When considering the prospect of a minimal or even non-existent state, many are understandably concerned about how society would function. Doesn’t the government provide vital services “behind the scenes” that keep society running? Wouldn’t there be chaos and disorder without those services?
These are legitimate apprehensions that are worth taking seriously. Leaping into a vastly different governing system could cause serious problems, so we need to be confident before we make the leap that we aren’t jumping into a dystopia. Fortunately, economic reasoning gives us good reasons to be optimistic. Specifically, the fact that markets reliably respond to consumer demand can give us confidence that essential “behind the scenes” services will be provided by private businesses in the government’s absence.
To demonstrate how this could work, let’s consider some of the common items that get listed as examples of “government keeping society running in the background.” As we’ll see, every one of these items inevitably falls into one of two categories: things the government has monopolized and that could easily be addressed by the private sector, and things that shouldn’t be done in the first place.
Licensing and Product Certification
One of the items that people often have in mind when they think of government functions that keep society running are consumer protection laws. These would include things like professional licensing for doctors, lawyers, and engineers, and product certification for things like food and pharmaceuticals. If the government didn’t provide these functions, many people imagine that there would be no way to trust whether professionals were competent, whether food was safe, and so on.
But economic reasoning paints a considerably different picture. If consumers want assurance that the products and services they buy meet certain standards of quality and safety, wouldn’t there be an opportunity for an entrepreneur to make money by providing that assurance? Wouldn’t businesses spring up to meet that consumer demand, just like with any other demand?
We don’t need to speculate; such businesses already exist! Many professions have professional associations that function as voluntary licensing bodies, precisely because there is consumer demand for these organizations. Likewise, private companies such as Underwriters Laboratories certify thousands of products every year.
The government imposes a compulsory monopoly on licensing and certification in certain industries. But, in the absence of such a monopoly, it’s clear that the private sector would step in—and since private businesses face competition, these private associations and certifiers will likely do a better job of meeting consumer needs than the government currently does.
Money
Another item people often point to as an example of the government “keeping society running” is the money system. Since money is so pivotal to the market, they reason, and we need the government to provide money, clearly markets would collapse without the government helping out in this area. But the faulty assumption here is that money has to come from the government.
“Money is not an invention of the state,” Carl Menger pointed out in his 1871 treatise Principles of Economics. “It is not the product of a legislative act. Even the sanction of political authority is not necessary for its existence. Certain commodities came to be money quite naturally, as the result of economic relationships that were independent of the power of the state.”
Emergency Services
Yet another function that people assume simply must be done by the government is emergency response, such as police, fire, and ambulance services. But why does that have to be the case? Are private businesses incapable of hiring paramedics, firefighters, and security guards, and providing a hotline you can call if you get into trouble?
Some may be concerned that these companies would charge a fortune, taking advantage of someone in desperate straits. But it’s far more likely that they would follow the insurance model: you pay a monthly premium and then call on them to “make a claim” whenever you need. Like all other kinds of insurance, competition would keep premiums reasonably low and service quality high (quick response times, competent employees, etc.), and a range of prices and service levels would be available depending on what a customer wants and what they can afford.
The poorest in society who can’t afford any emergency insurance could get coverage from a charity, much like a food bank provides food for those in need. This may sound radical, but that’s only because we’ve grown so accustomed to having the government fulfill this role. We don’t call for the government to provide free food for everyone just because some of the poorest can’t afford private-sector food.
Protecting Domestic Industries
In our globally-connected world, international trade is a key component of a thriving economy. But in many people’s minds, the government fulfills the vital job of shielding domestic industries from the winds of global competition. This is a job that the private sector would not be able to accomplish, but it’s also not something that should be accomplished. Trade barriers create unfair advantages for certain domestic producers at the expense of foreign producers and domestic consumers. By protecting inefficient businesses, they lead to a weaker economy and a generally lower standard of living than would otherwise be possible.
It’s true that some people may lose their jobs and some businesses may go under in the absence of trade barriers, but that is how the economy reorganizes itself into a stronger form. Far from “keeping society running,” this role of government is better understood as “holding society back.” The fact that the private sector can’t accomplish this is a feature of the free market, not a bug.
The Post Office
Many people also point to the post office as a government service that helps keep society running. But again, it’s not as if there wouldn’t be any mail delivery if the government suddenly stopped providing this service. Companies like FedEx and UPS would surely get in the game (currently it’s illegal for them to deliver mail!). Some may say that mail is too important to be left to the free market. But really, it’s too important to be left to the government. Or do you trust the USPS to deliver your package more than FedEx?
Learning to Trust the Market
In his 1973 book For a New Liberty, Murray Rothbard addresses this question of the private sector replacing government functions using a comical example involving the shoe industry:
The libertarian who wants to replace government by private enterprises in the above areas is thus treated in the same way as he would be if the government had, for various reasons, been supplying shoes as a tax-financed monopoly from time immemorial… He would undoubtedly be treated as follows: people would cry, “How could you? You are opposed to the public, and to poor people, wearing shoes! And who would supply shoes to the public if the government got out of the business? Tell us that! Be constructive! It’s easy to be negative and smart-alecky about government; but tell us who would supply shoes? Which people? How many shoe stores would be available in each city and town? How would the shoe firms be capitalized? How many brands would there be? What material would they use? What lasts? What would be the pricing arrangements for shoes? Wouldn’t regulation of the shoe industry be needed to see to it that the product is sound? And who would supply the poor with shoes? Suppose a poor person didn’t have the money to buy a pair?”
The concern about needing the government to “keep things running,” Rothbard is saying, really stems from a failure of imagination. People have difficulty picturing how Service X would function if it were privatized, and, on that basis, they conclude that it couldn’t function. They jump from “I’ve never seen it work” or “I can’t imagine how it would work” to “therefore it can’t work.”
But we need to have more faith in the market or at least the ethics of private property and voluntary exchange. True, we can’t predict exactly how certain needs would be met, but if history has shown us anything, it’s that the market will find a way. Entrepreneurs, driven by the profit motive, will come up with creative solutions to our problems, which in many cases will be better than the solutions currently provided by the government.
