Free trade leads to a wide variety of goods appearing on the domestic market, and they are cheap. This is not surprising, because free competition reaches an ideal state. Everyone has equal access to the market. There are no hints of anyone’s monopoly.
Free trade has a strong negative consequence. Many local producers cannot withstand competition from foreigners, go bankrupt, and leave the market. In critical cases, this phenomenon can become mass. Entire industries perish, and the population becomes impoverished. Goods are sold cheaply, but this pleases no one. There is no money to buy them. The second negative consequence is that the money of local residents ends up in the hands of foreign sellers and flows abroad.
How to solve this problem without the state?
Anal Magician
I tried for a long time to imagine a situation in which this internally contradictory set of statements could be observed, and I succeeded!
I take a boat, a tent, a laptop, a solar panel, a shotgun, cartridges, a net, fishing rods, and a couple more dozen kilograms of gear—and I head to a small island a kilometer from the nearest shore, where a village stands on the coast. The island is uninhabited, and I declare it mine, although fishermen and vacationers often hang out here, but it hasn’t occurred to anyone to settle here yet.
Then I begin to manage the household.
I can catch fish; it will be enough for fish soup, and if I build a smokehouse, I can preserve some. But in the village, they smoke fish in the same way, and my goods brought from the island are not in particularly high demand. I could plant a garden, but the soil is mediocre, manual non-mechanized labor is unproductive, and everyone in the village has plenty of such produce.
I could go to the shore with a shotgun and demand money from vacationers for the right to hang out on my shore, but they don’t take the threat seriously and are only willing to pay if I provide some service in return. In response to my warning shot in the air, they tell me that I’ve gone crazy and that they will, of course, sail away, but tomorrow they will return with weapons, because they are willing to tolerate my presence in a place where they are used to vacationing only as long as I don’t interfere with them. I reply that I was joking, bring out some smoked fish to go with their beer, we hang out together, and the incident is resolved.
Eventually, I arrive at the following business model: I catch fish for personal use, continue running this channel, occasionally write articles for hire, and begin to play the role of a hospitable hostess of the island, who entertains vacationers with conversation, and in return receives donations, primarily food, and occasionally, depending on the mood, sex. From time to time, I swim to the village to buy everything I need. The goods there are inexpensive; I cannot compete with their producers in any category, and my money gradually runs out. Eventually, I realize that I have begun to spend too much effort and time on activities that bring me a disproportionately small income, and too little remains for writing texts for money, and the internet here is half-dead. So, I end this prolonged vacation, pack my things, and return to where there is internet, a hot shower, and other blessings of civilization that allow me to focus on what I am more competitive in.
Yes, under ancap, any business model can well turn out to be unprofitable. Free trade is precisely what allows one to quickly realize such things and switch to more profitable activities. And if profitable activity with existing competencies is fundamentally impossible in a certain area, then one must change locations and go where those competencies are more in demand.
At the same time, I will note that in the same example with the island, having capital and knowledge, I could have opened a yacht club, or a hotel, or a diving school, or organized a larger-scale fishing and processing operation—and turned a profit. Singapore itself was dirty and poor until it attracted investments, so the same place under different conditions can turn out to be either completely prospectless or a gold mine.
And in conclusion, I will finally answer the question posed in one phrase. How to solve the problem of market inefficiency without the state? Entrepreneurial initiative.
