Reason as the Leading Motive

Financing the Government in a Free Society

Posted by Jerry on January 29, 2008

The other day, a friend and I were discussing the issue of financing the government in a free society. Needless to say, the topic is of incredible depth; and its particularly complexity is intensified further because one doesn’t have any real-life examples to look at and examine in practice. There has been no completely free society on earth with a purely laissez-faire capitalist system and a government of protection.

But a few points are absolutely clear:

A free society is not an ideal, utopian fantasy. Don’t let people who say that fool you. They are the same ones who insist that Communism is utopian and has never been consistently instituted on this earth. History is testament to the fact that there was nothing utopian about Communism: it was instituted consistently, it was practiced as advocated, and it lead inexorably to the evils, genocides, corruption, and socio-psychological wreakage that was inherent in itself as an ideology.

A free society is the only moral society possible for human beings: therefore, since it is a system derived from the nature of humans and our relationship to reality, a free society is a perfectly practical and realizable vision.

A free society will be radically different in every fundamental way from what we are used to imagining about the structure of society. For example, a free society may have a radically different geographic structure, with the absense of a continuous, uninterrupted geographic boundary–a “nation” might refer to and include private pockets of property that may even lie 1000s of miles apart, independently. The concept of citizenship will be wholly voluntary and assumed by parents for their children until the latter turn of the age of consent. Citizenship will have nothing to do with the accidental location of birth, but with the voluntary consent of assuming responsibilities–including tax and financial responsibilities–with regard to the nation of one’s citizenship, and owning of property within that chosen nation.

Also, police in a free society might function very differently from what we see today; perhaps, they might more likely resemble bodyguards or private security agencies of today. Also, I envision the role of the courts and the judicial system to be the most important in a free society, with only foreign national security policies (among other things) being the domain of the executive branch.

Finally, it stands to reason–and historical precedent has shown–that people do not need to be forced to protect what they value, or pay for the protection of that which they value. Take the case of the military draft: there was the fear that if citizens are not forced to join the military and serve the State, they won’t volunteer for it. This fear is absolutely unfounded, and the United States military is just one evidence of it.

Certainly, nations with oppressive regimes will need to force people into their armies because–without coercion–people wouldn’t risk their lives for a government they despise and a nation they do not value. This simply highlights the need for a government to be cognizant of its role, actions, and boundaries with respect to how it treats the people under its protection.

If young men and women are willing to voluntarily offer their life–their most precious value–in defense of a nation’s right to exist (and therefore, their own personal right to live in liberty), then why would it be inconceivable similarly for a nation’s people to voluntarily offer some money (in proportion to how much they can afford or some other legal arrangement) for the protection of their way of life, their property, their security, their nation, their values?

The end of the military draft and a switch to a volunteer force did not spell doom for the nation’s defenses: in fact, it attracted the best men and women of the highest character, who are motivated to fight on grounds that they accept, believe in, identify with, and wish to protect–not on the basis of compulsion by the State and servitude to an ideology of self-sacrifice.

Likewise, the exchange for money or capital to finance a government of protection on a perfectly voluntary and contractual basis is entirely reasonable and realizable. Indeed, a voluntary system of financing the goverment would additionally serve as one of many efficient checks and balances on the power of the government, because people who disapprove of government activities in any manner (if it is demonstrated that the government has overstepped its bounds) can effectively withold or reduce their finances until their grievances are reddressed contractually, bilaterally, or in the courts. Voluntary financing, thus, would serve not only as working capital for the government but also as an incentive (or disincentive) for a job well done (or badly done). The government and its agencies–like any other private and corporate entity or NGO–would be forced to monitor its own behavior for its own survival. 

This is much like in a volunteer army, soldiers have a right to stop fighting or quit if they believe the war is baseless, immoral, or illegitimate (of course, I’m aware that this is not currently permitted, and I agree that this serious action must be supported by objective evidence and facts proving the illegitimacy of government actions).

This whole issue is very complex and I don’t intend to address or explore all of the issues here. I am myself not very clear on how things might function in a free society, because–as I said–we have nothing in history or in reality to look towards for a demonstration. I have much to read and learn on this topic, which I haven’t done to well enough yet. It’s a very concrete-bound issue, albeit a very important one because it anchors the abstractions of a free capitalist society and makes the principles easier to grasp.

The principles themselves, however, are solid, undeniable, and objective: a free society is the only fully moral society of individuals; since it is fully moral, it is also a fully practical society for individuals to live in and flourish.

9 Responses to “Financing the Government in a Free Society”

  1. evanescent said

    Hi Ergo,

    What do you think of Rand’s suggestion in TVOS (it was only a suggestion but an example that proved that it could happen if we think about it), that businesses NEED the objective system of Law and Order, i.e.: the Courts. They should be willing to pay of course. Therefore every established business pays a small percentage of every transaction to the government for legal cover – those who don’t pay are free not to but have no legal recourse to arbitrate between contractual disputes and no way for any business agreement to be enforced. This way, government is providing a legitimate service; it becomes a paid agent with a service to perform. The money from this (whatever the agreed rate would be) would surely be enough to finance a government that was reduced to only its rightful roles.

    The money acrrued would be spent on the Courts, police, and army. Although financed by business, these services would indirectly benefit everyone – but the difference is that nobody’s property or lives are being sacrificed for the sake of others. Ayn Rand gave a great analogy, likening this situation to a bus or train service that lets poor people ride for free on unclaimed seats – those who pay are not being sacrificed, but since the seats are empty anyway, the poor can benefit through an act of free non-sacrificial charity.

    Great article though – whatever the means of finance, the principle of total freedom in society is non-negotiable.

  2. Ergo said

    Hi Evanescent,

    I read Rand’s essay a long while ago. I remember being skeptical at first, because I had the same doubts I assume most people have about financing the government: why would you give your money away to support government duties? What if most people won’t?

    Of course, I have changed my opinion over time; my doubts were of the same category as of the abandonment of the military draft; i.e., if people are not forced to join the military, why would they bother to risk their lives voluntarily?

    The key to remember is, if you let people free to produce values and enjoy their values, then you will also have them voluntarily willing to do whatever it takes to protect those same values. This is a very important principle, which also sheds light on why enforcing moral values upon people undercuts the entire process of valuation and undermines the intensity of pursuing values.

    Rand, as always, was brilliant in that essay; but it was not her brilliance that sold the idea to me. I’m glad to have approached her essay skeptically at first and then arrived at a satisfactory understanding of this issue through my own self-motivated, rational means.

  3. SEH81 said


    Very interesting topic and discussion (the entire site is fascinating, but I’m sure that’s something you’re more than aware of…). My question regarding financing the government in a free society is: What would prevent someone like a Warren Buffett from dominating the political landscape? Should there be a sort of “voluntary tax” cap to keep the government from being swayed by any one individual/group/business?

    I have made the assumption that the hypothetical free society has a government structured similar to that described by the U.S. Constitution.

  4. SEH81 said

    Re-reading Evanescent’s post may have answered my above question – the government sets the price of the tax/donation, whether it be a flat fee or or a percentage of each transaction, and the business is free to accept or reject the offer. Now more questions are arising in my mind – would there be competing governments in this society? Off to get myself a copy of TVOS…

  5. evanescent said

    SEH81, I strongly recommend TVOS – it will answer your query about competing governments. Will there be competing governments in a free society? In a word: no.

    The suggestion that Rand offers which I mention above is not tax – but rather paying the government for a service. Now, any company would be free NOT to pay or opt out, but if so they wouldn’t be covered legally for any transaction they engage in.

    In a free society, governmental power would be limited to protecting individual rights – therefore decisions in law could not be affected by simply giving a donation (bribe) to a political party or politician. For example, if some Christian wackjobs wanted to make abortion illegal, they couldn’t no matter how much money they “donated” to government, because the government simply wouldn’t have the authority to pass any such law. Governmental money would only be spent on protecting Rights and any corollary tasks.

  6. SEH81 said

    Thanks for the quick response – I will definitely be reading TVOS in the near future. In the meantime, I’ll have to pick your brain, if you don’t mind:

    In a free society, how would the government be structured differently (from what we see in the U.S.) to ensure that it acts only in accordance with the sole purpose of protecting individual rights? Correct me if I’m wrong, but the U.S. Founding Fathers set out to protect “life, liberty and the pursuit of happiness,” ie, individual rights. I’m probably asking for a critique of the U.S. Constitution, but I’m more interested in the structure of the government in a free society, insofar as protecting itself from the corruption that has befallen the U.S. government.

  7. evanescent said

    SEH81, I’m not a political or legal expert so this is just my guided opinion:

    In a free society, there is nothing wrong with a Federal government – and checks and balances would still be required to ensure the fair operation of government.

    In a free society, there would still be elected officials that would have the job of performing their governmental tasks. The difference is that these tasks would be precisely outlined and limited. In matters of policy that don’t infringe individual rights, there is nothing wrong in principle with a majority vote. Also, government would have the task of acting in matters where public opinion is impossible/unnecessary, and where it must use the experts in a particular field to make policy decisions. One excellent example of this is wartime. It is not necessary or rational to take a majority vote to see “which island to we invade first?” etc. This is the role of government – to protects its citizens.

    I should add that matters of policy where it would be necessary to take a vote would be very rare in a properly free society. One such example that I’ve alluded to is election of representatives to do a good job in government. In which case, it might be necessary to have a Bicameral government with a Senate and House of Representatives – I’m not sure.

    If it was left to me, and remember this is my non-expert opinion, I would start with the US as my model, and gradually roll back each layer of governmental power until no further influence on freedom was exerted. Then I’d stop – and that would be pretty close to a perfect government and society.

  8. Ergo said

    To add to Evanescent’s point,

    In a free society, I am certain that no one individual will gain so much economic or political clout as to be an unchallenged dominator of a nation. That would be a monopoly–and a belligerent monopoly will not last too long in a free society; if you study the nature of monopolies and what gives rise to them, it will become clear that in a society instituted upon individual rights, a coercive monopoly would be self-defeating.

  9. Tim R said

    Peikoff makes the point about how in the relatively more free 19th century in the US, it was common for heirs of large business empires to lose everything very quickly. Which is one good way (in my opinion) of demonstrating the fragile art of maintaining a sucessful business in a truly free society.

    I think it is very common for people to fear of business monopolies, even though to me it seems as if it would be impossible for one business to come close to owning everything within one large geographical area – it doesn’t seem logistically possible.

    I suppose in India you have government organisations such as the ACCC (Australia)? The Australian Competition and Consumer Commission are highly destructive, I can’t stand them.

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