Someone once told me that no state in history has ever allowed free market money, because if they did, a state could not exist. Is this true? Does anyone here have evidence or examples of states that have existed without a monopoly on money?
Well, I don’t know much, but I seem to remember in one of Rothbard’s books, I think it was What Has Government Done To Our Money?, he said something about private coins circulating in California as late as the 1840’s (date may be wrong). So if I’m not mistaken, I think the US used to allow private coins.
I haven’t yet read it, but Good Money should be of interest.
A state could exist without such a monopoly. It would be a more limited state however because it would have to rely solely on conventional taxation for its operation and could not inflate at will. Probably what you heard was that today`s leviathan state with all its massive spending could not exist alongside a free market in money. To sustain its spending it would have to raise taxes to such an extent that there would be a revolt.
Otherwise theorethicaly to exist a state does not even require money to exist. For example most of the “taxes” a serf had to pay would have been in natural produce and in labour, not in money. And in fact the Khmer Rouge in their short rule over Cambodia did abolish money.
What this theory implies is that, before someone could establish himself as a state he would have to establish a monopoly on money.
If you use the narrow definition of a state, a bureaucracy to which the powers of government have been delegated, then I suppose the theory could be correct.
If you use state in the broadest sense, a monopoly on jurisdiction, then obviously one would need to become a state before having the power to monopolize money. For some time then the state would allow free money.