Tuesday, March 05, 2013

Where There's No Government

Mason London
Excerpt from The Five Stages of Collapse

[In italiano: Dove non c'è governo]

Modern societies rely on the government to defend property rights, enforce contracts and regulate commerce. As the economy expands, so do the functions of government, along with its bureaucratic structures, laws, rules and procedures and—what expands fastest of all—its cost. All of these official arrangements show an accretion of complexity over time. Each time a new problem needs to be solved, something is added to the structure, but nothing is ever taken away, because previous arrangements are often grandfathered in, and because simplifying a complex arrangement is always more difficult and expensive than complicating it further. But socioeconomic complexity is never without cost, and once the economy crests and begins to contract, this cost become prohibitive. In the context of a shrinking economy buffeted by waves of escalating crises, an outsized officialdom comes to exhibit ever greater negative economies of scale, while the arduous task of reforming it so as to scale it down and simplify it cannot receive priority due to a lack of resources. In the best case, after a more or less chaotic transitional period, new, simplified and scaled-down official structures do eventually arise.

The government, at least in its non-functional, purely symbolic form, may not be abandoned outright. A few of its key functions may come to be served by unofficial groups. An almost completely lawless environment may prevail in certain particularly distressed areas for a time, after the government loses all ability to act due to lack of resources, and before local forms of unofficial self-governance spontaneously arise. It must be remembered that governments exist mainly through taxation. In a declining economy, the tax base shrinks while the government’s expenditures on social spending and crisis mitigation only go up, but the population cannot afford to pay a higher tax rate. In this situation, most governments nevertheless try to raise taxes, with the effect of driving economic activity underground. As the population is forced to resort to illegal forms of commerce, to informal arrangements, barter, gift and subsistence economies in order to survive in conditions of increasing poverty and joblessness, this vicious cycle feeds on itself and the government withers away, turns to criminal activities to survive, or both.

As the process of governmental disintegration runs its course, alternative, unofficial forms of governance take its place rather quickly. It is neither accurate nor helpful to imagine a spontaneous descent into some sort of Hobbesian state of nature, which, given what we now know, is best regarded as a ridiculous fable, a work of whimsy and a projection of ignorance, for where there is no law, there is custom and taboo that have the force of law and are upheld through judicious use of violence. Where there are no official authorities, unofficial ones spontaneously arise. Trade and commerce go on, but without government involvement or protection.

What’s more, in a transitional, crisis-wracked environment such unofficial forms of governance often turn out to be far more cost-effective. The government, with its predictable, impersonal, rule-governed, procedure-oriented set of evolved behaviors, is only able to function effectively in a stable, predictable environment. A collapsing economy is not such an environment. Here, all judgements and actions have to be based on the local, immediate situation, all solutions have to be improvised and ones that involve going through official channels and gaining official approval become noncompetitive. Illegal ways of doing business easily outcompete legal ones.

The focus on illegality is in some sense inevitable, but it is also not entirely helpful, because it tends to paint all activities as black or white. It is far more helpful to view them as grayscale, or as distributed over a two-dimensional map. In one corner, we have public institutions functioning legally—or perhaps not functioning at all: the police, the courts, code enforcement, inspectional services and so on. In the opposite corner we have private institutions functioning illegally: organized criminal groups. But there are two more corners. We also have public institutions functioning illegally—police and security forces acting privately, either for hire or on their own behalf. There can also be private organizations legally providing services that the government can no longer provide: private security and protection companies. There are numerous gray areas, such as officials randomly enforcing laws to settle scores with certain individuals or groups, or to provide a credible basis for later demanding bribes in exchange for agreeing to look the other way.

A large increase in illegal activity is often the direct fault of the government. A government that makes many essential activities illegal but lacks the ability to enforce the ban succeeds in only one thing: creating a large field of action for illegal enterprises. This, in turn, creates demand for their private protection. It is this key function of offering private protection for illegal enterprises that provides the initial basis for an entire new mode of governance. In this context, organized crime should be regarded not just as a form of social organization but as a form of alternative governance, which succeeds or fails based on personal and group reputation for honest dealing, and on its ability to use violence when it is justified and suppress it when it is not.

In many ways a weak government, which can impose a ban but not enforce it, is far worse than a largely defunct government, whose officials perform a few ceremonial duties and rarely set foot outside the heavily guarded official compound in the capital city. A weak government with some residual capacity for law enforcement produces a far more violent environment than a defunct one, by disrupting the work of organizations that offer private protection to illegal enterprises. Once the government has given up on law enforcement and become purely ceremonial, private protection organizations can begin to provide services to both legal and illegal enterprises, and indeed to the government itself. Ties between such organizations can then be worked out and territories and spheres of influence divided up, minimizing the level of violence. In this sense, a weak government’s efforts at law enforcement further weaken the economy by making it difficult for organizations that provide private protection to do their work, while their services are in demand precisely because of the government’s inefficiency in providing protection. Of course, this only further undermines the government... [This transition] should not be regarded as one that begins with the rule of law and ends with something else, but as a transition from badly organized crime to well-organized crime. Examples of this sort of succession can be found throughout history and in many parts of the world. Be it the Sicilian Mafia, Al Capone’s Chicago in the 1920s or Russia in the 1990s, there are numerous parallels in how such a transition occurs. If allowed to run its course, it eventually supplants the government and forms a system of self-governance and private protection whose legality is no longer in dispute.

Nor is this a recent phenomenon: during the Middle Ages, and even into modern times, protection rents were the largest source of fortunes made in commerce, playing a larger role in generating profits than production technology or industrial organization. Protection rents offer a means of stimulating an economic recovery (subject to natural resource constraints). This is because an organization that offers protection forms a natural monopoly within its territory, allowing it to raise the price of protection above its costs and generate a monopoly profit, which it is then able to invest in productive resources. In the absence of a government, it is the only actor that can create temporary austerity but produce greater prosperity down the road by reallocating resources from consumption to capital goods. If more competitive institutional frameworks are allowed to evolve, formerly criminal groups can become legitimate shareholders in the businesses from which they had previously extorted payments.

Such a scheme does not spontaneously arise everywhere. The demand for protection services is a matter of scale; it does not exist in societies where people deal only with those they know personally, face to face, and where disputes are mediated by family and clan. It is a byproduct of economic specialization, impersonal relations and the need for long-distance trade. In societies where interpersonal trust is high, no one needs enforcers, and where there is sufficient solidarity, people can unite and defeat the common threat of gangsterism. Like weeds that opportunistically colonize areas of disturbed soil, criminal groups sprout up in disturbed societies. Small-scale enterprises in large-scale societies are the most susceptible; kiosk owners and street vendors are traditional targets for racketeers. Next are corrupt public officials, who spontaneously give rise to private protection, because they create a market niche for those who broker bribes and guarantee the transactions of bribery, protecting both sides: the briber from non-performance and the bribed from non-payment. ...It is therefore necessary, as we start to explore this topic, to set aside our negative reactions to terms such as thief, racket, mafia, gangster and so forth and concentrate on the circumstances that create a need for their services, and on how the racketeers and the gangsters can evolve in a positive direction because, strangely enough, they often do.

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Jacob Gittes said...

Great post/excerpt.

How will computers/Internet/e-commerce affect the cycle you have described?
Presumably, the government, with its ability to monitor and control the Internet, could easily interfere with "illegal" activities, and seek to penalize barters and other gray-market and black-market transactions that utilize e-mail and web sites.

Will people be forced to forego electronic means of communication as things continue to devolve, or will the government (especially in the USA and Europe) make the smart decision to let such commerce evolve without too much interference?

Dmitry Orlov said...

Publius -

Concerning the current state of affairs viz. the Internet, see this. Concerning the future, it will all depend on the power of the international criminal syndicate which provides your protection and how much immunity from prosecution it can secure on your behalf: today it's just the banksters, tomorrow it might be everyone.

Kevin said...

Funny that you would post this today. I heard something on the radio this morning that kind of got under my skin, which is relevant to today's blog. The state of Washington is running ads telling the citizens that if they've had dealings with a person or business that they suspect is unlicensed, they should report it on a web site called "suspectfraud.com". It impressed me as a fine example of Orwellian doublespeak to equate unlicensed businesses with fraud, as I am sure there are plenty of people in this state who are providing completely fair and reasonable goods and services, but who are just doing so without the blessing of the state. Of course, I'm sure there are others who are just ripping people off, but I don't think that the simple fact of getting a business licence completely precludes fraudulent activities, either. I wonder if this is an early sign of a state struggling to maintain control of an economy that may be moving more and more towards the underground economic model.

Jeff Z said...

in response to Publius-

There's already a thriving grey market on the internet but on a local scale, and I bet most people here have already used it.

Crag's list (sp) is a fantastic source for all sorts of used products and services and barter, and as much as the mainstream media and local governments rant about it, they aren't able to touch it. Mostly because most users absolutely love it.

I've been a user for years and would have a hard time living without it. I've wondered for how long it would be able to avoid an official gov shutdown, but it seems to be doing OK so far.

There are other local grey markets I'm sure you could name, where goods and services are exchanged for cash only, which avoid the tax man. I think in some ways, they're a good example of markets that are too difficult to regulate by a weak government, at least on the local scale, and are therefore able to continue functioning. I don't see that changing in the future.

www dot eighthacrefarm dot blogspot dot com

Unknown said...

I am to a great degree responsible for
what is going on in Washington State.

A collection agency Investment Management and Recoveries, LLC, headed by Randall Goins, is trying to bilk millions out of the elderly nationwide. They threaten lawsuits, and worse. Randall hires young single mothers, who he does not pay. Furthermore he does not pay withheld tax to the IRS either.

The State of Washington is conducting an investigation into this nether world and the ad you mention is part of that.


Stanislav Datskovskiy said...


After Mr. G & friends find their proper place in prison, will the stoolie hotline be shut down? Or will it remain in place, and encourage people to turn in unlicensed hairdressers and auto mechanics? Somehow I suspect the latter.

forrest said...

It sounds like there's something more involved, a significant 'something' though hard for me to specify.

The US has had alcohol prohibition followed by [other] 'drug' prohibitions, which resulted in some of the processes you describe. Because some of these drugs were occasionally beneficial, and all of them were certainly wanted by the customers, this had dual effects: corrupting the government while making illegality socially acceptable with much of the public. Fine, we got a demented government in conflict with some of the more competent public [ala Kornbluth's setting for _Syndic_] -- but mainly we got really large amounts of money being made by investment in humanly-destructive activities, ie milking maximum profits from susceptible people's debilitating addictions. [Read Gabor Mate's _Hungry Ghosts_ for examples of what that looks like!]

The ultimate effect was not simply the corruption of the government, but the corruption of the illegal-business community itself, because [regardless of legality-considerations] higher profits were available for providing public dis-services than for constructive purposes.

This sucked the 'respectable' economy into the toilet bowl as well. Could a conscientious businessman refuse to join in fraudulent investments?-- Certainly, but the selective pressure of a 'criminogenic economic environment' systemically reduced the influence of conscientious people.

There were, last I heard, even a few tiny banks that persisted in honest loans for creditworthy purposes, and remain in business to this day. These were not, of course, the sort of banksters who came to dominate the economy, the government, the public information channels....

One could have a scenario like Kornbluth's, where a competent illegal organization came to supplant a rotten government -- but it's very unlikely that such an organization would continue to function in a way beneficial to the public -- in a setting where parasitic activities could easily generate the same amount of socioeconomic power. If the 'game' is Zero-Sum Hog-The-Loot then the sucker who simply tries to increase available goods will simply have his resources sucked away by a competitor intent on grabbing the available goodies.

The Gangster Revolution is over, and the government lost... but it hasn't been beneficial (or even been much noticed.)

Jacob Gittes said...

Jeff Z:
Thanks for the response.
We use Craigslist quite a bit for finding and selling odds & ends: everything from furniture, to tools, to things related to my hobbies. Yes, it is a great local bit of economic anarchism in action. Heck, you can even rave and rant about politics, or find a date...

I'm kind of surprised it hasn't been regulated or even shut down by the government yet. Even in France, we were able to get a great apartment to rent for a few days through CL. It's truly an amazing gift of the founder (Craig). It's an example of how one person can make a contribution to the future of the success of anarchism/freedom. But again, it's amazing that it's been attacked by the authorities as little as it has. There are the occasional spectacular crimes that are in the papers, and attributed to CL. Like any commons, it gets used by criminals and psychopaths...

Michael J. Petro said...

Good post, and interesting additions from the commentariat.

I just wanted to add a small observation: The imperative behind adding fixes to complex systems, as opposed to reasoned overhauls, is an additional symptom of the short- vs. long-term thinking that you described in your last post.

R. A. Davies said...

Legal is as legal does. The truth is we are human. All of the activities of people are part of a definitional process. For instance, one day drinking alcohol is legal, the next it is illegal. We defined it into its context. Thus, all military activity by state actors are essentially protection services for the moneyed. They have the monopoly on power and violence. You are not allowed to shoot your neighbor, but the state is. Once the state withers, that does not mean that a period of sweetness and light suddenly appears. I am struck by the frequent belief of those on both the right and left that the government is standing in the way of some perfect utopia and if it would only get out of the way or change in some fundamental way, we would reach nirvana. Au contraire. Humans are humans and subject to the same irrational desires, impulses, arguments, and violence as they ever were. I am afraid that we can change the uniforms but the duties remain the same.

Olive Farmer said...

Now altogether we have lost our faith in our species, lost our faith in ourselves, squander our beliefs on the false gods of democracy, of money, of religion, fictions all in the false reality they have woven to hold us back, to stop us stepping into a world of our own creation. They have been murdering the love that’s in us, murdering the care, slaughtering the unity that would cast them into the pit from whence they came.

They have to do this, for they can see our rising number and our rising collective intelligence that is its product. Our number is driving our evolution, our number is giving us the strength and the knowledge to force open the doors to a different future. This future is reaching back to us. Its light is brilliant. Here and there it is breaking through and our masters shiver and tremble at its power, are working ever harder now to prevent our ascension to the world we human beings will build, a world of beauty and love, a world free of fear.

Their weapon is, as ever, the control of our consciousness. Now we have devised new instruments of connectivity they have made them their instruments of magick. They see the power of our technology we have yet to see ourselves. They need now to act quickly before we make the discovery they fear most.

That we can unite.

That we are powerful.

That we are an amazing species of love and light and that this is the face we will turn to the universe when we take our world from them and cast them aside.

Walter said...

Okay Dimitry - Are you just planning on watching this unfold or do you actually have a "plan" to influence rising protectionist rackets? Does you plan have some "design" features? Have you formulated some sort of "vision" and "steps" to get there. There are a whole bunch of us working on "plans" and "steps" and "alternatives." Are you just writing to make money or do you have a larger purpose? [I suspect you will take a cheap shot at me now like you did on the Energy Bulletin, but I am a big boy so I don't really mind. - What I want to know is if you actually have a plan. I do.]

horizonstar said...


Seems that the ability of the Gooblement to control anarchists who use the internet as their highway is being put to the test already. Bitcoins are being used as a medium of exchange to move value between and around fiat currencies. And the open internet drug market called Silk Road operates behind a Pentagon-developed encryption wall that the DEA seems incapable of penetrating.

Dmitry Orlov said...

Walter -

"If you want to make the gods laugh, tell them your plans."

Walter said...

Kollapsnik - Laugh all you want. Meanwhile I work 3000 hours a year for no money so I can give food away to poor people. When Dimitry's collapse comes, I will be able to feed people PLUS teach them how to feed themselves. I do so right now. I will also have crops that are adaptable to extreme weather conditions. Laugh all you want. I don't do this for approbation or money.