By far the most common objection to the stateless society, exceeding even the questions of helping the poor, providing roads, or providing defense, is the belief that one or more of the private Dispute Resolution Organizations would overpower the others and create a dictatorship. This belief is erroneous at every level, but has a sort of persistence that is almost admirable.
Here is the general objection:
"In a society without a government, whatever organizations arise to resolve disputes or protect the public will inevitably become replacement governments. These agencies may initially start as competitors in a free market, but as time goes by, one will arise to dominate the others economically, and will then wage war against its competitors, and ultimately impose a new state on the population. The instability and violence that this "DRO civil war" will inflict upon the population is far worse than any constitutional democracy. Thus, a stateless society is far too risky an experiment, since we will just end up with a government again anyway!"
This objection to an anarchic social structure is considered self-evident, and thus is never presented with actual proof. Since discussion of a stateless society involves a future theoretical situation, it is difficult to use empirical evidence one way or the other.
However, like all propositions pertaining to human action, the "replacement state" hypothesis can be subjected to logical examination.
PREMISE
The premise behind the replacement state hypothesis is that human beings will tend to maximize their income while minimizing their expenditure of energy. The motivation for the DRO to use force is that, by eliminating its competition and taking military control over a geographical region, a DRO can make much more money than through free market competition, and that it is worth investing resources in military conflict in order to secure the permanent revenue of a tax base.
We can accept this premise so long as we apply it universally to all human beings in a stateless society. To make the "replacement state" case even stronger, we shall assume that no ethics will get in the way of such decision-making, and it shall be nothing but a pure cost-benefit calculation.
STARTING POINT
Let us assume a stateless society in which customers can voluntarily contract with a DRO for the sake of dispute resolution and property protection. Each citizen also has the right to withdraw from his or her DRO contract.
There are essentially three ways a DRO could conceivably go about achieving military control over a geographical region.
1. By secretly amassing an army and suddenly unleashing it on its competitors.
2. By openly amassing an army and doing the same thing.
3. By posing as a "Defense DRO," amassing arms under the guise of providing legitimate defense to the citizens, and then turning those arms against the citizens and instituting itself as the new government.
There is one additional possibility, in which a wealthy private citizen attempts to amass an army on his own. Let us deal with each of these in turn.
THE SECRET ARMY
In this scenario, our DRO executive Bob has decided he is tired of dealing with customers on a voluntary basis. He decides he is going to spend enormous amounts of company money buying arms and training an army. (For the moment, let us assume Bob can make this decision entirely on his own, and need not get approval from shareholders, a board of directors, or other executives).
Let us assume that Bob's business has annual revenues of $500 million per year, and profits of $50 million per year.
The most immediate challenge Bob faces is - how on Earth am I going to pay for this army? Given that, in a free society, there is no way of knowing how many citizens are armed, where those armed citizens are, or what kinds of weapons they have, it is better to err on the side of caution when forming a conquering army. Bob must assemble an overwhelming army to gain control of the entire region, or else Bob's investment will be lost in military defeat, and he will suffer harsh consequences under the DRO system.
Such armies are not cheap. For the sake of this argument, let's say that the army will cost $500 million over five years - surely a low estimate.
RAISING RATES
The most obvious way for Bob to acquire the funds to raise the army is to raise DRO rates. The $500 million Bob needs represents ten years of his DRO's annual profits. Thus, in order for Bob to pay for his army within five years, he will have to more than DOUBLE his prices. Since we have already assumed that it is Bob's greed that leads him to take this action, we must therefore assume Bob's customers will also behave in a greedy way. They will not be pleased by his increase in rates. Just like Bob, his DRO's customers wish to maximize their profits and minimize their expenditures.
The moment that Bob doubles his rates while failing to provide additional services, Bob's customers will leave and pursue business with another DRO. Bob's DRO will go bankrupt. Sadly, no army for Bob.
FULL DISCLOSURE
Perhaps Bob recognizes this danger, and thus plans to keep his customers by informing them that he is raising rates in order to form an army. "Help me buy an army by paying me double your current rates, and I will share with you the plunder when I take over X community." Even if we assume Bob's customers believe him and are willing to fund such a scheme, Bob's secret is out. The society as a whole, including all other DROs, have been informed of Bob's nefarious intentions. Clearly, in fear of their own economic well-being, all other DROs in the society will cease doing business with Bob's DRO. Since the central value of any DRO is its capacity to interact with other DROs - just as the core value of a cell phone company is its ability to interact with other cell phone companies, or banks with other banks - Bob's DRO will be crippled. Bob will be doubling his rates for five years while providing immensely inferior service, all for a highly uncertain and dangerous "profit."
In addition to the DROs, Bob's banks would fear for their own well-being, and likely cease doing business with him. Bob will be unable to withdraw any funds he had stored in the banks, and will be unable to seek retribution, since no other DROs will represent him, and his DRO is not respected. Bob will be unable to pay his employees, his office rental, or his bills. Bob will find his business without electricity, and his plumbing will mysteriously run dry. Bob's phones will be cut off, and road businesses are suddenly much more difficult to work with. People do not respond well to an open announcement of intention to murder them and impose dictatorial rule. It is difficult to imagine Bob lasting five days in this situation, much less five years.
Even if all the above problems could somehow be overcome, it is difficult to imagine that Bob's customers would be happy to arm Bob in hopes of sharing in the plunder. Unlike the government which can tax at will, DROs must actually provide value and effective service to retain business. Defense associations must actually protect property. DROs must actually resolve disputes. Given that those who form contracts with DROs will be those most interested in protecting themselves and their property, it is unlikely they would voluntarily fund Bob's army, as they'd have no control over the army once it was created, and thus no way of enforcing their "plunder contract." In a free society, people would not try to "protect" their property by funding a powerful army that could take it from them at will. This sort of madness only exists in the world of states.
ALTERNATIVE FUNDING
Perhaps Bob will try to fund his army in other ways. He may try to borrow the money, but his bank will only lend him the funds if he provides a credible business plan. If Bob's business plan openly states his desire to create an army, his bank would cease supporting him in any way, shape, or form, since the bank would stand only to lose should such an army come into existence. If Bob took the money from the bank by submitting a fraudulant business plan, the bank would become aware of this almost immediately and retrieve the remaining funds, with contractual penalties to boot! No army for Bob.
What if Bob tried to pay for his army by reducing the dividends paid to shareholders? Naturally the shareholders would resent this and would either have Bob thrown out or would simply sell their shares and invest their money elsewhere, thus crippling Bob's DRO. Perhaps Bob would try paying his employees less, but this would only drive Bob's experienced employees into the arms of other DROs - also destroying his business.
It is safe to say that it is impossible for Bob to acquire the funds necessary to raise an army from within the free market DRO system. There are, however, other dangerous possibilities that need addressing.
DEFENSE AGENCIES
The most likely threat would come from defense agencies, or those agencies which have already amassed weapons and combat-trained personel for the protection of their customers from crime and outside invasion. These resources could potentially be used against the general population. However, this would be very difficult for two reasons. Firstly, defense agencies would require banking and investment relationships in order to grow and flourish. Given that banks and investors would not want to fund an army that would steal their property, they would be certain to require a myriad of "failsafe" clauses in their contracts with the defense agencies. They would make certain all arms purchases were tracked, that all monies were accounted for, and that no secret armies were being assembled.
Citizens would never contract with a defense DRO that refused to submit to regular third-party inspections. If Dave, a defense agency CEO, attempted any of the nefarious things Bob did in his DRO, he would encounter all of the same difficulties in funding his army. He can't raise rates, undercut his investors, take out loans, or reduce wages. How will he pay for it?
There is no viable way for a business to form an army without destroying its business in the process. Armies are only possible when governments can use taxpayers to subsidize them.
INDEPENDENTLY WEALTHY?
Perhaps, instead of Bob or Dave, we have an independently wealthy dude named Bill who wants to take over his community. Bill decides to found a new army and install himself as the new dictator. Due to his immense wealth, he is not dependent on customers, employees, banks, or shareholders. Let's say he can pay for an army out of his own pocket, immediately.
Bill's main challenge is that he can't exactly pick up an army at his local Wal-Mart. Armies are fundamentally uneconomical, expensive overhead, and thus the most likely defense for a geographical region of an anarchist society would be a series of nuclear warheads to deter invaders. Even if Bill could acquire a nuclear weapon, it would do him little good, since he probably could not overcome the might of all of the defense agencies.
What about more conventional weapons? Part of the service of a defense agency, aside from deterring outside invaders, would be to prevent the formation of an aggressive army within the business's region. DROs and defense agencies alike would thus wish to interact closely with arms manufacturers, making certain they provide rigorous accounts of everything they were producing and selling, to be certain they weren't selling arms to a secret army. If people were worried about the formation of a secret army, they would only do business with the defense agencies which did business exclusively with "open and honest" weapons manufacturers - subject to independent verification.
Thus when Bill comes along and wants to buy $500 million worth of M16s, and hire an army of tens of thousands of soldiers, one question would be - where did they come from? Arms manufacturers would not be sitting on $500 million of unsold inventory. There's limited demand, and the costs of making and storing such merchandise are high. Arms manufacturers would have to dramatically ramp up production, which could not be long hidden from the general population or the defense agencies. If it was discovered that a weapons manufacturers was cooperating with an insane multi-billionaire to enslave the population, no one would ever do business with that manufacturer again.
Also, no manufacturer would ever expand production that dramatically for a "one-time purchase," any more than you would buy a car to make a single trip. Also, why would a manufacturer make so many weapons, knowing that those weapons could then be used against the manufacturer?
Even if Bill could somehow acquire all the weapons necessary, where will he find the thousands of troops? In a stateless society, military participation would not be the sort of "in-demand" career it is today. In order to assemble an army of tens of thousands of men, Bill would need to advertise, recruit, pay them, train them, etc. This would be impossible to hide.
If Bill's bank is concerned, it could request a contract clause giving it the right to refuse any payments that are involved with the formation of a new army. Secondly, no DRO would do business with Bob, or his soldiers, the moment it became apparent what they were up to. Acquiring food, water, energy, and other resources would thus become very difficult. Furthermore, there would no longer be any guarantee Bill's soldiers would be paid. Even if they were, who would they trade with? When society as a whole wants to stop doing business with you, life becomes pretty difficult. Their rule would have to be an absolute violent dictatorship. No one would view it with legitimacy. Historically, such states collapse almost immediately.
PROFIT?
Remember that this whole scenario operated under the assumption that Bill, Bob, or Dave could achieve greater profits by imposing taxes on the population than through doing honest business. Let us see if this is the case.
Let's say our first friend Bob somehow got his army. Can he make his army profitable?
Remember, it cost Bob $500 million to assemble his army. Let's assume the modest price of $1 billion to subdue a reasonably-sized region over five years. What kinds of financial returns can Bob expect?
If you knew that Bob's army was on his way to your house, what would you do? Chances are, you'd take everything you had of value with you and burn down your house. This was exactly what the Russians did to defeat Napoleon, Hitler, Alexander the Great, and so on. You leave Bob with nothing to consume from his conquest.
However, let's assume that Bob CAN steal something of value through his conquest. How much would he have to steal to make a profit?
First let's look at what Bob would have made had he invested his money in something other than an army. If Bob had invested his $500 million in his DRO, rather than his army, and made a 10% return on investment, in five years he would have had $832.61 million.
In order to complete his conquest, Bob had to invest $1 billion in his war. $1 billion invested over five years would have net him $1,655.22 million, or $1.655 billion. His $832 million could also have been further invested to net him $1,340.93 million.
Thus, if Bob had invested his money in his business rather than raise an army, he could have saved $1.5 billion and made an additional $1.5 billion. Bob could have doubled his value! Bob's investors probably would have made this projection, and understanding the ridiculous risk associated with his war effort, would have demanded an enormous ratio of the war profits in exchange for their participation, perhaps 20:1 - comparable to the software industry today. In order to pay back his investors and get some money for himself, Bob would have had to plunder over $60 billion from his conquered territory.
What is worth $60 billion? The houses? The cars? It is hard to imagine anything Bob got his hands on would be worth much, particularly since he could not possibly trade it.
Bob's war effort would have resulted in an enormous financial loss. If we seek empirical evidence for this, it is abundant. Throughout history imperialism has proven to be utterly destructive, and all sides lose enormous amount of capital. The only ones who benefit are those connected with the coercive power of the state.
We could talk about Bob attempting a spring attack on customers and taxing them, but once again, everyone would seek protection from this through their DROs with various "checks and balances." If people are really concerned about defense agencies forming armies, then customers could simply include in their contracts enormous fines to be paid to the customer by the agency should any evidence be found of aggression against the customers. "If sufficient evidence is found (sufficient as determined by a third party) that my business intends on aggressing against you, my business will pay you $1 million, and this will be enforced by X, Y, and Z DROs and guaranteed by competing defense companies A, B, and C." Clearly such a provision would encourage defense agencies to find all possible means of displaying their trustworthiness. Unlike the state, they would be utterly committed to the defense, and not the enslavement, of their customers.
ONE FINAL NOTE
The "replacement state" hypothesis relies on an error that is important to address. Many people believe that states emerged organically from a need - that old wise men in ancient times became leaders of organizations and were given a monopoly on violence to resolve disputes. This is not how states emerged.
States are a product of early cults. In early civilizations such as Uruk and Egypt, certain individuals claimed to be able to communicate with gods, or claimed to be gods themselves. Since farmers were extremely vulnerable to the elements, these cult leaders preyed on the fears of these farmers by claiming they could control the elements, and demanded tribute. These tributes allowed these cult leaders to survive and flourish without having to provide goods and services. They used these tributes to hire body guards and later to raise armies. When these armies were sufficiently powerful, tributes became enforced through violence. Taxation was born.
States are not a result of a need, but of superstition. The state, much like slavery, is an obsolete, barbaric relic from the ancient days of humanity. You scarcely find anyone who thinks that slavery was a good idea, nor anyone who advocates its rebirth. When the state is abolished, so will it be regarded. You do not witness a gang fight on the street and view the violence as legitimate. In the same way members of a stateless society will not view a private business attempting to enslave them as legitimate. All violence will be regarded as unjust aggression. Though the stateless society has many ways to prevent the re-emergence of a state, it is not required. States do not emerge organically from needs - they are cults. The more rational the civilization, the less likely a state will ever need to be put down again.
Thanks for reading!
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