True Competition versus the Monopolist “Minimal State”

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David Gordon
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According to Ayn Rand’s ethics, the only basis for value is an individual’s survival as a rational being. In order to live as a rational being, you must respect the rights of others as rational beings each aiming at his own survival. As Harry Binswanger, a leading follower of Rand, explains,

The basic political principle of the Objectivist ethics is: no man may initiate the use of physical force against others. No man—or group or society or government—has the right to assume the role of a criminal and initiate the use of physical compulsion against any man. Men have the right to use physical force only in retaliation and only against those who initiate its use. The ethical principle involved is simple and clear cut: it is the difference between murder and self-defense. A holdup man seeks to gain a value, wealth, by killing his victim; the victim does not grow richer by killing a holdup man. The principle is: no man may obtain any values from others by resorting to physical force.

Rather than use force and act parasitically to seize resources from others, you must operate according to the “trader principle.” Here you offer someone a value in return for a value the other person offers you. But the operation of a society based on the trader principle requires a single correct law code based on Randian principles, and a state restricted to the protection of individual rights is necessary. Rand’s minimal state lacks a feature common to most states: it cannot impose taxes. It can, however, charge user fees for people who wish to establish a contractual relationship. People are free to refuse to avail themselves of the state’s services, but if they don’t pay the user fees, the state will not enforce their contracts and, because the state has a monopoly on the use of retaliatory force, people of their own volition cannot enforce compliance on contract violators.

Roy Childs Jr. raised an objection to Rand’s argument in his 1969 “Open Letter” to her. Suppose, Childs challenged, some people aren’t satisfied with the protective services furnished by Rand’s minimal state. Why don’t these people have the right to establish their own protective services, peacefully competing with the minimal state? If the minimal state attempts forcibly to put them out of business, isn’t it initiating force and thus violating Rand’s force principle?

In a January 24, 2014, Forbes article, “Sorry, Libertarian Anarchists, Capitalism Requires Government,” Binswanger advances a simple argument that he thinks suffices to defend Objectivism against libertarian anarchist challenges like Childs’s. Binswanger’s argument starts from the premise that in a free market exchange, each party to the exchange expects to benefit. In Randian language, a trade is an exchange of value for value. He then says that force is not a value—it is the negation of value. Therefore, protective services are not a proper subject for market competition. They must be provided by a government monopoly. As Binswanger puts it,

Force properly employed is used only in retaliation, but even when retaliatory, force merely eliminates a negative, it cannot create value. The threat of force is used to make someone obey, to thwart his will. The only moral use of force is in self-defense, to protect one’s rights…. The wielding of force is not a business function. In fact, force is outside the realm of economics. Economics concerns production and trade, not destruction and seizure. Ask yourself what it means to have a “competition” in governmental services. It’s a “competition” in wielding force, a “competition” in subjugating others, a “competition” in making people obey commands. That’s not “competition,” it’s violent conflict. On a large scale, it’s war.

However, there is a mistake in Binswanger’s argument. Someone who is forced by an aggressor to do something is not engaged in an economic exchange with him. So far, Binswanger is entirely right. But someone who purchases defense services from a protection agency is not using force. He is exchanging money for the service of protection; and that, contrary to Binswanger’s claim, is an exchange of value—money—for value—protection. The fact that protection may involve the use of force on criminals does not change its status as an economically valued good. Binswanger, in brief, confuses the economic transaction of purchasing protection with the use of force. The sort of government that Ayn Rand and her followers favor does not extract resources from people through taxation. It depends on voluntary funding, e.g., user fees for its protective and judicial services. If Binswanger were right, such services could not be the object of market purchase: because they involve the use of force, they are not a value. How, then, can they be offered for sale? Or does Binswanger think that it is all right to purchase protection from a monopoly, but not from a competitive enterprise? Supporters of Ayn Rand have failed adequately to meet the challenge that Roy Childs posed. So long as competing protection agencies adhere to the trader principle, what rules them out?

Supporters of Rand have another argument they direct against libertarian anarchists. A society of laissez-faire capitalism requires property rights before the market can function. If that is so, property rights can’t be established by the market. If you think otherwise, they say, you are reasoning in a circle. You are saying that the market presupposes rights but also that the market establishes what it presupposes.

J. Roger Lee, a minarchist philosopher, poses the essential point concisely in an essay that appeared in the book Anarchism/Minarchism: Is a Government Part of a Free Country?(edited by Roderick T. Long and Tibor R. Machan; Ashgate, 2008): “Anarchistic libertarianism illegitimately and self-defeatingly presupposes the existence of contract law in its account of how law and its enforcement would come to exist and have an ongoing role in an anarchistic society.” Lee’s argument rests on a suppressed and highly contestable premise. Why does the existence of contract law require a state to create it? Lee is not just saying that the state created contract law. It’s important to realize that Lee has advanced a much more extreme claim. His assertion is that contract law conceptually requires a state.

Why should you believe such a thing? Suppose people for the most part accept a libertarian scheme of rights—this, by the way, was the only circumstance which Murray Rothbard considered viable for an anarchist society—wouldn’t they have, contrary to Lee, contract law without a state? Lee has given us no reason to think that they wouldn’t.

To sum up, the supporters of Rand haven’t come up with a good argument against libertarian anarchism. At any rate, the two arguments I looked at don’t work. If there are others, bring them on.

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