[The Road to Freedom and the Demise of Nation States. By Peter B. Bos. Free Trade Press, 2015. Xxv + 620 pages.]
This remarkable book reflects the author’s enthusiasm for liberty and his vast intellectual curiosity. I propose to discuss only a few of the book’s central insights, but only reading the book will adequately convey Peter Bos’s intellectual range.
Like Mises, Bos emphasizes that the free market economy, by taking full advantage of the division of labor, greatly increases prosperity. “In those countries where the exchange of goods and services has been relatively unhampered, capitalism, through investment and the division of labor and skills, has produced a standard of living unimagined even a few decades ago.” (p.162)
Socialists and other critics of the free market are not content with this abundance. Even if capitalism is, as Mises often said, a system of “mass production for the masses,” is it not unfair that some people earn vastly more than others? Laments about unequal shares of wealth abound.
Bos expertly parries this attack on capitalism. Wages depend on labor’s marginal productivity, and this rises as the accumulation of capital increases. With better tools and equipment, labor becomes more valuable to the capitalist and gets paid more. “In capitalist countries, the increase of capital accumulation is exponential and outruns the increase in population. To the extent that this happens, the marginal productivity of labor increases exponentially as against the marginal productivity of the material factors of production, which makes ever-higher wages possible.”(p.163)
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Classical liberalism recognized the superior productivity of capitalism, as well as its manifest benefits to liberty, but it suffered from a fatal flaw. Although the classical liberals favored the free market, they made an exception for protection, justice, and defense. Here the state was necessary. “The greatest fallacy of the classical liberals was their assumption that a constitutionally limited state government was necessary and ceding to it a monopoly of coercion over all purported state functions. In ceding to the state these traditional services, the classical liberals never considered that these purported services of the state were no different from other consumer services and thus could and should be provided by proprietary organizations, subject to competitive market forces and incentives in the free market.” (p.184)
A skeptic might say to Bos, “it is easy to postulate that free-market institutions can replace the state, but how do you know this is possible?” Bos has carefully worked out a response. Protection and defense would be carried out by insurance companies. These companies would have strong incentives to offer protective services efficiently. “In a voluntary market economy, the success of an insurance company will be directly linked to the welfare of its clients, because it will be profitable to enhance that welfare.” (p.272)
Many libertarian readers will be familiar with this idea, but Bos tells us something new about it. He claims that he originated the idea. After a presentation on constitutional government in the fall of 1961, “I privately disclosed my insurance concept of natural government to the presenter, Alvin Lowi. . .The concept thereafter became a major part of the Andrew Galambos FEI [Free Enterprise Institute] courses. Regrettably, Galambos never publicly acknowledged or credited my contributions.” (p.253)
Again, a critic might respond, “This is an interesting idea, but it is no more than a pipe dream. We will never get rid of the state.” Here Bos defies convention. He argues that the state will soon collapse and further that the proprietary communities he favors have an excellent chance of arriving on the scene.
In predicting the demise of the state, Bos has been influenced by Joseph Schumpeter’s prescient article, “The Fiscal State,” to which he draws our attention. “In a short essay reflecting the experience of World War I, he predicted a new era in state government finance and government policy. He pointed out that before the war there were no absolute governments. By that he meant that nation states before World War I could raise no more than perhaps 5 percent of a country’s national income through taxes or borrowing. However, during World War I, every belligerent nation state raised far larger sums year after year. . .Schumpeter predicted that this precedent would create a different economy in which inflationary pressures would become endemic, which in turn would undermine the political system.”(p.220)
Bos finds in this dim prognostication grounds for optimism. “Since the state is an inherently unstable and illegitimate organization based on unworkable and immoral premises, its demise is inevitable.”(p.247) This gives us the opportunity to establish a free society.
As should by now be apparent, Bos has firm views on how such a society would be organized. His proposal about insurance companies functioning as protection agencies has already been canvassed, but he also has views about the monetary system and what he calls “proprietary communities.”
He supports “individual sovereign money issuance.” (pp.286 ff.) Those interested in the details of this proposal must consult the book, but at one point he differs from Mises and Rothbard. He writes, “However, a commodity can never act as money, for the purpose of money is to obviate the necessity of a physical transfer of value from the buyer to the seller. . .The shortcoming of metal-based money is that it still represents a commodity barter system, albeit one based on precious metals.” (p295) Bos has been much influenced in his ideas about private money issuance by the libertarian writer E.C. Riegel. I confess that I should have liked to have seen here a greater engagement with the arguments of the Austrian economists.
Bos, following Spencer Heath, favors proprietary communities. In this system, a private company owns a community’s land and “leases separate parts of the land under specified conditions or covenants to selected tenants.” (p.389).Bos argues forcefully that such communities could handle in a peaceful and profitable way all the problems so woefully mismanaged by the states of the contemporary world.
Bos offers us a vision of a better world, and readers of The Road to Freedom and the Demise of Nation States will be instructed and challenged by what he has to say.
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
