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Why the State Celebrates Its Failures

May 9, 2005

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The second anniversary of America's expedition into Iraq passed with relatively scant fanfare. Since hostilities in Mesopotamia commenced, thousands of American and Iraqi casualties have been tallied. Every month Washington spends billion of dollars on counterinsurgency and rebuilding efforts in Iraq and further afield, which swells the nation's largest budget and budget deficit in its history[i].

As vast quantities of blood and treasure are expended abroad, Washington politicians win plaudits domestically for their warmongering, and government contracting at home and abroad burgeon, on what basis is this imperial project—financed by foreign lenders and American taxpayers—justified?

Whiffed on a curveball

The "slam dunk" pretext for the invasion of Iraq was Saddam Hussein's reputed stockpile of weapons of mass destruction. Although the Bush administration touted the virtues of toppling a mass murderer and inspiring/imposing democracy across the Middle East, the most compelling and controversial justification put to the American people was the prospect of Saddam striking the U.S. with WMD himself or by proxy, given his alleged connections to al-Qaeda. Only when the hyped weapons failed to surface, and they have yet to do so, did the Bush administration quickly scrap the weapons talking points and opt for the democratization gambit.

Judging by the findings of the latest presidential commission to investigate the intelligence failures concerning Saddam's fictitious arsenal, it is clear the nation's security services and the American people were duped, however willingly. The 14-month, $10 million presidential commission concluded that virtually every shred of evidence produced by the government's $40 billion per annum intelligence apparatus was predicated on gravely flawed information. At the center of the commission's report[ii] on the pre-war amalgamation of WMD evidence was the Iraqi ex-pat code-named "Curveball," a chemical engineer and brother of one of the aides to Ahmed Chalabi, head of the then Pentagon-connected Iraqi National Congress.

Although American intelligence officers never met Curveball before the war, save on one occasion, his dubious claims were unquestioningly infused into the Bush administration's case against Iraq. The sole Iraqi source spoke with frank specificity about Iraq's alleged biological weapons programs and existence of mobile labs described by then-Secretary of State Colin Powell during his now infamous Feb. 2003 address to the United Nations.

Post-war investigations showed that Curveball was not even in the country at the times he claimed to have taken part in illicit weapons work. CIA analysts who lobbied for the agency to come clean about its star source's duplicity were sacked.

According to the commission, U.S. intelligence agencies' reliance on Curveball and their failure to scrutinize his claims was the "primary reason" that the CIA and other spy agencies "fundamentally misjudged the status of Iraq's weapons programs."

Washington's other showpiece examples of Saddam's malevolent intent—secret acquisitions of uranium and aluminum tubes for a resurrected nuclear program and fleet of unmanned aerial vehicles capable of discharging nasty chemical agents above U.S. cities—were all undermined in turn by outside organizations. Inspectors from the International Atomic Energy Agency discovered in Jan. 2003 that documents fingering Iraq for attempting to purchase uranium from Niger were forged, a mere inconvenience the CIA opted to ignore until a few months after the war.

America's leading centrifuge physicists, who characterized it as technically garbled and unmistakably false, dismissed the CIA's case for aluminum tubes. Without convincingly substantiating in the first place how unmanned aerial vehicles would make the trek from Iraq to America undetected, the White House's claim was duly refuted by UN Weapons inspectors before the war, who correctly assessed the vehicles as fit for reconnaissance missions, not WMD delivery.

The glaring deficiency of the Robb-Silberman commission's report is that its remit did not entail investigating policy-makers' (mis)use of intelligence. Though the commission's findings explicitly deny that political pressure was exerted on intelligence analysts to ensure information fit the Bush administration's bellicose agenda, the dismissal is belied by the text's accounts; one could reasonably infer such a colossal blunder could not have been perpetrated without direction from political handlers at the top.

Rather, Bush secures re-election for prosecuting a war under deliberately false pretenses against an infirm adversary unconnected to 9-11. Deputy Defense Secretary Paul Wolfowitz's appointment to head the World Bank smacks of former defense secretary and Vietnam War architect Robert McNamara's selection in 1968. Condoleezza Rice becomes secretary of state while her subordinate Stephen Hadley, assumes her former post. A figure instrumental in ensuring the spurious uranium story posited in the 2003 State of the Union Address, Bob Joseph, gets to be under secretary of state. Lastly, George Tenet—head of the CIA during this mess—is awarded a medal of freedom for presumably bending intelligence to suit his boss's whims.

Hence, the Bush administration is exonerated by default and is presented with an unprecedented opportunity to take credit for the massive revamp of intelligence collection at home and abroad. If justice were to be served, the president and his cronies would be held to account for their actions.

Political and commercial means

To understand why the ruling political class is exempt from reproach for their misguided and devious policies, one must recognize that the state operates by distinct rules.

For starters, consider managers who deliberately fib about the health of the commercial enterprise they run or that the company is simply unable to pay its bills, which is tantamount to the entity failing at its chief functions—serving customers and providing a return on investment to its owners. Should management's chicanery or the firm's woes be unmasked, whether by the keen eye of investment analysts, savvy traders or competitors, the business's core stakeholders may choose to sell shares and/or discontinue patronage.

Contractual and civil remedies ensure that the transgressors receive comeuppance for their misdeeds and the business is liquidated, so that the residual factors of production are better employed in more honest and successful enterprises. At the heart of the process is the voluntary exchange of property rights, embodied by enforceable contracts and monitored by shareholders and their agents (traders) as well as consumers, who ultimately decide the fate of businesses via profits and losses, the unmistakable gauge of customer satisfaction.

Rarely are executives retained or promoted for presiding over spectacular or chronic mistakes detrimental to shareholder value and customer retention. Indeed, consumers jettison faltering entities as quickly as they embrace burgeoning enterprises, which equally applies to businesses' stewards.

Conversely, the government sector does not operate by the sanctity of property rights, marginally adjusts to market signals and is only nominally accountable at the ballot box. As the only organization—save criminal gangs—that parasitically thrives on plundering the fruits of others, it is apparent that the aforementioned features of commercial exchanges are absent.

One simply cannot determine whether government agencies are efficient and effective at bureaucratic activity and any accrual of revenue by state agencies through their own production of goods and services is funded solely through taxation[iii]. Only in the marketplace, where all property transactions between individuals are voluntary, may one properly account for revenues and expenditures and measure an organization's success or shortcoming.

Since the state's viability is inexorably linked to the predation of others' production, it follows that government administrators would jealously guard its turf from rivals, thereby ensuring the state retains a monopoly on the provision of defense and justice services. Murray Rothbard made no distinction between the state and a criminal gang[iv], save the scale of its operations and its perceived legitimacy among a majority of its subjects. Ascendancy over waterways, roads, and land ownership—including eminent domain—the post office and education are often cited as vital to the state's viability.

As with any monopoly, the price of the good or service produced tends to rise and the efficiency and effectiveness of output falls. Imbued with the disutility of labor common to all men and bereft of competition, much less the scruples and yardsticks of voluntary production and exchange and profits and losses, state agencies tend toward profligacy.

What is more, democracy is the political system most conducive to burgeoning expenditures and an ever-expanding state due to its intrinsic incentive structure.

Democracy deconstructed

As Hans Hermann-Hoppe adeptly describes in Democracy: The God that failed, the democratic state is inherently a "public" monopoly. Unlike privately-owned monopolies, e.g., monarchies where the sovereign generally has an incentive to moderate expropriations of property to preserve the realm's present value for heirs, state officials in a democracy are mere caretakers who cannot privately enrich themselves from ownership or sale of government property.

Rather, a moral hazard and tragedy of the commons ensues as bureaucrats and politicians may merely exercise use of government property while on the state payroll, precipitating a strong inducement to maximize current use of government property, irrespective if such activities entail dire consequences for taxpayers and the economy at large.

As concerns government finance, officials conduct the borrowing and enjoy the resultant political plaudits from the constituencies that benefit from state largesse while other private citizens defray the expenditures and debts via taxation or government-stoked money creation. Indeed, Hoppe contends an elected president can run up public debts, instigate inflation, inaugurate long-running wars, and introduce other state projects footed by hapless taxpayers without being held personally liable for the consequences.

Rothbard's Wall Street, Banks and American Foreign Policy methodically chronicles how the personnel of successive democratically-elected administrations manipulated American foreign policy to secure the narrow self-interests of connected business interests whilst justifying these massive, costly and incessant interventions on the pretext of combating communism or promoting democracy.

Politicians who have aggressively expanded the state in America and elsewhere are extolled as great. Verily, democratic governance provides an alluring career for aspiring politicians, their cronies and bureaucrats. Not only do officials have the resources accrued by the state at their disposal, they also exercise the authority and wherewithal to confiscate private property and participate in the process of spending and borrowing—absent individual culpability—all the while receiving a salary and pension funded by taxpayers. Furthermore, politicians and appointed administrators are only accountable during regular popularity contests, in which voters can reshuffle personnel but are not inclined to alter fundamentally the scheme of free-for-all theft.

Hoppe states democracy abolishes the distinction between rulers and ruled—the limited opportunity to become a member of the royal family that pervaded under monarchy—and assumes that any member of the political system may ascend to the upper echelons of governance. Given the state's indispensable need to steal for its subsistence and the nearly unfettered entry into the ranks of the ruling class, democracy renders it that much easier for politicians to accelerate exactions from the public, as the gates remain open for any individual or faction to gain access to governmental powers and impose the same taxes or regulations themselves. As democracy has taken root in the United States and elsewhere, jostling between rival political factions has been less about how flaccid or robust the state should be, but what direction the state should take as its scope expands.

The ability of elected politicians and entrenched bureaucrats to institutionalize and enforce systematic predation and redistribution of private property is an outcome of the democratic ethos itself. Indeed, the grand bargain of democracy is this: every individual within the system—whether voluntarily or not—cedes the inviolable title to his or her property for the ability to either elect, participate in or marshal a political movement that competes for the privilege of seizing and spending everyone else's money. It follows that individual responsibility and private property ownership are seriously impaired and denigrated as the government-instituted "law of the jungle" taps innate human characteristics such as envy, self-preservation, and keenness for gratification.

As Frederic Bastiat explained in The Law, self-preservation and self-development are universal instincts among men as is the preference to do so with the minimum amount of pain and the maximum level of ease. Plunder then is favored over production, so long as the risks and inputs of confiscation are not as agonizing or as indomitable as the painstaking act of production and exchange. When given an opportunity to seize private property or stipulate regulations on owner's use thereof, as democratic rule is wont to do, participants in the political system vie for the chance to apply the state's coercive arm in service of their supporters' ends.

Motivated by envy and self-preservation, all classes of individuals demand, whether through forceful or pacific means, the franchise as its price for defraying the expenses of others running the government. Once empowered to help decide the course of public expenditures—Bastiat wrote—plundered classes opt to be as licentious as other enfranchised classes, rendering the systematic looting universal, even though such profligacy is undeniably detrimental to the economy's well-being.

It should be noted that the chief feedback mechanism of democratic government, voting, does occur in private enterprises and associations. Beyond this superficial similarity, however, there are acute distinctions. Shareholders exercise voting rights in a corporation proportionate to stock ownership whereas every eligible voter in a democratic election is entitled to one vote, irrespective if they are net tax-eaters or taxpayers.

Should shareholders grow disaffected by voting procedures, business strategies or dividends payouts they may opt out of owning a portion of an enterprise by selling stock, a prerogative denied to democratic voters who must acquiesce to government spending plans and policies—regardless of consent—lest they risk jail or emigration. The intrinsic tenuousness of property ownership in a democratic system and the inability to extricate oneself and possessions from possible confiscation accelerates the temptation to seize other people's goods.

Bastiat argues that the onset of universal plunder undermines the purpose of law, in his view the collective organization of the individual right to defense of life, liberty and property. The moment law is perverted to engineer ends contrary to individual liberty, e.g., enshrining the notion individuals are entitled to a portion of each other's property absent voluntary agreement, the conversion pits morality versus the adulterated law. Thus, moral chaos is the outcome of democratization, as one must either relinquish respect for the law or compromise moral sense.

Freedom's case against war: $35

The divergence between morality and democratic rule can be observed in legal positivism, the notion that right and wrong are absent prior to the introduction of legislation. Legislation attenuates predictability of law as the free entry into government and the intrinsic fluidity of political priorities ensure the governing process reflects the most urgent desires of policy-makers and the electorate, irrespective of the long-term ramifications of the enacted rules. Furthermore, the emergence of public or administrative law, which exempts government agents from individual culpability when exercising their sanctioned duties, enables the state's workforce to engage in behaviors that no other individual may commit licitly. Lew Rockwell cites a few euphemisms where the state excused itself from the laws it professes to uphold, such as kidnapping posing as selective service, counterfeiting masquerading as monetary policy and mass murder sold as foreign policy[v].

Consequently, law is not considered negative—inimical to injustice as Bastiat would have it—much less universal, eternally bestowed, discoverable by man and anterior to the institution of government. Bastiat asserts that the prior existence of life, liberty, and property is the impetus for enacting laws in the first place. Moreover, the demarcation between right and wrong and the very definition of crime is obfuscated and debased by the inexhaustible and transitory adoption and amendment of legislative diktat and the bifurcation of law codes applicable to the rulers and the ruled.

In sum, the unique characteristics of democratic government tend, according to Hoppe, Bastiat and others, to accelerate rising time preference, decivilization, and the incidence of crime to the detriment of private property, voluntary production and exchange, individual responsibility and even morality.

Why then do Messrs. Bush, Wolfowitz, and any other politicians, statesmen or bureaucrats get away with inaugurating recurring conflicts and administer an ever-expanding vehicle of coercion and plunder? The fundamental rules and ethos of democratic government impel man's innate inclination toward self-preservation and self-development to not only produce, trade and safeguard his own possessions but also employ legal theft to acquire more property from others.

Politicians and their deputies are merely the best at exploiting the system's impaired moral climate to organize the state's confiscatory arm to serve their backer's interests.


Grant M. Nülle is a Research Fellow with the Ludwig von Mises Institute. [grantn007@yahoo.com]. Comment on the Mises Economics Blog.

[i]Nülle, Grant. "Is Bush a budget cutter?" Mises.org. 10 March 2005.

[ii] "Commission on the capabilities of the United States regards in Weapons of Mass Destruction."

[iii]Mises, Ludwig von. Bureaucracy.

[iv]Rothbard, Murray N. Power and Market.

[v]Rockwell, Lew. "Why the State is different." Mises.org. 30 Dec. 2003.


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