Sunday, July 18, 2010

Where is the state?

One of the conceptual difficulties that I have with libertarianism is that, as I understand it, it prescribes minimally invasive government interference with society or the economy and prefers, instead of such interference, a maximum of individual liberty consistent with the respect due to other's rights. My "conceptual difficulty" arises, in part, because I have a hard time distinguishing what is the state in contradistinction of other entities. It seems to me that without a "state," or entities might come into being or continue in existence, and these can be oppressive in a manner similar to the state.

For example, one of the items I am studying for my dissertation was a short-lived organization that was called the "Coal Trade Branch of the Toronto Board of Trade," or "coal section" for short, which lasted from about 1886 to 1889 or 1890. This was an organization of Toronto coal dealers that became, not surprisingly, given its name, an affiliate of that city's board of trade.

The goal of the coal section was, basically, to keep retail coal prices in the city at what its members considered a "fair" or "reasonable" rate (translation: they wanted to limit competition among themselves). If a retailer cut prices without permission, the coal section would fine him (to my knowledge, they were all male), and if he did not pay the fine, he would be declared in "default." Being in default meant that the retailer could not get coal from the wholesaler or from shippers in the US. (It's a complicated story, but the American coal operators and distributors were in on the deal; and it's important also to note that Ontario at the time--and for several decades thereafter--depended on the US for almost all of its coal.)

I'm studying the coal section because of its antitrust implications. It was one of the reasons that Canada enacted the first ever (that I know of) national-level antitrust law in 1889. (There were several state-level antitrust laws in the US before 1889; and some laws that might be construed as proto-antitrust--such as laws against forestalling--had been a staple of Anglo law since at least the 1600s, and other legal systems, such as the Napoleonic Code, had laws against "coalitions" that resembled antitrust laws. I should also point out that I'm using the word "antitrust" somewhat loosely.)

But this organization highlights what I take to be the conceptual difficulty I have with libertarianism. The coal section was in some ways a "voluntary association" and in other ways was a creature of the state. But its statelike actions--what I take to be its claim to "legitimate coercion"--were not seriously implicated in the state as people seem to understand "the state" (i.e., the coercive components of the section were not seriously implicated with Toronto, Ontario, Canadian, British, American, New York, or Buffalo "state" action).

It was a creature of the state, or at least implicated in state action, in a few ways. As a branch of the Toronto Board of Trade, it was part of a corporate entity that had its charter from (if I recall correctly) the Dominion (federal) government of Canada. Membership in the coal section required signing an official affidavit asserting that the affiant had read and understood and agreed to abide by the rules of the coal section (as I understand it, these affidavits were "legal" documents somewhat akin to what we might understand as a notarized document, and by virtue of being legally recognized, they were implicated in the state; however, it appears that the Board of Trade never signed off on the affidavit requirement of the coal section, so any legal import the affidavits may have had might be therefore nullified.) Finally, anthracite coal, until about 1887 or so, was imported to Canada under a duty, and so was "protected" in a way (but in another, more accurate, way, it wasn't "protected" because Canada had no significant anthracite deposits, and Canada's bituminous coal--at that time limited to Nova Scotia--was an poor competitor to US-based anthracite, both because anthracite and bituminous could not always be used for the same purposes, and because it was cost-prohibitive to ship bituminous coal much farther west than Montreal, the chief markets for such coal being the New England states of the US.)

The coal section was a voluntary association because its functioning rested upon the willing cooperation of several factors of the coal industry, from the anthracite operators in Pennsylvania (almost all the coal in question was anthracite), to the owners of the railroads with access to the anthracite mines (often the same as the operators), to the coal merchants in New York (particularly Buffalo) to the coal importers in Toronto, to the "small dealers" who bought from the importers. Its voluntariness is further highlighted by the fact that the coal section, while coercive, seems to have been an inefficient and not entirely effective way of coercing recalcitrant dealers who undersold the official prices: the minutes of the section disclose numerous repeat violators and deals the section made to accept previous defaultors back into the fold. Still, there is some evidence that some businesses were indeed severely hurt by the actions of the coal section.

A working definition of the state I am familiar with, even though I'm sure it has been theorized and "complicated" by further debate and analysis, is that the state is an entity that has "a monopoly of legitimate coercion."* I suppose it is not inconsistent with this definition that coercive entities might exist in a state's jurisdiction, and either that such entities are not "legitimate" in that they are not explicitly approved by the state, or that their existence is suffered by the state or enabled by the state and therefore does not challenge the state's claim to a "monopoly" of its coercive power.

The coal section was, however ineffectively, an organization that engaged in coercion. It, of course, did not pretend to exercise a "monopoly" of such coercion, although its minutes suggest that it believed it controlled a certain market, the Toronto market, defined as the city limits of Toronto and five miles outside those city limits. It would not have willingly suffered a rival organization of coal dealers, although there might not have been much it could have done if such an organization had an "in" with American-based shippers of coal. Much of its coercive power came of its own, and, I argue, not from the "state" as understood by the definition I cited above.

I'll admit that the history of Anglo law on trade restraints, in my limited understanding, might be read as affirming that the coal section offered at the sufferance of the Canadian state. Canada's enactment of an antitrust law (called an "Anti-Combines Law")--partially in response to the machinations of the coal section--might be read as a parable on the state asserting its monopoly on legitimate coercion by making such "combines" as the coal section illegal (as a practical matter, the law was so hard to enforce and even interpret, that it was not clear that such entities as the coal section were made illegal by the law). There were also prior common-law doctrines against unreasonable "restraints of trade," which might be interpreted as the state's claim to a monopoly on legitimate coercion. (The liberalizing laws in England in the 1840s and 1850s essentially repealed the more restrictive barriers to "restraints of trade," and one might argue that this was a voluntary cession by the government of its monopoly on coercion.....and such an argument would support the claim that the English state continued its claim on a monopoly of legitimate coercion. I'm unclear about how much this carried over to Canadian jurisprudence.)

Still, there's a circularity to the definition I cited above. If it's coercive, it's either legitimate or not legitimate. How do we know if it's legitimate? If the state approves it or suffers it to exist, it's legitimate; if the state does not, then it's not legitimate. I suspect this alleged circularity stems in part from the way I have defined the state; in other words, I fear I may be concocting a straw man.

My overall point is not that the coal section was wholly good or bad, but that it exercised coercion to some degree independent of the state. It's not clear to me what a proper solution was.

If you've read this far, thanks! I realize these are essentially random musings.

*I understand that Max Weber came up with this maxim, or something like it, although I have never read Weber. I got this particular phrasing from Gordon Graham's Against the Democratic State. I forget who he credited for this phrasing.

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