Intro To AnCap: Private Defense Pt. 2: Military Defense

{Editor’s Note: This is part of a continuing series in which I will explore the concepts of Anarcho-Capitalism. I introduced the concept in this post. The series will follow the general structure of a class on Anarcho-Capitalism  at The Mises Academy taught by economist and author of Chaos Theory: Two Essays on Market Anarchy , Robert Murphy.  In each installment,  I will examine a different aspect of how free market forces could take over areas currently run by government in a hypothetical Anarcho-Capitalist society. Two articles introducing the concepts of Private Law can be found here and here. The last installment introducing the concept of Private Defense can be found here.}The general assumption that most people in our society make, including many libertarians, is that at a minimum we need the existence of a State to form an army and protect the citizens of the land from all of the Evil Foreign Menaces the world over just itching to bomb the living daylights out of us. And of course, the only way to do this "fairly" is to forcefully extract the money from all of the citizens of the land, otherwise not everyone would chip in and defense would be unsustainable.To begin to understand how military defense would work in an anarcho-capitalist society, we must first begin to rethink what "military defense" actually means.  Wars are typically fought between States, usually in a dispute over land or resources of some kind.  In today's world we have the "War on Terror", meant to track down every possible "terrorist" around the world and stop them before they commit a horrific act of some kind. In reality, practically all acts of terrorism are committed either by a State or State-funded actors, or by various groups rebelling against a State that is occupying territory they claim to be their own. A stateless, anarcho-capitalist society would remove many of these conditions.  There would be no wars of aggression against other States, and their would be no large occupying forces or military bases abroad creating enemies.  Infact, a society such as this with bustling free markets would likely be very wealthy and be an excellent international trading partner.  There would be no central entity with which a foreign government could have a dispute.  At worst, any dispute with a foreign State would be between that State and possibly a single individual or a private company.  And without a central government "representing" an entire geographical area, there would be no reason for a foreign country to invade a large region if they did have such a dispute.All of that aside,  it is certainly recognized that the entire planet will likely not be a perfect anarcho-capitalist society anytime soon, and even if some regions of anarcho-capitalism do pop up and prosper, there will always be some sort of governments out there that could potentially pose a military threat to a society.  Anarcho-capitalist theorists in no way disregard this possibility.  Many such as Hans Herman-Hoppe ("The Private Production of Defense") and Robert Murphy have addressed the issue in depth. I will attempt to address the issue in slightly less depth here, but I hope to create the foundation for understanding how private defense could work under a system of anarcho-capitalism.As I previously discussed when making the case against State monopoly of the legal system, there is no logical or practical reason that military defense should be provided by a single monopoly entity known as The State.  As with any other industry, without competition and price signals set by the marketplace, there is no way for the politicians and bureaucrats at various levels that make military decisions to know how to efficiently allocate their resources.  And when the ones making those decisions do not have to bear the cost of their policies, the result is a complete disregard for the costs involved with military action.  Sure, it's easy for George W. Bush to launch an invasion of Iraq, whatever his motivation may have been, when he has the United States Treasury at his disposal.  But would George W. Bush, President and CEO of U.S. Defense Services, Inc.,  be so willing to put up more than $3 Trillion of their own money to launch such an invasion? And if, for some reason a private defense company did see such an invasion as somehow profitable or necessary, would they really be paying companies like Halliburton $45 for a case of Coca-Cola for their employees? Government monopoly creates a moral hazard in that those making military decisions do not bear any of the costs of those decisions.On the contrary, a truly private defense firm that was not funded by the unlimited fruits of a nations' laborers would only make military actions based on profit and loss motives, just as a firm in any other sector would.  So who would be the clients of private defense firms in an anarcho-capitalist society?  Both Hoppe and Murphy agree that military defense would most likely be provided by insurance companies.Property owners, particularly those who owned large areas of resource-rich land or say, an expensive landmark such as the Empire State Building, would purchase insurance against military attacks just as they would against natural disasters, fire, or other unlikely but possible events.  An insurance company's goal is to take in more in premiums than it pays out, and would therefore be very motivated to protect its' insured properties.  Any firm that  that offers this type of insurance will have to have a lot of capital, and would likely divert some of that capital into defending insured properties if there is indeed some sort of threat, as opposed to just looking the other way and happily writing a check for $500 billion dollars when the Chinese try to blow up the Empire State Building.War is very expensive, and private insurance companies and the military defense firms they employ would be very hesitant to go to war against a State.  As Robert Murphy has stated, "incentives for peaceful resolution of disputes would be far greater in market anarchy than the present system.”  Insurance companies would not seek to conquer other nations, they would simply seek to protect those they are insuring.  Alternatively, if an attack did take place, an insurance company might send a private defense firm to take out the military capabilities of an aggressor State to prevent future attacks, or to extract compensatory funds in order to pay the insured.  In either case, insurance companies would be motivated to force the enemy into a peace treaty or a truce in the most affordable way possible.  This would likely lead to more of  a focus on winning over the population of a given area as opposed to simply bombing them into oblivion.  Hoppe expands on this idea:

Insurers would be ready to counterattack and kill—whether with long-range precision weapons or assassination commandos—state agents from the top of the government hierarchy of king, president, or prime minister on downward while seeking to avoid or minimize collateral damage to property of innocent civilians (nonstate agents). They would thereby encourage internal resistance against the aggressor government, promote its delegitimization, and possibly incite the liberation and transformation of the state territory into a free country.

The goals of insurance companies and the private defense firms that they employ would be simply to protect their clients in the most economical way possible.  This would make things like Weapons of Mass Destruction such as chemical weapons or nuclear weapons both illogical and unprofitable.  A firm would be much more likely to allocate its resources on intelligence and defensive weaponry than to throw billions of dollars into say, a nuclear weapons program.  What profit can be had from dropping a nuclear bomb on a population"? What kind of public relations nightmare would occur for a firm using Sarin nerve gas on innocent populations? WMD's would be both uneconomical and counterproductive. The Free Rider ProblemThere are many objections to the ideas behind private military defense, by far the most common being the "Free Rider Problem".  In terms of military defense, this is the idea that, with many large firms essentially "footing the bill" for defense, many other people in surrounding areas would also benefit from this without having to actually chip in.  But is the "free rider problem" really a problem at all in this case? The fact that others may benefit from defense of a certain geographic area doesn't actually cost the insurer or the corporations purchasing the insurance anything extra. They are paying to have their specific property protected, and that cost will remain regardless of whether others sign on with the same insurance company.If we apply a little bit of logic and sound economic theory however, we will see that it will still be in the interests of most people to be insured for the event of a war with  a State.  Now in the event that the aggressor State "wins"  a certain conflict, clearly the worst case scenario for those living in this society, the insured citizen will likely lose freedom and possibly be compensated for damages, depending on the state of the insurance company following the conflict.  The same loss of freedoms will hold true for the uninsured citizen, and of course this citizen will be in no way compensated for any damages.  Now what if the "private society" wins, and successfully deflects the enemy's attack? In this case the insured will likely have been the target of more attacks, but they will also be compensated for all of their losses.  The uninsured will likely be the target of less attacks, but may still suffer damage as all wars do result in collateral damage.  Those uninsured citizens would then be personally responsible for all damages incurred.  Regardless of the outcome , those without insurance will suffer the most.   So the average citizen would still have a strong economic motive to purchase insurance, though they would pay much lower premiums than those that are insuring a large skyscraper or an oil field.There are many other aspects to the ideas behind private defense, and many other possible objections to deflect.  But I hope this article as well as the the previous articles in this series will at least get some wheels turning on the idea that, even if every theory isn't perfect, there certainly are viable ways that private military defense could and would function in the absence of  a State.I plan to continue this series, though I am not sure in what form. There are many topics that can be tackled, and many objections to be countered.I encourage anyone with suggestions or objections of their own to just drop me an email, and I just may answer them in a future article.Receive access to ALL of our EXCLUSIVE bonus audio content – including “Conspiracy Corner”, “Degenerate Gamblers” and the “League of Liberty Podcast” by joining the Lions of Liberty Pride and supporting us on Patreon!