I find it common, amongst the few statists who have had the opportunity to intellectualize their opposition to Market Anarchy, to see arguments that seek to prove that Market Anarchy would eventually collapse back into a State. I have already debunked the most popular of such arguments: the “restitution imbalance” argument was debunked on my old blog, and Nock’s agency monopoly is debunked in my upcoming book (“But Who Will Build the Roads?”: Market Anarchy Explained).
Arguments of this type take a general form like this:
(1) In an uncontrolled market system, wealth/consumer demand/power would become more and more concentrated in a few hands. We would have growing inequality.
(2) After a certain level of inequality, power would be so centralized that it would become in the interests of the agents that possess that power to establish a State by force.
(3) Therefore, an uncontrolled market system eventually collapses into a State.
Before I get into the the theoretical problems of the argument form, I must first point out that this argument has zero empirical evidence to back it up. This is not a definite objection, as it may well be that a modern Market Anarchy would be subject to different dynamics, although it is unclear how a primitive tribe would be any less vulnerable to the supposed power concentration than a modern society. Also, history seems to indicate that societies can both be Anarchic and have vast inequalities.
No, the empirical data is clear. If we look at the coefficients of inequality (gini coefficients), we find that freedom entails less inequality in a society, not more. And this is not surprising, as the less centralized decision-making power is, the less possibility there is for people to use coercive means to accumulate wealth. When the Roman Empire steamrolled its way into a town, relative equality between all slowly became gruesome inequality between those who worked for the Empire or were its friends, and those who weren’t. This is how all States work.
Premise (2) is also unproven. No State has ever been formed by “concentration of power” within a society. All States have been the result of the necessity for an outside warring group to create organization in order to efficiently extract tribute from a defeated enemy, or the maintenance of the interests of such an organization. Of course, we don’t call it tribute any more, we call it taxation: but the principle is still the exact same as it was thousands of years ago.
This being said, I, once again, cannot debunk the argument form on those grounds alone. We also have to look at its theoretical underpinnings.
Let’s start with (1). Do we have theoretical evidence that a market could collapse into a monopoly due to increasing concentration of power? In a competitive context, monopolies do not occur unless market conditions are extremely unusual, such as a condition where the raw supply available is so low as to sustain but one viable producer.
Keep in mind that, since we are talking about the State, we are talking about the market in governance. For such a market, competitors have a relatively low barrier to entry, and no strict limitations in supply or demand. Therefore there is no reason to believe that a monopoly, or even an oligarchy, would develop. We should expect to see tens or hundreds of thousands of security businesses, communes, private neighborhoods or communities, etc.
Should we observe some concentration? Of course. Even if all producers were equal, it would be unlikely to observe no concentration at all. But all producers are not equal. To put this in simplistic terms, some producers offer products that most people find superior, occupy a busier niche, or just know how to manage their resources better. In short, we should always expect some inequality: however, this does not mean that we should observe a tendency towards greater concentration.
A lot of people are fooled by this argument because they confuse visibility with concentration. Concentration should not be measured on a basis of “how many businesses are prominent” but rather on the repartition of market power and the nature of that market. We must also consider the existence of alternatives. If Microsoft became a monopoly in OSes (at the moment it occupies 85% of OS market share), then we would have no viable alternatives. If McDonalds became a fast food chain monopoly, we would still have plenty of viable alternatives.
To be continued in part 2.