From: Steve Schear <azur@netcom.com>
Date: Mon, 8 Sep 1997 03:53:42 +0800
To: Jim Choate <ravage@ssz.com>
Subject: Removing Tyranny from Democracy (Part I), was Democracy is thetrue enemy...
In-Reply-To: <199709061824.NAA23842@einstein.ssz.com>
Message-ID: <v03102803b0376888d957@[10.0.2.15]>
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I think this discussion regarding democracy vs. anarchy is misguided.  It
may be more important recognizing where the control of democratic
government is lodged.  The following excerpts, from the Soverign
Individual, make an excellent case that democracy is not in and of itself
the primary cause of many of our objections, but rather the means of
democracy.

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			WHO CONTROLS GOVERNMENT?

The question of who controls the government has almost always been asked as
a political question. It has had many answers, but almost uniformly these
involved identifying the political party, group, or faction that dominated
the control of a particular state at a particular moment. You probably have
not heard much about a government controlled by its customers. Thinking
about government as an economic unit leads on to analyze the control of
government in economic rather than political terms.

In this view, there are three basic alternatives in the control of
government, each of which entails a fundamentally different set of
incentives: proprietors, employees, and customers.

Proprietors

In rare cases governments are sometimes controlled by a proprietor, usually
a hereditary leader who for all intents and purposes owns the country. For
example, the Sultan of Brunei treats the government of Brunei somewhat like
a proprietorship.

Governments controlled by proprietors have strong incentives to reduce the
costs of providing protection or monopolizing violence in a given area. But
so long as their rule is secure, they have little incentive to reduce the
price (tax) they charge their customers below the rate that optimizes
revenues. The higher the price a monopolist can charge, and the lower his
actual costs, the greater the profit he will make.

Employees

It is easy to characterize the incentives that prevail for governments
controlled by their employees. They would be similar incentives in other
employee-controlled organizations. First and foremost, employee-run
organizations tend to favor any policy that increases employment and oppose
measures which reduce jobs. A government controlled by its employees would
seldom have incentives to either reduce the costs of government or the
price charged to their customers. However, where conditions impose strong
price resistance, in the form of opposition to higher taxes, governments
controlled by employees would be more likely to let their revenues fall
below their outlays than to cut their outlays. In other words, their
incentives imply that they may be inclined toward chronic deficits, as
governments controlled by proprietors would not be.

Customers

The medieval merchant republics, like Venice, examples of governments
controlled by their customers. There a group of wholesale merchants who
required protection effectively controlled the government for centuries.
They were genuinely customers for the protection service government
provided, not proprietors. They paid for the service. They did not seek to
profit from their control of government's monopoly of violence. If some
did, they were prevented from doing so by the other customers for long
periods of time. Other examples of governments controlled by their
customers include democracies and republics with limited franchise, such as
the ancient democracies, or the American republic in its founding period.
At that time, only those who paid for the government, about 10 percent of
the population, were allowed to vote.

Governments controlled by their customers, like those of proprietors, have
incentives to reduce their operating costs as far as possible. But unlike
governments controlled by either proprietors or employees, governments
actually controlled by their customers have incentives to hold down the
prices they charge. Where customers rule, governments are lean and
generally unobtrusive, with low operating costs, minimal employment, and
low taxes. A government controlled by its customers sets tax rates not to
optimize the amount the government can collect but rather to optimize the
amount that the customers can retain. Like typical enterprises in
competitive markets, even a monopoly controlled by its customers would be
compelled to move toward efficiency. It would not be able to charge a
price, in the form of taxes, that exceeded costs by more than a bare margin.

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