Putting aside the morality of trying to bankrupt the state through the use of welfare, is it actually possible to withdraw so much in welfare, that the state will collapse before it reforms, or resets the access to entitlements and other subsidies?
I understand people will offer opinions, but I am more interested in whether anyone has thought through this notion of shriveling the state by causing it to implode under its own weight. Have we seen examples of this before? Has the state actually disappeared, or has it just been replaced with a new state that does everything the old state did, without the entitlements (specifically thinking of the USSR here)?
Looking for feedback from people willing to give this topic some thoughtful considering.
Has the state actually disappeared, or has it just been replaced with a new state that does everything the old state did, without the entitlements (specifically thinking of the USSR here)?
Living in the intersection of the ex-USSR and the EU, I see a lot of people feeling entitled to this and that. It is really amazing how people who have been living under socialism before still want more of it.
Maybe I didn’t understand your question, but the state is still there, and the main differences are: private business is legal (but quite often demonized), you fear much less about being arrested for speaking your mind, and there are many parties to vote for (instead of just one).
Here is one hypothetical situation I can conceive.
There is an independent central bank which holds the personal accounts of the government, the state governments, and the other banks.
Assuming that the current account of the government, or the treasury as we normally call it, has $5 trillion in it, and there is an immediate request for $6 trillion in entitlements and subsidies…
all that happens is that the banks simply makes an entry in the checking books. It will bring the government’s overdraft to $1 trillion, and various bank accounts of people on welfare will see balances rise by a sum total of $6 trillion. So what happened? Nothing. The checks simply got handed out.
Now, the problematic issue here is whether people start withdrawing the cash from their bank accounts, to the point that banks find themselves without the cash needed to redeem demand deposits. What does the government do? It does what it did in Argentina during the Argentine financial crisis. It simply declares that you can not draw out money from the bank.
Nothing will happen. Insolvent governments work differently from insolvent households.
For modern day examples, I would think that Greece makes a good example of a welfare state that reached that breaking point of “collapse or reset/reform”. Italy and Spain could be others, but they are attempting reforms to avoid repeating the problems that Greece incurred from its welfare programs.
Thinking about it from a theoretical standpoint, I would think that any government would want to maintain power. Those people involved in government directly would probably do their best to institute whatever changes were necessary in order to maintain their positions. Naturally, special interest groups would attempt to influence whatever reforms might be instituted to gain an advantage or lessen any impact from losing advantage.
I don’t know if a State has ever disappeared. I would even venture to argue the point that the State in former Soviet Russia did not disappear, but merely reorganized.
Bankrupt in the legal sense of a state having to restructure a bit, sure. But in terms of putting a state out of business, considering its ability to tax and support from organizations such as the EU in the case of Greece and the UN etc, no. It’s in the interest of other states to make sure that one of their own doesn’t go out of business.
Possible? Inevitable, rather. The problem is that that does not cause the state to disappear, but creates chaos for some time, and than allows for its reemergence. It’s not a good, long-run prospect, I’m afraid.
But there is a chance that after the implosion, the state will fracture in smaller, leaner states, possibly even city-states. After all, in hard times the guys of the City of are likely to think: “why should we be paying for the rest of the ?”. Add in the fact that, for the first time in history, we have the technology to allow even the smallest of city-states to defend themselves against attack, and there could be hope of a renewal of decentralization.
I’m inclined to say no because the State’s revenues are gathered by force. Hence, a revenue “shortfall” is just a matter of applying more force. That said, the limiting factor is the disposition of the rabble to riot. To me, it seems like there is a parallel between a popular toppling of a regime and bankruptcy of a market firm.
If de la Boetie is correct, the true purpose of welfare transfers is to buy off a portion of the rabble with bribes… “The mob has always behaved in this way—eagerly open to bribes that cannot be honorably accepted, and dissolutely callous to degradation and insult that cannot be honorably endured.” The portion of the rabble thus purchased is to be the State’s ally when the productive sector becomes restless and threatens to stop producing (and, perhaps, riot). But I think the Egyptian revolution shows just how fickle such bribed friends can be.
The state can only become bankrupt when its currency is no longer considered legitimate, which usually is a product of some attempt by the state to use its currency as a method of monetizing ever-growing debt. In other words, the only avenue to “bankruptcy” is hyperinflation, because as long as the state’s currency is worth something then it is not revenue constrained. As we know from history, countries that have faced hyperinflation have continued to exist by simply developing new mediums of exchange.
Welfare is a form of interventionism. Interventionism is not a stable and permanent system of social cooperation. The system eventually always liquidates itself. Putting aside morality, I think the answer must be Yes then. However, bankrupting the State and bankrupting the idea of the State are not the same thing. The idea itself can only be bankrupt by other ideas.
Personally, I cannot conceive of any possible way for the State to ever go away without first going through a total fiscal collapse. Something that will render whatever is left of the government as totally dysfunctional and untrustworthy. This is one event that I think (unfortunately) must occur. Pointing this out is not to advocate for this or that welfare program.
Great responses guys. High quality discussion so far.
My take is that de la Boetie was correct, and that it’s a matter of mass consent, and when people remove consent, the state is gone. It could be a crisis which brings the loss of consent around, but as some indicated, if people aren’t ready for statelessness or liberalism, then it will be statism again, just a little less over the top, but marching right back into oblivion.
I see overcoming the state as part of the evolution of the species. It could take 10 generations. It could take 100. Until man wants different, and recognizes the state for what it is, just as we eventually identified overt slavery for what it was, nothing can change. People have to recognize that the state is fundamentally irrational, contradictory and very dangerous.
Putting aside the morality of trying to bankrupt the state through the use of welfare, is it actually possible to withdraw so much in welfare, that the state will collapse before it reforms, or resets the access to entitlements and other subsidies?
I think the Republican Party has been trying this for 30 years now. Do you think the US state is any closer to collapse?
You probably CAN collapse the state thru bankruptcy. But it will take a very long time, and will probably be a total systemic collapse akin to the fall of Rome, something Im sure none of us want to see.
My view is that we know the socialist state will collapse once economic calculation becomes unsolveable. I am also of the opinion that fiat money makes economic calculation near impossible and maybe even impossible. The greater the amount of intervention the more chaotic things become. The more chaotic it becomes the greater the chance some event will happen that ultimately destroys the whole damn scheme, wakes people up to what is really going on.
It would not be difficult for all of you to learn to leech the system and maintain your current standard of living. How would things change if you were making 100k had a taxable income of 20k and were able to qualify for all the government programs? How many people would have to game the system before it would fail to be able to support itself and collapse?
It would be difficult for me because I don’t believe causing chaos or collapsing a welfare state with millions addicted to welfare is going to lead to a libertopia or ancapistan. I have seen no arguments which indicate this is likely to happen except as some coincidence or random chance.
Is the nature of a state is that it continually expands through time eventually it has to reach some point where it will begin to consume itself and collapse?
Is the only thing that can prevent this increased produtivity and capital accumulation, lengthening the period of production?
If the collapse is inevitable it is impossible to undo the state through the internal mechanisms of the state. You may be able to temporalily slow the rate of growth or quite possible regress the power of the state for some period of time, but the state will eventually resume growth. In the end the only way for a state to die is at its own hand.
Mao once said that an all out nuclear war would be preferable, because it would weaken the capitalist world so effectively that the Communist bloc could hit back harder and take complete control. That was a speech that made many Russian officials very concerned when they heard it, even though many of them had ordered killings and liquidations themselves.
It takes a very rare person to delight in disaster to get his way. The hippies of the 1960s rebelled against The Man and the idea of a soulless life in the workplace, with grinding work all day long. But now that millions are unemployed in the post-recession world, we don’t see or hear any of the former 1960s hippies rejoicing that people out of work can now join them in their naturalistic life.
Basically, one has to be Mao in order to desire disaster to change the world to one’s own liking.
PS: I guess you are already familiar with the Cloward Piven strategy.
I was waiting for someone else to bring up the fact that this notion of collapsing or withering a state to get to a Utopia is a very Marxist perspective.
I think it is either supreme arrogance or supreme ignorance to think that you have to hurt other people to improve their lives, or to shock them into an understanding they cannot reach through reason. It doesn’t speak well for the development of a liberal commercial society when the way to get there is welfare and subsidies.