Power & Market

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State capitalism is typically viewed as anathema to the voluntaryist tradition. However, there are takeaways from the idea that might prove useful for our tradition. Particularly, I am concerned with our inability to counter certain critiques coming from the “libertarian” left. In this article, I am proposing a new system of governance that would address these critiques.

Well, first let us start with what critiques need discarding. Among those to discard, parents who sell their young into labor and being underpaid or worked overtime. We should not dignify these questions; they detract from one major critique- that our society might empower a business entity to act and serve as a de facto government.

Now if there is no state, there is no rent seeking, and we very frequently point this out to our detractors. However, political ecosystems are organic and that makes self-interest a bending will in anarchy too. So, what is the alternative?

First, imagine there is a charter in the proposed society. A charter is a document that grants rights to the public, to individual constituents of that society. It is essentially a constitution for all intents and purposes. Now, this charter establishes a company. So, a chartered company does not define any limitation or minimum as to its size, but it does establish an unchangeable structure with its board of directors.

This chartered company would be classified as “the government.” It is where the semantics kill, as “the government” would be forbidden from obtaining and exercising police powers, taxation or anything else that implies infringement. It is in essence, a nominal government and placeholder at that. It is a placeholder, to preclude another company from acting as substitute authority and nothing more.

This is important, particularly as it pertains to a lack of power to tax. Why? Not only is taxation theft, but it also means a lack of fiscal responsibility or general merit. If the state can extort to cover its shortcomings, it isn’t incentivized to check itself. So, this problem is averted. This is averted, that matters because "the government" here will be operating like a business.

Why then define “the government” in my proposed system as a chartered company? If it is simply a state without a social contract, that question probably runs through your mind. Easy, it operates as a business does in the way it will sell its services. Think of welfare as a private good that competes with its competition on the market. If it has no power to extort to cover its losses, it must appeal to the consumer.

That is not irrelevant in the system I propose, because there are private businesses all around “the government.” “The government” does not have a monopoly, the way other forms of state capitalism do. So, it is certainly competing inside the marketplace, now it hopes to make a profit. These profits are a substitute for taxation. Profits, not taxation, make sure “the government” stays in-business.So for instance, one of the products that "the government" wants to sell is healthcare. It must do better than Aetna or Blue Cross, that is earn a bigger profit by catering to its audience and double-checking any loose expenses.

Simple enough, right? Aside from establishing “the government,” this charter document establishes a protocol for its own nationalization. Here, nationalization of “the government” means the assumption of direct democratic control over itself. The common public would oversee and operate for each transaction or managerial decision in “the government” by referendum, in other words. The protocol is this- a popular referendum may be called by any citizen, should “the government” fail in keeping its finances from bankruptcy.

This nationalization could only happen at that point. Further, any direct democratic control would be forbidden from changing the terms in the charter document. Purely, it gives them control over its operations and employment but nothing else. It is here, the fun begins as it is not meant to check against power. Rather, it is expected that nationalization could only reinforce a cyclical bankruptcy that empowers a growth of private competitors to outcompete “the government.”

Most important in all of this might be that it gives the “libertarian” leftist a sense of control with which to keep himself comfortable. Further, its "nationalization" protocol ensures that any demand that a state be invented should operate wholly within a controlled paradigm. Because any scandal or failure is easily exploited to that end, it is time that this be planned for.

The story goes something like: In the last few years, the Federal Reserve printed up to 80% of all bills that were ever in circulation. While Austrian economists have long recognized the superfluousness of central banking and understand the benefits of a decentralized monetary system, it's important not to give in to false ideas, even if they appear to support honest ones.

It starts by recognizing the existence of various money supply measures. Perhaps the most shocking is the M1 chart:

money_supply_m1_last_5_years.png

In April 2020, the M1 figure stood at $4.79 trillion, then it skyrocketed to $16.24 trillion the following month. To clarify, this surge was primarily a result of the Fed's revised definition of the money supply, without restating the prior amount before May 2020.

This topic was discussed in the article: Why Prices Have Gone Up, published last year. In a Technical Q & A, the Fed explains:

Recognizing savings deposits as a transaction account as of May 2020 will cause a series break in the M1 monetary aggregate. Beginning with the May 2020 observation, M1 will increase by the size of the industry total of savings deposits, which amounted to approximately $11.2 trillion. M2 will remain unchanged.

Meaning, from May 2020 (M1 of $16.24 trillion) to its peak in March 2022 (M1 of $20.66 trillion), the balance sheet grew by approximately $4.42 trillion, representing a growth of nearly 30%. While this may appear significant, it is still far from 80%.

On the same Q & A, the Fed includes a graph illustrating the changes to the M1 money supply, specifically highlighting the revision made in May 2020:

h.6-monetary-aggregates.png

With no revision made to the M2 money supply, it provides a clearer interpretation. Taking the March 2022 peak of $21.70 trillion and going back to February 2020, to coincide with the beginning of the official recession, we have an initial starting point of $15.45 trillion. This two-year period represents an extraordinary increase in the money supply of around 40%. See below:

money_supply_m2_last_5_years.png

It may also cause confusion when the term "printed" is used to describe the money supply. The Fed or commercial banks do not physically print dollar bills. Instead, the money supply is increased through the creation of credit (debt), and the production of notes and coins is handled by the Treasury.

Looking at the currency in circulation, which reached its highest point last month at $2.32 trillion, and comparing it to February 2020, when it stood at $1.80 trillion, we see a growth rate of approximately 30%.

currency_in_circulation_last_5_years.png

In the last several years there has been a significant increase in the money supply. While it’s far from the 80% figure seen on social media, it still appears to be substantial. It’s also important to remember, there is no optimal or ideal amount of money that should be created, and this highlights the inherent flaws of an unsustainable monetary system that has long since drifted away from sound economics.

A few days ago, Frank Shostak reminded us:

Because the present monetary system is fundamentally unstable, there cannot be a “correct” money supply growth rate … Whether the central bank injects money in accordance with economic activity or fixes the money supply growth rate, it continuously destabilizes the system.

However, it ultimately traces back to the Fed. During the same period from 2020 to 2022, the Fed’s balance sheet expanded from approximately $4 trillion to nearly $9 trillion. However, this is $9 trillion too much, and unless the Federal Reserve is completely abolished or prevented from interfering in the free market, we will continue to experience the roller coaster ride known as the boom-and-bust cycle.

The noteworthy headline should read that during the previous recession, the Fed doubled its balance sheet, and if a similar approach is taken in the upcoming recession, then the current high prices of today would pale in comparison to the price inflation that would inevitably follow.

Last Thursday, Enrique Tarrio, a reputed national leader of the Proud Boys organization was convicted in federal court of seditious conspiracy along with three-co-defendants. This conviction in a District of Columbia court represents a victory for the Justice Department which has now charged more than a thousand people with "crimes" related to the January 6 riot at the US capitol. Most of the charges related to the riot have been for small-time offenses that amount to vandalism and trespassing. A handful of those allegedly involved in the riot, however, have been convicted of seditious conspiracy.

Notably, Tarrio wasn't even in Washington, DC on the day of the riot, and thus could not have engaged in any violent acts against Capitol personnel. Yet, he has nonetheless been convicted on grounds that he was involved in some sort of "agreement" to "hinder" federal laws, and thus is guilty of saying things that allegedly led to the riot. The Tarrio case is an excellent example of how federal "crimes" can be spun by federal prosecutors from actions that are neither violence, nor fraud, nor any other act that a normal person would recognize as a real crime. 

Seditious Conspiracy Was Invented to Get Around Limitations on Treason Prosecutions 

Seditious conspiracy must not be confused with the act of treason legally defined in the US Constitution, however. Generally speaking, while treason requires an overt act of some kind, seditious conspiracy is a charge that a person has said things designed to undermine government authority. In other words, it is a “crime” of intent as interpreted by state authorities. This is fundamentally different from picking up a weapon and using it against agents of a government.

Of course, as we’ve noted here at mises.org before, the very idea of treason is itself problematic, since it assumes that violence against a government agent is somehow worse than a crime against a private citizen. Governments love this double standard because it reinforces the idea that the regime is more important than the voluntary private sector. Ultimately, however, violence against a person or property should be prosecuted as exactly that, and not as some separate category of crime against the “special” human beings who work for a regime.

Seditious conspiracy suffers from this same problem but is even more problematic because it relies primarily on circumstantial evidence to “prove” that a person was saying things in favor of obstructing or overthrowing a government. Indeed, the supposed necessity of such a “crime” is belied by the fact that no such crime existed even in federal law between the repeal of the hated Alien and Sedition Acts and the advent of the Civil War. Nor did seditious conspiracy laws play an important role in the US regime’s military success against the Southern secessionists.

Instead, what we find is that seditious conspiracy is a crime that is both prone to abuse by state authorities and unnecessary in terms of preventing violence to life and property. In cases such as the January 6 riot, crimes against persons and property ought to simply be considered violent crimes and property crimes of the usual sort. Seditious conspiracy, in contrast, is merely a type of “thought crime.” 

The Origins of Seditious Conspiracy

The framers of the Constitution defined treason in very specific and limiting terms:

Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the testimony of two Witnesses to the same overt Act, or on Confession in open Court.

Note the use of the word “only” to specify that the definition of treason shall not be construed as something more broad than what is in the text. As with much of what we now find in the Bill of Rights, this language stems from fears that the US federal government would indulge in some of the same abuses that had occurred under the English crown, especially in the days of the Stuart monarchs. Kings had often construed “treason” to mean acts, thoughts, and “conspiracies” far beyond the act of actually taking up arms against the state. By contrast, in the US Constitution, the only flexibility given to Congress is in determining the punishment for treason.

Naturally, those who favored greater federal power chafed at these limitations and sought more federal laws that would punish alleged crimes against the state. It only took the Federalists ten years to come up with the Alien and Sedition Acts, which stated:

That if any persons shall unlawfully combine or conspire together, with intent to oppose any measure or measures of the government of the United States, which are or shall be directed by proper authority, or to impede the operation of any law of the United States, or to intimidate or prevent any person holding a place or office in or under the government of the United States, from undertaking, performing or executing his trust or duty, and if any person or persons, with intent as aforesaid, shall counsel, advise or attempt to procure any insurrection, riot, unlawful assembly, or combination, whether such conspiracy, threatening, counsel, advice, or attempt shall have the proposed effect or not, he or they shall be deemed guilty of a high misdemeanor.

Note the references to “intent,” “counsel,” and “advise” as criminal acts so long as these types of speech are employed in a presumed effort to obstruct government officials. This part of the act, however, was never used by the regime. Those prosecuted under the Alien and Sedition Acts were charged under the section on seditious libel, which was heartily opposed for being obviously and blatantly against basic rights of free expression. Nonetheless, the Sedition Act was allowed to expire, thanks to the election of Thomas Jefferson and the Republicans (later known as Democrats).

For sixty years, the United States government had no laws addressing sedition on the books. But the heart of the 1798 Sedition Act would be revived. As passed on July 1861, the new Seditious Conspiracy statute stated

that if two or more persons within any State or Territory of the United States shall conspire together to overthrow, or to put down, or to destroy by force, the Government of the United States, or to oppose by force the authority of the Government of the United States; or by force to prevent, hinder, or delay the execution of any law of the United States; or by force to seize, take, or possess any property of the United States against the will or contrary to the authority of the United States; or by force, or intimidation, or threat to prevent any person from accepting or holding any office, or trust, or place of confidence, under the United States. . . . Shall be guilty of a high crime.

Given the timing of the legislation—i.e., in 1861, following the secession of several Southern states—it is assumed that the legislation originated to address alleged Confederate treason. This is not quite the case. The legislation did enjoy considerable support from those who were especially militant in their opposition to the Confederacy. For example, Rep. Clement Vallandigham of Ohio—who would later be exiled to the Confederacy for opposing the war—supported the bill precisely because he thought it would help punish those engaged in “conspiracies to resist the fugitive slave law.” But the Congress had initially become serious about punishing “conspiracies” not in response to Southern secession, but in response to John Brown’s 1859 raid at Harper’s Ferry.

Southern secession and fears of rebellion helped enlarge the coalition in favor of a new sedition law. The new sedition law represented a significant expansion of the idea of “crimes against the state” in that the sedition law did not require overt acts against the government, but merely “conspiring,” vaguely defined. Stephen Douglas understood this perfectly well, explaining the benefits of his bill as such:

You must punish the conspiracy, the combination with intent to do the act, and then you will suppress it in advance. There is no principle more familiar to the legal profession than that whenever it is proper to declare an act to be a crime, it is proper to punish a conspiracy or combination with intent to perpetrate the act. . . . If it be unlawful and illegal to invade a State, and run off fugitive slaves, why not make it unlawful to form conspiracies and combinations in the several States with intent to do the act?

Others were more suspicious of expanding federal power in this way, however. Sen. Lazarus Powell and eight other Democrats presented a statement opposing the passage of the bill. Specifically, Powell and his allies believed the new seditious conspiracy law would be a de facto move in the direction of allowing the federal government to effectively expand the definition of treason offered by the federal constitution. The statement read:

The creation of an offense, resting in intention alone, without overt act, would render nugatory the provision last quoted, [i.e., the treason definition in the Constitution] and the door would be opened for those similar oppressions and cruelties which, under the excitement of political struggles, have so often disgraced the past history of the world.

Even worse, the new legislation would provide to the federal government “the utmost latitude to prosecutions founded on personal enmity and political animosity and the suspicions as to intention which they inevitably engender.”

Seditious conspiracy legislation gives the federal government far greater leeway to punish political opponents. Certainly, such legislation could have been used against opponents of the fugitive slave acts, as well as against opponents of federal conscription. After all, opponents of both the Civil War draft and the Vietnam War draft “conspired” to destroy government property—as with the heroic draft-card burnings of the Catonsville Nine, for example. It would be far harder to prove in court that such acts constituted treason. Unfortunately, the new legislation was ultimately approved in 1861, and the United States government had its first permanent laws against seditious conspiracy.

We now have the same reasons to fear seditious conspiracy laws as Powell did in 1861. Such measures allow the federal government to construct laws addressing intent, thoughts, and words, rather than overt acts. This greatly expands federal power and allows for prosecution of mere inflammatory rhetoric against the federal government. 

As a practical matter, seditious conspiracy laws are simply unnecessary. A commonsense foundation for addressing violence in the Capitol building would be to simply prosecute those who engaged in actual violence and trespass. It is clear, however, that gaining convictions for seditious conspiracy has been an important goal for the administration because it furthers the narrative that Donald Trump’s supporters attempted some sort of coup.

Unfortunately, these sorts of political prosecutions are just the sort of thing we’ve come to expect from the Justice Department. The FBI can’t be bothered with investigating sex criminals such as Larry Nassar, but they’ll pull out all the stops to prosecute hundreds of those who entered the Capitol on January 6, many of whom simply stood around gawking at the scenery. But when Congress gives the FBI a near carte blanche, as it has done with seditious conspiracy laws, we should expect as much.