considered the existence of a two-class order, with rulers and subjects, as natural. Only a small group of libertarian thinkers have expressed their dissatisfaction with this situation, and have engaged in a cultural campaign for liberating the new slaves of monarchical and democratic regimes. But the current unqualified acceptance of despotism is also the consequence of a lack of ethical responsibility. This European crisis, generated by the widespread acceptance of aggression and the refusal to resort to self-defense, has moral origins.
Therefore, a complete change in the way we connect with other people implies a rediscovery of human dignity and a more vivid sense of altruistic responsibility toward our fellow men, as well as ourselves. If Europeans will be generous and at the same time more respectful of individual natural rights, the claims of public authorities to justify their role as social benefactors will appear to everyone as a tragic farce. And we will all see that the Emperor—even the European Emperor—has no clothes.
Originally published as "European Unification as the New Frontier of Collectivism: The Case for Competitive Federalism and Polycentric Law."
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