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The Appetite of Leviathan
by Robert Kurz (mbatko [at]
Thursday Oct 3rd, 2002 9:50 AM
"Money replaces the culturally mediated `cosmos'..Every pack of wolves is organized more socially than free enterprise persons.. Hobbes did not describe the `nature' of human society but the historical result of a process..The state share increases.."
The Appetite of Leviathan

Privatization and the “Austere State”: an Illusion

By Robert Kurz

[This article is translated from the German on the World Wide Web,]

Two souls wrestle in the breast of the modern person: the soul of money and the soul of the state. The “homo oeconomicus” is always simultaneously a “homo politicus”. The institutional polarity of the market and the state corresponds to this structural splitting of the individual. This fissure did not exist in pre-modern societies however they may be judged. Rather a cultural unity or “cosmos” prevailed to which the different social activities were subordinated. The modern goods-producing system has destroyed the “cosmos” of the old cultures without producing a new cultural order. Instead the relation of economy and social order was turned upside down. The economy is no longer a function of an overarching culture. “Human society has fallen into an accessory of the economic system” (Karl Polanyi).

This means people by themselves do not have any social and cultural connection in this system beyond economic activity. They become “abstract individuals” or “isolated persons” who look desperately similar to the “windowless monads” of the philosopher Leibnitz. Their social connection is only produced negatively through economic competition. Money replaces the culturally mediated “cosmos” so that the common interest of society appears objectified, not human. Every pack of wolves is organized more socially than free enterprise persons.

In the early period of this absurd system, the English philosopher Thomas Hobbes (1588-1679) described the person as an egoistic being who by nature is more lonely than an animal. Therefore society in the “state of nature” is nothing but the “war of everyone against everyone else”. Hobbes did not describe the “nature” of human society but rather the historical result of a process where the first thrusts of the modern market economy began to dissolve the old community. The new freedom of individuals was only the freedom to submit to the coercive laws of competition. So individuals did not completely tear each other to pieces, Hobbes constructed the state as a necessary coercive authority standing above egoistic individuals to which he gave the name of the biblical monster “Leviathan”. The little monsters of free enterprise individualism should be tamed by the enormous monster state “Leviathan”. What a sophisticated society that leaves nothing to be desired in maliciousness!

The “Leviathan” is not an institution of common cultural and social community any more than the free wild course of the market. The state does not annul the total competition but is only a repressive authority external to “windowless” individuals, a machine that sets the common emergency conditions for the raving mad subjects of the market, comparable to the umpire of a rugby game. Nothing has changed in this characterization since Hobbes. More than ever, free individuals today submit as beings made socially incompetent by the market who therefore must be put in legal and bureaucratic strait-jackets by the monster of the state machine.

In this “best of all worlds”, there is unfortunately a little logical blemish. Like all monsters, Leviathan is rather voracious. The question is how should he be fed. The incompetence of competing individuals is shown in their insensitiveness to their own social and natural conditions of existence. This is also the problem of the state economy. The state is by no means a “non-economic factor” as often assumed since the state must be financed (and money is doubtlessly a thoroughly “economic factor”). The state constitutes a secondary economy, the economy of common conditions of existence for individuals competing in a free enterprise way. By definition the subjects in the “state of nature” of competition do not voluntarily surrender a penny. The state monster must forcibly collect its own costs (which are nothing but the social “business expenditures” of the market economy) and forcibly hinder free individuals from devouring one another hook, line and sinker.

The great monster should easily prevail against the little monsters. However the “business expenses” of the market economy unfortunately become ever greater in the course of time. The more people were individual subjects of competition, the greater was the need for a legal and police state regulation of their relations and the more strongly were machines of justice and administration inflated. The Byzantine empire can be compared with the bureaucratic Moloch that modern western democracies produced. Still this is not everything. The more competition led to the scientization of production and the application of massive technical aggregates, the more it massed together great human multitudes in urban agglomerations. The greater the need for a social logistics and infrastructure, the more the state had to provide material, technical and organizational conditions for lively free enterprise activity: from schools and universities and building streets and airports to sewage and waste removal. Lastly, the follow-up costs also increased. The more people were socially uprooted by the market economy, the more intensely the social transaction costs of the state rose. The more the natural environment was strained and destroyed by narrow-minded economic rationality, the higher the state expenses rose for emergency ecological repairs.

Ignorant economic liberalism arising in the late 18th century wanted to know nothing of these costly problems. In his “bee fable”, the brilliant cynic Bernard de Mandeville (1670-1733) argued that the sum of ruthless pursuit of profit would assure quasi automatically the welfare of the community. This notion remains the most important argument today for the justification of economic liberalism. As everybody knows, Adam Smith (1723-1790), the classical author of political economy, adopted this argument. According to his theory, the “invisible hand” of the market can regulate the whole reproduction of society much better than the state. This economic liberalism did not fundamentally contradict the state philosophy of Hobbes. The “Leviathan” should include that social and economic activity while simultaneously fulfilling its function as a repressive monster, forcing the victims of competition through the administration of justice, police and the military to adjust to the “laws of the market economy”. As a result, political dictatorship and economic liberalism could always go and in hand. A Pinochet did not have to first prove this.

In the first half of the 19th century, the political execution of liberal dogmas led to social catastrophes. There were more and more social rebellions, mass criminality exploded and epidemics spread in the industrial population centers. During the great Irish famine from 1846 to 1849, the British government in the name of free trade allowed 1.5 million people to die of starvation and forced 2.5 million to emigrate to America. Doctrinaire liberalism threatened to completely dissolve human society. At the same time many entrepreneurs began to call for the infra-structural state economy because they recognized that school education, roads, information networks and so forth were necessary for further accumulation of capital.

A great change of paradigms gradually occurred. More and more theoreticians accepted the necessity of an extended state economy. In 1867 the German economist Adolph Wagner (1835-1917) propounded the so-called “law of constantly growing state activity”. Seldom has an economic prognosis been as confirmed by historical reality as this prognosis. A glance at the statistics in three significant western countries demonstrates this:

State Share in Gross Domestic Product (in percentages)

Year 1870 1960 1994
Germany 10 32 50
Sweden 6 31 69
US 4 27 32

Source: IMF/Wirtschaftswoche

Despite all relative distinctions, the state share historically has strongly increased everywhere. In the US, it increased 0.3 percent under president Reagan. For a long time, this high state share could only be sustained through a dangerously growing state indebtedness. Therefore economic liberalism experienced a new spring although its doctrine actually broke down in the 19th century. The neoliberals repeat the very ancient ideas of Mandeville and Smith. They claim that the prognosis of Wagner does not represent an economic law but only reflects political arbitrariness. Therefore they regard an historical trend reversal as possible. The fate “Leviathan” should be put on a “diet” and its functions largely “privatized”. Nearly 130 years after the prediction of Wagner, the two IMF economists Vito Tanzi and Ludger Schuknecht recently drew up a counter-prognosis: from now on the state share should fall to under 30 percent in an opposite historical process.

To clarify the problem, the character of economic state functions must be understood. Like all representatives of economic liberalism, Tanzi and Schuknecht confuse the private production of goods for the market with the aggregate social conditions of the market itself. Liberalism imagines that most functions of the state can also be performed by private, profit-oriented businesses like the production of cars or hamburgers. First, the social risks of capitalism should be “privatized”. In other words, the state should withdraw from the social responsibility that accrued in the last 100 years to its functions as a repressive monster. However history has shown that most people cannot individually bear the social risk for want of adequate income and are driven into hopeless situations. Liberalism prefers the costs for prisons and death squads to the costs of social assistance even if the costs of repression are greater in the long run and fattens “Leviathan” even more. As a result, the liberal doctrine shows its vicious irrationalism and advances its own criteria ad absurdum.

The absurdity of “privatization” is even clearer with other functions of the state. For example, ecological measures for protection of the environment cannot be organized as free enterprise transactions between private persons since the consumption of the improved environment cannot be isolated for a solvent demand. The air and climate cannot possible be stabilized only for the district of the rich. The environment can only be improved for the whole society or ruined for the whole society, irrespective of the purchasing power of individuals. Therefore protection of the environment can only be an exaction of the state. Sewage, waste removal and water supply can hardly be isolated for private demand. The public health system and the schools cannot be “privatized” without negative repercussions on society leading to new social costs.

Even when the functions of the state are assumed by private businesses, dissolving these functions in the market6 is an illusion. These expenditures then appear as state expenses since they must be accepted in large part by the state. When for example a new Mexican highway was privately built for the long-distance traffic of private investors according to criteria of profit, this was a great fiasco. The mammoth transportation companies and private motorists could not pay the new fees. The traffic rolled over the hopelessly overstrained public streets still free of charge.

Whichever way one looks, the presuppositions, conditions and consequences of the market economy are qualitatively different than the market economy itself. Aggregate social problems cannot be solved privately. Only the state “Leviathan” can assume these tasks in a society of competing individuals. This is also true for state subsidies whose drastic reduction will radically intensify the worldwide crisis. Large parts of industry and agriculture in nearly all countries would be ruined without these subsidies.

The relation of market and state in the process of modernization can be summarized in the formula of a general rule. The more market, the more state. The relation of the blindly competing “windowless monads” and the monster “Leviathan” is like Dr. Jekyll and Mr. Hyde. Therefore the doctrine of economic liberalism is just as false as the prognosis of the IMF economists Tanzi and Schuknecht. The inflated market and the inflated state can only live or die together.