The Tax-Monetary Regime of the Modern State — Stationary Bandits and Refined Coercion

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The modern state emerges when roaming bandits turn into sedentary bandits. Instead of looting the sources of their wealth along their itinerary of nomadic robbery, they become territorial discovering a less destructive and more profitable form of exploitation. A refinement of coercion occurs. 

As we shall see further below, the modern monetary state belongs in this tradition of refined coercion. It exerts pressure on the population to exact tribute from it, nowadays predominantly by threats of persecution rather than manifest violence, of which the state, of course, is quite capable as everybody is aware of. 

The modern state has developed the advantages of benign suppression far beyond the attainments of the first stationary bandits, but as we shall see later on, in many ways it remains a robber of the people, an entity that utilises its monopoly of coercion to exploit its subjects. However that exploitation is part of a trade-off widely regarded as reasonable most of the time.

As I have written here in The State - (6) - [Draft]:

§ 29 - From Roaming Bandits to Stationary Bandits - The State's Advantage over Anarchy 

Nothing is worse than anarchy. The state is guaranteed a floor of attraction in that it is capable of saving people from anarchy. In Mancur Olson's theory of the state, anarchy is characterised by a world in which roaming bandits appear more or less regularly to raid and rob productive settlers. Under these conditions, the size and growth of distributable wealth is severely limited. There is little incentive to invest and produce goods, especially of a kind that is easily stolen. In fact, the roaming bandits and their victims are trapped in a sub-optimal equilibrium. Their forays are far less profitable than other forms of confiscating a society's wealth. The relationship between robbers and robbed could be improved to the advantage of both. How? 

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. High levels of exploitation notwithstanding, compared to anarchy, under the regime of stationary bandits life is still better, allowing for greater efficiency, security, productive innovation and progress, however slim and slow. From the Neolithic revolution to the French revolution, the development of our civilisation takes place mostly in the presence of regimes of stationary bandits. 

The powers-that-be have good grounds to care for the common weal, in however limited and imperfect manner, while the governed populace also have reason to welcome a rule that limits the incidence of violence, robbery and utter arbitrariness. The improving qualitative leap from anarchy to stationary banditry is very large — which is the easier forgotten the more normal is becomes to live in a world pacified and rendered orderly by the state. Also, the population will tend to rank certain fundamental conveniences provided by the state, especially peace and security, higher than others that are lacking or being only deficiently provided for. On balance, even a rather imperfect state will enjoy support or acquiescence by the population, especially if there are avenues for gradual improvement and the voicing of grievances.

Power is the means, coercion the effect of that means. 

The modern stationary bandit exerts its (monopoly of) power and coercion by creating a new phenomenon that is generally dreaded, motivating people to escape it if only they can: unemployment. 

What is unemployment? It is the inability to secure the employment that yields income sufficient and acceptable to pay the state the tribute that it imposes on its citizens. 

Nowadays this tribute takes the form of taxes.

By demanding payment of taxes in a kind of money that only the state can issue, the state is capable of putting every citizen into a state of unemployment:

Think of the hut tax. The British demanded from the indigenous population of an African region to pay a tax on their huts on penalty of losing the hut. The tax was payable in the currency determined by the British. The Africans did not have that currency. They needed to get hold of it. They had to earn it. Not being in a position to earn income denominated in that currency meant people were unemployed — without work from which only they could uphold their livelihood.

Remember, only the state can issue that currency. If the state does not offer this money to its tax debtors, people are not only unemployed (without work that pays the kind of money needed to honour the tax liabilities that the stationary bandit imposes on the citizenry), they are criminals liable to lose their freedom. Taxes are a price one pays to remain free and unpunished. That is the nakedly coercive side of modern tributes called taxes.

Like any good old stationary bandit, the modern state uses its coercive power to extract wealth from its subjects. In order to avoid imprisonment or worse, people must offer the state something it wants. Goods, services, labour used by the state to pursue its purposes. In return, the providers of these inputs receive that very special kind of money issued by the state which is uniquely authorised to redeem the tax debts imposed on the population. Serving the state, they receive state money which they can use to pay for the right to remain free and unpunished.

Before the state can collect the tax tribute, it must first issue this very tribute, spend state money to reward those who are willing, or in fact, eager to provide the state with what it needs to function as a state.

The state spends before it can collect taxes. It does not tax in order to be able to spend. 

It creates money to make people depend on it.

It spends money into existence to reward those who provide the state with what it needs to accomplish its mandate.

It takes money from the rewarded and other users of the state's currency (i. e. it taxes them) to limit their claims on the output of the economy. To the extent that purchasing power is reduced through taxation, the part of the economic pie available to non-government agents is reduced, leaving more for the government to shop.

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