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May 1, 2006 - Freedomain Radio - Stefan Molyneux
30:38
218 Existing Stateless Economies
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Good afternoon, everybody.
I hope you're doing well. It's Steph.
It is the 1st of May 2006, and it is 20 past 5 on Monday afternoon.
And what a scintillating day at work I had.
Actually, I closed another deal, so that was good.
But the life of a salesman, a little bit different than the life of a high-tech guy.
It's feast or famine in terms of stuff to do, so today was just a little slow.
But I'm sure that we shall survive.
Now get on to the exciting stuff.
Now... I wanted to talk today about the black market or the grey market.
And this is the under-the-table commerce that goes on in the OECD companies.
OECD countries.
And this is a very interesting phenomenon.
I'm going to read off a couple of statistics here and then we shall chat about it on the way home.
Now, I don't know how they calculate all of these things, but let's just say that these statistics are okay.
They're probably a little low, but let's just say that they're relatively valid.
And what these are is the alleged extent of under-the-table commerce in OECD countries.
So in Switzerland, 7.5% of the gross national product is completely under the table.
And that means, of course, you're breaking the law and you're forgoing any legal recourse.
And this goes all the way up to, I guess, the United Kingdom, 13.5%.
The U.S., 8.5%.
Canada, the broadcast center of Freedom Aid Radio, 14.5%.
Denmark, Norway, and Sweden, 18, 19, and 19%.
Spain, 23%.
Hungary, 28%.
Greece! 31%.
Well, Greece has a very historical lack of respect for this sort of stuff.
So 31%. We'll talk about sort of what that means in a moment.
I'm going to read a little bit from this article.
This is from the Toronto Star, which is available at thestar.com in case you want to read along.
When the GST was brought in in 1991, the GST is a much-hated tax up here.
It's 7% on goods and services, and it replaced a manufacturer's tax of 10%.
And there was a nasty recession going on.
They brought in the GST. When the GST was introduced, it pushed about 2% of Canada's economy into the underground, or $21 billion.
Of course, construction and things like that are pretty big.
And in the first five years after it was introduced, about 95% of clients asked for all cash deals.
Now, that is a very, very, very important fact.
And this guy says it was like everyone you could imagine under the sun.
But this is a very important thing when people look at the question of law and order and contracts and so on.
I think it's absolutely essential that people understand that without the state, like people say, well, without the state, there'd be anarchy!
Yay! But the bad kind of anarchy, right?
The anarchy that seems to have, I don't know, puppies have swastikas carved in their foreheads or something.
But the important thing is you've got to get people out of the propaganda and into the real world.
This is the same thing that the early scientists had to do with those who believed in stuff like alchemy and gods and goblins and so on.
Witches. Get people out of the propaganda.
Get people out of the life of the mind, or the death of the mind, if it's disconnected from reality, and get them into the facts.
Get them into the facts.
The only cure for statism is facts.
The only cure for fantasy is fact.
And this, to me, is quite, quite, quite fascinating.
On many levels.
The first... Well, of course, the natural question to ask people would be to say, do you think that Greece...
Is a horrible, civil war-raging, you know, massive mafia kind of shoot-em-in-the-streets prohibition anarchistic nightmare?
And people would say, no, I mean, maybe Sicily a little, but Greece?
No, I've not heard anything coming out of Greece that is anything like that.
It's not Somalia or any of the more sort of obviously anarchic or anarcho-questionable kind of societies.
But that is something that's fairly important for people to understand.
In Greece, a third of the economy operates without the state.
I mean, just sit with that, simmer with that, like a cashew chicken in a nice tandoori sauce.
Oh, now I'm making myself hungry.
I'm actually quite hungry and I'm going to the gym, so before I get something to eat, we might have a few sizzlingly spicy metaphors.
But just sit with that for a moment.
A third of the economy in Greece...
It operates with no laws whatsoever.
And in fact, it operates counter to law.
It's not even that they don't have access to law.
They're in direct contravention to all of the existing laws, and they operate under the radar.
Christine, of course, has told me a number of stories about this, about the way that in Greece, taxes and plus their natures, they just recognize that the government is just a bunch of bandits and you do whatever you can to get away from it.
And I myself have asked for cash discounts.
Unfortunately, because I'm a well-dressed, bald whitey, In his 30s, I look like a narc.
You know, if you watch the old WKRB in Cincinnati, Johnny Fever's going to see The Who with his boss, and he says, great, who's like a bald white guy?
He says, great, now it looks like I'm going to see The Who in the company of a narc.
So I don't get a lot of it, because people think that I'm the worst undercover revenue cop in the world.
They're not going to hire someone who looks a little different.
But I'll take it wherever I can.
I'm perfectly frank with you.
And, you know, let's just say that theoretically I was able to take it in various situations.
Absolutely, I will take cash.
I will take cash and I will forego a refund and I will forego a warranty and I will forego legal recourse.
Because, you know, what legal recourse am I going to have anyway?
You're going to spend five years and $50,000 going through the court system?
Forget it. I mean, the court system is not available to anyone anyway.
So, this is...
This is an important thing to understand, right?
It's so important to get people out of propaganda.
Get people out of these sort of weird images that people just make up about the world, like the state is friendly, and if there's no state, there's anarchy.
People, this is all just propaganda.
This is all just nonsense.
Deal with the facts. I'm not saying you don't, but I'm saying that it's just important to get people out there in the world to understand the facts.
Now, there's the black market and there's the grey market, right?
So, the grey market is legitimate business activity that goes under the radar, not totally, but partially.
So, if you're a contractor and you're working in the building industry or something, and you take some cash payments and others that are non-cash payments and so on, then you are in the grey market, and if you're in the black market, then you're operating completely, quote,
illegally, right? So, let's start just mentally, and I don't have the stance, and I don't think anybody does, and if you think of a good source, just let me know, but let's just start adding up the kind of interactions that escape the legal system, right, or are not part of the law, canter-beating the law. All the cash deals in the world that go on.
All of the deals that go on that are quid pro quo, that are barters in kind.
You know, I fix your deck and you give me a barbecue, your barbecue or something.
Everything like that.
All the second-hand stuff that goes on.
I mean, all of the activity that goes on sort of eBay or sort of, we have them here, the bargain hunters pages or something like that.
Buy and sell. Where people are selling old TV. I mean, they're not charging taxes and paying taxes on all that kind of stuff.
It's nonsense. You have all of the criminal activity that's going on, which of course is what's called the black market, right?
Except for some money laundering fronts, there's almost no...
A particular situation wherein there's above-board business dealings at all, right?
You don't even ask whether you can pay for your drugs using a credit card, right?
I mean, that's usually not the way it goes.
A lot of stuff that goes on in PayPal and goes on internationally.
A lot of the stuff that goes on in eBay and so on.
All of these are transactions that are occurring without the state.
Without the state!
Now, the interesting thing as well is if we look at the existing transaction that goes on, here we have a 7% GST that has pushed significant, like tens of billions of dollars of the economy has been pushed off these quote-of-quote legitimate table into the gray or black market.
And so when we look at people and their evaluation of what the government is worth to them, Well, it's worth something less than 7%.
And it's probably worth quite a bit less than 7%.
So if you say, okay, well, when there was no GST, when there was no 7% tax on this, then I would be willing to pay it legitimately, but now tens of billions of dollars are no longer changing hands, quote, legitimately because of the GST, then we know for a fact that those people who are exchanging those tens of billions of dollars Value the government at less than 7%.
Value the services that the government brings them in terms of legitimacy and so on at less than 7%.
That's pretty important.
Now, given that people are not only having no recourse to the legal system, but they're also acting against the law and can pay enormous fines or go to jail, I've got to tell you, I think that that is pretty inconvenient all around.
And so we've got to knock quite a bit off that 7%.
Now, if we look at something like a service that is provided in terms of cash transfers holding dispute resolution to some degree and so on, look at something like PayPal, which charges a couple of percentage points of transaction, well...
Then we know that people will pay, or like they do with the visas, credit cards, they will pay a couple of percentage points for not having to go to the bank, for not having to carry cash, for getting all the error plan points that you collect on different credit cards and never redeem for anything, but still feel obsessed for collecting them.
So we know that people will pay a couple of percent for pretty extraordinary levels of service and convenience and ease, but they won't pay 7% to either keep the police off their backs or to have access to the state legal system for a dispute resolution.
That's pretty important, I think.
I would say that what people count the state at is relatively little.
I would say that of that...
What they're paying for, if people paid a percentage point more and got access to the government court system and dispute resolution services, then I've got to tell you, sort of looking in my own mind, looking at my own heart and saying, well, how much would I pay for that?
I've got to tell you, it's kind of like nothing.
Because there's just no chance that I'm ever going to take someone to court.
I mean, you can take someone to small claims court.
And I did once take someone to small claims court.
And it took a couple of months. I ended up getting some portion of my money.
But I had to pay...
Gosh, I'm trying to think. I went for something like $900 from a guy who took a deposit with a refund on an apartment that I ended up not taking.
He wouldn't give me the refund back. So I got $900 back and I paid about $100...
Which was not tacked on to what he owed me in return.
He just gave me the 900 bucks back.
And I had to pay about $100 to do this.
I had to take a morning off work, which is another couple of hundred bucks.
So my costs of resolution were kind of close to 40 or maybe even 50%.
It really wasn't muchly worth it, right?
All the time, the paperwork and so on.
So at a 50% transaction recovery rate, and you can only, I think, go up to $1,000 for this, so it's not really useful in any particular kind of way.
So, at 50% collection for dispute resolution, up to $1,000, and after that, oh my lord, it just gets ridiculous.
It just gets ridiculous.
I know somebody who was owed a severance package, didn't receive a penny, and it's going to cost him tens of thousands of dollars to go for this.
An ironclad contract written in stone.
We will pay you X. And he has to go to a lawyer and the lawyer is saying, give me a retainer of $20,000 and I'll go.
I mean, it's ridiculous.
It's absolutely inaccessible.
And so I don't think that I would pay one single thin dime to the government for its supposed dispute resolution services, and I think people feel pretty much the same way.
I mean, there are some people who don't, of course, like the tort lawyers and so on, but they're the ones who are bilking the system and making it inaccessible to everyone else, and there are people whose accidents and sewers and so on.
But that, to me, is pretty much nonsense.
I mean, we can go into this sort of problem of tort law another time, but that kind of stuff is not exactly dispute resolution.
It tends to be a lot more gimme, gimme, gimme, right?
And... So the number of people who actually would turn to the state for dispute resolution, kind of got to tell you it's really not that many.
Maybe you know some people who've used it.
I don't. And I myself, as I've mentioned before, had to withdraw from a situation wherein I'd been completely exploited by my broker who was trading on my account at ridiculous levels.
What the trading company had done was actually illegal, and I got, through various means, a document wherein their internal ethics commissioner had attested to that very fact, and it was still not a shoe-in in court.
And so I ended up having to go through a resolution process that was more private, that was not appealable.
And even then, even though I had the document which said, we acted illegally and we ripped this guy off, I still, I still did not go to court, even with this smoking gun.
Because my lawyer said, well, I can't guarantee any of that.
So when you start to add up the fact that people simply don't use the state for dispute resolution, either explicitly, as in a third of Greece, and I guess just under a fifth of Canada, don't use the state for dispute resolution and will pursue this kind of contractual or non-contractual obligations to each other, regardless of the fact that they suffer or are exposed to the suffering of severe sanctions.
Then I think we have a legitimate reason to be able to say that anarchy can work.
Because it does work.
Forget Somalia. Look at Greece.
I mean, given that they count state transfers for the most part in GDP calculations, gross domestic product, sum total of all economic activity, and blah blah blah.
Oh, you can Wikipedia if you don't know what it is, but I'm sure you do.
Given that they count people who are being paid by the state, and they count a lot of activity generated from debt, I've got to think that, given that the state is usually about 40-50% of the economy, let's just go with me here, this might be going out on a limb,
but I don't think so, at least I'm not feeling any creaking yet, no koalas chewing at the root, but if we realize that the state is usually 40-50% of the economy as a whole, And that there's really no possibility of the state operating in a black or grey market,
save for kind of kickbacks and stuff like that, then we can realistically, if we look at the private sector or the free market, quote, free market aspect of the economy, we can realistically double, double what we're talking about in terms of the free market.
So in Canada here, 15% of the total GDP, well, half of it, it's impossible.
To have that occur.
So, you know, it's really 15% of 50% of the economy.
So it's a third of all free market transactions here in Canada.
And it's almost two-thirds of all free market transactions in Greece occur with no legal protections whatsoever.
And with legal sanctions, which you would never get in a free market situation.
There are legal sanctions.
For this. I mean, people risk going to jail, they risk having their houses taken from them, they risk everything.
So, this is a pretty important thing to understand.
When people say, anarchy could never work, you can legitimately say, well, you should really tell two-thirds of people in the free market in Greece that, because they kind of think that it's working.
So, you should probably go and tell them that what they're doing is impossible, so that they stop doing it.
And that's something that's kind of important.
Once you get out of the propaganda, once you get out of emotional things, as Stephen Culper says, I think it's just hilarious.
I haven't watched his show very much, but he was interviewed on 60 Minutes yesterday.
I think that's great.
I think something like...
He said something like, and I don't care about the beginning, but the second half is fantastic.
He said something like...
Most news organizations will analyze the news for you.
We will feel the news at you.
Which I think is great.
And he talks about this concept called truthiness.
And truthiness is if you twist the facts, you can get just about anything.
And this is what feels like it should be true.
Truthiness for him is stuff that feels like it should be true, but only can be believed if you ignore a good chunk of the facts.
It's not really what the facts support.
And the perfect thing for me, this definition of truthiness, is this idea that anarchy can't work, that people cannot function economically in the absence of a centralized and coercive state.
Well, as I said, it's legitimately arguable that two-thirds of Greek people do just that.
And that, to me, is really quite fascinating, and that...
The level of crime in Canada did not increase when the GST came in, when tens of billions of dollars suddenly vanished into the rolling fog of the grey market.
That's fairly important.
That handshakes do work, that phone calls do work, that people don't need a massive and centralized state coercive mechanism, even in the absence of DROs.
I mean, you could legitimately say, I think, if people say, well, DROs are stupid, and I think they won't work, and blah, blah, blah, blah, blah.
Well, you can say, well, fine, because we've got two-thirds of Greek people who operate with neither DROs nor a state, and they also operate with significant sanctions for what it is that they're doing.
Or two-thirds of the free marketing Greece.
Well, that's pretty important.
I mean, I've never said that the DROs are how it has to be.
It's just one possibility.
It might be the case, and I think it's perfectly justifiable to make the argument, it might well be the case that DROs are complete ridiculous overhead, and people just...
After, like, I don't know, half a generation, people go, eh, you know, this DRO thing is ridiculous.
I've been doing business with this guy for 20 years.
A handshake has always been good enough.
We're both dropping our DRO representation.
We're going to go with that. Maybe that'll be the case.
Maybe after you've built a certain amount of credibility up, your DRO representation will represent you for free.
Like, you know how you still get life insurance after you finish paying for it?
Because you've been such a great guy, you've never called upon the DRO thing.
We'll now represent you for free.
I mean, that would certainly be a possibility.
And that would allow them to shift their costs to the higher-risk people.
I mean, it's just possibilities. Maybe the DRO system is overkill and people don't need it at all.
People operate perfectly well without any DRO system.
Two-thirds of the free market in Greece, and I guess it's about 25% of the free market in the States, all operates perfectly well without state representation, access to legality, and with significant state compulsions against what it is that they're doing.
And I think that's kind of important.
Now, another thing that the grey market does, and the black market does, is in my view, it creates intercultural tensions, I guess you could say.
In that, you could probably argue that most wasps brought up in the middle class don't really have a very strong sense, I don't mean wasps, but you know, sort of natives, I guess.
They don't really have a very strong sense of how to go about getting something going in the grey market.
One of the things that occurs in law, as Harry Brown has pointed out, is that when you pass a law, there are inevitably enormous numbers of complications.
I mean, a regulation, right?
Not like a don't kill, don't steal law.
You get an enormous amount of complications that arise in the practice of that law.
Because you say, well, food should not be taxed because it's an essential.
Well, are muffins food?
Are potato chips food?
What degree of nutrition do you need?
Are passion flakies food?
I mean, who knows, right? So you get all of this nonsense coming in, and...
It's the same thing with the grey market, that you start to get all of these rules, and this cat and mouse game gets pretty significant between people who are in the grey market, people who are looking yearningly at the grey market, and so on.
And so if I wanted to set up some sort of contracting shop, like I'm going to go do house repairs or something, I would have no idea how to go about doing it in such a way that I would have enough income that the government would not be off my back, I wouldn't know who to bribe, I wouldn't know who to...
Deal with, I wouldn't know what was the right way and the wrong way to do it.
But just to take a cliche, if you say that, you know, if some Italian guy is going to be in the community and other people are going to trust him, hey, but then, you know, some Italian guy is going to trust him, or if he grows up with an Italian father or a construction father who knows all of these things, then you can get all these kinds of things kind of...
I have no idea how to go and buy drugs.
Not a single clue. Wouldn't have any clue.
You could pay me $50,000 to go and pick up some coke by tomorrow morning.
I really wouldn't know how to do it.
But if you're in that world, then you know how to do it.
And so I'd get caught, and somebody in that world would not get caught.
And certainly the serious drug dealers themselves never get caught, right?
Because they know exactly how to work the system.
And so there's a certain amount of, I think, intercultural tensions when you look at, say, I mean, immigrants.
It happens with immigrants from certain cultures.
It's certainly the case up here in Canada.
It's pretty hard to understand how these people who sort of run their own businesses can afford, you know, in their 20s, houses in my neighborhood that I couldn't afford until I was in my late 30s.
And I've been working pretty hard.
I've got a master's degree. I've been working pretty hard for quite a long time.
It's kind of hard for me to understand how these people are able to do it.
And my strong suspicion, of course, is that they're doing it by working under the table.
In other words, they're receiving benefits from the tax situation.
And, of course, I do as well.
Water and roads and so on.
Although I use the private roads for the most part.
But... I appreciate their freedom.
I just wish I could get me some, right?
And I can't. I can't.
Because I'm just not part of that culture and I don't know anyone who's in that culture who can get me set up or tell me what to do or what level of risk is the optimum level of risk so that the rewards are great and so on.
So, It's just kind of annoying from that sort of a personal observation.
But I think when you look at these kinds of situations, like illegal immigrants, right?
And you look at that kind of situation, well, a lot of people are irritated because those people are underbidding them, and they're underbidding them in the construction world and so on because they're not subject to the minimum wage, all the regulations, the social security tax, everything that's going on.
So it's unfair, right?
And of course, like most people who recognize that things are unfair and know which way their bread is buttered on and what is possible, They then say, instead of, well, it's unfair, so I should be more free, they say, well, it's unfair, so you should be more enslaved.
We should kick these people out or legitimize them so they have to pay all their taxes or whatever.
And that's simply because most people know, or at least sense deep down, that the government is going to be far more interested in enslaving the illegal immigrants than it is in freeing the actual taxpaying citizens.
It's never going to happen. From the government, right?
It's going to come from outside. And so I think that is something that's very sad.
It's another way in which this sort of tax slavery and regulatory slavery spreads across the land like a vile red fungus.
From another world. And so that is a real shame, I think.
And it's a real, I guess, lack of brotherhood.
What we do want is to say, well, these people are able to outbid me because they're free of all these regulations.
So what I want to do is become free of all these regulations.
But, of course, that's very unlikely to happen.
And, of course, unions, which are a lot behind these anti-immigrant and racist kinds of legislations, They definitely don't want that, right?
Because unions are one big regulation, as I talked about last November.
And so there's no way that unions are ever going to be interested in making their own people as free as the people who are illegal immigrants who, ooh, don't have to join unions, and so on.
There's no place for the unions to go in that kind of situation.
So when you start to put all of this stuff together about how much of economic activity is going on that has nothing to do with the state, that is in direct contradiction to state edicts, and that certainly has absolutely no capacity to use state power to deal with these kinds of conflicts of resolution or restitution or legal conflicts around warranties or contracts and so on,
There is an enormous amount of economic activity.
You put together illegal immigrants, the grey market, the black market, crime, under the table, the stuff, all of the economic activity that goes on, which is secondhand goods sales or reciprocity agreements like I scratch your back, you scratch my back, bribery, corruption.
There is an enormous amount.
Of economic activity.
Trillions and trillions of dollars the world over.
That operates completely without contract.
Operates completely without access to the courts and the police.
Operates completely without contract.
Because with these kinds of situations you can't have a paper trail.
And, of course, this is one of the reasons why the government wants to get rid of cash, right?
Because cash is very hard to track, and cash is a big source of crime.
But, of course, the government only wants to get rid of cash to a certain degree, because once the government gets rid of all cash, then it can't itself accept bribes, which would not be so good for them, right?
But you put all of this stuff together, and you have...
I don't know.
I mean, it's so hard to come up with real numbers.
But definitely, if you count what's going on in Saudi Arabia, and if you count what's going on in Somalia, and if you count Eastern European stuff where there's so much money under the table, it's ridiculous.
And Greece, of course, pushes the average up just a little bit.
You put all of this stuff together, there is an enormous...
I've got to think it's at least 30% to 40% of the world's...
Sorry, 20% to 35% of the world's economic activity is completely anti-state and operating completely without a contract to legal recourse.
No DROs, nothing.
And so it's hard for me to understand what people mean when they say, well, it can never work.
Oh, you can't have economic activity without the state.
Ah, it never worked. It's impossible.
It couldn't happen. Well, these are people who, I don't know if they've watched too many CSI Miami shows, or I don't even know what it is that makes people think that everything that goes on is either has access to the state, in which case it's perfectly legitimate and honorable, or it does not have access to the state, in which case it's shooting and sopranos and kneecap breaking and so on.
I mean, it's just to me kind of funny.
Because when you actually get interested in the facts, which I think is somewhat significant, Then you really do realize, and fairly quickly too, that anarchy is alive and well.
That anarcho-capitalism is perfectly alive and well.
And it's surviving state sanction, and it's surviving fiat currency, and it's surviving a lack of access to contracts, and a lack of access to warranties and restitution, and so on.
It's doing perfectly well, thank you very much.
In fact, it's growing rapidly as the state interference in people's legitimate economic activity grows.
It is growing exponentially in some areas.
So the next time somebody says to you, anarchy can't work, you might want to tell them about the good quarter of people around the world in the free market who are currently using it and very happily too.
So thank you so much for listening as always.
And speaking of the grey market, feel free to come by www.freedomainradio.com and throw me some dollars and see what you can do to help me stay in the perfectly legitimate and taxpaying market.
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