Irish Liberty Forum

The Economics of Politics

with 3 comments

[This post is excerpted from a reply made on a thread at (link), which may help to illustrate the context of the message]

I believe that I understand your point of view (that it is acceptable for taxes to be used in political campaigns, and that these are, if anything, more legitimate than privately-funded campaigns). There is a justification for the political parties to use taxes in a campaign like this, because of their trusted, accountable position as elected representatives. However, for private campaigners to use money which was gained in the marketplace, not through political procedures, is a perversion of democratic ideals.

Firstly, we need to get a handle on the nature of government (there are obviously more foundational assumptions I hold which I will have to leave out for the sake of brevity). A government is a special kind of organisation: one which claims a territorial monopoly of the right to inflict property rights violations. It runs like any other business, with the sole difference that it holds exclusive violent monopoly powers over the people in the areas under its control. This is a straightforward definition which you should find corresponds with reality.

Of course, governments can be managed in more than one way. They can exist as private monopolies (monarchy or dictatorship), where influence is strictly limited to the rulers and their allies, or as quasi-public monopolies (democracy), where a larger section of the population may have an entitlement to inflence policy.

Now I want to consider the question of different kinds of political campaign, but before I do that we need to understand what taxation is: the governmental extortion of funds. This may sound inflammatory but tell me if I am mistaken. To extort is to obtain from another by coercion or intimidation. It falls into the general category of property rights violations whose exclusive ability to commit is the defining feature of government.

Taxes used in a political campaign are clearly of a very different nature to funds obtained in the marketplace being used for this purpose. I believe that understanding this difference and its implications is absolutely key. Without going too deeply into theory, it is clear that those people who have used the coercive apparatus of the state to obtain their funds might not have been able to obtain them without this apparatus. Strictly speaking, we cannot know for definite that they wouldn’t. However, we can say that it is extremely unlikely.

If you take away the threat of prosecution, what incentive would we have to pay for a government political campaign? Some of us would give away our money voluntarily, though some of us would not, and it would not necessarily correspond with electoral voting patterns. It would come down to individual, subjective valuations of the government’s campaign.

Individual, subjective valuations form the basis of the wealth acquired by actors in the marketplace. Without coercive apparaus, they must rely on their ability to offer exchanges which satisfy the desires of their trading partners. Naturally, these desires may include that the actor does not use their funds for certain kinds of political action. Such a desire may be written explicitly in a contract, or it may be expressed less formally. In any case, going against the wishes of their trading partners is likely to carry consequences for any actor in the marketplace.

So there is a very different form of accountability for the political and economic actors. In a democracy, political actors offer a selection of package deals to their customers at varying time intervals. Their customers are then violently coerced into doing business with the actor who wins the power monopoly. Accountability is promised by the potential for alternative political actors to compete for the monopoly at the next election. (In practice, government influence over business, media and electoral procedures inhibit the ability of competitors to offer radically different package deals.)

In the market, accountability is promised by each actor’s inability to coerce their trading partners. If their partners are dissatisfied with their actions, the sequence of exchanges may simply be terminated at the most immediate opportunity. There is a self-regulation to this process which motivates actors to do their business in ways which do not arouse suspicion or in any way damage their reputation.

After all of this, we may deduce that in the political arena “private” campaigns, funded by market actors, are the only ones which can be said to represent organic demand. The funds have been donated voluntarily for the express purpose of the campaign. Donors may have acquired their funds from trading partners who might not themselves agree with the campaign, but this fact is a cost borne by the donors in the risk they face of losing business.

The market is a process, and it may be the case that market mechanisms are insufficiently advanced to provide assurances of the absence of political activity in particular cases where some traders may actually desire such an assurance from those with whom they exchange. If this is true,we may trust that the continued division of labour inherent in the market process will eventually develop such mechanisms. But this is not actually required for the purposes of this post, for if no market mechanism exists to provide these assurances, it is impossible for a government, whose only special tool is coercion, to provide assurances either (at least, not in a way which would better satisfy individual, subjective valuations).


Written by Graham

April 15, 2008 at 1:13 pm

Posted in economics, politics

3 Responses

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