People often ask us why we consider governments so pernicious when it is clear that "normal" business rules do not apply to them since their job is to "govern". And our answer is always the same: There is no free lunch. F&P
Look, this is quite simple. We, the people, are physical beings. As such we need physical stuff. This stuff is in short supply which means that we need to economize it (i.e. to use it sparingly and carefully). We need to maximize the benefits we get from it because we only get so much of it. We all do. With few -clinical- exceptions we are not big spenders. We do perform economic calculations to economize our stuff -which often times go horribly wrong- but at least we try. One of those economic calculations that got horribly wrong and continues to get worse and worse is that we allow governments to do these economic calculations for us. As such, the role of the government is not to "govern" but to perform economic calculations for us. Consequently, they are ruled by the very same economic realities than everybody else. Economically speaking, governments are in no way different than any other corporation or business. The entire difference relies in the assumptions and limitations governments use to perform economic calculations. We, the people, look at reality and try to base our calculations on the way the world really works. They, on the other hand, look at their political theories and try to base their calculations on how the world should work.
Notice the difference? We are both grounded in reality but they operate in faryland.
Governments cannot create physical stuff out of thin air and thus they cannot give us this non-existing physical stuff. What they can do is to move resources from one place to another by force (i.e. re-allocate budgets) while blackmailing people for "protection" (i.e. taxation - see Taxes And Myths).
And why do we tolerate this? We do so for many reasons. Some of them are historical -yes, governments were created many millennia ago for mutual protection- and some are trivial -honour, pride, misguided sense of culture-. But the most important reason is economic. We want something for nothing which is exactly what politicians promised us. Free beats costly. But does it work? Of course not! Think about it! More governments have collapsed due to economic reasons than for all other reasons put together. The economy is so important that it is actually the engine of political evolution (see Political Systems Lifecycle).
At its most basic what we demand from governments is economic prosperity and not "social justice" or "cultural protection" or an independent "judiciary" or honest "police" or… or… or… All those items are important to a degree but the economy comes first and this makes sense, again, because we are physical beings and need physical stuff.
Let's recap. We chose governments to perform economic calculations for us because we are physical beings who need physical stuff. But those economic calculations cannot be performed based on hypothetical theories against hypothetical goods and services; they must be performed in reality against real-life goods and services, same as any other corporation. As such, it is only fair to compare business against corporations since the very same economic rules apply. What changes is their behaviour. And how! To task.
GOVERNMENTS VS CORPORATIONS
A corporate business model is a strategy the corporation will use to make profits. Every single legal corporation (and many illegal ones) have a very simple business model. This model dictates that they must provide a desirable good or service to customers for a price. Buy raw materials and convert them into finished goods or buy wholesale and sell retail. The idea is always the same: buy low and sell high. But this idea is based on one element which cannot be removed without destroying the business model. And this idea is that there must be a good or service that customers want and are willing to pay for. This applies to Apple, IBM, GM, Nokia, but it also applies to drug dealers, prostitutes, pimps, gambling den owners and so on. Some of these activities are "illegal" but from our perspective as Libertarians as the concept of "legality" is invalid; they are all free market activities. Any corporate business model is based on serving customers.
A government business model on the other hand is completely different. It is based on the extortion of money through blackmail (i.e. tax) and brute force (the police and judicial system) from a captured market (the country) while holding and enforcing an artificial monopoly (i.e. authority) through invalid decrees (i.e. laws). Notice the difference?
It is clear that you may own a piece of a corporation simply by buying shares. But the question is, do you own a piece of the government or a piece of your county simply by having one vote?
The crucial difference is that you can own the shares of a corporation and sell them whenever you like. And when you do, you receive payment for them. Yet, when it comes to governments, you do not own a share of your country, you only own one vote. Perhaps. And you cannot sell that vote and even if you could, you would get no compensation for it. Even in the few countries on earth that offer opt-out contracts (such as a tiny region in Switzerland) you get nothing in return for your vote. All you get is reduced taxation. Basically, less blackmail. The conclusion is unavoidable. You do not own your government nor your country.
Oftentimes the shareholders of corporations are not known but board members, high officers and managers are known. Typically all those people are subject to the wishes of shareholders in the proportion in which they own the business. Fair is fair. Votes do add or remove people from authority positions in corporations. Special votes to decide "no confidence" actions are quite common, but even before it gets to this point, boards usually act. This happens all the time. Power is truly in the hands of the owners.
As to governments and for any intent and purpose, its owners are not known. Only certain people are allowed to vote. We also do know who the high officers and managers (i.e. politicians) of governments are. But people in government authority cannot be removed through votes; they can only be replaced through votes. This is a crucial difference. When was the last time that you have heard that a politician was removed through a plebiscite? This is so incredibly infrequent that when it does happen is news all over the world. The simple fact is that you cannot remove a politician from office through vote. And even when such a plebiscite is held, its rules are vastly different from normal elections and far more demanding. Why? Why is that in order to kick-out a politician far more votes are required than to put it in power? This almost never happens with corporations and shareholders votes.
True, you may be able to eventually replace a politician at a prescribed voting occasion, but does this mean that you are a shareholder? Of course not!
The crucial issue of representation is whether or not you are represented by government officials. In the case of a corporation you made a voluntary choice to subject yourself to the majority vote. Furthermore, you can increase the weight of your preference simply by acquiring more shares. The opposite is also true. Should you wish to distance yourself from this corporation you may choose not to vote or simply to sell your shares. If you do the latter then no corporate official represents you in any capacity whatsoever.
However, in the case of governments, you did not voluntarily agree to subject yourself to their representation through majority vote; you were born into that state of affairs just like a slave. Furthermore, there is no way to increase your point of view through the acquisition of votes and there is no way to distance yourself from your "representatives" by selling your vote. No matter what you do they claim that they represent you whether you like it or not. This is but one reason why Social Contracts Are A Scam.
Look at it from this point of view. Let's say that tomorrow a lawyer shows up at your doorstep and announces that you are now being represented by him. Just like that. For no reason. Without your consent. Would you agree? Of course not! Then why do you agree with politicians who claim that they represent you when they clearly do not?
The most basic concept of representation hinges on voluntary agreement. No voluntary agreement means no representation. Nobody can represent you against your will… except politicians!
Corporations and business borrow but their borrowing capacity and limits are determined by lenders with profits in mind. These lenders also perform economic calculations trying to figure out if they will be having a return of their investment before they get a return on investment (or ROI). Their calculations are not that difficult because corporations are known entities. Although shareholders may not be known, boards and officers are and they represent you, the shareholder. They are validly borrowing in your name. Loans are used with the expectation of increasing your wealth. Loans are repaid from corporate profits. Furthermore, should a corporation fail, their outstanding loans will affect only the shareholders and only to the extent of the assets the corporation has. In other words, if you are a shareholder and the corporation goes broke, you will only lose your shares but not your other savings, the house, the car and so on.
Governments officials are also known, but they clearly do not represent you although they do operate as if they do. They are committing fraud. They borrow invalidly vast amounts of money in your name and spend it as they see fit, oftentimes not for your benefit. Loans are not repaid through government profits (as they have none) but from direct or indirect taxes which are, of course, extortion rackets i.e. your pocket. Should governments fail to pay back the debt and default on it (and even if they don't), you are liable through the decrease in your standard of living because of the economic collapse such default (and debts) invariably produce. Basically, all your goods and services, your house, your car, your bank account and so on will lose value. You lose wealth far beyond the "value" of your vote.
Note: please see the Glossary if you are unfamiliar with certain words.