Economy, Society, and History

My subject today is parasitism and the origin of the state. So far, one important element has been missing in my reconstruction of the present world. We’ve seen what the nature of man is, we’ve talked about property, the division of labor based on property, the development of money, capital accumulation, production of law and order, and the natural order resulting from all of this. Now we have to come to the disturbing elements that developed in history, those events that somehow took the natural tendencies off this path and made history deviate from its natural course.

I will begin by reminding you why we had this tendency toward a natural order. The fundamental insight was that the division of labor and human cooperation is beneficial for all people who participate in it. Division of labor implies higher productivity, and provides mankind with a reason to peacefully cooperate with each other. Otherwise, if this higher productivity associated with the division of labor did not exist, we would indeed get some sort of permanent war of each against each other. Mises writes, for instance,

If it were not for this higher productivity of labor, based on the division of labor, men would have forever remained deadly foes of one another; irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs.1

And again, because of this higher productivity, it is not necessary that people consider themselves as enemies, but can consider themselves as cooperative partners, if not even friends. And to hammer away on this point, let me once again briefly requote something that I have already quoted before, in a slightly different connection, where Mises says that

[i]f one recognizes a principle which results in the union of all Germans…or all proletarians and forms a special nation, race or class out of individuals, then this principle cannot be proved to be effective only within the collective groups. The anti-liberal social theories [the theories that somehow emphasize that there must be conflict in humans] skim over the problem by confining themselves to the assumption that the solidarity of interests within the group is so self-evident as to be accepted without further discussion, and by taking pains only to prove the existence of the conflict of interest between groups and the necessity of conflict as the sole dynamic force of historical development. But if war is to be the father of all things, the fruitful source of historical progress, it is difficult to see why its fruitful activity should be restricted within states, nations, races and classes. If nature needs war, why not the war of all against all, why merely the war of all groups against all groups?2

Now, at this point, before I come to my genuine subject here, let me make you aware of the fact that this principle that people can cooperate peacefully with each other to their own advantage does not necessarily mean that all groups have to live in immediate neighborhood with each other. That is, even if people dislike each other, people hate each other for various other reasons, they can still peacefully cooperate with each other from some distance. That is, to accept the principle of peaceful cooperation does not at all imply the advocacy, for instance, of multicultural societies. Multicultural societies might indeed, and likely will, be extremely dangerous institutions, because people who are ethnically or culturally different do not necessarily like each other very much. But from a distance, from a physical distance, again, there is this overriding solidarity of mankind as a whole, that is, we can all benefit from each other peacefully cooperating with each other without any need to have multicultural societies anywhere on the globe.

In all of my talks so far I have concentrated, with brief deviations, on what we might call productive activities. And let me briefly explain again what I mean by productive activities, in order to distinguish productive activities from what one might call parasitic activities. Productive activities are activities that increase the well-being of at least one person, without reducing the well-being of other individuals. You realize that by this definition, we avoid all sorts of interpersonal comparisons of utility. This formulation is similar to the formulation of the so-called Pareto criterion, which also assumes that we cannot compare my happiness with your happiness. If we cannot compare your happiness with my happiness, can we still say something about social welfare increasing or not increasing? The answer is yes, we can do this if we recognize that if through my activities my well-being increases and the well-being of others is not decreased, then we can indeed say that social welfare has increased.

And there exist three types of activities that accomplish this, that is, making at least one person better off without making anybody else worse off: first, an act of original appropriation, that is, I am the first person to put some previously unowned resource to some use, is, in this sense, a Pareto-superior move. It makes me better off, otherwise I would not have appropriated what I appropriated, and it does not take away anything from anybody else because everybody else would have had the chance to appropriate the same thing, but they demonstrate through their own inactivity, that they did not attach sufficient value to it. So, nothing has been taken away from anybody else through an act of original appropriation, but one person is definitely better off; nobody else is made worse off as a result of it.

The second type of Pareto-superior move is to engage in acts of production. I use my own physical body, and with the help of originally appropriated resources I now transform something that was less valuable into something that I expect to be more valuable. Obviously, I am better off because of this, otherwise I would not have engaged in this act of production. And nothing is taken away from anybody else; everybody else has exactly the same resources at their disposal that they had prior to my act of production. One person is better off; no one is made worse off.

And finally, acts of voluntary contractual exchange are also productive, in the sense that two individuals expect to benefit from the exchange; otherwise, this voluntary exchange would not have taken place, and again, no resources at the disposal of any third party are affected by this voluntary transaction between two individuals. So, in this case, we have two individuals gaining in utility and satisfaction and nobody losing in utility or satisfaction. Because of this, these three types of activities can be referred to as productive activities, as activities that increase social well-being.

In contrast, we have, of course, what we call parasitic activities and I mean parasitic, this time, in a slightly different meaning from that which I mentioned very early on as having been used by Carroll Quigley. Remember, Quigley refers to parasitic activities as activities that somehow diminish the amount of goods in existence, like picking berries and not replacing them with anything. I would refer to this, under the current definition, as a productive activity, so he uses that term in a slightly different way. At that time when I talked about it, the use of parasitic simply had a different explanatory purpose than the one that I’m using now. What I mean by parasitic in this context is: activities that make some people better off, at the expense of making other people worse off. And those activities would be, obviously, activities such as taking away what some other person has originally appropriated, taking away what some other person has produced, or not waiting for the agreement of some potential exchange partner, but simply robbing him of whatever is his. In this case, in all of these cases, we obviously have a situation where one person gains and another person loses.

Let me briefly mention three typical parasitic activities that play a great role in history, before I then come to a special form of parasitic behavior which is associated with the institution of the state. Parasitic behavior would be, for instance, in the most drastic form, cannibalism. That is, people simply eating another person up. It was, again, insight and intelligence on the part of people that led to the abolition of cannibalism. People realized that yes, in the short run, cannibalism might be beneficial, but if you have a slightly longer-term perspective, you would prefer slavery over cannibalism. This is, indeed, a stage of human development for which we have anthropological evidence. Most cannibals realized, at some point, after smartening up a little bit, that slavery was definitely superior over this, unless you are very, very hungry at this particular moment.

But eventually people even overcame this temptation, and developed slavery. And again, it was rational thought that also overcame this institution of slavery, because they realized that slavery is by and large an unproductive system of human interaction. Again, slavery, in the short run, can, of course, be beneficial if I can use you as my slave for a while, even if I were to recognize that in the long run, I would be better off if you were a free man and I were a free man and we cooperated with each other. In the short run, of course, slavery can have certain advantages and again, it requires a certain development of intelligence, a certain lowering of our time preference, to be willing to give up this immediate advantage that the institution of slavery might represent.

Apart from slavery, of course, the most common form of parasitic behavior is plain crime: robbery and fraud and activities such as those. And again, we can say that the fact that most people abstain from these types of activities is based on insight, is based on the fact that they realize that in the long run, these things simply do not pay. If robbery were to become common we would all be in terrible shape, but we abstain even from engaging in robbery and fraud, even if we know that, in the short run, we might be able to get away with it. Again, insight, a certain amount of intelligence, a certain ability to delay gratification is necessary on the part of man in order to give up the temptations that these forms of parasitic behavior might represent.

And because of this, because of a certain amount of intelligence, we have reached a stage where cannibalism has basically disappeared, where slavery has basically disappeared, and where fraud and robbery have become rare events, conducted by just a few asocial individuals, and most people abstain from it. So, civilization is maintained by rational insight, by having developed a certain state of intelligence and having lowered our time preference to a certain degree. And again, let me give you a quote to this effect by Mises, and then I will really come to the problem of the origin of the state as I promised. Mises says here,

One may admit that in primitive man, the propensity for killing and destroying and the disposition for cruelty were innate. We may also assume that under the conditions of earlier ages the inclination to aggression and murder was favorable to the preservation of life. Man was once a brutal beast....But one must not forget that he was physically a weak animal; he would not have been a match for the big beasts of prey, if he had not been equipped with a peculiar weapon, reason. The fact that man is a reasonable being, that he therefore does not yield without inhibitions to every impulse, but arranges his conduct according to reasonable deliberation, must not be called unnatural, from a zoological point of view. Rational conduct means that man, in face of the fact that he cannot satisfy all his impulses, desires and appetites, forgoes the satisfaction of those which he considers less urgent. In order not to endanger the working of social cooperation man is forced to abstain from satisfying those desires whose satisfaction would hinder establishment of societal institutions. There is no doubt that such renunciation is painful. However, man has made his choice. He has renounced the satisfaction of some desires incompatible with social life and has given priority to the satisfaction of those desires which can be realized only, or in a more plentiful way, under a system of the division of labor.…

This decision is not irrevocable and final. The choice of the fathers does not impair the sons’ freedom to choose. They can reverse the resolution. Every day they can proceed to the transvaluation of values and prefer barbarism to civilization, or as some authors say, the soul to the intellect, myth to reason, and violence to peace. But they must choose. It is impossible to have things incompatible with one another.3

Now, this fact that mankind has, by and large, developed sufficient reason to engage in cooperation and build a society, has also led, on the other hand, to the temptation of creating a system of institutionalized exploitation or institutionalized parasitism or, as some people have referred to it, stationary banditry. That is, only insofar as we have a rich society before us does the temptation arise for some people to take advantage of the wealth that society has accumulated, to institute a system where they can systematically benefit themselves at the expense of the great masses of productive individuals.

And this brings me to the institution of the state. Let me begin by giving you a definition of what the state is, a definition that is more or less uncontroversial, that you find adopted by practically everyone who talks about this institution. And this definition of the state is that a state is defined as an organization or an agency that exercises a territorial monopoly of ultimate jurisdiction or of ultimate judgeship or of ultimate arbitration in cases of conflict. In particular, it is an institution that is also the ultimate judge, in cases of conflicts involving itself with other people in society. And as a second element of the definition, which is, in a way, already implied in the first one, the state is an organization that exercises a territorial monopoly of taxation. That is, it can determine unilaterally without the consent of others how much the inhabitants of the territory have to pay to the agency of the state for having the state provide this service of being the ultimate judge and arbitrator in the territory.

Now, you immediately recognize from this definition that it is not difficult to explain why people might be motivated to create an institution such as a state. Just imagine what that means. It means that whenever you have conflicts with each other, you must come to me and I settle the conflict and then I tell you what you owe me for the settlement, without receiving or having your consent doing this. This is, of course, a magnificent position to be in. And the position is even better once you recognize that even if I caused a conflict, if I hit someone on the head, then he must come to me and I decide what is right and what is wrong and then, typically I will decide, of course, that what I did was right and what he is doing, complaining about the fact that I hit him on the head, is wrong—and then I tell him in addition that this is the amount of money that you have to pay me for providing you with this magnificent service. It should be very clear from the outset that to explain why there have been attempts to form an institution such as a state is anything but difficult. It is easy as pie to explain why there are constant attempts to try to form institutions such as this, because what more wonderful position could one have, as somebody who has parasitic inclinations, than being in charge of an apparatus such as the state? To explain why there are attempts to found states is a very, very easy thing to do. What is the difficult thing to do is to explain why anybody can get away with this—why people do not prevent such institutions from coming into existence.

And I will turn now to the task, to explain why people would ever have put up with an institution such as this. This explanation becomes even more difficult once you recognize the following, which I call the fundamental law of parasitism. The fundamental law of parasitism is simply this. One parasite can live off a hundred or a thousand hosts very comfortably, but we cannot imagine that thousands of parasites can live a comfortable life off one or two or three hosts. In that case, their life would be miserable too, so what we recognize from this fundamental law of parasitism is that those people who aspire to create an institution such as a state must also always have an interest to be, themselves, just a small group that is capable of ruling, of exploiting, of taxing and exercising an arbitration monopoly over a group of people far larger than they themselves are. And if this is the case, that the state must always attempt to be a very small group as compared to the group which they exploit, then we realize another fundamental insight. Obviously, a small group, very small group, cannot subjugate a large group only by means of brutal force and weapons. Yes, for a short time it might be possible. We can imagine that there are ten people who are all heavily armed. They might control two hundred, three hundred, four hundred people and keep them in subjection, if the people have no arms and the rulers do have arms. But, in the long run, this is very difficult to maintain. That is, we must expect that these four hundred to five hundred people will also find a way to arm themselves—and in that case, how can ten people equipped with arms rule over four hundred to five hundred or thousands of people also equipped with arms and the means to defend themselves? Then, the explanation based on violence, on sheer brute force, this explanation does not work.

What we recognize instead is that the class of parasites, the small group of parasites, must, if it wants to rule over a population for a lengthy period of time, must base its power on popular opinion. That is, it must have at least tacit support among the public. The public must have taken on a position where they put up with this, somehow see a reason for having this institution. The public must have accepted certain ideologies. And this insight, which was first formulated by Étienne de La Boétie and David Hume—and we also find it in Ludwig von Mises and Murray Rothbard—is that the rule of the state over its population depends not on the exercise of sheer brute force, even though that plays some role, but rests fundamentally on nothing other than opinion and tacit agreement on the part of the public.

So then the task becomes to explain the transition from a natural order, as I described it yesterday, from a system of feudalism under which essentially no state organizations existed, to a state of affairs where a stable state institution has come into existence. And let’s assume, for a moment, the most favorable situation for state formation without having a state already there. What I mean by this is the following scenario. Let’s assume we have a feudal king who is the natural monopolist for conflict resolution. By natural monopolist, I mean every person whenever they have conflicts with each other, do, in fact, go to the king and say, “Come on, you are the most prestigious, most wise and most experienced person. I’ll ask you to settle the dispute that I have with this other person.” People are entirely free to choose different arbitrators, different judges, but as a matter of fact, they all go to the king to do this. Such a scenario would still be what I call a natural order. The king, in this situation, would receive nothing but rental payments from his own tenants and from the nobles, who would receive rental payments from their own tenants. There’s no exploitation of any kind going on. The king does not tax anyone who has property that is independent of the property of the king. The king also does not pass any laws; that is, he does not legislate. Of course, he lays down the rules that his tenants have to follow, but that would be no more than if I’m the owner of a house, then, of course, I lay down certain rules that the tenants of my house have to follow, such as that they have to clean the stairs once a week and things like this. So, this king is part of a natural order and not yet a state king. He neither taxes nor legislates; he only collects rent and lays down the rules of the house of which he himself is the genuine owner.

The decisive step that he must take in order to transform his position into the position of a state would be the following: the king, at one point, would have to say, “From now on, you must come to me whenever you have a conflict with somebody else. You can no longer go to anybody else for conflict resolution. Up to this point, you chose me voluntarily, to be the judge in all cases of conflict. Now, I take away this possibility from you, to turn to others, and I take the right away from others to act, if they should be chosen as judge to do so.”

Now, you immediately recognize that by taking this seemingly small step, the king does engage in an act of expropriation. In particular, this act of expropriation is very visible to the other leaders in society, the other nobles, to whom conflicting parties could have turned to receive justice. Again, recall that in the feudal order it was precisely the case that there existed a large number of independent, separate jurisdictions. Each lord was responsible for creating justice within his own territory, over his own property. Now he can no longer do this, so it is in particular the other nobles of whom we would expect to put up resistance against this attempt of the king to monopolize, to acquire the exclusive monopoly. It is no longer a natural monopoly, but it becomes in this case a compulsory monopoly on being the ultimate and final judge in cases of conflict.

How can the king get away with this? The first step—and again, I offer you here not a precise historical description of what happened here or there, but something that you might call a logical reconstruction of what has happened more or less all over the place. The first step is for the king to cause and bring about a crisis situation. And how does he bring about a crisis situation? In a way, that is not very difficult to explain. Just as we recognize how natural, how easy it is to have the motivation to become a state, we can also recognize that among mankind, there exists always the temptation, the itching, especially among the tenants, to free themselves from their rent payments and the rules laid down for them by their own landlords. That is, tenants, wherever you go, you can imagine that it would be not all that difficult to persuade them to engage in some sort of riots against their own landlords. I free you of the rent payment that you must pay. I free you of the disciplinary rules that your landlord imposes on you and I promise to make you a free man. I promise you that you will become the owner of those things which you previously only occupied as a tenant.

Or, in a slightly different scenario, you, as the king, incite a riot among the poor against the rich. You form a coalition with the poor against your own immediate competitors, that is, the well-to-do people in society that somehow are the most direct rivals to the king. So then you create a civil war, that is to say, you create a situation that is similar to the situation that Hobbes claims exists naturally among mankind. Recall, I explained that the natural condition of mankind is not war of all against all. People do recognize that the division of labor is beneficial, and because of this they tend to be in favor of peaceful cooperation, at least the large majority of people do this. But you can incite, especially if you are yourself an influential person, a person who is trusted by the masses, if you are the king, you can incite a situation that brings about a situation such as a war of all against all.

And then, in this situation where the war of all against all breaks out, where the tenants rise against their landlords and the poor rise against the rich, then you come to the rescue of the nobles and the middle classes and strike some sort of compromise. That is, you get a promise from the nobles and your immediate competitors. Yes, we will give up our former right to act as judge ourselves and grant you an exclusive right to be the monopoly judge, in exchange for you and us getting together and stopping this civil war.

This was, by the way, precisely the situation, for instance, during the Middle Ages, especially during the so-called Protestant Revolution, or Protestant Reformation, when first, the Protestant Revolution resulted in big-time looting activities and so forth, and then people turned to the king saying, “This sort of stuff has to be stopped and in order to stop it, we will grant you the exclusive right to be the judge.”

So, you create a Hobbesian situation. The Hobbesian situation does not exist from the outset, but it can be created. Again, let me just read you a quote here from Henri Pirenne, who in a slightly different way describes the same phenomenon, that is to say, the king allying himself with the lower classes, with the subnoble classes, so to speak, in order to break the power of the competing aristocracy, of those people who would lose the most from the fact that the king acquires a monopoly. Pirenne there says,

The clear interest of the monarchy was to support the adversaries of high feudalism. [That is, the adversaries of the noble class, of the aristocracy.] Naturally, help was given whenever it was possible to do so without becoming obligated to [In this case he talks about the cities, the king in particular—he also is inciting the inhabitants of cities to rise against the nobility.] these [city] middle classes who in arising against their lords fought, to all intents and purposes, in the interests of royal prerogatives. To accept the king as arbitrator of their quarrel was, for the parties in conflict, to recognize his sovereignty. The entry of the burghers upon the political scene had as a consequence the weakening of the contractual principle of the Feudal State to the advantage of the principle of the authority of the Monarchical State. It was impossible that royalty should not take count of this and seize every chance to show its good-will to the communes which, without intending to do so, labored so usefully in its behalf.4

But this is of course only the first step. You create the crisis. The noble class comes to you and wants to be rescued, and you rescue them in exchange for them granting you exclusive judgeship rights. You have to offer something in addition, of course, to the aristocracy. What is typically offered is that the aristocracy now plays some particularly important role in the slowly developing royal bureaucracy that will be established. But more than this, you now need an ideology. Again, recall, without ideological support for it, this institution is not going to last for very long. And the ideology that is created and that is still with us to this day, is the so-called Hobbesian myth. That is, the idea that the normal state of mankind is precisely this war of all against all, which the king deliberately brought about, and that in order to stop this war of all against all, it is necessary that there must be one single monopolist ruling over all people in order to create peace. Now, if you ask yourself—or if you ask all around—ask them why do we need a state? Almost everyone will give you exactly this reason. Without a single monopolist, there would be permanent war of all against all. This is the belief that up to this day has maintained the state apparatus. This is by now a firmly held belief: I have asked my own students and that was the answer that everyone gave. Without the state there would be chaos! There would be no cooperation. There must be a single monopolist. This is the ideology that keeps the state in place.

Let me only point out the following at this point. You can quickly realize the weakness of this ideology, if you do two things. On the one hand, imagine what this means if you have very small groups of people, just two individuals. So, what this theory essentially says is, no two people can ever peacefully cooperate with each other; this would always lead to war of one against the other. There must be always a master and there must be always someone who is subject to the master. You realize immediately, if you just use a very small group of people, how absurd this thesis becomes. We have five people. Is it necessary for the group of five people that there must be one person who is the monopolist in every possible conflict, including conflicts involving himself with the other four? For these small groups, most people would immediately say, “You must be crazy to believe this sort of stuff. That can never be true. Because you know groups of this size who peacefully cooperate all the time.” Nonetheless, this is one of the implications.

What you recognize here is that they never talk about the size of the territory. And on the other hand, you recognize that if this theory is true, then it must be the case that we must have a world state in order to create peace because the same argument applies, of course, to a situation where we have a multitude of states. If we have a multitude of states, then these various states are in a state of anarchy, of natural order, vis-à-vis each other and allegedly there must be permanent war among them. Now, this is also obviously not the case. There are wars among them, and I will explain why there are more wars among states than there are wars among individuals in one of my next lectures, but it is certainly not the case that states are permanently at war with each other.

What remains entirely unexplained here, and what is somehow taken intuitively for granted, is that we are talking about sizes of states where it is not perfectly clear immediately that these people would peacefully cooperate with each other, but the size of states are, in a way, arbitrary. Why should not a state have the size of a small village for example? In a small village, we have not the slightest difficulty imagining that there can be peaceful cooperation going on without a monopolist. Only when the size becomes a little bit bigger do we become increasingly blind to recognizing that at all times, the same principle is at work, just as the same principle was at work to explain why all of mankind can engage in peaceful cooperation based on the division of labor, why there is not only a reason for the division of labor among the Germans, but the Germans and the French must not fight against each other, why the same principle applies to Germans and to the French. So we have to recognize that this statist principle, if it should be correct, should also apply to the level of you and me. That is to say, I am your slave or you must be my slave, but it is impossible for peaceful cooperation between the two of us to exist.

And once you recognize that the same principle applies, not just to two people, but to the entire world, you recognize immediately that what we have is just a made-up myth, created by this initial crisis that the states themselves or the would-be states created in order to blind people to something that should be perfectly obvious. So now, once a state has established this sort of mythology, they all go through a sequence of steps, essentially the same sequence of steps wherever you look. The first one is, of course, that you have to disarm the population. There existed initially in the Middle Ages independent army leaders offering their army services to whoever needed them: mercenary troops. They are now incorporated into the national army or into the king’s army or they are eliminated. Again, all states try to disarm the population.

In the Middle Ages, one of the immediate things that kings did, as soon as they had acquired a semi-state position, was to insist that all the nobles had to raze their own fortresses, to prevent them from coming up with the idea that maybe that whole thing was a screwy process after all and they would defend themselves against the jurisdiction or the tax impositions coming from the side of the king. So, raze your fortresses. You can build nice palaces, but no longer anything that serves defensive purposes.

Then, of course, all independent jurisdictions must be eliminated, ultimately, even going as far as to no longer allowing husbands and wives to be judges in their own homes. This process takes hundreds of years. My reconstruction compresses this into a very short period of time, but all of these powers are gradually won step by step from civil society, and we have basically only now, in the twentieth century, reached the point where the power of the state extends as far as involving itself in immediate family affairs, like daring, for instance, to take children away from their parents. This is something that would not have been possible hundreds of years ago; the power of the kings was not sufficient from the outset to do something like this, but we realize that now the power of the state is large enough to tell you whether you can smoke in your own house or not.

The next step is very important: to control the ideology, to keep alive this belief in the Hobbesian myth and the necessity of the state for the creation of peace. And for this you have to take over, you will first try to take over, the churches. This occurs with the Protestant Revolution, as a result of which a far closer alliance between church and state is built than existed prior to this. By the way, that’s why the Protestant Revolution was supported by so many princes, because they realized that that was exactly offering them the opportunity to establish themselves as states, besides the obvious motive that they could also grab property from the Catholic Church, which, in some countries, made up 20–30 percent of the used landmass. And, it offered them a great opportunity to just enrich themselves greatly by expropriating the churches.

And then, of course, you introduce successively public education, by controlling the church, given that the church was a main instructional institution for a long period of time, and making the priests state employees. This has, of course, happened in all European countries, to a larger or smaller extent, particularly in the Protestant countries where all priests are paid according to the official pay scale that regulates how other bureaucrats are paid. And if this does not go far enough, then, of course, you create a system of public education under direct state control. Martin Luther, for instance, played a great role in this, advising the princes not only to oppress the peasants (whom he had first brought to rise against the princes, but then smashed them down), but also advised the princes that just as the people should be trained in order to be ready for war, so they should also be brainwashed in state-controlled schools in order to become brave and well-trained citizens.

And the last step, after the nationalization of education, is the control of money, that is, the monopolization of the issuance of money. There existed, for instance, in France, before the establishment of a central French king, a multitude of mints competing against each other, trying to acquire the reputation of producing the best, most reliable, least manipulated, type of money. All these competing mints were gradually closed down, until, in the end, only one central government mint remained in existence, which, of course, makes it far easier to engage in manipulations of the gold or silver content than it would be if there were a multitude of mints competing against each other. If you have a multitude of mints competing against each other, each mint has an incentive to point out if another one is defrauding you. You have a mint from town A or town B, they are engaging in coin clipping so people would respond by bankrupting or boycotting this type of mint. As soon as only one mint exists to serve a large territory, it becomes far easier to engage in these sorts of manipulations and thereby having a tool for enriching yourself, in addition to your power to tax.

Lastly, they also then monopolize the means of transportation and communication, which is of great importance once you recognize that means of communication and transportation would have to play a very important role in any attempt to revolt against the government. You have to move troops from place to place; you have to send letters and messages from place to place, so you monopolize the postal service and you monopolize at least the main throughways and make them the king’s roads and the king’s postal service, in order to control the public.

I will end with a few additional observations. With states coming into existence, the normal natural tendencies for markets to expand, division of labor to expand and intensify, is not brought to a halt, but it is somehow distorted and disrupted. There exist now, all of a sudden, state borders that previously did not exist, and automatically, once you have state borders, the possibility arises that you can now hamper and interfere with the free flow of goods. That is, you can impose tariffs. Second, the normal tendency of money to become an international money is also brought to a halt because now we have borders. There will be national monies arising, even if they are initially commodity monies, but they will now be French francs and Italian lira, and this brings about monetary disintegration, or reduces the amount of integration that would otherwise naturally arise on the market. Then, with the existence of the state, of course, the tendency for law to become universal and international, that I described in my lecture yesterday, is slowed down or halted. We had these insurance agencies and reinsurance agencies and arbitration agencies and the conflict between various insurance agencies leading, then, to the competitive development of universally accepted standards of right and wrong, of what is legal and illegal; this comes to a halt. Law is now broken up into German law, Dutch law, Swedish law, every country having different sorts of principles, procedures, etc. The tendency that normally exists for unifying this comes to a halt.

And last but not least, states also have a profound effect on the development of languages. On the one hand, they sometimes forcibly expand certain types of languages within their territory, eliminate certain languages and make some languages the official language of the country. On the other hand, by doing this, as the other side of the same coin, they also disrupt the natural tendency of people to learn different languages and on the fringes of different territories for people to speak multiple languages and, in a way, also prevent the development of some languages that are used as international languages. Just think of what happened to Latin, which used to be the language of international communication for hundreds of years all throughout Europe. Latin basically disappears from this function as soon as national states come into existence. It is then that French is spoken, German is spoken and Latin becomes, if it does not die out immediately, a language that is spoken less and less and in the end, it becomes just a relic that some strange people still learn in strange places without really knowing why, because nobody except the pope and his people actually speak that language.

• 1Ludwig von Mises, Human Action: A Treatise on Economics, scholar’s ed. (1998; Auburn, AL: Ludwig von Mises Institute, 2008), p. 144.
• 2Ludwig von Mises, Socialism: An Economic and Sociological Analysis (1951; Auburn, AL: Ludwig von Mises Institute, 2009), p. 318.
• 3Mises, Human Action, pp. 171–72.
• 4Henri Pirenne, Medieval Cities: Their Origins and the Revival of Trade (1925; Princeton, NJ: Princeton University Press, 1974), pp. 179–80.