In this article you will learn what is the nature of the state, the nature of the market and the biggest problem that Liberland faces today.
The intention of the writer is to make questions based on 1. the historical data of Liberland, and 2. the Austro-Libertarian economic theory. With a small dose of opinion.
I believe that if these problems are resolved liberland will have a great future regardless of its known issues with its neighbor.
Part I — Definitions
The nature of the state (political means) vs. The nature of the market (economic means)
According to the sociologist and economist named Franz Oppenheimer, there are two opposite ways to get financing:
- The economic means: it requires productivity, adds wealth and is characterized by respect for private property, work, and voluntary exchanges in a free market environment.
- The political means: it does not require productivity, subtracts wealth and is characterized by the denial of private property, fraud, coercion and theft.
The State — The Political Means — Serving himself
As you can see, the states use the second way, the political means, to finance their activities. In this way, state representatives do not need to serve or please anyone other than themselves, because their economic return is independent of their performance as a consumer server. Once your financing is secured, why place special efforts to improve something?
For this reason that state production culminates in a brutal fall in production quality of what the state wants to produce, there are no reasons to be concerned with the efficient allocation of resources or with the quality of the product in the same way that a private institution cares, if it wishes to finance and prosper, depends on the efficient allocation of resources and voluntary interactions through exchanges that occur without a weapon pointing at the heads of consumers.
How does an organization like the state get resources by denying private property, fraud, coercion and theft? What are the two attributes that allow you to acquire financing through non-contractual or spontaneous methods?
What defines the state?
That organization in society which attempts to maintain a monopoly of the use of force and violence in a given territorial area; in particular, it is the only organization in society that obtains its revenue not by voluntary contribution or payment for services rendered but by coercion. (Murray N. Rothbard, Anatomy of the State, p. 11).
The state, according to Rothbard, has two fundamental properties: the use of violence, and territory. Indeed, not only is the state made up of a body of people who claim the right to use coercive violence, but their claim to violence is, more typically, endemic to the territory over which they rule.
We can conclude that:
- By not having to respond to the market, they do not have to be efficient in their activities, nor solve the problem they propose to solve because they do not meet the demands of the market but only serve themselves.
- A state logic monetize the problem by perpetuating the problem. so they have incentives that the problem persists to justify their expenses.
- In state / political logic, the only objective is the illusion of improvement and stay in power, whatever the cost.
The Market — The Economic Means — Serving the consumer
Throughout evolution as a species, the human being learned to avoid wild methods (political means) to obtain scarce resources. Instead of “A” being able to barely acquire resources in violation of the property rights of “B”, the human being learned to immensely multiply the resources through the harmonious and peaceful process of production and voluntary exchanges, which occur when the two sides see mutual benefit, they see economic sense in what the other has to offer, so in this way a voluntary exchange can be formalized.
While other individuals or institutions obtain their income by production of goods and services and by the peaceful and voluntary sale of these goods and services to others. (Murray N. Rothbard, Anatomy of the State, p.11).
The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybody’s actions aim at the satisfaction of other people’s needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens. Everybody, on the other hand, is served by his fellow citizens. Everybody is both a means and an end in himself, an ultimate end for himself and a means to other people in their endeavors to attain their own ends.(Ludwing Von Mises, Human Action, p. 258; p. 257)
The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. (Ludwing Von Mises, Bureaucracy, p. 20–21)
The capitalistic social order, therefore, is an economic democracy in the strictest sense of the word. In the last analysis, all decisions are dependent on the will of the people as consumers. Thus, whenever there is a conflict between the consumers’ views and those of the business managers, market pressures assure that the views of the consumers win out eventually. (Ludwing Von Mises, On the Manipulation of Money and Credit, p. 178)
The capitalist system of production is an economic democracy in which every penny gives a right to vote. The consumers are the sovereign people. The capitalists, the entrepreneurs, and the farmers are the people’s mandatories. If they do not obey, if they fail to produce, at the lowest possible cost, what the consumers are asking for, they lose their office. Their task is service to the consumer. Profit and loss are the instruments by means of which the consumers keep a tight rein on all business activities.(Ludwing Von Mises, Bureaucracy, p. 21–22)
The market economy — capitalism — is a social system of consumers’ supremacy. (Ludwing Von Mises, Money, Method, and the Market Process, p. 233)
The issue is always the same: the government or the market. There is no third solution. (Ludwing Von Mises, Planned Chaos, p. 28)
The market process is a daily repeated plebiscite, and it ejects inevitably from the ranks of profitable people those who do not employ their property according to the orders given by the public. (Ludwing Von Mises, Liberty and Property, p. 10)
We can conclude that:
- Market logic monetizes the problem by solving the problem.
- Being market dependent, we have incentives to respond correctly to the market because otherwise the market expels you.
- The customer (the market) is the boss and they are always right.
Now that we understand the antagonistic concepts between the political means (state) and the economic means (market). Let’s identify if Liberland is a state or a private institution.
Let’s define Liberland, is Liberland a state today?
- Liberland does not have complete control over a certain territorial area to exercise a monopoly on the use of force and violence.
- Liberland does not earn its income from coercion but from voluntary contributions.
We can conclude that Liberland is not a state today.
But can Liberland be a state in the future?
Everyone knows that Liberland is proud to announce that it will not be financed through taxes but through voluntary contributions (1). That is, if the theory is put into practice, Liberland will not obtain its income through the political means, but through the economic means.
you will be saying: Ok, but what about the territory and the monopoly of the use of force?
The territorial area where Liberland is located does not belong to any legitimate owner. In this way, it could be justified through the homestead principle method (2). Liberland, by demarcating its territory, can legitimately appropriate these lands. Moving from no man’s land to be privately owned by the private government of Liberland. Upon completion of the appropriation, Liberland obtains the right of exclusive control over its scarce resource (territory), consequently the right to defend its property and expel anyone who does not respect its private rules, as is done in any other property.
We can conclude again that Liberland is not a state in practice, nor in theory according to Austro-Libertarian definitions. Consequently, Liberland is part, happily, of private institutions, that is, of the sector that if it wishes to prosper, needs to serve seeking constant consumer approval to win the economic vote.
Part II — The efficiency of executing its own plans in the administration Jedlicka
Now that we have the concepts defined, we can start looking for the problem of Liberland. To do this, we will analyze two factors:
- The historical chronology recounting the birth of its financial asset, the Merit.
- Some anti-capitalistic mentality and contradictory statements of its current CEO of Liberland, at the time of publication of this article, Vit Jedlicka.
Based on the following information, I invite you to respond from now. The Jedlicka’s vision is directed towards the nature of the market or towards the nature of the state? Is Vit’s administration efficient or inefficient?
2015–04 Liberland is born and begins to be financed through donations on its website.
2017–01 Liberland announces its financial asset called The Liberland Merit and its ICO for 2017.
"The Liberland Merits concept has been justified by real-world experience. Liberland Merits as a future digital currency is already getting its value, even without any free-market convertibility. The transformation to a real digital currency is planned to start during 2017, including a public offering (IPO/ICO)." (Summary Annual Report 2015–2016, 10, https://liberland.org/en/assets/documents/2017_03_MF-Liberland_web.pdf )
The year of 2017 elapsed and its asset was not launched nor its IPO/ICO.
2017–12–13 Liberland announces its ICO for its third anniversary. (which would happen in 2018–04)
"Liberland is preparing an initial coin offering during third anniversary planning to raise as much as 70 million USD. The currency is called Liberland merit." (https://liberland.org/en/news/state-of-liberland-in-december-2017-293.htm )
2018–02–27 Liberland finance minister makes a comment on telegram saying they would be planning to launch the Liberland token in 2018–04.
Jan Purkrabek: Liberland token to be launched April this year, right on Liberland 3rd anniversary. (https://t.me/liberlanders/850 )
The 3rd anniversary and the year of 2018 elapsed and its asset was not launched nor its ICO.
2018–11–30 Jedlicka announces on Telegram a new date for the launch of his asset and ICO for early 2019.
Vit Jedlicka: ICO is now planned for early 2019 with assistance of Daostack that will include governance model. @milan_s and @MrReubot are in charge (https://t.me/liberlanders/1947)
2019–03–11 The market (individuals) presses Liberland and by the merit of the market the Merit is finally born without a published Whitepaper or an ICO.
2019–04–05 Without published Whitepaper or an ICO, the first trade in the market is made
2019–04–09 Liberland announces that its asset is in an exchange due to the private initiative of Liberland citizens and supporters.
2019–04–10 Bitcoin.com announces the Liberland Merit
Liberland's Merit Token Built on Bitcoin Cash Captures $1M Market Cap - Bitcoin News
The sovereign microstate known as Liberland has recently minted a new token called merit (LLM) and the coin has been…
2019–11–29 Vit Jedlicka announces in telegram that his new plan is to conclude the governance system before 2020–04. (So far the ICO has not been done, neither its whitepaper)
Vit Jedlicka: Hello Bryan, as you probably know we are building governance on blockchain for Liberland. My plan to finish it before April but all depends on technology development. Until then these articles are in place. https://t.me/liberlanders/4722
a group member reply:
Yoshi: Your plan was to finish it in april 2018, just to add a bit of info. https://t.me/liberlanders/4723
Vit talk back:
Vit Jedlicka: No Yoshi work actually started last April. (https://t.me/liberlanders/4724)
2019–12–04 Michael Yeates, a representative of the Ghostbustersx (responsible for the development of the Liberland Governance System) announces that the development of the DAG governance system would be ready for the first elections at the end of 2019.
“So we’re currently halfway through, we’re expecting to launch the main net for the Liberland, the first version of the DAG, towards the end of this year.”
“The very first thing that we will have in December is rudimentary elections and therefore, we can have… The people who are currently running it now they’re kind… they took the power for themselves they weren’t elected, so to give them legitimacy we will hold the first elections and then the president and the other twelve members of the government can have some real autonomy themselves. Once we’ve done that, then we start to look really deeply into all the other functions of the government.” ( Michael Yeates — EOS Community Conference 2019, 7:16–8:43 https://youtu.be/avttSy6quXI?t=436 )
2020–1–18 (day of publication of this article) Since January 2017, the ICO has been promised and to date, after 3 years, it did not materialize. There is no ICO, there is no a published Whitepaper, there is no Governance System, there are no elections.
This chronology shows the inefficiency of the Jedlicka administration, being unable to execute its own plans, its own dates. Surely people closest to Liberland can give other examples of inefficiencies of this administration, however for the purpose of this article the information available on the internet is sufficient.
It is interesting to note that the developer of the Liberland governance system declares that they are ready for the first elections, who, but the developer himself, knows if the system is ready or not? However, Vit believes that the system is not ready.
Based on this information I would like to ask some questions, each one will answer it.
- Could it be that Vit fears the elections?
- Could it be that Vit has the desire to delay the launch of the governance system as long as possible in order to delay the elections and thus guarantee his current permanence as the CEO of Liberland for as long as possible?
- Could elections mean the end of the Jedlicka’s era?
- Considering that the elections take place someday, is it possible that Vit and his friends have enough voting power to vote for themselves, win and manage to continue leading Liberland?
Before you respond, I want to share more information.
Part III — Vit’s contradictions & his anti-capitalistic mentality
Liberland’s documents say that the price of the Merit will be determined by the market.
Liberland Merits Act to be put in place in 2017 transforming LLM to a publicly tradable cryptocurrency allowing for a freely floating exchange rate. Institute an Initial offering (ICO). (MINISTRY OF FINANCE Summary Annual Report 2015–2016 https://liberland.org/en/assets/documents/2017_03_MF-Liberland_web.pdf)
Followed by exchange listing to provide global liquidity of Merit, allow availability and allow the market to determine a transparent open market price of Merit. (LL_ICO_WP_ver0, 5.4 ICO finished, https://t.me/liberlanders/1137)
But, Vit says the opposite, that the price will not be determined by the market but will be “stable.”
You can also see his anti-capitalist mentality referring disparagingly to the exercise of supply and demand as “pump and dump schemes”. For Vit, it seems that supply and demand is a good excuse to control prices. It seems that supply and demand should be something to be avoided, it seems that the profit, and the market is a faulty or evil thing.
Vit Jedlicka: It is not speculative coin, but we will actually run out of coins potentially quite fast as unstaking mechanism will not allow us to put more on the market. (https://t.me/liberlanders/3527)
L: if it is not a speculative coin why is it on the market? (https://t.me/liberlanders/3528)
Vit Jedlicka: That is nice question at the times of pump and dump schemes. Merit is planned to be a medium of stable exchange. Which will skyrock as Liberland find its way forward. But it is not get quick rich scheme. (https://t.me/liberlanders/3529)
In a personal conversation on whatsapp, Vit also stated:
2019–12–13 Vit Jedlicka: Tradeable Merit was always portraid as pegged to US dollar.
Vit Jedlicka: If something is pegged to USD it is not great investment by definition. https://imgur.com/a/Tcikc5I
Liberland expects the market to speculate that Liberland is a project that is initially worth 70.000.000 USD at present, since 1 USD is the first price they will offer and 70 million is the amount of tokens they want to sell in their ICO. Which should be the cheapest price, right? The ICO is characterized by being a great offer and unique buying opportunity. Also they expect the market to speculate that the country will materialize.
Is Vit contradictory with Liberland and with the economic laws?
What does the Austrian Economic theory say about price control?
Controls are demanded by lobbyists to achieve noneconomic ends.
Controls create comfortable attitudes. In the market, decisions have to be made, profits rise or fall, firms succeed or go bankrupt, and men are given jobs or laid off. Controls sometimes create the illusion, that these decision do not have to be faced.
Controls draw attention away from the real causes of inflation, and the need for actual reforms.
Controls negate the profit principle. It is the profits, that draw investment resources to worthwhile industries and by calling this motive into question, controls undermine the philosophy of the free market and cause dislocations in capital formation and investment.
(Robert L. Schuettinger and Eamonn F. Butler. “Forty Centuries of Wage and Price Controls”, Chapter 19 — The Economic Effects Of Wage and Price Controls, p. 139–141, referenced 2009–08–09.https://mises.org/library/forty-centuries-wage-and-price-controls-how-not-fight-inflation )
Is speculation a bad thing? Let’s see what Ludwing Von Mises tells us about speculation
Action necessarily always aims at future and therefore uncertain conditions and thus is always speculation. (Ludwing Von Mises, Human Action, p.58)
There is no such thing as a nonspeculative investment. In a changing economy action always involves speculation. Investments may be good or bad, but they are always speculative. (Ludwing Von mises, Human Action, p. 514; p. 517)
The influence of speculation cannot alter the average level of prices over a given period; what it can do is to diminish the gap between the highest and the lowest prices. Price fluctuations are reduced by speculation, not aggravated, as the popular legend has it. Ludwing Von mises, (The Theory of Money and Credit, p. 286)
Speculation in the capitalist system performs a function which must be performed in any economic system however organized: it provides for the adjustment of supply and demand over time and space. (Ludwing Von mises, Socialism, p. 125)
Speculation is the link that binds isolated economic action to the economic activity of society as a whole. (Ludwing Von mises, Socialism, p. 182)
Vit contradicts Liberland’s documents again referring to its funders exclusively as donors.
2019–12–13 Vit Jedlicka: “no investments, only donations”
Vit Jedlicka: “Tradeable merits are currency not investment”
Vit Jedlicka: “Everyone else who got merits did it under condition of donation not investment”
Vit Jedlicka: “I had zero benefit from Liberland only work”
Vit Jedlicka: “I was purposefully avoiding investors for pump and dump scheme”
Liberland’s documents refer to their funders as investors, not as donors, when the context is about their asset, the tradeable/unlocked/unstaked Merit.
“The financing has been supported by quite a unique concept of Liberland Merits. This motivates supporters and investors to participate in building this European HongKong (what Liberland has sometimes been likened to).” (Summary Annual Report 2015–2016 https://liberland.org/en/assets/documents/2017_03_MF-Liberland_web.pdf )
“We are proud that one of the top global Bitcoin investors Mr. Roger Ver belongs among the top Liberland contributors. It not only helps Liberland to grow and to fulfill the mission, but also throws a positive light on Liberland from a global investors’ perspective.” (Summary Annual Report 2015–2016 https://liberland.org/en/assets/documents/2017_03_MF-Liberland_web.pdf)
Another important topic of the year was a global tender aiming for public trading and listing of the Liberland Merit. Our ICO has been yet postponed as a result of required finalization of all parameters of the Merit tokenomics, as well as achieving the best timing due to the low investment sentiment on the market in the second half of 2018. (Summary Annual Report 2018 https://liberland.org/cs/assets/documents/liberland_finreport_2018.pdf)
and donors when the context is about "voluntary taxes", citizenship or "locked/staked Merits".
The total Income of 225.126 USD equivalent was mainly represented by two streams.
First one is represented by at least 1.000 relatively smaller nominal incoming payments, often on a repetitive basis. Those counterparties call their contribution as ‘donation’ or even ‘voluntary tax’.
The second part is represented by relatively high nominal values considering strategic investments or high one-off donations from individual supporters or investors (see further).(Summary Annual Report 2015–2016 https://liberland.org/en/assets/documents/2017_03_MF-Liberland_web.pdf )
Definition of donor by Wikipedia: A donor in general is a person, organization or government which donates something voluntarily. The term is usually used to represent a form of pure altruism. In business law a donor is someone who is giving the gift.
Definition of Investor by Wikipedia: An investor is a person that allocates capital with the expectation of a future financial return or to gain an advantage.
Cambridge Dictionary: A person or group of people that puts its money into a business or other organization in order to make a profit.
Part IV — Conclusions
In part I of this article through the definitions we can understand that Liberland is not a state, neither in theory nor in practice.
In part II we can conclude that the Vit administration is highly inefficient in executing its own plans, which have been postponed during the last 3 years of the Liberland’s almost 5 years of existence. (in 2020–04 complete 5 years)
In part III we can conclude that:
- Vit contradicts what Liberland says in his publications.
- Vit seems to want to operate inefficiently as if Liberland was a state, when it is not.
- Vit does not understand basic economics.
- Vit seems to want the Liberland asset to be stable, that is, not to suffer market fluctuations, not to be subject to market speculation.
- Vit seems to want every penny that Liberland receives to be a gift, a donation, an act of altruism and kindness. He intends to receive 70m USD in the ICO as a donation/gift when he says “no investments, only donations”,“Tradeable merits are currency not investment”, “If something is pegged to USD it is not great investment by definition”.
The reason may be to continue in the comfortable attitude that is found today: postponing plans such as elections, allowing the Merit to be in the market in an almost clandestine way and without official information, postponing the whitepaper and the official launch of the merit, the ship too(?), maintain the routine of traveling around the world with money from Liberland investors, making the same conference for 50–100 people, making anti-capitalistic statements preventing the market from pressuring them out of their comfort zone, by devaluing their assets, when their administration demonstrates deficiencies in the allocation of their resources and in their quality of service. To have the comfort of not having to report to the market on the efficiency of its operations and resource allocations, that is the comfort that the state enjoys receiving income regardless of its performance, but Liberland it is not a state neither in theory nor in practice as demonstrated in the part I. We could discuss at another time if it is beneficial to call oneself as a state solely for strategic purposes in the face of the statist world stage. But, Vit seems to wants to operate his activities just as a state does when Liberland has no income through political means to afford to be inefficient as a state is.
Liberland is no longer a man’s dream, it is the dream of thousands of people mainly from their funders.
It is time for Liberland to be directed by someone who does not seek to operate in a state logic, serving himself, but someone who understands basic economics, recognizes that it is a private entity subject to the logic of the market, and leaves its area of comfort, be responsible, innovate in the way of reaching the objectives, be productive allocating their resources, work in an exceptional way and mainly show respect to their speculative funders, who pay their operations, a person who demonstrates not only with their words but with acts, with the effort to reward the funders with profit, as any asset does, regardless of the success or failure with Croatia, for the trust that was given as CEO of this beautiful institution called Liberland.
I can’t think of anyone better than Roger Ver to be in the position of CEO, but that’s a discussion for another article.
(1) As Vít explains, the most innovative concept that Liberland has introduced is a voluntary taxation system. https://futurethinkers.org/vit-jedlicka-liberland/
(2) As soon as scarce resources are visibly appropriated — as soon as somebody “mixes his labor” with them, as John Locke phrased it, and there are objective traces of this — then property (the right of exclusive control), can only be acquired by a contractual transfer of property titles from a previous to a later owner, and any attempt to unilaterally delimit this exclusive control of previous owners or any unsolicited transformation of the physical characteristics of the scarce means in question is, in strict analogy with aggressions against other people’s bodies, an unjustifiable action. (Hans Hermann Hoppe — The Economics and Ethics of Private Property, 319–320)
I apologize for the grammatical mistakes this article may have. English is not my native language. Thank you for your attention and your interest in Liberland.