Entrepreneurship in a Stateless Society

Given the State’s far-reaching involvement in various aspects of our lives today, it’s clear that the absence thereof would at least to some degree have led to an alteration of the social and economic arrangements presently characterizing our societies. Anarchists all agree that a stateless society would, generally speaking, turn out better than a Statist one, but they differ on the desirability of certain modes of interpersonal interactions and the likelihood of how they would manifest themselves. The 19th-century Anarcho-Syndicalist Dyer D. Lum (1890) argued, for instance, that “Rent, Wages, Interest, Profits, Taxation, are not natural but artificial, having no claim in equity, founded on privilege and only maintained by the denial of equal freedom,” which right-wing free-market Anarchists would disagree with except for the case of taxation. I’ve previously reflected a bit on the ethical justifications for voluntary hierarchies (Kløvning, 2019a), which left-wing Anarchists [1] like Lum tend to oppose as a matter of principle, so I will here focus more on how economic affairs would be more or less likely to be altered as derived through the praxeological method (The Praxeological Academy, 2019), with basis in the four first economic phenomena Lum decried above.

Employment

Wages and profits are necessarily interrelated, and although these are considered undesirable (based on the labor theory of value) and dispensable for a stateless society (as a principled stance against all hierarchies) by left-wing Anarchists, there are strong reasons to believe it would’ve emerged spontaneously without the State, although I’ll argue that it may have had certain key differences. In a stateless society, as in a Statist one, entrepreneurs will need to hire people to actualize their ideas and scale their businesses, and non-entrepreneurs need money to survive and thus are willing to offer their work in exchange thereof. Any serious attempt to enforce against such employment being instituted will, therefore, tend to lead to the establishment of a central authority, which is an important reason I’ve previously argued that Socialism, as the term is commonly understood, cannot in the long term be reconciled with Anarchy in practice (Kløvning, 2019b).

Still, I agree with left-market Anarchists that the employee-employer relationship would likely have certain differences in a stateless society from our current status quo. The schooling we’ve gone through is necessarily interlinked with how we view employment, and the State school system most of us have spent over a decade of our lives going to is, namely, designed to prop us up to become suitable for an employee-status in the marketplace, and taught us that that’s pretty much the only alternative we’ve got. As John Taylor Gatto (2003) has documented,

Spartan ideas of management came to American consciousness through classical studies in early schooling, through churches, and also through interest in the German military state of Prussia, which consciously modeled itself after Sparta. As the nineteenth century entered its final decades American university training came to follow the Prussian/Spartan model. Service to business and the political state became the most important reason for college and university existence after 1910. No longer was college primarily about developing mind and character in the young. Instead, it was about molding those things as instruments for use by others.

How things were prior to this development may provide us with an indicator of how it could be in a stateless society where this mental entrapment would be absent. Joseph Stromberg (2009) has, for instance, contended that

A typical nineteenth-century American “self-help” book aimed at young men did not say, “Get a job working for wages within an increasingly in tricate division of labor so as to enjoy a greater variety of consumer goods.” Instead, it said, “Get yourself a competency” – a vision fraught with republican implications suitably modernized. Working for wages, if one did it at all, was a temporary stage – to be endured while learning a skill or trade and abandoned later in favor of real or potential independence.

It may be said that private schooling in a stateless society would be no guarantee of becoming acquainted with some of the many alternatives to accepting a life-long wage job (such as entrepreneurship or living a minimalist lifestyle off the grid), and though I think competition and a lack of State interference in education would make such alternatives more likely to be taught, I grant its theoretical possibility. We are naturally ignorant of the alternatives we haven’t been told about and haven’t thought through ourselves, and parents have the most influential role in raising their children in the best way they can and informing them of the different opportunities life has to offer to the extent they’re familiar with them. School may be more suitable for some than others, and the same thing may be said about employment: For many, it’s necessary for a while, while others do just fine without it.

With the possibility to grow your own food without being bothered by the FDA or EPA (or whatever agencies regulate food and agriculture in your country) all the time, starving wouldn’t necessarily be the only alternative to employment, and one could also just use employment as a temporary stage to save up money to start a business for oneself. As there would be no central bank in a stateless society, there would be little inflation (if any – based on the historical record, deflation might be expected to be the trend), as well as no taxes, so it would be significantly easier to save up the money required to start one. On top of that, the absence of State licenses, permits, regulations, and taxes for new business owners makes the barriers of entry drop significantly in a stateless society compared to a Statist one. With such unnecessary costs gone, there seems to be much reason to believe that far more people would dare venture to become entrepreneurs in the absence of the State [2].

In short, employment would likely not be so much of an inevitability for all enter into in a stateless society, but rather only a temporary stage for those who want to start something up for themselves or just save up a lot of money to raise one’s living standards depending on the situation. These things can both be done in a Statist society as well, but only with a great degree of difficulty in comparison to in a stateless one. Of course, this by itself may not satisfy many left-wing Anarchists who see total egalitarianism as their ultimate goal, but with the standard that individuals should have a wide arrange of opportunities available for them to follow as simply as possible, I consider a stateless society as I’ve described it here to be vastly superior to a Statist one by a vast proportion. 

Large Businesses

An increasing degree of competition as a result of the surge of new entrepreneurs entering the market will naturally lead to large businesses having their market share constantly threatened, and with the lack of State privileges, subsidies, and bailouts, they will have no easy time holding onto it. There’s thus reason to believe that there to some degree would be less inequality in a stateless society [3], but I think there still would be some degree remaining albeit with a different standard than a Statist one.

A stateless society has the ideal free market, where you can only gain a profit and a larger market share by providing something of value that people want. One company or another must have the highest quality or lowest price on some goods or services provided at a given time and thus be able to legitimately acquire a larger market share. However, they will still constantly be at the risk of going out of business if they don’t maintain that status, to be replaced by some competitor(s) eager to supersede them by taking advantage of their weaknesses.

To use Lum’s terminology, there is more plasticity in the economy of a stateless society in comparison to the fixity in a Statist one. Companies already do frequently change in rank of market share, large businesses go bankrupt, new ones become dominant, etc. in relatively free-market Statist societies, but this would be occurring to a much greater degree with the absence of the State.

Bosses

It can be deduced from what has hitherto been said that the bosses (employers) in a stateless society would have to treat their workers better and focusing more on motivating them to work than merely dictating to them what to do. Though the extent would depend on the organizational structure of the business, competition would incline the employer to be more like a leader than a boss, in the sense the terms are used in the figure below, as studies indicate that motivation plays a significant role in increasing worker productivity (Khan, 1993; Hackman, 1980; Shahzadi et al., 2014).

The differences between a boss and a leader.

If only for the sake of keeping up with the competition, employers will be incentivized to motivate their workers for increased productivity lest some competitor snatches their place for failing to realize the importance thereof. Such competition serves as a self-regulating mechanism for the marketplace, making State regulations of workplace conditions unnecessary and even undesirable in the long term for replacing it.

Cooperatives, Communes, and Flat Organizations

Due to their distaste for hierarchies, left-wing Anarchists tend to prefer egalitarian structures, emphasizing the importance of cooperatives and communes, and that organizations would, in general, tend to be a lot flatter in a stateless society. Some of them concede, however, that such egalitarianism would require an alteration in the mindset and human nature to actualize, though certain historicists consider this development inevitable. William Godwin ([1793] 1994, p. 75), for instance, has claimed that “the intellect has an infinite tendency to raise itself […] Reason must develop itself further. What it perceives as correct, it will sooner or later venture to actualize. This is an unavoidable law of human nature.”

We must first emphasize that the state of equality that we advocate is not a result of coincidence. It is not an equality that is forced from above by the authorities or after overeager pressures by a few enlightened philosophers. This must be an equality that is created for the serious and well-reflected conviction of society as a whole. We will without further ado assume that such a conviction can exist among a certain number of people living along, and if it is possible in a small community, we see no reason to doubt that it’s also possible in an ever bigger society (p. 43) [my translation].

Egalitarian structures of production would, of course, be possible to establish in a stateless society, and right-wing Anarchists have nothing against that as long as it’s done voluntarily, but where they disagree is the empirical question of which organizational structure would be most efficient for providing the goods and services they’re set up for.

Flatter (meaning less hierarchical) organizations is preferable where a lot of creativity and innovation is required, but where work tasks are more standardized (such as in producing cars), hierarchies seem unavoidable to get any production done and to stay in business, no matter the egalitarian convictions the employers may have. Hence, flat organizations, and even more so with cooperatives and communes, may be suitable for certain modes of production, but to acquire certain other goods and services, they would need to trade with or purchase from more hierarchical businesses.

Rent

Rent as an economic phenomenon arises from the incentive to let others use one’s land or property in exchange for money. The tenant is dependent on the renter to keep a place to stay and will be evicted therefrom if the rent runs sufficiently overdue. Left-wingers, both of the Statist and Anarchist variety, tend to infer from this that the renter is exploiting the tenant. Indeed, it may sound insufferable to hear about folks becoming homeless for failing to pay rent on time, but one must recall that they’re not entitled to the property of the renter, and one cannot expect them to provide free housing to anyone who needs it.

The tenant might, however, expect to find his/her circumstances more preferable in a stateless society. Without property taxes, the costs of the renter would be far lower, making it possible for him to decrease the rent. Without zoning laws and rent controls, it would be far easier for new house investors to enter the market, increasing supply leading to a decrease in rents. Without the income tax, sale tax, and inflation, the tenant would also be free from State parasites extorting him, making it a lot easier to keep up on rent and being able to escape perpetual poverty. Possibly he may also be able to save up enough to own an apartment or house at one point, at least with far less difficulty than it is in a Statist society.

Interest

Interest payments are a result of time preference, i.e. the extent to which one prefers to have something now more than in the future. I prefer having my money available at the moment more than only being able to access it sometime in the future, so for me to be incentivized to lend you some of it, a certain interest rate may be set in accordance with my time preference as a percentage over given periods (i.e. every week, month, or year).

The official lending market is operated by banks rather than private individuals, however, and the interest rate set in a stateless society would be dependent on the supply and demand of loanable funds. In a Statist society, however, the general interest rate is set by a central bank independently from the market rate. If the interest rate is set lower than the market rate (as the central bank is incentivized to do), an artificial boom (bubble) is propped up as entrepreneurs and investors take up more loans than is really available in the market, manipulating the structure of production and dooming the economy for an eventual downturn (though the government and the central bank tries to maintain the bubble through inflation and keeping interest rates low). Higher employment rate and more economic growth in the present comes at the cost of lower employment rate and less economic growth in the future under such a manipulated market, which may benefit those who understand (and control) the system at the expense of those who don’t.

Another bastardization of interest is fractional reserve banking (FRB). FRB is the tendency of banks to keep less money in reserve than the customer has deposited, and earns interest by lending out the difference. This also increases the money supply as the difference may now simultaneously be used by the lender and the depositor, as is illustrated in the figure below (with a 10% reserve rate):

Fractional Reserve Banking simply illustrated by Coactus (2017).

Fractional Reserve Banking may be said to be inherently fraudulent insofar as the customer of the bank considers himself to be keeping his money protected in the bank rather than lending it away.

FRB cannot, of course, be banned in a stateless society, but one might at least expect banks to be far less reliant on that in such a system. At least in the United States, deposits have been insured through the Federal Deposit Insurance Corporation (FDIC) since 1933, which has incentivized banks to increase their degree of FRB as they run zero risks of being held liable in case they couldn’t return the money to the depositors who demanded it back. As the banks would have a risk by operating with FRB in a stateless society, they would be far more careful with doing so, though banks technically still could be an intermediary as long as they were open about the money being lent by the bank rather than kept as a deposit. To that extent, FRB wouldn’t be inherently fraudulent, but would rather serve an important role in the modern economy.

The Desirability of Statelessness

Whether one considers a stateless society at least theoretically to be superior to a Statist one is dependent on which status and position one currently holds. Without a doubt, those business owners who today are dependent on State-provided subsidies, privileges, and bailouts would abhor seeing those suddenly withering away, but the plasticity of statelessness would mean a far greater amount of people having the opportunity to escape poverty and the dependencies of employment, rent, and debt, and making it easier to enter the market for those willing to put in some effort by utilizing their abilities to create value for the public.

No system can satisfy everyone, but its legitimacy relies on the strength of the underlying principles it’s built upon. Will it be based on mutually beneficial voluntary interactions or forcibly extracting resources? Will it be based on leaving people alone to be lazy or productive as they please, or the lazy being parasites on the productive? Will it be based on rewarding those who create the most value for the customers, or those who are the best politically connected? Will it be based on allowing or hindering people to pursue new opportunities? Will it be based on freedom or slavery? That’s the real choice between a Stateless and a Statist society.

Conclusion

A stateless society would be significantly different from a Statist one. With a lack of all kinds of regulations and taxes, one may expect the former to have plasticity and be open to change to a far greater extent than the latter, to the benefit of society at large. More competition would mean more difficulty for entrepreneurs, and they would not be able to rely on State subsidies, privileges, and bailouts to stay in business. As the ultimate free market would reign, they could only profit by creating value for customers through high-quality and low-cost goods and services to a greater degree than their competition.

Employment would likely not be so much of an inevitability for everyone to follow in a stateless society, and would rather only be a temporary stage to save up money for later investment or consumption. Increased competition would incline employers to improve work conditions and be more motivating and inclusive for the workers at hand, though the degree to which it would be beneficial to flatten the organizational structure would depend on the goals and tasks at hand. Both real estate investors and tenants would have a greater time in a stateless society, as regulation and taxes wouldn’t be a bother for either of them, making it easier for the former to enter the market (lower barriers of entry leading to more supply) and making it easier for the latter to pay the rents for living there.

Interest would also be present in a stateless society, although with rates set by the markets (supply and demand) rather than a central authority, and the much-derided cyclical system of booms and busts would be far less volatile (not to mention that the State couldn’t bail out the failing banks with taxpayer money). Fractional Reserve Banking would, similarly, only be possible on a lower and more transparent level, where the banks to a far greater degree would be responsive to feedback by their customers and the public at large to stay in business.

Statelessness isn’t desirable for those with interests in maintaining the State, especially politicians, bureaucrats, and politically well-connected tycoons. But is it those we should be primarily concerned about in our reflections of the desirability of abolishing the State, extorting and controlling us for their benefit and to maintain the system, or is it justice, fairness, and freedom we should pursue? The ability for everyone to pursue happiness in whatever voluntary way they desire, by escaping poverty, increasing their living standards, creating value for others, acquiring property, etc.

Whether left-wing, right-wing, liberal, or conservative, you may from your individual perspective now see how a stateless society could supersede a Statist one. You have the choice here and now to decide for yourself which system to fight for. Will it be liberty or slavery? The future is in your hands.

Footnotes

  1. For a great overview of left-market Anarchist writing, see Chartier and Johnson (2011).
  2. It may be objected to my argumentation that I too strongly emphasize the downsides of government while ignoring the upsides, in that protection of private property would be nonexistent given the absence of the State, undermining my case in that people would be scared away from entrepreneurship as a result. I deny, however, that law and court systems can only be provided by a central government. For a brief explanation of the private alternatives for this, see Kløvning (2019c).
  3. On the question of the historical trend of inequality in a Statist society, some causal factors thereof, some spurious aspects of the statistics on it, and ultimately whether it from a philosophical perspective is justifiable or not, see Kløvning (2019d). For more in-depth reflections on the last question, see Rothbard (1974).

References

Chartier, G. and Johnson, C. (2011). Markets Not Capitalism. [ebook] Brooklyn, NY: Minor Compositions. Available at: http://radgeek.com/gt/2011/10/Markets-Not-Capitalism-2011-Chartier-and-Johnson.pdf [Accessed 12 Oct. 2019].

Coactus, V. (2017). Why Fractional-Reserve Banking Would Be Limited in an Unhampered Market. [online] Medium. Available at: https://medium.com/@ViCoactusMedia/why-fractional-reserve-banking-would-be-limited-in-an-unhampered-market-2e6e2adc7869 [Accessed 12 Oct. 2019].

Gatto, J. (2003). The Underground History of American Education. [ebook] p.32. Available at: https://ia903006.us.archive.org/13/items/JohnTaylorGattoTheUndergroundHistoryOfAmericanEducationBook/John%20Taylor%20Gatto%20-%20The%20Underground%20History%20of%20American%20Education%20Book.pdf [Accessed 11 Oct. 2019].

Godwin, W. ([1793] 1994). Om politisk rettferdighet. Oslo: Fjørtoft forlag.

Hackman, J. (1980). Work redesign and motivation. Professional Psychology, [online] 11(3), pp.445-455. Available at: https://psycnet.apa.org/record/1981-24572-001?casa_token=JtRc3b-qzBwAAAAA:PYVw1jicYmq2I2Kn7bt0oLUYFyPCvs0ls1RQ6yGBdI8X799HBpAmvtmSab0KxhAHFWUupRaAQhuWrkMu5BW1cg [Accessed 12 Oct. 2019].

Khan, M. (1993). Methods of Motivating for Increased Productivity. Journal of Management in Engineering, [online] 9(2), pp.148-156. Available at: https://ascelibrary.org/doi/abs/10.1061/(ASCE)9742-597X(1993)9:2(148) [Accessed 12 Oct. 2019].

Kløvning, S. (2019a). On Natural and Artificial Hierarchies. [online] MisesRevived. Available at: https://misesrevived.net/2019/04/07/on-natural-and-artificial-hierarchies/ [Accessed 10 Oct. 2019].

Kløvning, S. (2019b). Why Socialism Leads to Totalitarianism and Vice Versa. [online] MisesRevived. Available at: https://misesrevived.net/2019/08/07/why-socialism-leads-to-totalitarianism-and-vice-versa/ [Accessed 11 Oct. 2019].

Kløvning, S. (2019c). Is Anarchy a Faustian Bargain?. [online] MisesRevived. Available at: https://misesrevived.net/2019/08/18/is-anarchy-a-faustian-bargain/ [Accessed 12 Oct. 2019].

Kløvning, S. (2019d). What’s the Big Deal About Economic Inequality?. [online] MisesRevived. Available at: https://misesrevived.net/2019/03/06/whats-the-big-deal-about-economic-inequality/ [Accessed 12 Oct. 2019].

Lum, D. (1890). The Economics of Anarchy A Study of the Industrial Type. [online] Molinari Institute. Available at: http://praxeology.net/DL-EA.htm#contents [Accessed 7 Oct. 2019].

Rothbard, M. (1974). Egalitarianism as a Revolt Against Nature, and Other Essays. [ebook] Auburn, Alabama: Ludwig von Mises Institute. Available at: https://mises.org/library/egalitarianism-revolt-against-nature-and-other-essays [Accessed 12 Oct. 2019].

Shahzadi, I., Javed, A., Pirzada, S., Nasreen, S. and Khanam, F. (2014). Impact of Employee Motivation on Employee Performance. European Journal of Business and Management, [online] 6(23). Available at: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.684.9465&rep=rep1&type=pdf [Accessed 12 Oct. 2019].

Stromberg, J. (2009). The American Land Question. [online] Fee.org. Available at: https://fee.org/articles/the-american-land-question/ [Accessed 11 Oct. 2019].

The Praxeological Academy (2019). Praxeology | Austrian Economics | The Praxeological Academy. Available at: https://www.youtube.com/watch?v=eTbE2eyX-o0&t=1053s [Accessed 10 Oct. 2019].

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