Freedom and Money (1)

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I.

I have concluded my post The Tax-Monetary Regime of the Modern State — Stationary Bandits and Refined Coercion by stating:

Money and taxes are the way in which the modern state organises exploitation.

In a post — Exploitation —, in which I criticise Marx's concept of exploitation, I show that differential power is an inalienable attribute of every human community, and hence integral part of the social relationships relating people to one another within the productive processes of an economy.

In my vocabulary, the presence of political scarcity i. e. the absence of unanimity and the consequent  need to reconcile differing preferences concerning issues considered of weighty moral and social significance, is ubiquitous in societies from the very beginning of human togetherness to today's states.

This is overlooked by communists as well as libertarians, both of whom demand emancipation from politics and its most powerful facilitator — the state. Politics is the type of activity we engage in to ameliorate political scarcity, i. e. reduce it by making it more sufferable and thereby ideally transform it into arrangements of mutual understanding that make for social peace and coherence despite irreducible disagreement and conflict.

The state has evolved to be the most powerful facilitator of politics, by virtue of its singular capability to enforce what is to be respected by everyone as being socially valid. It can (en)force social reconciliation, it can compel people to accept the settlement of issues raised by political scarcity.

Now, in exercising this ability it may not be effective and successful in the medium to long term, in which case it will have to adjust to the needs of the community or eventually degenerate and/or be superseded by new structures of maximal power. But there will always be a state, a structure of maximal power.

The important point is that the state, in being the monopolist of coercion and most effective wielder of power, can also be the most effective facilitator of politics. In other word, if you are looking for the relatively best solutions for problems engendered by political scarcity, you are looking for solutions that will involve the state. You may not find such a solution, but if you do, the state will play a central role in the successful outcome.

Neither Marx nor Hayek understand this. Both propose regimes of freedom — communism and liberalism. Both ignore the need of politics and the state to ensure social conditions preventing anarchy and allowing for gradual improvements in peaceability, social coherence as well as personal and national wealth.

Naturally, the state is an ambiguous institution, precisely by virtue of its ability to force a minimal level of acquiescence and compliance in a human community. Marxists and Hayekians fail to appreciate this inescapable ambiguity, rushing to provide criticisms of the state and alternatives to it that miss the point.

The point is that we must try to shape and influence politics and the state in such a manner as to exploit their potential of being the most effective instrument in mitigating political scarcity. The point is not to condemn the state categorically for its innumerable deficiencies, the point is to make it incrementally better.

A final note on the ambiguous nature of the state, before I conclude by explaining the intimate relationship between freedom and money: being the most successful evolutionary product in terms of dealing with political scarcity, people are reluctant and, indeed, strongly inhibited in practical terms, to discard the state. Simply put, the reason why, is that any (state-like) regime providing for political dominance is better than sheer anarchy. Even in the presence of a very bad type of state, people will find it difficult to call for the abolition of the state as such in view of the many consciously recognised, culturally accepted and customarily consumed "goods" provided by the state. A totalitarian state, its unbearable excesses notwithstanding, will still (promise to) offer many of the welcome and indispensable services of a state — which is why many people under Stalin and Hitler were unable to ascribe the regime's failings to the Stalinist or the Nazi state, respectively. In fact, the good a state is capable of tended to be identified with the person of Stalin and Hitler. The bad was held to be due to evil foreign and internal enemies — not the state. 

This is no different today, when the majority of people tend to acquiesce in what the state delivers, propagandises, or truthfully claims, while at the same time in a functional pluralistic-democratic order there is a constant flow of undercurrents driven by the process of political competition that keep eroding the status quo and gradually rebuild a new base on which the emergent political status quo will eventually rest. 

[Personal note: 14:20, 4 November 2018 — first food in nearly six days of fasting: an apple. Delicious, though I did enjoy fasting.]

II.

Structures of maximal power, meaning the modern state, have evolved precisely because of their ability to wield insurmountable power over all members of a community. Typically, this feature of total dominance cannot be maintained for long unless it is balanced by forms of social service that (a) genuinely support the viability of the community and (b) meet approval of the populace. The process of mitigating total power to achieve (a) and (b) may be very complex and imperfect, but it is also amenable to conscious improvement.

As I have written here on the evolution of the state:

If the roaming bandits become stationary bandits, if they settle among the victims of their raids, they will inevitably develop a certain interest in improving the very conditions of production which is the spring of their wealth. Exploitation becomes more ample for the exploiter and less disadvantageous for the exploited. There is more left for both. As Olson puts it, the bandits develop "an encompassing interest" in the community from which they steal. Actually, the line between pilferage and exchange begins to blur, when the bandits take into consideration and even cater to some of the needs of the community. Being resident owners of a territorially delimited precinct of exploitation, it is in their self-interest to ensure peace and orderly conditions and provide a range of other public goods liable to make the task of ruling more tractable, efficient, and profitable.

Pillars of the Successful State

Successful states allow themselves to be bound by rules which limit, control, and thereby, ultimately, increase their power/capabilities/resources. They accommodate within the structures of maximal power a political system that is superior in coping with political scarcity, the best type of which so far is pluralist democracy. So, an effective process of political competition appears to be one of the major pillars that make for a state that is maximally powerful and at the same time maximally benign. Again, it is still ambiguous and subject to imperfection and severe discontent among the people — after all, we are dealing with approximations and perfectible socio-political developments.

Another pillar consists of the organisational structure and the functional capabilities ensuring that the state is effective in wielding the power implied by its mandate.

The first pillar has a stronger exogenous component — emphasising the public influence on it —, the other a more intrinsic component — the effectiveness of its design and self-organised proceeding.

Money and Freedom

The monetary order of modern states is not a spontaneous product of free  markets. Instead it is organised, managed and enforced by the state. It has a very strong coercive side to it, rooted in traditions of exploitation from times when coercion was less refined, less socially beneficial for the broader population — remember the roaming bandits.

However, the monetary order sustained by the coercive state has also very strong features of social support, making pivotal contributions to the common weal — actually defining the common weal for the first time in a sense that is inclusive of the entire population as it never had been before.

The fiat money system organised by the state is the precondition for Promethean economic growth  and hence the key to man's escape from mass poverty and Malthusian cycles of annihilation which has been the gruesome fate of human beings until 250 years ago.

A strong state is the precondition for a free society with a powerful economy, as we shall spell out more fully in Freedom and Money (2). But such a strong state depends on growing freedom both as a prerequisite and an attendant feature of its development. To become strong and viable, a modern state needs the pressure of those who want it to be accountable and constrained constitutionally, politically and judicially. Provided it is steering into that direction, the state will create an increasing economic basis for individual freedom (and thus alternative and competing attempts at solutions to the challenges individuals and the community face every day). But social freedom will grow at the same time — the kind of freedom that enhances the options for the community as a whole, for instance, the ability to guarantee medical health care and retirement for all members of society.

In organising the fiat money regime analysed by MMT, the modern state is instrumental in creating social freedom that supports and enhances individual freedom. For only a regime of fiat money can support ongoing economic growth which, in turn, is required to maintain the economic base of a society with high levels of individual freedom.

Continued here.