Quote of the Day: The ISIS as evidence to theories of the state’s origins

How does ISIS spend the money it collects? This too sheds light on how a state embeds itself with a population and creates its own particular equation of sources and uses of funds. Every state (and organization of any kind) by definition has this equation: sources of funds = uses of funds.

“‘It’s assumed that ISIS pays the foreign fighters in its ranks, but perhaps it pays all its troops,’ according to Charles Lister. ‘In the areas under ISIS control, the organization subsidizes bread, water, and fuel, and also finances the maintenance and operation of basic public services. All that costs money.’”

ISIS has three main uses of funds: military + goods to the population + support of government administration. The “population goods” keep its subjects quiet. The military provides the force and threat to be able to extract the taxes and other resources from looting. The support of government pays for the government officials, tax collectors and bureaucracies. Every state, not only ISIS, is the same. The equation, in simplified terms as exemplified by ISIS, looks like this:

TAXES = MILITARY SPENDING + GOODS TO THE POPULATION + GOVERNMENT ADMINISTRATION

(TAXES includes all forms of looting, and I’ve omitted charitable giving as a source because it is typically not a continuing major source for states. It can be a significant startup source.)

Since taxes are necessarily higher than goods returned to the population, the subjects of any state continually incur a loss. They supply the funds that go to the military that keeps them under the rule of the state. That and the resources that go to government administration are a deadweight monetary loss. (There are other losses. There is a loss in utility or happiness because the taxes do not go to goods that the citizens want. There are losses from the disincentive effects of taxes and government rules.)

ISIS, now a proto-state and seeking to become a state, began in violence and conquest. This is how states begin according to Franz Oppenheimer and Albert Jay Nock, among others. ISIS provides further evidence consistent with their theories of the state’s origins.

This excerpt is from former economics and finance Professor Michael S. Rozeff at the lewrockwell Blog