The Question Libertarians Supposedly Can’t Answer, Answered

"If your approach is so great, why hasn’t any country anywhere in the world ever tried it?" writes Michael Lind of Salon.com.

Supposedly this is the great impossible question which entirely refutes the efficacy of a free and voluntary organization of society. Lind argues in his article that, since no nation has ever tried it, it must not actually be a plausible means of social organization. The errors with this line of reasoning are many.

For starters, the question is a non-sequitur. It does not logically follow that because no geographical area has tried it, free people living among themselves could not work.  In order to actually make this determination, controlled testing would need to be conducted. However, no state in its right mind would ever agree to establish such a test case.

Imagine if the state of Nevada, and the U.S. federal government, agreed to set aside a 50-square-mile area in the middle of the Nevada desert that would be entirely free from any legal jurisdiction. I'd wager that within a matter of a decade, that 50-square-mile area would transform itself in an economic powerhouse rivaling Hong Kong.

Every major international corporation would seek tax asylum there.  Every person that currently banks with the Swiss or Cayman Islands in order to hide their wealth would bank there instead. Pharmaceutical producers would flock there by the thousands to escape regulations. Currency exchanges that allow for wealth preservation (money laundering) would spring up overnight. The financial incentive for industry to move into that area would be absolutely enormous. The city of Las Vegas itself grew out of a lack of regulation. Why do you think Vegas is in the middle of a desert?

The biggest gripe by the Southern states leading up to the U.S. Civil War was that the Northern states were not holding up their end of the constitutional bargain. The Northern states were refusing to return runaway slaves, which effectively created a vacuum of freedom. Prior to the Northern states' rejection of slavery, the slaves in the South had nowhere to run. But once the North stopped returning slaves, a mass exodus of slaves followed shortly thereafter.

It must be recognized that taxation, along with inflation, is effectively a form a slavery. The same thing that happened with the Southern slaves will happen with productive citizens, if a zone of freedom is made available to them. The act of taking wealth which is not earned by force is effectively the same as forcing a victim to work for free. What is the difference between taking $100 from a computer programmer or forcing the computer programmer to work for you for free for the same amount of time it would have taken him to earn $100?  There is no effective difference.

While taxation is a milder form of slavery, since taxes typically don't take all of what a person earns, the incentive to flee to a tax-free zone is directly proportional to the amount of taxes levied.  As tax burdens and inflation rise, the incentive for productive citizens to flee rises. All state governments know this, so they act accordingly. This is why states have capital controls between nations, why states have immigration controls, and why states cooperate with each other in dealing with international tax evaders. One small zone of freedom is all it takes to undermine the financial resources of every state entity on the face of the earth.

It's worth noting that Hong Kong is consistently rated the most economically free nation on the planet. Hong Kong is only 426 square miles in size (smaller than Los Angeles), yet it packs a population of over seven million people (more than double L.A.'s population). This is what happens when a relatively free zone borders a communist country — people move there. The more freedom a zone offers, the higher the incentive to move there becomes.

Further, there are other factors at play when it comes to understanding why no completely free zones exist on the planet. It might be argued that if freedom actually worked, we should expect governments to adopt it! But clearly this assertion has some major logical problems. It should be understood that there really is no such thing as a "state." No one can point and say, "here is the state!" States are nothing more than term for a group of people who have assumed power over others.

Since states are composed of individual actors, we have to look at the self-interests of those who support the state. It is in the self-interest of bureaucrats to take the wealth of the productive. It is in the self-interest of poor people to take the wealth of the rich. It is in the self-interest of corporations to use regulations as a barrier to market entry. It is in the self-interest of bankers to get bailouts and artificially depress interest rates. It is in the self-interest of the drug cartels to keep drugs illegal. And so on and so forth. As Frédéric Bastiat said, “The state is that great fiction by which everyone tries to live at the expense of everyone else.”

Coercively funded governments work on the exact opposite principles of the free market. In the free market, if a corporation is producing a product or service that people don't value, they will be driven out of business. However, the same is not true for political "services." If a politically organized "service" doesn't work the way it was envisioned, typically it will be subsidized more than it already is. There is no way for the public itself to have a say in what "services" are funded, other than through the electoral process. It should be self-evident that defunding any program is not in the best interest of any politician, because it will cost him the votes of those people who are employed in carrying out that service. These perverse incentives almost always cause the state to expand over time, rather than contract.

So what we are left with is a situation where the smallest and most free governments will, over time, generally tend to become the largest and most intrusive. A large amount of economic freedom creates a tremendous capital base that the state can draw from over a long period of time. This is why states that have always tended to be socialist are poor, while states that were more free in the past and have become socialist over time, are relatively richer by comparison. This is not a hard-and-fast rule, as the size of a state and the type of political organization employed can have a large impact on the growth rate of government, but does make for a good rule of thumb. It also helps explain why no completely free zones presently exist on the planet.

The question remains as to just how a completely free and voluntary society might organize itself, but luckily, some very bright economists have done some work to show how a system of property rights, law enforcement, and national defense might come about. If you're interested in an overview of voluntarism, I recommend checking out the following video by economist David Friedman:


To sum up, I think I've effectively answered Lind's question. Libertarians can indeed present arguments against the non-sequitur offered by Lind.  

How much do you trust the information in this article?

Michael Suede

Michael Suede is an Austrian economist and author who holds a business degree from the University of Wisconsin. Michael's articles have appeared in numerous economics publications. Michael is also one of the few economists who is well versed in the economics of voluntary crypto-currencies such as Bitcoin. Michael is a veteran of the US Navy and an advocate of voluntarism. Michael authorizes the use of all his content under Public Domain copyright. Any organization or individual may freely republish, edit, modify and distribute Michael's works without restrictions.

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