[The Daily Bell, exclusive interview, March 27, 2011.] Reprinted from LewRockwell.com
DAILY BELL: Please answer these questions as our readers were not already aware of your fine work and considered opinions. Let’s jump right in. Why is democracy “The God That Failed?”
DR. HANS-HERMANN HOPPE: The traditional, premodern state form is that of a (absolute) monarchy. The democratic movement was directed against kings and the classes of hereditary nobles. Monarchy was criticized as being incompatible with the basic principle of “equality before the law.” It rested on privilege and was unfair and exploitative. Democracy was supposed to be the way out. In opening participation and entry into state-government to everyone on equal terms, so the advocates of democracy claimed, equality before the law would become reality and true freedom would reign. But this is all a big error.
True, under democracy everyone can become king, so to speak, not only a privileged circle of people. Thus, in a democracy no personal privileges exist. However, functional privileges and privileged functions exist. Public officials, if they act in an official capacity, are governed and protected by “public law” and thereby occupy a privileged position vis-à-vis persons acting under the mere authority of “private law.” In particular, public officials are permitted to finance or subsidize their own activities through taxes. That is, they are permitted to engage in, and live off, what in private dealings between private law subjects is prohibited and considered “theft” and “stolen loot.” Thus, privilege and legal discrimination — and the distinction between rulers and subjects — will not disappear under democracy.
Even worse: Under monarchy, the distinction between rulers and ruled is clear. I know, for instance, that I will never become king, and because of that I will tend to resist the king’s attempts to raise taxes. Under democracy, the distinction between rulers and ruled becomes blurred. The illusion can arise “that we all rule ourselves,” and the resistance against increased taxation is accordingly diminished. I might end up on the receiving end: as a tax recipient rather than a tax payer, and thus view taxation more favorably.
And moreover, as a hereditary monopolist, a king regards the territory and the people under his rule as his personal property and engages in the monopolistic exploitation of this “property.” Under democracy, monopoly and monopolistic exploitation do not disappear. Rather, what happens is this: instead of a king and a nobility who regard the country as their private property, a temporary and interchangeable caretaker is put in monopolistic charge of the country. The caretaker does not own the country, but as long as he is in office he is permitted to use it to his and his protégés’ advantage. He owns its current use — usufruct — but not its capital stock. This does not eliminate exploitation. To the contrary, it makes exploitation less calculating and carried out with little or no regard to the capital stock. Exploitation becomes shortsighted and capital consumption will be systematically promoted.
DAILY BELL: If democracy has failed what would you put in its place? What is the ideal society? Anarchocapitalism?
HOPPE: I prefer the term “private-law society.” In a private-law society, every individual and institution is subject to one and the same set of laws. No public law granting privileges to specific persons or functions exists in this society. There is only private law (and private property), equally applicable to each and everyone. No one is permitted to acquire property by means other than through original appropriation of previously unowned things, through production, or through voluntary exchange; and no one possesses a privilege to tax and expropriate. Moreover, no one is permitted to prohibit anyone else from using his property in order to enter any line of production he wishes and compete against whomever he pleases.
DAILY BELL: How would law and order be provided in this society? How would your ideal justice system work?
HOPPE: In a private-law society the production of law and order — of security — would be undertaken by freely financed individuals and agencies competing for a voluntarily paying (or not-paying) clientele — just like the production of all other goods and services. How this system would work can be best understood in contrast to the workings of the present, all-too-familiar statist system. If one wanted to summarize in one word the decisive difference — and advantage — of a competitive security industry as compared to the current statist practice, it would be: contract.
The state operates in a legal vacuum. There exists no contract between the state and its citizens. It is not contractually fixed what is actually owned by whom, and what, accordingly, is to be protected. It is not fixed what service the state is to provide, what is to happen if the state fails in its duty, nor what the price is that the “customer” of such “service” must pay. Rather, the state unilaterally fixes the rules of the game and can change them, per legislation, during the game.
Obviously, such behavior is inconceivable for freely financed security providers. Just imagine a security provider, whether police, insurer, or arbitrator, whose offer consisted in something like this: I will not contractually guarantee you anything. I will not tell you what I oblige myself to do if, according to your opinion, I do not fulfill my service to you — but in any case, I reserve the right to unilaterally determine the price that you must pay me for such undefined service. Any such security provider would immediately disappear from the market due to a complete lack of customers.
Each private, freely financed security producer must instead offer its prospective clients a contract. And these contracts must, in order to appear acceptable to voluntarily paying consumers, contain clear property descriptions as well as clearly defined mutual services and obligations. Each party to a contract, for the duration or until the fulfillment of the contract, would be bound by its terms and conditions; and every change of terms or conditions would require the unanimous consent of all parties concerned.
Specifically, in order to appear acceptable to security buyers, these contracts must contain provisions about what will be done in the case of a conflict or dispute between the protector or insurer and his own protected or insured clients as well as in the case of a conflict between different protectors or insurers and their respective clients.
DAILY BELL: Are you denying, then, that we need the state to defend us?HOPPE: Indeed.
And in this regard only one mutually agreeable solution exists: in these cases the conflicting parties contractually agree to arbitration by a mutually trusted but independent third party. And as for this third party: it, too, is freely financed and stands in competition with other arbitrators or arbitration agencies. Its clients, i.e., the insurers and the insured, expect of it that it come up with a verdict that is recognized as fair and just by all sides. Only arbitrators capable of forming such judgments will succeed in the arbitration market. Arbitrators incapable of this and viewed as biased or partial will disappear from the market.
DAILY BELL: Are you denying, then, that we need the state to defend us?
HOPPE: Indeed. The state does not defend us; rather, the state aggresses against us and it uses our confiscated property to defend itself. The standard definition of the state is this: The state is an agency characterized by two unique, logically connected features. First, the state is an agency that exercises a territorial monopoly of ultimate decision making. That is, the state is the ultimate arbiter and judge in every case of conflict, including conflicts involving itself and its agents. There is no appeal above and beyond the state. Second, the state is an agency that exercises a territorial monopoly of taxation. That is, it is an agency that can unilaterally fix the price that its subjects must pay for the state’s service as ultimate judge.
Based on this institutional setup you can safely predict the consequences: First, instead of preventing and resolving conflict, a monopolist of ultimate decision making will cause and provoke conflict in order to settle it to its own advantage. That is, the state does not recognize and protect existing law, but it perverts law through legislation. Contradiction number one: the state is a lawbreaking law protector. Second, instead of defending and protecting anyone or anything, a monopolist of taxation will invariably strive to maximize his expenditures on protection and at the same time minimize the actual production of protection. The more money the state can spend and the less it must work for this money, the better off it is. Contradiction number two: the state is an expropriating property protector.
DAILY BELL: Are there any good laws and regulations?
HOPPE: Yes. There are a few, simple, good laws that almost everyone intuitively recognizes and acknowledges and that can also be demonstrated to be “true” and “good” laws. First: If there were no interpersonal conflicts and we all lived in perfect harmony there would be no need for any law or norm. It is the purpose of laws or norms to help avoid otherwise unavoidable conflict. Only laws that achieve this can be called good laws. A law that generates conflict rather than helps to avoid it is contrary to the purpose of laws, i.e., it is a bad, dysfunctional or perverted law.
Second: Conflicts are possible only if and insofar as goods are scarce. People clash because they want to use one and the same good in different, incompatible ways. Either I win and get my way or you win and get your way. We cannot both be “winners.” In the case of scarce goods, then, we need rules or laws helping us decide between rival, conflicting claims. In contrast, goods that are “free,” i.e., goods that exist in superabundance, that are inexhaustible or infinitely reproducible, are not and cannot be a source of conflict. Whenever I use a nonscarce good it does not in the slightest diminish the supply of this good available to you. I can do with it what I want and you can do with it what you want at the same time. There is no loser. We are both winners; and hence, as far as nonscarce goods are concerned, there is never any need for laws.
Third: All conflict concerning scarce goods, then, can be avoided only if every good is privately owned, i.e., exclusively controlled by one specified individual(s) rather than another, and it is always clear which thing is owned, and by whom, and which is not. And in order to avoid all possible conflict from the beginning of mankind on, it is only necessary to have a rule regulating the first, original appropriation of previously unowned, nature-given goods as private property.
In sum then, there are essentially three “good laws” that assure conflict-free interaction, or “eternal peace”: (a) he who first appropriates something previously on-owned is its exclusive owner (as the first appropriator he cannot have come into conflict with anyone else as everyone else appeared on the scene only later); (b) he who produces something with his body and homesteaded goods is owner of his product, provided he does not thereby damage the physical integrity of others’ property; and (c) he who acquires something from a previous or earlier owner by means of voluntary exchange, i.e., an exchange that is deemed mutually beneficial, is its owner.
DAILY BELL: How, then, does one define freedom? As the absence of state coercion?
HOPPE: A society is free if every person is recognized as the exclusive owner of his own (scarce) physical body, if everyone is free to appropriate or “homestead” previously unowned things as private property, if everyone is free to use his body and his homesteaded goods to produce whatever he wants to produce (without thereby damaging the physical integrity of other peoples’ property), and if everyone is free to contract with others regarding their respective properties in any way deemed mutually beneficial. Any interference with this constitutes an act of aggression, and a society is unfree to the extent of such aggressions.
DAILY BELL: Where do you stand on copyright? Do you believe that intellectual property doesn’t exist as Kinsella has proposed?
HOPPE: I agree with my friend Kinsella that the idea of intellectual property rights is not just wrong and confused but dangerous. And I have already touched upon why this is so. Ideas — recipes, formulas, statements, arguments, algorithms, theorems, melodies, patterns, rhythms, images, etc. — are certainly goods (insofar as they are good, not bad, recipes, etc.), but they are not scarce goods.
Once thought and expressed, they are free, inexhaustible goods. I whistle a melody or write down a poem, then you hear the melody or read the poem and reproduce or copy it. In doing so you have not taken anything away from me. I can whistle and write as before. In fact, the entire world can copy me, and yet nothing is taken from me. (If I didn’t want anyone to copy my ideas I only have to keep them to myself and never express them.)
Now imagine I had been granted a property right in my melody or poem such that I could prohibit you from copying it or demand a royalty from you if you do. First: Doesn’t that imply, absurdly, that I, in turn, must pay royalties to the person (or his heirs) who invented whistling and writing, and further on to those, who invented sound making and language, and so on?
Second: In preventing you from or making you pay for whistling my melody or reciting my poem, I am actually made a (partial) owner of you — of your physical body, your vocal chords, your paper, your pencil, etc. — because you did not use anything but your own property when you copied me. If you can no longer copy me, then, this means that I, the intellectual property owner, have expropriated you and your “real” property. Which shows: intellectual property rights and real property rights are incompatible, and the promotion of intellectual property must be seen as a most dangerous attack on the idea of “real” property (in scarce goods).
DAILY BELL: We have suggested that if people want to enforce generational copyright that they do so on their own, taking on the expense and attempting through various means to confront copyright violators with their own resources. This would put the onus of enforcement on the pocket book of the individual. Is this a viable solution — to let the market itself decide these issues?
HOPPE: That would go a long way in the right direction. Better still: more and more courts in more and more countries, especially countries outside the orbit of the US-dominated, Western-government cartel, would make it clear that they don’t hear cases of copyright and patent violations any longer and regard such complaints as a ruse for big Western-government-connected firms, such as pharmaceutical companies, for instance, to enrich themselves at the expense of other people.
DAILY BELL: What do you think of Ragnar Redbeard’s Might Is Right?
HOPPE: You can give two very different interpretations of this statement. I see no difficulty with the first one. It is that I know the difference between “might” and “right,” and, as a matter of empirical fact, might is in fact frequently right. Most if not all of “public law,” for instance, is might masquerading as right.
The second interpretation is that I don’t know the difference between “might” and “right,” because there is no difference. Might is right and right is might. This interpretation is self-contradictory; because if you wanted to defend this statement as a true statement in an argument with someone else you are in fact recognizing your opponent’s property right in his own body. You do not aggress against him in order to bring him to the correct insight. You allow him to come to the correct insight on his own.
That is, you admit, at least implicitly, that you do know the difference between right and wrong. Otherwise there would be no purpose in arguing. The same, incidentally, is true for Hobbes’s famous dictum that one man is another man’s wolf. In claiming this statement to be true, you actually prove it to be false.
DAILY BELL: It has been suggested that the only way to reorganize society is via a return to the clans and tribes that characterized Homo sapiens communities for tens of thousands of years. Is it possible that as part of this devolution, clan or tribal justice could be reemphasized?
HOPPE: I don’t think that we, in the Western world, can go back to clans and tribes. The modern, democratic state has destroyed clans and tribes and their hierarchical structures, because they stood in the way of the state’s drive toward absolute power. With clans and tribes gone, we must try it with the model of a private law-society that I have described. But wherever traditional, hierarchical clan and tribe structures still exist, they should be supported; and attempts to “modernize” “archaic” justice systems along Western lines should be viewed with utmost suspicion.
DAILY BELL: You have also written extensively on money and monetary affairs. Is a gold standard necessary for a free society?
HOPPE: In a free society, the market would produce money, as all other goods and services. There would be no such thing as money in a world that was perfectly certain and predictable. But in a world with unpredictable contingencies people come to value goods also on account of their marketability or salability, i.e., as media of exchange. And since a more easily and widely salable good is preferable to a less easily and widely salable good as a medium of exchange, there is an inevitable tendency in the market for a single commodity to finally emerge that differs from all others in being the most easily and widely salable commodity of all. This commodity is called money.
As the most easily salable good of all, it provides its owner with the best humanly possible protection against uncertainty, in that it can be employed for the instant satisfaction of the widest range of possible needs. Economic theory has nothing to say as to what commodity will acquire the status of money. Historically, it happened to be gold. But if the physical makeup of our world would have been different or is to become different from what it is now, some other commodity would have become or might become money. The market will decide.
In any case, there is no need for government to get involved in any of this. The market has provided and will provide some money commodity, and the production of that commodity, whatever it is, is subject to the same forces of supply and demand as the production of everything else.
DAILY BELL: How about the free-banking paradigm? Is private fractional banking ever to be tolerated or is it a crime? Who is to put people in jail for private fractional banking?
HOPPE: Assume gold is money. In a free society you have free competition in gold mining, you have free competition in gold minting, and you have freely competing banks. The banks offer various financial services: of money safekeeping, clearing services, and the service of mediating between savers and borrower-investors. Each bank issues its own brand of “notes” or “certificates” documenting the various transactions and resulting contractual relations between bank and client. These bank notes are freely tradable. So far so good.
Controversial among free bankers is only the status of fractional-reserve deposit banking and bank notes. Let’s say A deposits ten ounces of gold with a bank and receives a note (a money substitute) redeemable at par on demand. Based on A’s deposit, then, the bank makes a loan to C of nine ounces of gold and issues a note to this effect, again redeemable at par on demand.
Should this be permitted? I don’t think so. For there are now two people, A and C, who are the exclusive owner of one and the same quantity of money. A logical impossibility. Or put differently, there are only ten ounces of gold, but A is given title to ten ounces and C holds title to nine ounces. That is, there are more property titles than there is property. Obviously this constitutes fraud, and in all areas except money, courts have also considered such a practice fraud and punished the offenders.
On the other hand, there is no problem if the bank tells A that it will pay interest on his deposit, invest it, for instance, in a money-market mutual fund made up of highly liquid short-term financial papers, and make its best efforts to redeem A’s shares in that investment fund on demand in a fixed quantity of money. Such shares may well be very popular and many people may put their money into them instead of into regular deposit accounts. But as shares of investment funds they would never function as money. They would never be the most easily and widely saleable commodity of all.
DAILY BELL: Where do you stand on the current central-banking paradigm? Is central banking as it is currently constituted the central disaster of our time?
HOPPE: Central banks are certainly one of the greatest mischief-makers of our time. They, and in particular the Fed, have been responsible for destroying the gold standard, which has always been an obstacle to inflationary policies, and replacing it, since 1971, with a pure paper money standard (fiat money). Since then, central banks can create money virtually out of thin air.
More paper money cannot make a society richer, of course — it is just more printed paper. Otherwise, why is it that there are still poor countries and poor people around? But more money makes its monopolistic producer (the central bank) and its earliest recipients (the government and big, government-connected banks and their major clients) richer at the expense of making the money’s late and latest receivers poorer.
Thanks to the central banks’ unlimited money-printing power, governments can run ever-higher budget deficits and pile up ever more debt to finance otherwise impossible wars, hot and cold, abroad and at home, and engage in an endless stream of otherwise unthinkable boondoggles and adventures. Thanks to the central bank, most “monetary experts” and “leading macro-economists” can, by putting them on the payroll, be turned into government propagandists “explaining,” like alchemists, how stones (paper) can be turned into bread (wealth).
Thanks to the central bank, interest rates can be artificially lowered all the way down to zero, channeling credit into less and least credit-worthy projects and hands (and crowding out worthy projects and hands), and causing ever greater investment bubble-booms, followed by ever-more spectacular busts. And thanks to the central bank, we are confronted with a dramatically increasing threat of an impending hyperinflation when the chickens finally come home to roost and the piper must be paid.
DAILY BELL: We have often pointed out that the Seven Hills of Rome were initially independent societies, just like the Italian city-states during the Renaissance and the 13 colonies of the US republic. It seems great empires start as individual communities where people can leave one community if they are oppressed and go nearby to start afresh. What is the driving force behind this process of centralization? What are the building blocks of empire?
HOPPE: All states must begin small. That makes it easy for people to run away. Yet states are by nature aggressive, as I have already explained. They can externalize the cost of aggression onto others, i.e., hapless taxpayers. They don’t like to see productive people run away, and so they try to capture them by expanding their territory. The more productive people the state controls, the better off it will be.
In this expansionist desire, they run into opposition by other states. There can be only one monopolist of ultimate jurisdiction and taxation in any given territory. That is, the competition between different states is eliminative. Either A wins and controls a territory, or B. Who wins? At least in the long run, that state will win — and take over another’s territory or establish hegemony over it and force it to pay tribute — that can parasitically draw on the comparatively more productive economy. That is, other things being the same, internally more “liberal” states (in the classic European sense of “liberal”) will tend to win over less “liberal,” i.e., illiberal or oppressive states.
Looking only at modern history, we can so explain first the rise of liberal Great Britain to the rank of the foremost world empire and then, subsequently, that of the liberal United States. And we can understand a seeming paradox: why it is, that internally liberal imperial powers like the United States tend to be more aggressive and belligerent in their foreign policy than internally oppressive powers, such as the former Soviet Union. The liberal US empire was sure to win with its foreign wars and military adventures, while the oppressive Soviet Union was afraid that it might lose.
But empire building also bears the seeds of its own destruction. The closer a state comes to the ultimate goal of world domination and one-world government, the less reason there is to maintain its internal liberalism and do instead what all states are inclined to do anyway, i.e., to crack down and increase their exploitation of whatever productive people are still left.
Consequently, with no additional tributaries available and domestic productivity stagnating or falling, the empire’s internal policies of bread and circuses can no longer be maintained. Economic crisis hits, and an impending economic meltdown will stimulate decentralizing tendencies, separatist and secessionist movements, and lead to the breakup of empire. We have seen this happen with Great Britain, and we are seeing it now with the United States and its empire apparently on its last leg.
There is also an important monetary side to this process. The dominant empire typically provides the leading international-reserve currency, first Britain with the pound sterling and then the United States with the dollar. With the dollar used as reserve currency by foreign central banks, the United States can run a permanent “deficit without tears.”
That is, the United States need not pay for its steady excesses of imports over exports as is normal between “equal” partners, in having to ship increasingly more exports abroad (exports paying for imports). Rather, instead of using their export earnings to buy American goods for domestic consumption, foreign governments and their central banks, as a sign of their vassal status vis-à-vis a dominant United States, use their paper-dollar reserves to buy up United States government bonds to help Americans to continue consuming beyond their means.
I do not know enough about China to understand why it is using its huge dollar reserves to buy up US-government bonds. After all, China is not supposed to be a part of the US empire. Maybe its rulers have read too many American economics textbooks and now believe in alchemy, too. But if only China would dump its US treasuries and accumulate gold reserves instead, that would be the end of the US empire and the dollar as we know it.
DAILY BELL: Is it possible that a shadow of impossibly wealthy families located in the city of London is partially responsible for all this? Do these families and their enablers seek world government by elites? Is it a conspiracy? Do you see the world in these terms: as a struggle between the centralizing impulses of elites and the more democratic impulses of the rest of society?
HOPPE: I’m not sure if conspiracy is still the right word, because in the meantime, thanks to people such as Carroll Quigley, for instance, much is known about what is going on. In any case, it is certainly true that there are such impossibly rich families, sitting in London, New York City, Tel Aviv, and elsewhere, who have recognized the immense potential for personal enrichment in the process of state- and empire-building.
The heads of big banking houses played a key role in the founding of the Fed, because they realized that central banking would allow their own banks to inflate and expand credit on top of money and credit created by the central bank — and that a “lender of last resort” was instrumental in allowing them to reap private profits as long as things would go well and to socialize costs if they wouldn’t.
They realized that the classical gold standard stood as a natural impediment to inflation and credit expansion, and so they helped set up first a phony gold standard (the gold-exchange standard) and then, after 1971, a pure fiat-money regime. They realized that a system of freely fluctuating national-fiat currencies was still imperfect as far as inflationist desires are concerned, in that the supremacy of the dollar could be threatened by other, competing currencies such as a strong German mark, for instance; and in order to reduce and weaken this competition, they supported “monetary integration” schemes such as the creation of a European Central Bank (ECB) and the euro.
And they realized that their ultimate dream of unlimited counterfeiting power would come true only if they succeeded in creating a US-dominated world central bank issuing a world paper currency such as the bancor or the phoenix; and so they helped set up and finance a multitude of organizations, such as the Council on Foreign Relations, the Trilateral Commission, the Bilderberg Group, etc., that promote this goal. As well, leading industrialists recognized the tremendous profits to be made from state-granted monopolies, from state-subsidies, and from exclusive cost-plus contracts in freeing or shielding them from competition, and so they, too, have allied themselves to and “infiltrated” the state.
There are “accidents” in history, and there are carefully planned actions that bring about consequences that are unintended and unanticipated. But history is not just a sequence of accidents and surprises. Most of it is designed and intended. Not by common folks, of course, but by the power elites in control of the state apparatus. If one wants to prevent history from running its present, foreseeable course to unprecedented economic disaster, then, it is indeed imperative to arouse public indignation by exposing, relentlessly, the evil motives and machinations of these power elites, not just of those working within the state apparatus, but in particular also of those staying outside, behind the scenes and pulling the strings.
DAILY BELL: It has been our contention that just as the Gutenberg press blew up existing social structures in its day, so the Internet is doing that today. We believe the Internet may be ushering in a new Renaissance after the Dark Age of the 20th century. Agree? Disagree?
HOPPE: It is certainly true that both inventions revolutionized society and greatly improved our lives. It is difficult to imagine what it would be to go back to the pre-Internet age or the pre-Gutenberg era. I am skeptical, however, if technological revolutions in and of themselves also bring about moral progress and an advance toward greater freedom. I am more inclined to think that technology and technological advances are “neutral” in this regard.
The Internet can be used to unearth and spread the truth as much as to spread lies and confusion. It has given us unheard of possibilities to evade and undermine our enemy the state, but it has also given the state unheard of possibilities of spying on us and ruining us. We are richer today, with the Internet, than we were, let’s say, in 1900, without it (and we are richer not because of the state but in spite of it). But I would emphatically deny that we are freer today than we were in 1900. Quite to the contrary.
DAILY BELL: Any final thoughts? Can you tell us what you are working on now? Any books or websites you would like to recommend?
HOPPE: I once deviated from my principle not to speak about my work until it was done. I have regretted this deviation. It was a mistake that I won’t repeat. As for books, I recommend above all reading the major works of my two masters, Ludwig von Mises and Murray Rothbard, not just once, but repeatedly from time to time. Their work is still unsurpassed and will remain so for a long time to come. As for websites, I go most regularly to Mises.org and to lewrockwell.com.
As for other sites, I have been called an extremist, a reactionary, a revisionist, an elitist, a supremacist, a racist, a homophobe, an anti-Semite, a right-winger, a theocrat, a godless cynic, a fascist and, of course, a must for every German, a Nazi. So, it should be expected that I have a foible for politically “incorrect” sites that every “modern,” “decent,” “civilized,” “tolerant,” and “enlightened” man is supposed to ignore and avoid.
DAILY BELL: Thank you for your time in answering these questions. It has been a special honor to address them to you in the context of your remarkable work.
HOPPE: You’re welcome.