The problem up to 1914 was comparatively small and the possible solution was comparatively easy then; and today as we will see, matters are more difficult and the solution is far more complicated. By mid-19th century, in Europe as well as in the United States, not only was the degree of political centralization far less pronounced than it is now; the Southern War of Independence had not yet taken place, and neither Germany nor Italy existed as unified States.
But in particular, the age of mass democracy had hardly begun at this time. In Europe, after the defeat of Napoleon, countries were still ruled by kings and princes, and elections and parliaments played little roles and were in addition restricted to extremely small numbers of major property owners. Similarly, in the United States, government was run by small aristocratic elites, and the vote was restricted by severe property requirements. After all, only those people who have something to be protected should be running those agencies that do the protection.
One hundred and fifty or even one hundred years ago, only the following thing was essentially necessary in order to solve the problem. It would have been necessary only to force the king to declare that from now on, every citizen would be free to choose his own protector, and pledge allegiance to any government that he wanted. That is, the king would no longer presume to be anyone’s protector, unless this person had asked him, and met his prize that the king would have asked for such service.
Now what would have happened in this case? What would have happened, let’s say, if the Austrian emperor had made such a declaration in 1900? Let me try to give a brief sketch or scenario of what I think would likely have happened in this situation.
First, everyone, upon this declaration, would have regained his unrestricted right to self-defense, and would have been free to decide if he wanted more or better protection than that afforded by self-defense, and if so, where and from whom to secure this protection. Most people in this situation undoubtedly would have chosen to take advantage of the division of labor, and rely, in addition to self-defense, also on specialized protectors.
Second, on the lookout for protectors, almost everyone would have looked to persons or agencies who own or are able to acquire the means to assure the task of protection—that is, who have themselves a stake in the to-be protected territory in the form of substantial property holdings—and who possess an established reputation as reliable, prudent, honorable, and just.
It is safe to say that no one would have considered an elected parliament up to this task. Instead, almost everyone would have turned for help to one or more of three places: either the king himself, who is now no longer a monopolist; or a regional or local noble, magnate, or aristocrat; or a regional, national, or even international operating insurance company.
Obviously, the king himself would fulfill these requirements that I just mentioned, and many people would have voluntarily chosen him as their protector. At the same time, however, many people also would have seceded from the king; of these, a large proportion would have likely turned to various regional nobles or magnates, who are now natural instead of hereditary nobility. And on a smaller territorial scale these local nobles would be able to offer the same advantages as protectors as the king himself would be able to offer. And this shift to regional protectors would bring about a significant decentralization in the organization and structure of the security industry. And this decentralization would only be reflective of, and in accordance with, private or subjective protection interests—that is, the centralization tendency that I mentioned before has also led to an overcentralization of the protection business.
Lastly, nearly everyone else, especially in the cities, would have turned for protection to commercial insurance companies, such as fire insurers. Insurance and private property protection are obviously very closely related matters. Better protection leads to lower insurance payoffs. And by insurers entering the protection market, quickly protection contracts, rather than unspecified promises, would have become the standard product form in which protection would have been offered.
Further, by virtue of the nature of insurance, the competition and cooperation between various protection insurers would promote the development of universal rules of procedure, evidence, conflict resolution, and arbitration. As well, it would promote the simultaneous homogenization and dehomogenization of the population into various classes of individuals with different group risks regarding their property protection, and accordingly, different protection insurance premiums. All systematic and predictable income and wealth redistribution between different groups within the population as it existed under monopolistic conditions would be immediately eliminated. And this would of course make for peace.
Most importantly, the nature of protection and defense would have been fundamentally altered. Under monopolistic conditions, there is only one protector; whether it is monarchical or democratic makes no difference in this respect, a government is invariably conceived of as defending and protecting a fixed and contiguous territory. Yet this feature is the outcome of a compulsory protection monopoly. With the abolition of a monopoly, this feature would immediately disappear as highly unnatural or even artificial. There might have been a few local protectors who defended just one contiguous territory. But there would have also been other protectors, such as the king or insurance agencies, whose protection territory consisted of widespread patchworks of discontiguous bits and pieces and stretches. And the “borders” of every government would be in constant flux. In cities in particular, it would not be more unusual for two neighbors to have different protection agencies, than it is to have different fire insurers.
This patchwork structure of protection and defense improves protection. Monopolistic, contiguous defense presumes that the security interests of the entire population living in a given territory are somehow homogeneous. That is, that all people in a given territory have the same sort of defense interests. But this is a highly unrealistic and actually untrue assumption. Actually, peoples’ security needs are highly heterogeneous. People may just own property in one location, or numerous territorially widely dispersed locations, or they may be largely self-sufficient, or only dependent on a very few people in their economic dealings; or on the other hand, they may be deeply integrated into the market and dependent economically on thousands and thousands of people strewn out over large territories.
The patchwork structure of the security industry would merely reflect this reality of highly diversified security needs that exist for various people. As well, this structure would in turn stimulate the development of a corresponding protective weaponry. Rather than producing and developing weapons and instruments of large scale bombing, instruments would be developed for protecting small-scale territories without collateral damage.
In addition, because all interregional redistribution of income and wealth would be eliminated in a competitive system, the patchwork structure would also offer the best assurance of interterritorial peace. The likelihood and the extent of interterritorial conflict would be reduced if there are patchworks. And because every foreign invader, so to speak, would almost instantly, even if he invaded only a small piece of land, run into the opposition and military and economic counterattacks by several independent protecting agencies, likewise the danger of foreign invasions would be reduced.
Indirectly, it is already clear at least partially how and why it has become so much more difficult to reach this solution in the course of the last one hundred and fifty years. Let me point out some of the fundamental changes that have occurred which make all of these problems far bigger. First, it is no longer possible to carry out the reforms from the top-down. Classical liberals, during the old monarchical days, could and did in fact frequently think and could actually realistically believe in simply converting the king to their view, and ask him to abdicate his power, and everything else would have almost automatically fallen into place.
Today, the State’s protection monopoly is considered public instead of private property, and government rule is no longer tied to any particular individual, but to specified functions, exercised by unnamed or anonymous individuals as members of a democratic government. Hence, the one or few man conversion strategy does no longer work. It doesn’t matter if one converts a few top government officials—the president and a handful of senators—because, within the rules of democratic government, no single individual has the personal power of abdicating the government’s monopoly of protection. Kings had this power; presidents don’t.
The president can only resign from his position, only to be taken over by someone else. But he cannot dissolve the government protection monopoly, because supposedly the people own the government, and not the president himself. Under democratic rule then, the abolition of the government’s monopoly of justice and protection requires either that a majority of the public and of their elected representatives would have to declare the government’s protection monopoly and accordingly all compulsory taxes abolished, or even more restrictive, that literally no one would vote and the voter turnout would be zero. Only in this case could the democratic protection monopoly be said to be effectively abolished. But this would essentially mean that it was impossible to ever rid ourselves of an economic and moral perversion. Because nowadays it is a given that everyone, including the mob, does participate in politics, and it is inconceivable, that the mob should ever, in its majority or even in its entirety, should renounce or abstain from exercising its right to vote, which is nothing else than exercising the opportunity to loot the property of others.
Moreover, even if one assumes against all odds that this was achieved, the problems do not end. Because another fundamental sociological truth in the age of modern egalitarian mass democracy is the almost complete destruction of natural elites. The king could abdicate his monopoly and the security needs of the public still would have been almost automatically been taken care of because there existed for mostly the king himself, and also regional and local nobles and major entrepreneurial personalities, a clearly visible and established natural, voluntarily acknowledged elite and a multilayered structure of hierarchies, and rank orders to which people could turn with their desire to be protected.
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