By Hans Hermann Hoppe, Mises Institute
States, regardless of their constitution, are not economic enterprises. In contrast to the latter, states do not finance themselves by selling products and services to customers who voluntarily pay, but by compulsory levies: taxes collected through the threat and use of violence (and through the paper money they literally create out of thin air). Significantly, economists have therefore referred to governments—i.e., the holders of state power—as stationary bandits. Governments and everyone on their payroll live off the loot stolen from other people. They lead a parasitic existence at the expense of a subdued and “host” populace.
A number of further insights emerge from this.
Naturally, stationary bandits prefer larger loot to smaller loot. This means that states will always try to increase their tax revenue and further increase their spending by issuing more paper money. The larger the loot, the more favors they can do for themselves, their employees, and their supporters. But there are natural limits to this activity.
On the one hand, the bandits have to be careful not to burden their “host,” whose work and performance make their parasitic existence possible, so much that the latter stops working. On the other hand, they have to fear that their “hosts”—and especially the most productive among them—will migrate from their dominion (territory) and settle elsewhere.