Hoppe pikkuvaltioista

Centralisation Leads to Poverty
From the desk of Paul Belien on Tue, 2005-06-28 15:06

On 24 and 25 May, Hans-Hermann Hoppe, Professor of Economics at the University of Nevada, Las Vegas and senior fellow of the Ludwig von Mises Institute (Auburn, Alabama), visited Antwerp, where he gave a lecture on the economic surplus value of small states.

You have a lot of sympathy for secessionist movements worldwide. Why?

According to the politically-correct view, closer political integration is good, whereas disintegration and secession is bad. It is said, for example by the bureaucrats of the European Union in Brussels, that economic prosperity has increased dramatically with increased political unification. In reality, however, political integration (centralisation) and economic (market) integration are two completely different phenomena. Political integration involves the territorial expansion of a state's powers of taxation and property regulation. Economic integration is the extension of the interpersonal and interregional division of labour and market participation. In general, the smaller a country and its internal markets the more likely it is that it will opt for free trade.
I think that a world consisting of tens of thousands of distinct countries, regions and cantons, and hundreds of thousands of independent free cities such as the present-day "oddities" of Monaco, Andorra, San Marino, Liechtenstein, Hong Kong, and Singapore, would be a world of unprecedented prosperity, economic growth, and cultural advancement.

One of the economically most prosperous nations however is the United States, which is a big country.

Yes, in fact there is no direct relationship between territorial size and economic prosperity. Switzerland and Albania are both small countries, while the U.S. and the former Soviet Union are large. However, there is a highly important indirect relationship. Smallness contributes to moderation. In principle, all governments are counterproductive in taxing and regulating private property owners and market income earners. A small government, however, has many close neighbours. If it taxes and regulates its own subjects visibly more than its neighbours it is bound to suffer because people will "vote with their feet": they will leave to live and work elsewhere. And they need not go far to do so.

This is the situation we had in mediaeval Europe when the Low Countries or the Netherlands, of which Flanders was a part, were a confederalist cluster of semi-independent provinces.

Indeed, and this explains why mediaeval Flanders was so prosperous. Contrary to the political orthodoxy of the contemporary Eurocrats, precisely the fact that Europe posessed a highly decentralised power structure of countless independent political units explains the origin of capitalism - the expansion of market participation and of economic growth - in the Western world. It is not by accident that freedom and prosperity first flourished under conditions of extreme political decentralisation: in the northern Italian city states, in southern Germany, and in the secessionist Low Countries.

It is assumed that larger political units - and ultimately a single world government - imply wider markets and hence increased wealth. However, this is untrue. The larger the territories the lower a government's incentive to continue its domestic liberalism will be because people will lose the possibility of voting with their feet. Throughout the entire period of European and, indeed, global unification we have witnessed a steady and dramatic growth of government power, taxation and regulatory expropriation. In the light of social and economic theory and history a very strong case can be made for secession.

In Belgium we have witnessed how during the 175 years of the country's existence the tensions between Flemings and Walloons have only grown. What used to be a linguistic and cultural conflict is now a socio-economic conflict as well.

Which is only natural. Forced integration invariably creates tension, hatred and conflict. In conflict voluntary separation leads to harmony and peace. Through secession, hegemonic domestic relations are replaced by contractual - mutually beneficial - foreign relations. Rather than promoting a downward leveling of cultures, as under forced integration, secession stimulates a cooperative process of cultural selection and advancement. This is a lesson that is important, not just for Flanders and Europe, but for the world at large.