“Pandemic” in a Stateless Society

Abstract

This chapter debunks the myth that only the state is capable of handling a pandemic. Instead, without the state, private individuals and entities, when given the full freedom, can better ameliorate the risk and harm of a virus outbreak and at the same time maximize the well-being of the entire society. In particular, this chapter discusses what would have happened in a world without a state and how would the economic laws in the Austrian tradition drive individuals to act in ways that maximize the net benefits not only to themselves but ultimately to every member of the society.

1. Introduction

In response to the coronavirus pandemic that began in China, most governments have resorted to shutting down cities, communities, businesses, and almost every human activity that are deemed to be too dangerous and risky, possibly proliferating the spread of the virus. States and governments have heavy-handedly expanded their powers on civil societies to levels that are hardly imaginable in peacetime. Individuals are stripped of their freedom of movement, and in many places, their freedom of expression too is taken away. Arrests, fines, and severe punishments on ordinary citizens are made for carrying out their daily life activities that nobody could have imagined would constitute crimes. In countries where basic freedoms have always been suppressed, harmless activity such as jogging alone on the road is treated as high crime where so-called offenders are locked up, fined, or even jailed.

Amid these draconian actions by governments, the fundamental question that remains is whether harsh ruling is the only and the best way to respond to an outbreak of a highly contagious disease. Must coercion, force, and threat be used by the state on the civil society? Are there no better alternatives to contain the plague? Would private individuals, led by the invisible hand, better handle and resolve the crisis or would have they avoided the plague totally? The objective of this chapter is to find out what could have happened in a society without the state, also known to some people as anarchy. While the literature contains myriad definitions and conceptions of anarchy, anarchism, and statelessness, for this exercise the stateless society is governed by private institutions and agents that include private courts, security firms, defense agencies, and so forth to ensure that law and order is maintained and preserved. For detailed discussions on the functioning of a stateless society and its legal system, see, for example, Block [1], Chartier [2], Hoppe [3], Murphy [4], Rothbard [5, 6], and Stringham [7]. In the tradition of classical liberalism and Austrian economics, the remaining discussion walks through the logic of what might have happened in a world where virtually, if not all of the lands, premises, properties, and waters are owned by genuine private persons or entities.

It is widely accepted that the novel coronavirus originated in Wuhan, China, in late 2019, either from a wet market selling exotic animals as raw food or from a not-far-away laboratory that carries out virological research. In either case, in the authoritarian China, both entities are owned and managed by the government, probably the former by the municipal authority and the latter by one of the agencies under the purview of the central government. Since no election of government officials exists in this regime governed by a single communist party, the owners and managers of both entities are likely to be government bureaucrats who need not satisfy the needs of voters or answer to the wants of the people. Also, since only government-run markets are allowed to operate and only in selected locations permissible by local authorities, the local populace have limited options if they want to purchase goods that are available for sale at this type of wet market. In other words, a wholesale market like this can easily be a monopoly in a locality. Even if privately owned markets are allowed, they are likely to be linked to the interests of high officials since operating licenses and other permits are monopolized by the officials. Therefore, the local bureaucrats have little to worry about the business and the revenues from rental and other sources. But even if the market does fail in luring sufficient customers, the government which is not driven by profit and loss, will not ever go bankrupt and the officials in charge will still keep their job. The same can be deduced for the research institute of virology in which, if things go awry, the managers who are likely closely linked to the officials of the authoritarian regime are unlikely to be held accountable. By and large, bureaucrats and officials will hardly lose their job or be brought to justice for reasons of negligence and incompetence in a country where the state overpoweringly controls the media, the police force, and the judicial system. Instead, more likely they will lose their job for reasons of politics and relationships. Following this, it is extremely improbable that the operations of the market and the laboratory can be as effective and efficient in serving their customers, stakeholders, and the local community with the highest quality, a dimension that includes also hygiene and safety.

Quite the opposite, a privately owned wholesale wet market that operates in a stateless society faces totally different circumstances. Driven by nothing but profit and loss and passion in serving their fellow men and women, the entrepreneurs behind the business must not only meet the needs and preferences of customers but, at the same time, appease the demands of other stakeholders which include the local community. In this society of competing private courts, enforcement agencies, and security firms, no one single authority or entity has absolute power in a specific area as to grant anyone or any business with privileges and protection against any lawsuit from anyone. No business or entity will be granted monopoly privileges. There are no licensures and barriers against new entrants into the market. Competition, either current or potential, even for the locality market will be stiff. Thus, the owners and managers of the wet market must ensure that every food item sold and every service rendered at their premises are absolutely safe and hygienic.

In the face of stiff competition, the management might even have to obtain certain certification or endorsement from certain private agencies specializing in evaluating, testing, and endorsing food suppliers and markets with ranks and ratings of safeness and hygiene. Even in our current world, various ratings are available for various businesses and services, either online or brick and mortar. However, agencies, services, and businesses owned or run directly and indirectly by the government are either immune or not really dependent on such quality check. Their existence and the taxpayer money that funds them are not subject to any market test and quality check, whatsoever. Quite the reverse, since the privately owned wet market in a competitive stateless world needs to promote and market its goods and services, it has no choice but to accept the scrutiny of private media and rating with open arms. Only businesses that are competent and transparent in their operations will survive the test of the market. No consumers will patronize businesses that are associated with suspicious or questionable practices. Remember also that in this stateless world, every media company must compete for audience and customers so that the media too are not exempted from the market test.

Along this line of reasoning, in the stateless society, it is almost impossible that any live exotic animal that is sold for consumption at any market poses any infection threat to consumers, not to mention the transmission of virus from animal to human. In this world where media are extremely competitive, any trader that appears to pose any threat to consumers would have instantaneously been exposed to the public. Hence, if such a dangerous animal is indeed up for sale or if such an infection does in fact occur, the public and the media would have quickly disseminated such a news because the quicker they are, the greater the satisfaction a private individual can get and the more profits the media companies can make from spreading the news. It does not matter if the news eventually turns out to be a false alarm because in the long run only the news provider that produces good news will sustain. If some audience prefers fake news, there is a niche for it. If most people prefer valid news, then the vast majority of news providers would provide valid news. Ultimately, those who want fake news will turn to fake news providers, while those who want genuine truths will turn to genuine news providers. In a free society, no one has the right of denying anyone from receiving any news that he or she wants to hear.

In a stateless society, the freedom of expression and media is likely to be high or completely absolute since private courts that rule out such freedom will be put out of business by consumers if most consumers prefer to have such freedom. Rational persons would prefer the freedom of expression and media because naturally human beings want to know more than less, possess more than less information, particularly when making crucial decisions. It is natural for individuals to prefer to have more choices even in the sphere of information, data, and knowledge. Only complete freedom of expression and media can provide the public and every individual with the most information and data possible, without any censorship and filtering by any authorities. Individuals too would like to freely express themselves, be it, satisfaction, dissatisfaction, criticism, compliment, happiness, or unhappiness toward something. For the above reasons, the freedom of expression and media is preserved in the stateless society.

Back to the origin of the virus, the same line of logic for the wet market can be applied to the laboratory if it operates in a stateless society. The owners and managers of the laboratory have to satisfy their customers, most likely pharmaceutical companies and drug makers, and at the same time boost the research firm’s reputation and status in the community. Nobody would want to deal with a research institute or laboratory that undeliberately or deliberately does harm or leaks any virus to the public. In addition, this private entity is subject to lawsuits and its rivals would want it to close down or acquire it. Furthermore, it is extremely hard if not impossible for the research laboratory to bribe and silence the media, the enforcement officers, and the private courts because these service providers too must compete in their respective markets for customers or be driven out of business. Thus, any leakage accident and lawsuit can lead to great losses and probably bankruptcy for the private research firm. As that in any other private business, the owners would not want to suffer losses on investments and the managers and personnel would not want to lose their job. Incentives matter. Without any protection from the omnipotent state, the managers and employees have no choice but to be as airtight as possible in quality and safety control. Hence, akin to the wet market, the chances of a deadly mistake such as a virus leakage from the laboratory are essentially zero in a stateless society.

Despite the above, in the unfortunate and rare event that either an animal-to-human transmission or a virus leakage does indeed occur in a stateless world, how would the society react to it? First, we must begin our logical analysis by understanding that a society is nothing but a group consisting of many different individuals with diverse needs, preferences, and goals who face different circumstances over their lifetimes. It must not be misunderstood, as what communism or socialism suggests that a society or community is a whole under which the so-called common interests and needs of the whole are more important to those of the individuals. While individuals certainly share some common characteristics and interests, because circumstances surrounding each person through his or her lifetime are different from each other’s since the person is born, even if all persons are born identical in every aspect, they are bound to be different in needs, tastes, preferences, desires, and life goals.

Simply by knowing this, in our current world, a one-size-fits-all response by many governments to the viral outbreak will certainly either overdo or underdo in preventing transmission among pockets of individuals in the society. An across-the-board ruling necessitates coercion, overreach, and intrusion into individual rights of liberty by enforcement officers even in perfectly safe situations where transmission is impossible. Meantime, tougher penalties on supposed offenders will only open up opportunities for enforcement officers to solicit bribes. Even if state leaders and officials are genuinely sincere in trying to eradicate the plague, they do not and will never possess the vital localized information pertinent to an individual, which enables that person to avoid getting infection and at the same carry on with his or her life as close to usual as possible.

Second, in the world without the state, all lands, waters, premises, and properties will be privately owned. Hence, all dwellings, cities, townships, roads, railways, airports, ports, train stations, walkways, rivers, beaches, hospitals, schools, playgrounds, parks, hills, mountains, forests, and everything that is usually owned or managed by the state will be owned, in one way or another, by private individuals or groups. Since there is no state to protect them, all these private entities operate in a competitive environment. They face constant threats from direct rivals and indirect substitutes. The structure and arrangement of these private ownerships and how they work are beyond the present discussion (for details, see references). The objectives of these private owners, though, can be profit- or charity-maximizing or both. Unquestionably, people work for pecuniary income and profits but also for various reasons, passions, and interests, and among others, the passion to help the needy and unfortunate.

2. Reactions of a stateless society

Given the above first and second conditions, how would a stateless society handle and resolve a contagion or initial outbreak? Certainly, most rational individuals will try their best to avoid infection, given the latest and most complete information provided by various media platforms which enjoy complete freedom in disseminating all information. In this regard, it is up to rational individuals to choose the right information and act upon it. If certain mentally sound individuals wish to risk their lives or intentionally contract the virus, they are allowed to do so because they have all the rights to their own bodies and lives. Members of society may persuade and advice but ultimately the choice is theirs. Nonetheless, their actions should in no way harm or inconvenience other persons. If they contract the virus and need treatment, they should pay all by themselves or they can get funding from willing persons, certainly not from taxpayers as what exists in our current system. If all private health-care suppliers and even charitable organizations refuse or are unable to help, these rational people should face all the consequences including death which may result from their intentional actions.

Nonetheless, it can be safely assumed that most people will act rationally and accordingly to their best interests, and if there are certain outliers, their eccentric behaviors should not prevent other persons to pursue their objectives of safeguarding their health. The standard libertarian principle applies in which everyone is free to exercise his rights provided that he does not prevent others to exercise their equivalent rights. Those harming others who have not consented to be harmed will be brought to justice by the private judicial system.

If most people in the society prefer not to be infected, the risk of infection can be minimized or eliminated and this can be executed in the best ever manner, certainly more effective, precise, and efficient through voluntary private incentives than what governments have done today. This is possible and will certainly be done because virtually everything is privately owned. Let us begin with a simple case. When one owns a house and perhaps also the surrounding area, in this stateless society, he has the absolute right to allow or prevent anyone from entering his premises. If he suspects someone has an infection or that he just wants to be perfectly safe and therefore isolate himself, he can just prohibit a particular person or just anyone from accessing his premises. To safeguard his borders, he may hire private security. Similarly, when shops, eateries, malls, townships, roads, housing estates, airports, trains, planes, and all other transportations and premises are owned by private owners, it is up to the owners or managers to decide whether to take precautionary measures, prohibit any suspicious persons from accessing, or completely close their borders.

To profit-maximizing owners, they have to weigh the benefits against the costs of every option. Since most people do not want to contract the virus, owners of these businesses have no choice but to meet this new need of their customers and other stakeholders but at the same time also meet customers’ demands for goods and services. If some entrepreneurs predict most of their customers will not purchase anything, they may choose to just suspend their businesses. However, if certain businesses predict that customers will still demand for their goods or services despite the risk of infection, they will carry on with their operations. Knowing that their customers and other stakeholders are fearful of infection, the business managers will now find ways of delivering goods and services and at the same time meet their additional need of prevention of infection. This additional need now becomes part of the service the businesses have to deliver.

This is no surprise because entrepreneurs have to constantly adapt and meet the changing demands, needs, tastes, and preferences of customers and other stakeholders, including in the period of fear of infection. Unlike the state, they operate in a competitive environment and during a period of panic and distress, only businesses that can innovate and alleviate the fear can sustain their sales and reputation. Accordingly, in this stateless world, one will find different businesses and organizations, incentivized by profits or passion or both, will employ innovative ways to ensure the safety and well-being of customers, associates, members, and other stakeholders. It is then up to the rational individuals to choose which sellers they want to patronize or whom they want to associate with. In fact, even in our current world with the state, various voluntary cooperations and initiatives to tackle the coronavirus pandemic have been carried out despite the counterproductive, obstructionist, and harmful actions of the state.

3. Who cares for the workers?

The next question one may ask is, while customers and the general public are taken care of by themselves and by the owners and managers of private properties and enterprises, who shall protect the working class? Will they not be subject to infection risk by their cruel and mean employers? First and foremost, in this world without the state, private enterprises are owned or run by people who are incentivized by pecuniary profits or by passion or a combination of both. Entrepreneurs, businesspersons, and managers hire employees for their services of which the value created is expected to outweigh the cost of hiring an additional employee. Hence, no sound-minded bosses would want their employees to fall sick and become unproductive. In this highly competitive world, every worker counts and every productive hour of the worker is highly valuable. No one is going to subsidize any employer for hiring certain group of people or penalize any employer for not hiring certain people. The labor market too is completely free and competitive. To meet the demand of customers, businesses must ensure smooth operations of the production process. In this regard, employers too would take precautionary measures to prevent their workers from contracting the disease. To put in perspective, keeping workers from any danger at the workplace is just a rational practice for profit-maximizing businesses even in this current world with the state. This is more so in a stateless world. Maltreatments by employers will not only undermine profitability but also damage the brand, image, and reputation of private enterprises and employers since the media industry is highly efficient and effective in the stateless world.

The same line of reasoning can be applied for enterprises and organizations that are driven by passionate individuals who do not prioritize economic reward. To keep their cause and activity going, employees, members, and associates must be healthy and productive. Not to mention viral infection, every risk of workplace accident, hazard, and stress will also be minimized. Every organization has goals to achieve, and without any financing by taxpayer money, every private organization has to treat workers and associates the best they can if they ever need them to achieve those goals. If workers are not really important, they would not have been employed in the first place. In this world without the state and taxation, every decision and action of private firms is completely rational, given the circumstances and limitations of decision makers. There will be no distortion in decisions due to arbitrary state regulations. Remember that there will still be private law and order and hence no rational firms will purposely expose non-consenting rational workers to danger or infection since harming others (or even negligence) is still a crime in this libertarian society. In short, as individuals, workers can take care of themselves in the face of infection danger, and on top of that, when working or at the workplace, employers will make sure they are as safe and as healthy as possible.

4. The unhealthy health-care industry

The common reason for lockdown given by governments is to prevent patients from overwhelming hospital capacity in their respective countries. This narrative implies that the state has always exerted an overbearing control over the supply and quality of medical services in general and hospital beds and equipment in particular. Ironically, no one would have ever heard of impending overload of hotel capacity so that the state must step in to reduce the influx of guests and tourists from abroad or within. Also, no one will ever imagine a possible overload of foodservice, cinema, or stadium capacity so that the authorities must help to chase away by force excessive guests from patronizing all these business premises. Only in state-owned or -controlled sectors one can find that the rising demand for a product or service is a bad thing so that harsh measures must be taken to curtail the increase in demand or to limit the amount one can purchase at a time. In a competitive private economy, no business and certainly no industry will ever grumble of too high sales or too much demand from customers. Two main reasons account for the peculiarity in the health-care sector.

First, the health-care sector has always been restrained or suppressed by the state from fully unleashing its potential. This is done through direct or indirect state ownership and management of health-care facilities and through various regulations and bureaucracies on private players that produce health-care workforce, drugs, equipment, devices, methods, and so forth. Regulations stifle innovation and risk-taking that is essential even in the health-care service. Specifically, occupational licensing enforced by the state restricts new entrants into the industry, directly reduces supply, and suppresses competition. Regulations and licensing laws are often set or crafted by elected politicians and unelected bureaucrats together with existing dominant players that seek to shield current suppliers from competitors and substitutes. Consequently, incomes of current players are propped up, not to mention the corruption, rent-seeking, and kickback that may be involved. This barrier to entry not only limits the quantity and quality but also the breadth of choice that consumers can choose legally. Hence, it is of no surprise that health-care service providers in many countries find it difficult to cope with the surge in demand amid the coronavirus outbreak. As a result, quantity supplied has to be rationed or quality has to be compromised or a combination of both has to happen in the treatment of all patients.

Second, the price mechanism has always been restrained, inhibited, or held back by the state from being fully operational in many sectors including also health care. In some countries, the health-care provider is none other than the state, and in many countries, the government and the private sector co-provide health-care services. In the latter regime, the state crowds out resources available in the economy and competes unfairly with the private health-care providers by undercutting private suppliers in price. Government providers can afford lower prices because they are funded in whole or partially by taxpayer funds. The reliance on cheaper priced services offered by government providers would grow over time because the state restricts total supply through regulations, causing long-term undersupply and hence higher prices of health care. This is on top of the general price inflation that is also created by the state. These conditions perpetuate a vicious cycle in which the public will keep on relying on the state for cheaper health-care services.

The financing of health care by the state gives the illusion to the general public, especially the low-income group, that health care is more affordable than otherwise and hence this tends to disincentivize them to act rationally. In the wake of viral outbreak, knowing that the government is always there to take care of them, the general public will be less cautious and careful than otherwise if they had to finance the medical expenses all by themselves when they fall sick.

Quite the opposite, this moral hazard does not arise in the stateless society. Individuals must finance medical expenses using funds of themselves, relatives, friends, other willing persons, philanthropists, and/or charitable organizations. Consequently, when demand for health care surges, price will tend to go up accordingly, and this increase in price will discourage more demand. Individuals will be more cautious about their health knowing that they have to pay the full expenses of medical services. Health-care capacity can hence be allocated properly since in the short run, total capacity can be rigid or constant. The deterrence to demand more health care buys time for entrepreneurs and businesses along the value chain to increase supply. This is true for all health-care services, not just that for pandemic. Incentivized by the higher marginal market price, suppliers of all goods including capital goods through the value chain will find ways to increase production at fastest speeds possible. Entrepreneurs know that speed is important to enable them to capture the higher marginal profit. In the event of viral outbreak, if masks are in shortage, the rise in the marginal price of masks will signal the suppliers to increase output as efficiently as possible. Scarce resources such as trees, paper, string, and rubber will now be directed more to the production of masks instead of other production, given the higher price of mask relative to other goods in the market. More labor hours too can be directed to producing masks than producing other goods. More mask-making machineries are produced. The same goes for machines to make the ingredients to mask-making machineries. All these actions are coordinated voluntarily and seamlessly by multitude market suppliers and participants as led by the higher price of the final consumption good, namely, mask.

How about in our present world having the government command producers to manufacture more masks and at the same time retain the previous lower retail price? How about the state also distributing the additional supply of masks? On human grounds, any form of coercion is not only immoral but certainly a crime and should be denounced. Having the state mandate production of certain goods is just like pointing guns to a person forcing him to work involuntarily, an act no different from enslavement. On economic grounds, coercion does not incentivize a person to act in the most productive, effective, and efficient manner. If the state were to force mask producers to increase production but at the previous lower selling price despite the overwhelming demand and scarcity of supply and resources, entrepreneurs and managers would not act with their best efforts and certainly not with their best knowledge in assembling the factors of production through the best method to produce more masks. Matters are even worse if the government forces non-mask-making manufacturers to produce masks.

Specifically, managers would not select the best materials and workers to produce the additional output and also would not deploy the best method of production that could produce most effectively and efficiently. Even if managers were willing to employ the best workers, the quality workers too would need additional compensation for working more. If more quality workers are needed, higher rates of wages are involved. All these require greater marginal profits to finance. Similarly for the best materials and so forth. Only with market prices, will best materials be delivered to the mask manufacturers at the right time and place. The same applies to machinery and other resources, inputs, and complementary products and services provided by other suppliers through the value chain before the finished masks are packaged and displayed on retail shelves or delivered to hospitals. Without additional profits from higher prices of masks, the resources, materials, inputs, and services would not be shipped or delivered accordingly at the right quality, time, and place. Instead, these items and services would be used in current or other production or other uses that would be more profitable. For example, without additional rewards, logistic companies would rather ship other goods or delay shipping the masks, if shipping those other goods yields greater payoffs. In addition, greater marginal profits would attract more competitors to the marketplace at a much faster speed.

Without having the essential local knowledge and specific information through the value chain, the government would not be able to effect prompt supply of quality masks at the right places because the actors through the value chain would not be incentivized to do so even if the state were to coerce all involved actors. The result of coercion on production will be inferior quality, quantity, or both. In addition, without the lead given by the higher prices and differences of price across places, the government also does not know how much to produce and how to allocate the supply. Under this authoritarian regime, the state would certainly oversupply or undersupply, using up exorbitantly more resources than otherwise, and harass more individuals in the society because more and more people in different jobs and sectors must be coerced to give up their freedoms, rights, and properties so as to produce the amount required by the state and distribute the supply of masks to those of whom, according to the bureaucrats, are most in need of the masks.

On the supply side, without the price system to allocate scarce resources, misallocation of resources in both quality and quantity will be put into production and elsewhere at the wrong time or at the wrong place or both. On the demand side, without the functioning price signal to direct the allocation to consumers of different needs and preferences, at different times and locations, certain consumers will be given more than demanded and others will be given less. Besides mismatch of quantity supplied and actual need, those who require higher quality masks will get lower quality ones, while those who want lower quality ones will get higher quality, and on top of that, delivery will tend to take place at the wrong place and time.

In conclusion, the government has done more harm than good in imposing one-size-fits-all curfew-like measures through coercion. Akin to any other kind of intervention in the free society, the seen and unseen costs of government actions in tackling the viral outbreak and consequently the pandemic far outweigh the benefits. By stark contrast, in a society without the state, every private actor would act to his or her best interests in minimizing the risks and costs of such plague and simultaneously maximizing freedom and happiness. While not perfect, individuals with local and specific knowledge can make better decisions than what bureaucrats can. Hence, in our current world with the “omnipotent” state, instead of seizing more control from the private sector, more and more freedoms, rights, and powers should be returned to the private actors not only during a crisis but at all times. Had the state not meddled in every facet of society in the first place, any societal problem would have been a much milder one if not prevented. The word “pandemic” as appears in the title of this writing would have been “an infection” in a stateless society if it must happen.