Bumbling toward minarchy in Latvia

I have always been interested in libertarian politics and consider myself a libertarian on most issues -- decriminalizing drugs, legalizing gay marriage, striking victimless crimes from the law books, abolishing compulsory military service, etc. Broadly speaking, libertarians are divided into two camps -- minarchists, who favor a small, night watchman government, and anarchists, who prefer to let society self-organize without a state.

Without going into that debate, an interesting observation on the topic of this blog is that with the massive, rushed and hectic budget cuts that Latvia is undertaking, the country is, in fact, bumbling and stumbling in the worst possible scenario toward becoming a minarchy. When the LVL 1.5 billion are cut from the government budget over the three years 2009-2011, and when the real effect of the formal cuts on tax revenues (and tax evasion) take hold, it is likely that Latvia will be able to finance little more than a skeleton police force, a small professional military and some kind of court and criminal justice system. At least on paper.

The problem is that states, especially states with bloated bureaucracies and massive inefficiency in public administration such as Latvia, have created dependencies and reliance by the population that is very painful to cut and betray in the kind of series of short and desperate actions that the Latvian government is taking.

Employers have been compelled to pay social taxes on behalf of employees, among other things, for their pensions, and these pensions (some have argued, with considerable merit, that they are the vested private property of pensioners) are now being confiscated, all expectation of any benefit from the compulsory diversion of income has been shattered.

If Latvia were seriously moving toward minarchy, an essential step would be to cut social taxes and leave employees with more income to divert to private pension insurance schemes. Younger employees could have the option of spending some of their income to support sick or elderly parents or grandparents.

Since the government is, essentially, gutting the state health care system, it should also cut taxes to allow individuals to buy private health insurance and do nothing that would inhibit the rapid formation of private hospitals and other medical care facilities, where private insurers would pay most of the bills.

Education is another area that has been bulldozed by the government, making teaching the lowest legally paid "profession" in the country, assuming that one cannot be paid below the (reduced) minimum wage in the public sector. However, no steps have been taken to encourage the creation of private and cooperative schools and of "informal" education.

By late summer, it will become clear that the schools in Latvia will not open on September 1 (there may be a "stay-away" strike on the first day) and will be seriously depleted of teaching staff if they do open. So the issue of alternative, non-state education will be acute by fall. Creative solutions may have to be found, such as, perhaps, gathering pupils at library internet access points for instruction by internet video (rural children could be charged a small fee to watch lessons at private schools in Riga).

The police will also be severely affected by the cuts, with the result that the ability of the police to prevent and investigate crime will deteriorate, bribe-taking will increase and the police force will continue to lose its best and brightest to emigration and private sector work.

Little has been done to create an alternative system of private law enforcement by expanding the role of private security companies (perhaps allowing certain areas of the country to invite tenders for private law enforcement coverage).

In short, Latvia has unwittingly started on the path to minarchy, but has nothing resembling a transition plan, nor any substantial analysis of how this can be done. Indeed, the government is still projecting the illusion, to the public, that its current path of budget cutting will somehow lead to a system that still provides state-funded pensions, health care, education and law enforcement when, in fact it is (unintentionally) reducing these government entitlements and services to a completely inadequate and disfunctional level. The Latvian population will, over the next 18 months, be forced into the worst kind of minarchy. It remains to be seen if civil society can somehow improvise around this process.