It’s Time to State-Proof Yourself

The following is an amended extract from an upcoming report by the Free Market Foundation (FMF) entitled “State-Proof Money: The Case for Bitcoin Adoption in South Africa” by David Ansara.

What is state-proofing?

The FMF has long been a proponent of “state-proofing”, a strategy and set of practical recommendations for resisting hostile government action and mitigating the harmful effects of state failure.

This is particularly relevant in the context of South Africa, where government policies actively undermine economic freedom.

Hostile policy is no accident.

It is the expression of an underlying socialist ideological foundation that is suspicious of the profit motive and inimical to free enterprise, and which seeks to undermine private property rights and commerce through excessive government regulation.

In addition to being hostile, the state lacks capacity to provide basic services such as water, electricity, and public safety.

This breakdown is hazardous in the short term: businesses must plan around state failure, resulting in increased costs and a loss of efficiency.

If electricity supply is constrained, then industrial production becomes more difficult.

If ports, roads, and rail networks are destroyed through neglect or by criminal networks, then transporting goods gets slower.

However, the loss of state capacity is also an opportunity for private actors and civic groups to reclaim power from the government. Private electricity generation reduces dependency on the state energy utility, just as the provision of private security reduces the state’s monopoly on organised force.

It is therefore incumbent on individuals, firms, and community groups to fill the void left by the retreating state through voluntary self-organisation and co-ordination.

Centralisation versus decentralisation

State-proofing recognises the harmful effects of political centralisation and control, which concentrates decision-making power in the hands of politicians and officials in Pretoria.

South Africa is a vast country with diverse and complicated regional and local politics. Its various linguistic, ethnic, and cultural groups face unique challenges.

Local problems are best solved by local actors, but in a highly centralised system, the role of local authorities is diminished. Centralisation concentrates political power. It raises the stakes for institutional capture and breeds zero-sum thinking.

By contrast, political and economic decentralisation provides a mechanism for individuals, businesses, and communities to de-risk themselves by claiming political authority and responsibility for themselves. Decentralised systems are also more transparent and accountable than centralised systems.

Decentralisation can take many forms.

This can include formal privatisation processes, although this needn’t be state-led privatisation. Privatisation can also be bottom-up, e.g., a neighbourhood association taking over the maintenance of a derelict park.

Federalism is another form of decentralisation. The South African Constitution has many formal federal powers. However, these powers are often underutilised.

Because of the high concentration of political authority in the centre, voters in the provinces and municipalities have a negligible say in how they are governed. Reclaiming and asserting these powers is therefore of great importance.

Life, liberty, and property

State-proofing by nature does not require permission from government authority – it is a reaction to state malice or incompetence. For individuals and firms to build alternative institutions at the local level they must embrace permissionless innovation and problem-solving.

Although the state has significant resources and co-ordination power, it is neither omnipotent nor omnipresent. By reducing one’s reliance on the government, local actors can develop self-sufficient systems as an alternative to state services.

Since government action is often hostile, it necessarily follows that many of its laws will be unjust. For example, policies such as Expropriation Without Compensation (EWC) and Black Economic Empowerment (BEE) are an affront to the constitutional values of private property rights and non-racialism respectively.

A state-proof mindset requires adhering to a higher moral code than merely compliance with codified political diktat. This is encapsulated in the notion of constitutionalism, which includes but also goes beyond the written constitutional instruments that a specific state might have.

It recognises the fundamental dignity and agency of every individual, which does and must include their natural freedom to preserve themselves, their interests, and those of their families and communities. In other words: life, liberty and property.

More well-known and common forms of state-proofing also include taking legal action against the government to defend constitutional rights and business freedom, where appropriate.

State-proof money

How do we apply the principles of state-proofing to money?

Simply, state-proofing means reducing the power that the government has over the monetary system.

Money is a tool for storing and exchanging economic value and can exist outside of the state. In a broad sense, money is a form of private property. In a market economy, prices also act as signals, and a way for individuals to communicate with one another.

Attempts to manipulate the supply of money distorts these price signals and erodes the underlying value of money through inflation. Therefore, a high degree of political control over money creation is a risk that needs to be countered.

Individuals in a market must be free to exchange value directly with one another, without financial intermediaries. Therefore, increased government regulation and control over payment systems also represents a threat to monetary freedom.

Sound money enables individuals to allocate capital more efficiently and securely. Denationalising money preserves independence from the state and ensures financial sovereignty.

Taking responsibility

The most important first step is to have a state-proof mindset, internalising the locus of control and accepting your own fundamental capability to be an agent of change.

Politicians and bureaucrats are not coming to save you. State-proofing means taking responsibility for your lot and that of those closest to you, rather than expecting others to solve the problems that they created in the first place.

South Africa has many problems. They may not be your fault but fixing them is your responsibility.

Ansara is CEO of the Free Market Foundation.