Is Anarcho-Capitalism Viable?

The Path to a Libertarian Order is Systematic Privatization

Politics in all its variants, particularly the politics of political parties, is the archenemy of freedom, prosperity, and peace. Yet wherever one looks, more government is invoked as the solution.

Very rare are the voices that claim that a different way is possible. Few speak out in favor of anarcho-capitalism and a libertarian social order.

It is quite common nowadays to announce with confidence the verdict that anarchism, a society free of a repressive state, was possible. For most people, a libertarian social order is a pipe dream. False accusations abound, such that anarcho-capitalism would bring injustice and disadvantage the poor.

The precarious standing of libertarianism has partly to do with how history evolved. Societal evolution took a wrong turn when Rome vanquished Carthage and instead of a commercial society, militaristic statehood gained the upper hand. More than two thousand years of Caesarism have made the belief widespread that there is no alternative to politics and the state. Hierarchy and authoritarianism have come to be seen as the natural way of societal organization, not recognizing that such orders are imposed.

Libertarianism means a private law society. In social a commonwealth, private businesses in the marketplace provide the traditional functions of the state. The voluntary contract order of anarcho-capitalism substitutes the hierarchical commando-coordination of activities of the state. The basic meaning of anarcho-capitalism is an order where horizontal cooperation based on voluntary exchange dominates the coordination of human activities.

The spontaneous order of an anarcho-capitalist society requires that it must come about as a gradual process of privatization. Beginning with the ending of subsidies and regulations and the sale of semi-public enterprises and public utilities, privatization should extend step by step to education and health and finally would also encompass security and the judicial system.

There is ample evidence to be convinced that the so-called ‘public services’ will become better and cheaper under anarcho-capitalism. Under a comprehensive free market system, the demand and offer for education, healthcare, defense, and domestic security would be much different from how it is now. Privatizing the activities, which now are under the authority of the state, would not only lead to a decrease in the costs per unit of the services but also change the character of the products.

Because most of the current supply of so-called ‘public goods’ is a useless waste, a huge burden would fall off from the taxpayers. With none of the genuine benefits of education, healthcare, and defense getting lost, these goods would be tuned to the wishes of the consumers and be provided most efficiently. Costs would fall to a fraction of their present size.

If one includes the overblown judicial and public administration apparatus into the reduction of state activity, government spending, which nowadays is close to fifty percent of the gross domestic product in most industrialized countries, would come down to the single digits. Contributions would fall by ninety percent, while at the same time, the quality of the services would rise.

Different from what is presently the dominant belief, privatizing the police functions, and the judiciary is not such a big problem. It would mean to extend what is already going on. In several countries, including the United States, the number of private police and security already exceeds the number of official policemen. The private provision of judicial services is also on the rise. Arbitration courts experience a strong and increasing demand including services for cross-border disputes.

These trends will continue because private protection and arbitration are cheaper and better than public provision. In Brazil, for example, which entertains one of the most expensive judicial systems in the world, currently about eighty million cases are pending without decision, and legal uncertainty has become monstrous. In the United States, many parts of the judicial system have gone berserk.

The solution for the present problems is not more but less government, not more but less state, and not more but fewer politics. The current curse on young people to either have a well-paid fixed job or live on the borderline would vanish. Anarcho-capitalism means high productivity and ample free time. In an anarcho-capitalist society, salaried drudgery will no longer be the norm but individual self-employment.

Anarcho-capitalism is not a system to be established by some party or a strongman. A libertarian commonwealth should emerge as a spontaneous order. The right way, then, towards a libertarian society is negative action. The task ahead is the removal of subsidies and regulations. Instead of creating more laws and new institutions, the mission is to abolish laws and institutions. For that to happen, a change of public opinion is required.

In as much as the insight gains ground that not more politics and more state is the solution, the more the libertarian movement will gain momentum. To accomplish this, the will is necessary to demand and achieve privatization of as many public institutions as possible.

Privatization is a means, not a goal. Privatization serves to bring a supplier of goods under the control of the general public. In the free market, the customers determine which companies stay in business and which need to close. Under the current system of state capitalism, large parts of the economy are controlled by politics and the technocratic apparatus.

Privatization puts businesses under the regime of profit and loss and thus under the control of the customer. Profit is the key to capital accumulation and thus prosperity. Corporate profit is the engine of economic progress and, at the same time, the result of economic advancement. Only an economy that thrives generates profits. By the same logic, one can say that profits drive the economy toward prosperity.

For private companies, the size of the profit depends on the degree to which a company operates efficiently and that its product is useful in satisfying the tastes of the public. Yet, privatization per se is not enough. It must be accompanied by deregulation. In the past, many cases of privatization failed because the regulatory framework was not removed. Old barriers to entry continued to exist.

Another error often made has been hastily privatizing public companies that provide essential services instead of beginning with the obvious: cutting the subsidies. Deregulation and removing subsidies are crucial preconditions for privatization to succeed. Capitalism requires competition, and competition needs low barriers to entry.

Anarcho-capitalism denotes an economic order where the entrepreneur guides the company according to the command of profit and loss. These, in turn, depend directly on the actions of the customers. The laws of profit and loss compel the entrepreneur to employ his capital for the benefit of the consumers. In this sense, the market economy functions as a permanent selection mechanism in favor of the allocation of resources where there is the greatest degree of productivity and well-being.

To be successful, privatization needs to be seen as a step within a set of measures to establish a free-market economy. To work well, privatization needs to be accompanied by the opening of markets – including free international trade – by reducing bureaucracy and making the labor market more flexible.

Fundamental prerequisites for free markets to work are sound money and a low tax burden. Privatization of the economy must fail as long as the monetary system is subject to political and technocratic control and high tax burdens constrict the economic actions of the individual.

In the market economy, there is a permanent plebiscite regarding these ideas of entrepreneurs.  Private companies need to respond to the desires of consumers because they are the ones who indicate their preferences for the acts of purchase. Democratic choice in politics is systematically worse than the decision in the market. While most purchasing decisions allow for correction and replacement immediately or in a short space of time, political decisions have long-term consequences that often go beyond the control and intellectual horizon of the electorate.

Prosperity is the goal, and anarcho-capitalism delivers it. The basic tenet in favor of privatization follows from the insight that private ownership of the means of production – and thus privatization – guarantees economic progress and prosperity for all.

 Markets aren't perfect – and neither are entrepreneurs nor consumers. Capitalist production cannot fulfill all the wants or needs of every person. No system can. The market system does not eliminate scarcity for everyone, but the market system is that economic order that best deals with the universal presence of scarcity.

Anarcho-capitalism, correctly understood, does not fall into the same category as socialism. Socialism needs to be imposed. Its establishment and maintenance require violence. With anarcho-capitalism, it is different. It will arise spontaneously through the removal of the barriers that stand against the natural order of things.