Man cannot survive, as animals do, by acting on the range of the immediate moment. Man has to project his goals and achieve them across a span of time; he has to calculate his actions and plan his life long-range. The better a man's mind and the greater his knowledge, the longer the range of his planning. The higher or more complex a civilization, the longer the range of activity it requires-and, therefore, the longer the range of contractual agreements among men, and the more urgent their need of protection for the security of such agreements.

  Even a primitive barter society could not function if a man agreed to trade a bushel of potatoes for a basket of eggs and, having received the eggs, refused to deliver the potatoes. Visualize what this sort of whim-directed action would mean in an industrial society where men deliver a billion dollars' worth of goods on credit, or contract to build multimillion-dollar structures, or sign ninety-nine-year leases.

  A unilateral breach of contract involves an indirect use of physical force: it consists, in essence, of one man receiving the material values, goods or services of another, then refusing to pay for them and thus keeping them by force (by mere physical possession), not by right-i.e., keeping them without the consent of their owner. Fraud involves a similarly indirect use of force: it consists of obtaining material values without their owner's consent, under false pretenses or false promises. Extortion is another variant of an indirect use of force: it consists of obtaining material values, not in exchange for values, but by the threat of force, violence or injury.

  Some of these actions are obviously criminal. Others, such as a unilateral breach of contract, may not be criminally motivated, but may be caused by irresponsibility and irrationality. Still others may be complex issues with some claim to justice on both sides. But whatever the case may be, all such issues have to be made subject to objectively defined laws and have to be resolved by an impartial arbiter, administering the laws, i.e., by a judge (and a jury, when appropriate).

  Observe the basic principle governing justice in all these cases: it is the principle that no man may obtain any values from others without the owners' consent-and, as a corollary, that a man's rights may not be left at the mercy of the unilateral decision, the arbitrary choice, the irrationality, the whim of another man.

  Such, in essence, is the proper purpose of a government: to make social existence possible to men, by protecting the benefits and combating the evils which men can cause to one another.

  The proper functions of a government fall into three broad categories, all of them involving the issues of physical force and the protection of men's rights: the police, to protect men from criminals-the armed services, to protect men from foreign invaders-the law courts, to settle disputes among men according to objective laws.

  These three categories involve many corollary and derivative issues-and their implementation in practice, in the form of specific legislation, is enormously complex. It belongs to the field of a special science: the philosophy of law. Many errors and many disagreements are possible in the field of implementation, but what is essential here is the principle to be implemented: the principle that the purpose of law and of government is the protection of individual rights.

  Today, this principle is forgotten, ignored and evaded. The result is the present state of the world, with mankind's retrogression to the lawlessness of absolutist tyranny, to the primitive savagery of rule by brute force.

  In unthinking protest against this trend, some people are raising the question of whether government as such is evil by nature and whether anarchy is the ideal social system. Anarchy, as a political concept, is a naive floating abstraction: for all the reasons discussed above, a society without an organized government would be at the mercy of the first criminal who came along and who would precipitate it into the chaos of gang warfare. But the possibility of human immorality is not the only objection to anarchy: even a society whose every member were fully rational and faultlessly moral, could not function in a state of anarchy; it is the need of objective laws and of an arbiter for honest disagreements among men that necessitates the establishment of a government.

  A recent variant of anarchistic theory, which is befuddling some of the younger advocates of freedom, is a weird absurdity called "competing governments." Accepting the basic premise of the modern statists-who see no difference between the functions of government and the functions of industry, between force and production, and who advocate government ownership of business-the proponents of "competing governments" take the other side of the same coin and declare that since competition is so beneficial to business, it should also be applied to government. Instead of a single, monopolistic government, they declare, there should be a number of different governments in the same geographical area, competing for the allegiance of individual citizens, with every citizen free to "shop" and to patronize whatever government he chooses.

  Remember that forcible restraint of men is the only service a government has to offer. Ask yourself what a competition in forcible restraint would have to mean.

  One cannot call this theory a contradiction in terms, since it is obviously devoid of any understanding of the terms "competition" and "government." Nor can one call it a floating abstraction, since it is devoid of any contact with or reference to reality and cannot be concretized at all, not even roughly or approximately. One illustration will be sufficient: suppose Mr. Smith, a customer of Government A, suspects that his next-door neighbor, Mr. Jones, a customer of Government B, has robbed him; a squad of Police A proceeds to Mr. Jones' house and is met at the door by a squad of Police B, who declare that they do not accept the validity of Mr. Smith's complaint and do not recognize the authority of Government A. What happens then? You take it from there.

  The evolution of the concept of "government" has had a long, tortuous history. Some glimmer of the government's proper function seems to have existed in every organized society, manifesting itself in such phenomena as the recognition of some implicit (if often nonexistent) difference between a government and a robber gang-the aura of respect and of moral authority granted to the government as the guardian of "law and order"-the fact that even the most evil types of government found it necessary to maintain some semblance of order and some pretense at justice, if only by routine and tradition, and to claim some sort of moral justification for their power, of a mystical or social nature. Just as the absolute monarchs of France had to invoke "The Divine Right of Kings," so the modern dictators of Soviet Russia have to spend fortunes on propaganda to justify their rule in the eyes of their enslaved subjects.

  In mankind's history, the understanding of the government's proper function is a very recent achievement: it is only two hundred years old and it dates from the Founding Fathers of the American Revolution. Not only did they identify the nature and the needs of a free society, but they devised the means to translate it into practice. A free society-like any other human product-cannot be achieved by random means, by mere wishing or by the leaders' "good intentions." A complex legal system, based on objectively valid principles, is required to make a society free and to keep it free-a system that does not depend on the motives, the moral character or the intentions of any given official, a system that leaves no opportunity, no legal loophole for the development of tyranny.

  The American system of checks and balances was just such an achievement. And although certain contradictions in the Constitution did leave a loophole for the growth of statism, the incomparable achievement was the concept of a constitution as a means of limiting and restricting the power of the government.

  Today, when a concerted effort is made to obliterate this point, it cannot be repeated too often that the Constitution is a limitation on the government, not on private individuals-that it does not prescribe the conduct of private individuals, only the conduct of the government-that it is not a charter for government power, but a charter of the citizens' protection against the government.

  Now consider the extent of the moral and political inversi
on in today's prevalent view of government. Instead of being a protector of man's rights, the government is becoming their most dangerous violator; instead of guarding freedom, the government is establishing slavery; instead of protecting men from the initiators of physical force, the government is initiating physical force and coercion in any manner and issue it pleases; instead of serving as the instrument of objectivity in human relationships, the government is creating a deadly, subterranean reign of uncertainty and fear, by means of nonobjective laws whose interpretation is left to the arbitrary decisions of random bureaucrats; instead of protecting men from injury by whim, the government is arrogating to itself the power of unlimited whim-so that we are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.

  It has often been remarked that in spite of its material progress, mankind has not achieved any comparable degree of moral progress. That remark is usually followed by some pessimistic conclusion about human nature. It is true that the moral state of mankind is disgracefully low. But if one considers the monstrous moral inversions of the governments (made possible by the altruist-collectivist morality) under which mankind has had to live through most of its history, one begins to wonder how men have managed to preserve even a semblance of civilization, and what indestructible vestige of self-esteem has kept them walking upright on two feet.

  One also begins to see more clearly the nature of the political principles that have to be accepted and advocated, as part of the battle for man's intellectual Renaissance.

  (December 1963)

  15. Government Financing in a Free Society

  by Ayn Rand

  "What would be the proper method of financing the government in a fully free society?"

  This question is usually asked in connection with the Objectivist principle that the government of a free society may not initiate the use of physical force and may use force only in retaliation against those who initiate its use. Since the imposition of taxes does represent an initiation of force, how, it is asked, would the government of a free country raise the money needed to finance its proper services?

  In a fully free society, taxation-or, to be exact, payment for governmental services-would be voluntary. Since the proper services of a government-the police, the armed forces, the law courts-are demonstrably needed by individual citizens and affect their interests directly, the citizens would (and should) be willing to pay for such services, as they pay for insurance.

  The question of how to implement the principle of voluntary government financing-how to determine the best means of applying it in practice-is a very complex one and belongs to the field of the philosophy of law. The task of political philosophy is only to establish the nature of the principle and to demonstrate that it is practicable. The choice of a specific method of implementation is more than premature today-since the principle will be practicable only in a fully free society, a society whose government has been constitutionally reduced to its proper, basic functions. (For a discussion of these functions, see Chapter 14.) There are many possible methods of voluntary government financing. A government lottery, which has been used in some European countries, is one such method. There are others.

  As an illustration (and only as an illustration), consider the following possibility. One of the most vitally needed services, which only a government can render, is the protection of contractual agreements among citizens. Suppose that the government were to protecti.e., to recognize as legally valid and enforceable-only those contracts which had been insured by the payment, to the government, of a premium in the amount of a legally fixed percentage of the sums involved in the contractual transaction. Such an insurance would not be compulsory; there would be no legal penalty imposed on those who did not choose to take it-they would be free to make verbal agreements or to sign uninsured contracts, if they so wished. The only consequence would be that such agreements or contracts would not be legally enforceable; if they were broken, the injured party would not be able to seek redress in a court of law.

  All credit transactions are contractual agreements. A credit transaction is any exchange which involves a passage of time between the payment and the receipt of goods or services. This includes the vast majority of economic transactions in a complex industrial society. Only a very small part of the gigantic network of credit transactions ever ends up in court, but the entire network is made possible by the existence of the courts, and would collapse overnight without that protection. This is a government service which people need, use, rely upon and should pay for. Yet, today, this service is provided gratuitously and amounts, in effect, to a subsidy.

  When one considers the magnitude of the wealth involved in credit transactions, one can see that the percentage required to pay for such governmental insurance would be infinitesimal-much smaller than that paid for other types of insurance-yet it would be sufficient to finance all the other functions of a proper government. (If necessary, that percentage could be legally increased in time of war; or other, but similar, methods of raising money could be established for clearly defined wartime needs.) This particular "plan" is mentioned here only as an illustration of a possible method of approach to the problem—not as a definitive answer nor as a program to advocate at present. The legal and technical difficulties involved are enormous: they include such questions as the need of an ironclad constitutional provision to prevent the government from dictating the content of private contracts (an issue which exists today and needs much more objective definitions)-the need of objective standards (or safeguards) for establishing the amount of the premiums, which cannot be left to the arbitrary discretion of the government, etc.

  Any program of voluntary government financing is the last, not the first, step on the road to a free society-the last, not the first, reform to advocate. It would work only when the basic principles and institutions of a free society have been established. It would not work today.

  Men would pay voluntarily for insurance protecting their contracts. But they would not pay voluntarily for insurance against the danger of aggression by Cambodia. Nor would the plywood manufacturers of Wisconsin and their workers pay voluntarily for insurance to assist the development of the plywood industry of Japan which would put them out of business.

  A program of voluntary government financing would be amply sufficient to pay for the legitimate functions of a proper government. It would not be sufficient to provide unearned support for the entire globe. But no type of taxation is sufficient for that-only the suicide of a great country might be and then only temporarily.

  Just as the growth of controls, taxes and "government obligations" in this country was not accomplished overnight-so the process of liberation cannot be accomplished overnight. A process of liberation would be much more rapid than the process of enslavement had been, since the facts of reality would be its ally. But still, a gradual process is required-and any program of voluntary government financing has to be regarded as a goal for a distant future.

  What the advocates of a fully free society have to know, at present, is only the principle by which that goal can be achieved.

  The principle of voluntary government financing rests on the following premises: that the government is not the owner of the citizens' income and, therefore, cannot hold a blank check on that income-that the nature of the proper governmental services must be constitutionally defined and delimited, leaving the government no power to enlarge the scope of its services at its own arbitrary discretion. Consequently, the principle of voluntary government financing regards the government as the servant, not the ruler, of the citizens-as an agent who must be paid for his services, not as a benefactor whose services are gratuitous, who dispenses something for nothing.

  This last, along with the notion of compulsory taxation, is a remnant of the time when the government w
as regarded as the omnipotent ruler of the citizens. An absolute monarch, who owned the work, income, property and lives of his subjects, had to be an unpaid "benefactor," protector and dispenser of favors. Such a monarch would have considered it demeaning to be paid for his services-just as the atavistic mentalities of his descendants-in-spirit (the remnants of Europe's ancient feudal aristocracy, and the modern welfare statists) still consider an earned, commercial income as demeaning and as morally inferior to an unearned one which is acquired by mooching or looting, by charitable donations or governmental force.

  When a government, be it a monarch or a "democratic" parliament, is regarded as a provider of gratuitous services, it is only a question of time before it begins to enlarge its services and the sphere of the gratuitous (today, this process is called the growth of "the public sector of the economy") until it becomes, and has to become, the instrument of pressure-group warfare-of economic groups looting one another.

  The premise to check (and to challenge) in this context is the primordial notion that any governmental services (even the legitimate ones) should be given to the citizens gratuitously. In order fully to translate into practice the American concept of the government as a servant of the citizens, one has to regard the government as a paid servant. Then, on that basis, one can proceed to devise the appropriate means of tying government revenues directly to the government services rendered.

  It may be observed, in the example given above, that the cost of such voluntary government financing would be automatically proportionate to the scale of an individual's economic activity; those on the lowest economic levels (who seldom, if ever, engage in credit transactions) would be virtually exempt-though they would still enjoy the benefits of legal protection, such as that offered by the armed forces, by the police and by the courts dealing with criminal offenses. These benefits may be regarded as a bonus to the men of lesser economic ability, made possible by the men of greater economic ability—without any sacrifice of the latter to the former.