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The State: Engine of Creation or Engine of Plunder?

While in England recently I visited Buckland Abbey in Yelverton, Devon, the home of Sir Francis Drake (1540-1596).  As every English schoolboy knows Drake is famous for successfully raiding Spanish ships loaded with treasure from the New World, being the first man to circumnavigate the globe, and helping to defeat the Spanish Armada.  Of course, the Spanish see things differently, so every Spanish schoolboy knows that Drake (whom they call ‘El Draque’ or ‘The Dragon’) was a merciless pirate who made away with much of the gold being legitimately transferred to Spain.  A little less well known by both sides is the fact that Elizabeth I (1533-1603) was  personally involved in these buccaneering ventures, often loaning her own ships and/or owning shares in the ships of Drake, Hawkins and other merchant adventurers.

When Drake returned from one of his expeditions in 1579 after capturing the Spanish treasure ship, The Cacafuego, Elizabeth closeted herself with Drake for a six hour private meeting in which she agreed to allow Drake to amply reward himself and his crew from the booty. Drake used a  small part of his share to purchase Buckland Abbey while the Queen reserved for herself an amount that, it is estimated, exceeded a full year’s expenditure for the entire realm.

It is difficult for us moderns to comprehend that, at the time, no distinction was drawn between the public and private capacity of the Queen.  Elizabeth was expected to ‘live off her own’, to finance government from crown lands, feudal dues and customs. It was virtually impossible to draw a line between official naval expeditions and private commercial enterprises, which as described above, were frequently synonymous with buccaneering. In addition to the Queen, virtually all of her ministers invested in such enterprises and benefited significantly in terms of their personal fortunes.  Of course the Queen of England could never admit in official circles that this was the case so, lying and propaganda were routinely used to provide ‘cover’ and ‘legitimacy’ for the crude fact that the State was being used as an institutional machine of plunder.

Historians and political theorists will argue that by 1714 all this had changed and Parliament had wrested complete control of finance, the executive and all its actions – including foreign policy, which both the Tudors and Stuarts had regarded as their private preserve.  While this is true it does not necessarily mean that the State had changed in substance as opposed to just form.  Indeed, I want to suggest that the modern  State, despite all the changes that have taken place over the last 350 years, is still, at its core, an institutional machine of plunder.  There are only two ways to meet ones needs. One is by the voluntary production and exchange of wealth, as when one  starts a business, goes to work for someone or simply exchanges a good or service.  This is the economic means.  The other way is by forcibly taking the wealth that has been produced by others. This is the political means.  The State is the institutionalization of the political means.

Instead of Elizabeth and her ministers plundering civil society to pursue their own ends, the modern State plunders its citizens at the behest of a diverse and ever changing slew of interest groups ranging from congressmen, banks and unions, to corporations, environmentalists and the military.  However, the State continues to employ the political means and so remains at its core an institutional machine of plunder.

President Obama recently attempted to deny this by claiming that the State was an essential ingredient of the American success story.  He said:

“If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business – you didn’t build that.  Somebody else made that happen.  The internet didn’t get invented on its own.  Government research created the internet so that all the companies could make money off the internet.”

What he didn’t mention was the fact that the entire bloated edifice of the State is only made possible because productive members of society are forced to labor 147 days of the year to pay for it.  Furthermore, it is ludicrous to claim that if the State did not provide them we would not have teachers, roads, bridges or the internet.  The truth is that civil society is being bled dry by an overweening State that threatens to kill the hen that has, until now, laid the golden egg of American prosperity.

______________________

“The state is that great fiction by which everyone tries to live at the expense of everyone else.”

 “But how is this legal plunder to be identified?  Quite simply.  See if the law takes from some persons what belongs to them and gives it to other persons to whom it does not belong.  See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”  Frederick Bastiat

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About Malcolm Greenhill

Malcolm Greenhill is President of Sterling Futures, a fee-based financial advisory firm, based in San Francisco. I write about wealth related issues in the broadest sense of the word. When I am not writing, reading, working and spending time with family, I try to spend as much time as possible backpacking in the wilderness.

View all posts by Malcolm Greenhill

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8 Comments on “The State: Engine of Creation or Engine of Plunder?”

  1. Tom Pallante Says:

    Very Good.

    Tom

    Reply

  2. Margot Johnson Says:

    Malcolm, you’re right, the government is taking liberties to redistribute wealth, but who are the many beneficiaries? I think Obama meant we’re all standing on someone else’s shoulders.

    Witness, what’s left of our money after taxes goes further because we get our goods at a cost reflecting conditions of labor that drive workers to suicide at the Apple factory in China, and a girl in the middle east to endure sexual servitude to keep her job at a sewing factory for Target (and what else is there for her since once used, she can never go home). Real estate is worth more here because we ship our toxic waste (and work) overseas. A burger coke and fries are poor-peoples fare because the kid who made it can’t live on his wages.

    What we need to ask ourselves is – am I paying enough?

    Reply

    • Michael Says:

      Margot,

      You’re neglecting the worse thing the Govt does with its ill-gotten gains: destroy innocent lives, families, and communities in the Middle East.

      Reply

    • Malcolm Greenhill Says:

      Margot, thank you for this comment. You ask who are the many beneficiaries of the State’s redistribution of wealth. Currently the largest beneficiaries have been the big banks and financial institutions i.e. the State has taken money from the poor and middle classes and given it to some of the wealthiest groups in society.

      I disagree with your interpretation of Obama’s speech. He did not mean to utter the simple truism that everyone stands on someone’s shoulders. If you listen to the speech carefully you will see that he was playing the populist card, suggesting that ordinary people are really just as amazing as people who do amazing things and that amazing things are not as amazing as they look because somebody else did much of the spadework. Lastly, when people want to do really big things together the way to do it is through Government.

      I think you are suggesting that the West is wealthy because people in the developing countries are poor. If this is your point then it is wrong. They were poor long before the West was wealthy. Also, you would have to explain why the developing world, including China, has made such huge gains in standard of living in such a short space of time. Are they becoming wealthy at the expense of someone else as well?

      Reply

  3. Gregory Zaretsky Says:

    Hi Malcolm, it was interesting to read about the state supported buccaneering in the 16th Century Europe. State sponsored piracy was not unique to England however. I am sure you are aware that American privateers took about 600 British vessels during American Revolutionary War. This was done for the spoils, not out of some patriotism, mind you.

    God knows, I am no fan of Barak Obama, but I am all for some “state plundering” and agree that the government did build our infrastructure. This is what governments are for. They are to redistribute some wealth, so that crime stays manageable and that hungry masses do not riot on the streets. Likewise all the elements of modern day Internet were invented by individuals, but we needed DARPA to put it all together.

    I fully agree that our ridiculously oversized government, through mismanagement and waste, has created this monumental deficit which is killing the golden egg laying goose of American business. And yet, without the state, I think we would most likely have teachers, but not the interstate roads, Internet or GPS.

    Gregory

    Reply

    • Malcolm Greenhill Says:

      Grisha, the history of roads, railways, canals, telegraph, gas, electricity, postal services and other infrastructure projects around the world reveals that much of it started out privately until governments took control for reasons not related to efficiency. There are no technical reasons why highways should not be private. Indeed, private highways are relatively common in both Asia and Europe. In the United States, the biggest obstacle is that federal funding makes it difficult for private companies to ‘compete’ with government roads. Users of private highways have to pay tolls as well as the fuel taxes that help fund government highways.

      As to who put together the internet, the truth appears to be much more complex than simply attributing it to DARPA:

      http://online.wsj.com/article/SB10000872396390444464304577539063008406518.html

      Furthermore, even if government researchers did invent, say, GPS, what makes you think that private companies were inherently incapable of doing this?

      Reply

  4. Dr. Michael R. Edelstein Says:

    Gregory, you sound like a bright individual, so I’m interested in your thinking process.

    What is your evidence without the state we would have teachers? What is your evidence without the state we would not have roads, internet, or GPS?

    Michael R. Edelstein
    http://ThreeMinuteTherapy.com

    Reply

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