The question of roads always seems to arise as a central objection to a stateless society – which makes perfect sense in a way, because it is a form of public ownership that we have all experienced firsthand, and because it can be hard to picture what they may look like in the absence of a government.
The alternative to state-funded roads is generally conceived to be toll-based roads. This is considered a disastrous solution, because who wants to stop every block to put a quarter in a meter?
Remembering our methodology from above, it is essential that we put ourselves into the mind of a road developer, sitting on the other side of that table, attempting to sell us access to his roads.
Imagine that you have sunk your life savings into building a complicated network of roads. If you don’t attract drivers who are willing to pay to use them, you are finished – your children are going to cry themselves to sleep with hunger.
When you stand up to make a presentation to a group of potential customers – drivers – are you seriously going to tell them that in order to drive a half a mile to pick up a loaf of bread, they are going to have to stop a few times to put quarters into a toll meter?
Of course not.
So – how are you going to convince drivers to use your roads?
For those who have not spent any time – or blood – in the entrepreneurial world, this is exactly how almost all companies are funded. You take your business venture to a group of investors, who play a very serious game of “devil’s advocate,” trying to find holes in your business plan.
If your entire fortune hung in the balance, how would you answer these objections? If you cannot provide good answers, you will never get to sell your roads.
I am certainly no expert in construction – I was an entrepreneur in the software world – but I can tell you some possible answers that I would explore in order to prepare for such a meeting. I can also tell you that none of them would involve having drivers stop every few minutes to push change into a slot.
If I desperately wanted to build roads in a stateless society, I would first approach construction companies who wanted to build houses or malls in some area not currently served by a road. If you want to build a mall a few miles out of town, you’re not likely to attract many investors unless your business plan includes road access to the mall, since there are very few people who enjoy the prospect of a bracing hike to and from a “Target” store.
If you are developing a housing complex, you will face exactly the same requirement – it is true that you can sell houses without road access, but you will not be able to sell them for more than it costs to build them.
So there are really two kinds of roads, in two kinds of environments – highways and intercity roads, and already-existing and new roads.
NEW ROADS
It is easy for us to understand that highways to new places will be built in the free market, for the simple reason that if you cannot build a highway to that new place, that new place will never come into existence. Secondly, there is not much point building a highway to a new housing development, without building roads from the highway to and within the housing development.
Thus, anything that is built that is new will only be built if roads to access it are constructed at the same time.
If I want to buy a new house somewhere outside of town, and a new highway and new roads are built to accommodate my desire, I will certainly be very interested in the long-term quality of the roads that have been built, since so much of my property’s value hinges upon easy and comfortable access to it.
Thus, the long-term quality of these roads will be a significant factor – probably a deciding one – in my decision to buy a house. Road quality is as important as the house’s construction quality when it comes to evaluating the value of a property. How much would you pay for a million-dollar mansion in the middle of the Amazon forest, with no road access? Assuming you are not Howard Hughes, probably nothing at all.
What about the danger that someone sells me a house, and then jacks up the price of the road maintenance?
Knowing that this is a risk, when I was negotiating my mortgage, I would ensure that a built-in and fixed price for road maintenance was included in my mortgage terms. I would also want the right to demand an open bid on road maintenance services when the contract came up for renewal.
We can all understand that the construction and maintenance of new buildings – commercial or residential – can only occur with high quality road access. (We can see this kind of phenomenon, to a smaller degree, in the fact that almost no malls are built without parking spaces, or houses without driveways and garages.)
So really, the question of road construction and maintenance – as far as it is raised as an objection to a stateless society – only hinges on existing roads, not new ones.
THE STATIST PONY
Imagine some communist country which provided out of the public purse a pony for each girl on her sixteenth birthday. Now, imagine that some crazy capitalist thinker came along and said that this country should switch from communism to the free market.
Naturally, just about everyone would then demand: “But how will each girl get a free pony on her sixteenth birthday?”
Of course, the answer is that she will not – but it may very well be asked whether the pony is really such an absolute necessity for every girl.
Government roads are just such a kind of “statist pony” – they are extravagantly wasteful, badly planned and allocated, and facilitate all sorts of dangerous and inefficient behaviors, just like every other government program on the planet. There is thus no possibility that a free market system of roads will look exactly the same as a statist system – because drivers will have to pay for road use directly, rather than offloading the total costs to taxpayers as a whole.
Thus when picturing a free system of roads, the question becomes: what will we as drivers be happy to pay for?
Certainly we will pay for safety, which we currently do not receive. We get jolting and wasteful traffic lights instead of gentle and fluid roundabouts. We get endless predatory ticketing instead of road systems that promote safety. We get endless construction that does not take place in the dark of night, but rather in the agonizing slow motion of rush hour. We get a sagging expansion of our cities, because developers do not have to pay for the costs of the roads that lead to their houses, office buildings, factories and shopping malls. We get eighteen-wheeler trucks blaring and rocketing beside small passenger cars. We do not see businesses adapting to the monetary and social costs of rush hour, because they do not face increased demand in wages because traveling in rush-hour costs more. Thus everyone has to start at nine a.m. or thereabouts.
Like every other government program, roads and traffic control are run for the profit of special interests – construction companies, unions, bureaucrats and cops, primarily – and not for the sake of the end users, the drivers. The tens of thousands of deaths – and hundreds of thousands of injuries – that occur annually in the United States alone, would be a completely unacceptable body count in any private industry. Experiments such as roundabouts, removing traffic signs and lanes, charging a premium for high-volume traffic and so on – all of which have been proven to increase efficiency and safety – simply do not spread across the system, any more than salmon steaks showed up in your average Stalinist store.
EXISTING CITY ROADS
No matter what happens to the highway system in general, we all appreciate that city roads have to be maintained. How can this happen without a toll at every corner?
If we look at the average downtown core, it is largely composed of shops and businesses. Is it beyond the pale of human thought to imagine that the stores and businesses on a particular city block would be able to get together and all chip in for a relatively modest fund to maintain the roads and sidewalks around them – particularly when they no longer have to pay property and profit taxes to the State?
If we do believe that this is impossible, then we face exactly the same problem that we faced before about democracy. The central idea of democracy is that citizens are able to put aside their own petty personal self-interest and vote according to their conscience, with an eye to the collective good of society. If we accept that human beings are capable of voting in this way, then surely we can accept that they can put a few bucks a month into a common pot to pay for the roads that bring customers and employees to them. If we do not think that human beings can organize themselves to take care of a few hundred meters of roads that they directly benefit from, then they will never be able to vote for political candidates with any thought for the common good, and democracy must be abolished.
Either way, we end up with a stateless society.
There are, of course, many other ways to charge for roads in a free society. GPS tracking devices can effortlessly monitor the movements of cars, and a single bill can be sent, and the proceeds apportioned out to the road companies involved.
Furthermore, non-dangerous advertising could very easily subsidize the cost of roads – one possibility that springs to mind is radio commercials that would be inserted into programs based on the location of drivers, so that they did not provide visual distractions.
A PREDATORY ROAD MONOPOLY?
All right, you may say, but what about the reality that highways – and city roads – are extremely non-competitive situations, since no one is going to build a highway next to another highway and compete with it?
That is somewhat true, although it is important to be precise in terms of what is meant by the word “competition.”
Brad Pitt has a monopoly on Brad Pitt – or at least, he did before he got married. However, Brad Pitt still faces competition – not just with other actors, but rather with everything else that human beings could be doing instead of going to see a Brad Pitt movie. He competes with bowling, sex, napping, reading books on anarchy – everything you could imagine! Thus, although he has a monopoly on Brad Pitt, he does not have a monopoly on you. (That is the difference between the government and the free market – the government does have a monopoly on you, because it initiates the use of force against you.)
In the same way, any particular highway may have a monopoly on getting from A to B in the straightest line – but that does not mean that it has a coercive and exclusive hold over everyone’s entire decision-making processes.
Let us take an example of an “evil capitalist highway robber baron” named Jacques, who decides to start jacking up the rates for any driver using his highway.
First of all, Jacques will not be making this decision in a vacuum. After roads become privatized, everyone who buys a house who relies on a particular highway will be fully aware of their vulnerability to increased road tolls in the future. As an enterprising construction capitalist, I would sweeten the pot for people in this regard by negotiating a twenty year guarantee with Jacques that he would not raise their prices any more than one or two percentage points a year. (This highlights again a very essential aspect of understanding how a stateless society works, which is that obvious worries will always be addressed and alleviated ahead of time. If people are afraid that someone is going to jack up their road prices, they will simply negotiate fixed fees ahead of time – which is the essence of mortgages and car payments of course.)
However, let us imagine that no binding contracts limit Jacques’s ability to raise his prices, and one day he announces that his rates are going to triple.
What happens then?
Well, people are not about to move because the price of their road travel is going up, so that is not likely to be an issue – what they will do, however, is go to their bosses and say that they need a raise.
Bosses – having been one myself – are notoriously cheap individuals, who do not want to pay a penny more than they have to for what they want. If I were a boss in this situation, I would explore other alternatives to giving raises.
For instance, I might offer them a day or two a week to work at home. Alternatively, since no doubt Jacques’s prices are higher during rush-hour, I would also offer more flexible hours to those who wanted them, so that they would not have to pay a premium to come to work at a specific time.
If I were another kind of entrepreneur, I would set up a website dedicated to helping people find carpooling, so that people would end up paying less.
Also, the increased prices per vehicle might very well make it economically viable to start running buses along the highway.
In this way, Jacques might gain a temporary increase in his revenues, but consumers would simply adapt to his increased prices, in such a way that this increase could not be both significant and permanent.
In other words, by drastically raising his prices, all that Jacques is really doing is teaching people to find alternatives to using his highway. He is training them to avoid his service – and one of the terrible aspects of this practice is that once people get used to working at home or car pooling, not all of them will revert to their old habits if he drops his prices.
Jacques also creates another significant risk, which can easily escape the inexperienced eye.
By increasing the price of his highway, Jacques has reduced the collective wealth of entire neighborhoods to a far greater degree than he has increased his own wealth specifically. Of course, no one expects Jacques to be motivated by some abstract considerations of social wealth, but nonetheless he is creating a very dangerous situation.
Almost all neighborhoods have some sort of Business Association, where members meet to discuss a variety of collective concerns. This Association will certainly meet – and pointedly not invite Jacques – a day or two after he jacks up his prices, in order to figure out what they should do. They will likely decide to ostracize Jacques, which will certainly have a negative effect on his ability to move with ease and profit in the business world, since so many deals are consummated through existing relationships.
It is very possible that this form of business ostracism will cost Jacques more than he can possibly make by raising his rates, especially after the inevitable consumer adaptation.
However, perhaps Jacques doesn’t care about these particular business relationships – it does not matter, his ability to do business is still irretrievably harmed.
Whomever Jacques wants to do business with next will be fully aware that he has a habit of outrageously jacking up his prices without warning. Therefore, if someone has a choice about doing business with Jacques, he will very likely refrain.
Anyone who does end up wanting to – or having to – do business with Jacques will have to do far more due diligence and legal wrangling than before his fears were elevated by Jacques’s deleterious and unpredictable business practices.
Thus it is enormously unlikely that jacking up his prices will end up having a permanent and positive effect on Jacques’s profits.
However, to take the argument to its extreme case, let us say that Jacques does somehow end up creating a permanent and positive enormous profit.
His actions have created a large number of business people who have a direct interest in reducing those prices again – all those people whose property values and business expenses have been negatively impacted by Jacques’s price increase.
The Business Association members would be highly motivated to plot and execute a takeover of Jacques’s highway business, in order to restore their own property and business values. Whatever debts they may incur in this process will be more than recompensed by the increase in these values.
Since the personal profits that Jacques is accruing remain far less than the collective costs he is inflicting on others, he remains highly vulnerable and exposed to a takeover bid, either hostile or friendly.
Of course, the Business Association members are unlikely to be experts at running a highway, so they would more likely act as investors for competing highway companies, to fund an expansion takeover, on the condition that this new company would guarantee a return to the original rates, along with a longer-term guarantee of reasonable rate increases.
Thus in general the instability, customer alienation, ostracism and endless competitive risks introduced by sudden and large price increases do not pay off at all, and in fact threaten the viability of the business as a whole. In the example above, we have simplified the scenario by pretending that Jacques can make all of these decisions on his own, which would never be the case in any free market. Any industry that has a potential for a monopoly would require a large amount of capital investment and management, which comes with stockholders, investors, and a board of directors. Jacques would not have the right or the ability to make significant decisions about price without the support of the majority of the interested stakeholders – all of whom would view, and quite rightly too, the jacking up of prices as far too threatening to the long-term value of their investment.
MY WAY OR THE HIGHWAY?
We could imagine a scenario where Jacques is able to build a $500 million dollar highway out of his own pocket, because he has inherited billions or something like that – but it seems very unlikely that his venture would succeed in the long run, because people would be hesitant to get into business with someone who does not have a multitude of other interested parties to temper his judgment, and who retains a tyrannical level of control over his own organization. For instance, people do not want to get heavily involved in a company without a succession plan, and having a single “dictator” in a company does not bode well for its long-term success. If Jacques is not actively grooming a number of successors, and if he then gets hit by a bus, no one will be able to step into his shoes, and his company will fail. This level of risk would be too high for most other companies, since it would take a number of years to build his highway, and Jacques’s company could collapse at any time, leaving bills unpaid and orders unfulfilled. If Jacques insisted upon these conditions, all that he would be revealing would be his own lack of business judgment, which would also cause more experienced businesspeople to shy away from getting involved with him. Thus it seems exceedingly unlikely that Jacques would be able to build such a capital-intensive structure while retaining dictatorial control over the company.
I do apologize for the detailed and somewhat technical nature of the above explanation, but I do think that it is essential to understand that there are always two sides to every negotiation. In a free society, there are a near-infinite set of options available to peacefully address what could be considered sub-optimal business practices on the part of others.
AUTOMOBILE INSURANCE
Finally, let us look at how the provision of automobile insurance would affect the safety of roads.
In most Western countries, automobile insurance is compulsory – I believe that this would continue to be the case in practice, if not in principle, in a free society.
I would much prefer to use someone’s roads if I could know for certain that all the other drivers carried insurance. Thus it seems very likely that insurance would be required for anyone traveling on a road. (How could this be enforced? A number of options spring to mind, most notably that currency companies would not process gas purchases from uninsured drivers.)
Naturally, the fewer car accidents there are, the more car insurance companies can make in profit.
This direct correlation is one of the core foundations to the achievement of security in a stateless society. If, say, Jacques’s roads are unsafe, then the car insurance companies will charge a premium for anyone who wants to drive on them – thus cutting into Jacques’s profits considerably. This will drive Jacques to invest in road improvements.
At the moment, insurance companies have no direct control over government road policies, and so these companies can only compete on price, not on the proactive promotion of road safety.
However, when competition for roads heats up through privatization – and remember, the competition is not just between different road systems, but also between using roads and not using them – insurance companies will be forced to compete on creating the safest possible roads, in order to keep their prices as low as possible.
When the costs of roads are directly borne by the drivers, the benefits are both staggering and almost limitless. Without the ability to externalize the cost of roads to other taxpayers, drivers can make more informed and rational decisions about the costs and benefits of driving. Where to live, how far to commute, whether to drive in rush hour, whether to use public transit, whether to carpool, whether to work from home – all of these decisions are fundamentally driven by cost, but in a statist society, these decisions almost always turn out to be disastrous, because the simple and rational efficiency of the price mechanism is not allowed to function, to the detriment of resource consumption, the health of the environment, and the quality of life for literally hundreds of millions of people.
AN EXAMPLE OF PRIVATE ROADS
If I were to say that roads should not only be provided by the free market, but also that they should be enclosed under a roof, cooled in the summer and heated in the winter, that all stairs should in fact be escalators, that all corners should be landscaped with plants and fountains, and patrolled by security guards – surely you would say that this would be an outlandish standard, which could never be achieved in the free market.
Well – that is exactly what a mall is.
Never underestimate what the free market can provide.