From: jamesd@echeque.com
Date: Mon, 13 May 1996 19:17:04 +0800
To: cypherpunks@toad.com
Subject: Why does the state still stand:
Message-ID: <199605130214.TAA23835@dns2.noc.best.net>
MIME-Version: 1.0
Content-Type: text/plain


I intend to post this to a bunch of rant newsgroups.  It is the common
wisdom of cypherpunks:  Any corrections or objections?

   *************************************************************************

Why does the state still stand?

At 07:26 AM 5/5/96 -0400, Duncan Frissell wrote:
> Even though the population of those who regularly violate 
> federal tax laws is smaller (20 million?) the records show 
> that even for this population the odds of being convicted are
> approximately the odds of being murdered.
>
> http://www.trac.syr.edu/tracirs/analysis/IRS019page.html 

Now if the state had to compel everyone to write a check for ten thousand
dollars every quarter, or to make little trip to the IRS with a brown paper
bag full of hundred dollar bills, there would be massive tax resistance,
massive state violence to enforce taxes, and the many individual violent
conflicts with the state would swiftly become collective armed revolution. 

The state can get away with this extraordinary and exorbitant tax rate,
because for the most part it does not apply coercion directly to individual
people.  Instead it disrupts the large scale institutions that we have
created to facilitate large scale cooperation.

Now it is easy to coerce the transactions in physical marketplace, or a
physical large scale factory or office, because the state can easily find
the market place and see what people are doing in it, far easier than it can
find individual people and see what each person is doing overall, and if
people do not play by the state's rules it can easily send in the bad boys
to close down the marketplace.

Thus the state obstructs the large scale specialization of labor, and
charges us a high price to participate in that specialization.

The state can do this effectively because such specialization depends on
large numbers of people regularly meeting face to face in recognizable
physical places: company offices, stock exchanges, and the like.   The state
can extract this tax because it can send the bad boys into any such meeting
place and close it down. 

It is this, rather than direct coercion of taxpayers that enables it to
charge such savage and extraordinary taxes.  Any attempt to directly coerce
taxpayers on this scale would swiftly lead to rivers of blood.

Electronic marketplaces are less easy to coerce.  Note how states find
themselves largely powerless before the international money market.  This
has caused a substantial retreat of the state in many countries throughout
the world. 

The socialists complain because the World bank asks the Ukraine and Belarus
to be slightly less socialist, but the international money market will not
touch such governments with a ten foot pole, while it will roll over like a
puppy for governments such as Estonia and Tunisia which really are
dismantling socialism.

The challenge then is to move the meetings that make specialization of labor
possible to the net, thus making us less easy for the state to coerce.

The anarcho socialists have one half of an important truth: In order to
smash the state, we must first transform capitalism. 

Right now not much is happening.

Ecash today is rather like email eight years ago.  You had a bunch of email
systems none of which would talk to each other and none of which were very
easy to use and all of which cost too much.

Most good groupware, for example source code control programs, is designed,
perhaps intentionally, in ways that make it only useful for intranets, not
for WANs.  That is to say only useful inside the kind of corporations that
presently exist.  Also, to be useful in a post corporate economy, a source
code control tool would need to have better view control, since the boss
cannot simply announce.  "OK, we are now in alpha, so we shall now have
feature freeze on the product."  Instead somebody has to announce "I have
constructed and will maintain a feature frozen buildable source code view."
We would be vastly further ahead on PGP 3.0 and on ecash if we had a tool
like that.

How then did we solve the email problem?

The email problem was not a problem that big corporations were capable of
solving.  Whenever one network, such as Compuserv, negotiated with another
network, such as AOL they could never agree about settlements. How much
would compuserv charge AOL to deliver AOL customers mail to Compuserv
customers, and how much would AOL charge Compuserve to deliver Compuserve
customers mail to AOL customers.  And how would it be metered, and what
software standards would be used to enable the metering, and the lawyers
would talk to the accountants, and the accountants to the software guys, and
up and down the corporate hierarchy it would go, and back and forth between
corporations.

Eventually, on the internet, the custom and expectation grew up that you did
not charge for delivering mail to your customers, largely due to the
influence, and the moral and political outlook, of the IETF.   

Problem solved:  Nothing to negotiate;  Nothing to be metered.  Turned out
it was a moral and political problem, not a pricing problem.

Now right now we are in the same pickle with electronic transactions as we
once were with email.  We have a bunch of proprietary systems with
proprietary software and proprietary money that do not talk to each other. 

Worse, anonymous ecash is patented by Chaum.  This is an algorithm for how
people  structure promises to pay, and is therefor even less well suited to
be intellectual property than most software patents. As a result anyone who
wants to make an agreement with Chaum to implement anonymous electronic cash
faces a lot of cost and delay.  Such agreements are difficult to make and
implement.

What we need in addition to our existing electronic cash mechanisms is a
general mechanism for exchanging and transferring promises to pay, so that
Betty can exchange a promise by John to pay in system X for a promise by Sam
to pay in system Y.  Such a system must make every man their own bank and
their own credit agency, and must not be tied to any one proprietary
institution that issues promises to pay.

Now once we have that, it will cobble all the different ecash systems
together, just as the internet cobbled all the email systems together, and
we will start to make some real progress in moving the institutions that
facilitate large scale specialization of labor to the net.  Right now
nothing much is happening, despite the fact that several big names have
issued ecash systems.

Now in order to create such a system we need a patent free public key
system: (Rabin will be free from the DH patent in one year) and we need a
satisfactory public key management system, one that can couple to standard
databases.  Lots of folk are twiddling their thumbs waiting for Phil
Zimmermann to issue the PGP 3.0 key management system.  Possibly someone
will issue a PGP key management system that works with the Microsoft Crypt
API.   The Microsoft default key management system is crummy, and is limited
to keys small enough for the NSA to break.

So guys, that is the plan:  We destroy the state through higher mathematics.
We do this by replacing the current institutional mechanisms of corporations
with cryptographic mechanisms.  This will give more people the opportunity
to evade and resist taxes.

 ---------------------------------------------------------------------
              				|  
We have the right to defend ourselves	|   http://www.jim.com/jamesd/
and our property, because of the kind	|  
of animals that we are. True law	|   James A. Donald
derives from this right, not from the	|  
arbitrary power of the state.		|   jamesd@echeque.com