Small is Beautiful

by Hans-Hermann Hoppe on June 7, 2026

Hans-Hermann Hoppe, “Debatte: Small is Beautiful,” Schweizer Monat (04.06.2026): “Der wirtschaftliche Erfolg Europas ist eng mit seiner politischen Zersplitterung verbunden. Der Wettbewerb zwischen Staaten begrenzte staatliche Eingriffe und begünstigte Innovation und Wachstum. Aktuelle Tendenzen bedrohen diesen Mechanismus zunehmend – auch in der Schweiz.” [Europe’s economic success is closely linked to its political fragmentation. Competition between states limited government intervention and promoted innovation and growth. Current trends are increasingly threatening this mechanism – including in Switzerland.] Original English submission below.

The village fountain in the church square and the house “Zum Sternen” (17th century) in Thayngen. Image: Joachim Kohler Bremen/ Wikimedia Commons.

Staaten sind keine wirtschaftlichen Unternehmen. Im Unterschied zu diesen finanzieren sich Staaten nicht durch den Verkauf von Produkten und Dienstleistungen an freiwillig zahlende Kunden, sondern durch Zwangsabgaben: durch Androhung und Anwendung von Gewalt eingetriebene Steuern – sowie durch von ihnen buchstäblich aus dem Nichts geschaffenes Papiergeld.

Bezeichnenderweise haben manche Ökonomen Regierungen – also Inhaber staatlicher Gewalt – deshalb auch als stationäre Banditen bezeichnet. Regierungen und alle Personen auf ihrer Gehaltsliste leben von der Beute, die anderen geraubt wird. Sie führen damit eine parasitäre Existenz auf Kosten einer unterworfenen, als «Wirt» dienenden Bevölkerung. Daraus ergeben sich eine Reihe weiterer Einsichten.

Naturgemäss bevorzugen stationäre Banditen eine grössere Beute gegenüber einer kleineren. Das heisst: Staaten werden stets versuchen, ihr Steueraufkommen zu erhöhen und ihre Ausgaben durch Papiergeldvermehrung weiter zu steigern. Je grösser die Beute, desto mehr Gefälligkeiten können sie sich selbst, ihren Angestellten und ihren Unterstützern erweisen. Doch diesem Treiben sind natürliche Grenzen gesetzt.

Small is Beautiful, or:
Against Centralization and Democracy:
The Case of the European Union and of Switzerland

States, regardless of their constitution, are not economic enterprises. Unlike the latter, states finance themselves not by selling products and services to voluntarily paying customers, but through compulsory levies: taxes collected through the threat and use of force (and through paper money created by them literally out of thin air). Significantly, economists have therefore called governments, i.e. the holders of state power, stationary bandits. Governments and all persons on their payroll live off the loot stolen from other persons. They lead a parasitic existence at the expense of a subjugated population serving as “hosts.”

This leads to a number of other insights.

By nature, stationary bandits prefer a larger prey to a smaller one. I.e.: States will always try to increase their tax revenue and further increase their spending through paper money multiplication. The bigger the loot, the more favors they can do for themselves, their employees and their supporters. But there are natural limits to this activity.

For one thing, the bandits must be careful not to burden their “host,” whose work and performance make their parasitic existence possible, to such an extent that the host stops working. And for another, they must fear that their “hosts”—and especially the most productive among them—will migrate from their domain and settle elsewhere.

Against this background, a number of historical tendencies and processes become comprehensible.

First, it becomes understandable why there is a tendency toward territorial expansion and political centralization: States thus succeed in bringing more and more “hosts” under their control and making it more difficult for them to migrate to foreign territories. One expects thereby a larger booty. And it becomes clear why the endpoint of this process, the establishment of a world state, would by no means be a blessing for all mankind, as often claimed. Because from a world state one cannot emigrate, and there is no possibility at all to escape state looting by emigration. Therefore, it is to be expected that with the establishment of a world state, the scope and extent of state exploitation—indicated, among other things, by the amount of state revenues and expenditures, by monetary inflation, and by the number and extent of so-called “public goods” and persons employed in “public service”—will continue to increase beyond any previously known measure. And this is certainly no blessing for the “host population” which has to feed and support this state superstructure!

Secondly, a central reason for the rise of the “West” to the world’s leading economic, scientific and cultural region becomes comprehensible. In contrast to China in particular, Europe from the early Middle Ages to the recent past was characterized by a high degree of political decentralization, with hundreds or even thousands of independent dominions. Some historians have described this state of affairs as “orderly political anarchy.” And it is common among economic historians today to see in this quasi-anarchical state a major reason for the so-called “European miracle.” For in an environment with a great variety of independent small-scale dominions in close proximity to each other, it is comparatively easy to vote with one’s feet and to evade the predations of state rulers by migration. In order to ward off this danger and to keep the producers in line, these rulers are constantly under high pressure to moderate their exploitation. And this moderation conversely promotes economic entrepreneurship, scientific curiosity and cultural creativity.

Then, in the light of the above considerations, a well-founded historical classification and assessment of the European Union (EU) becomes possible: The EU is a prime example of the aforementioned tendency toward territorial expansion and political centralization, with the resulting consequences: an increase in exploitative state measures and a corresponding growth of the parasitic state superstructure (keyword: Brussels).

More concretely: The EU and the European Central Bank (ECB) are the first step towards the establishment of a European superstate, which shall eventually merge into a one-world government dominated by the USA and its central bank, the FED. Contrary to well-sounding political pronouncements, the EU and the ECB have never been about free international trade and competition. This does not require thousands and thousands of pages of paper, full of regulations and ordinances! Rather it was always and above all about an upward harmonization of the tax, law and regulations of all member states, in order to reduce or eliminate in this way all locational economic competition. For if tax rates and government regulations are the same everywhere, or are increasingly harmonized, then there are fewer and fewer economic reasons for productive individuals—the “hosts”—to move their activities to another location, and the more undisturbed the stationary bandits can therefore continue in their activity of loot-making and loot-distributing. — In addition, the present EU, as a cartel of various governments, holds together only because and only as long as the wealthier bandits, who can feast on a more productive “host population,” above all the German government, are willing and able to support their needier colleagues in the South and East, with their less productive “hosts,” permanently and on a large scale financially. At the expense of the domestic producers!

So the EU and the ECB are moral and economic monstrosities. You cannot continuously punish productivity and economic success while rewarding parasitism, waste and economic failure without creating disaster. The EU will lurch from one economic crisis to the next and eventually break apart.

Finally, against this background, the special position of Switzerland becomes understandable. On the one hand, as a small state surrounded by EU member states, Switzerland must offer productive or value-creating individuals more attractive locational advantages than the EU in order to prevent an exodus and a corresponding economic decline. In other words, the state exploitation rate must be comparatively lower. This has indeed been the case so far: While EU Germany, for example, is losing productive people, Switzerland is seeing an influx of productive, net tax-paying people. And the comparatively lower state quota and the resulting economic locational advantage have helped the once poor Switzerland to achieve a level of prosperity that clearly exceeds that of all surrounding EU states. This competition is a thorn in the side of the EU, and Brussels is therefore trying to force Bern to join the EU by means of carrots and sticks. For the political class, the political bandits, an accession indeed promises considerable advantages: more authorities and positions, more competences, more travel, more lucrative connections and more money—and these rulers are therefore in constant temptation. For Switzerland as a whole, on the other hand, accession would entail a noticeable loss of prosperity, since by joining the EU one would not only give up one’s own locational advantage, but would also have to financially subsidize mismanagement elsewhere.

Second, Switzerland itself offers an instructive example of political centralization and its consequences. Switzerland is not only a small state. With a large number of separate cantons, it also exhibits a high degree of internal decentralization. However, this high degree of decentralization and the inter-cantonal competition that accompanies it, with its economy-boosting nationwide effects, have diminished more and more over time. More and more cantonal powers have been usurped by the central government. And while this has led to a steady growth of the parasitic state superstructure in Bern, at the same time inter-cantonal competition for business locations has been progressively restricted by numerous harmonization, subsidization and so-called financial equalization measures. Basically, Bern is pursuing the same policy internally as Brussels does on a much larger scale. And the same good reason for which Bern has so far refused to join the EU and to submit to Brussels also applies to the relationship between the canton and the central government: an economically successful canton has no really good reason to join a central government and to submit unconditionally to its orders. Why then should it not also, as an expression of economic reason, want to break away from an existing connection with the central government or to reclaim from it appropriate competences!

While Switzerland’s smallness and internal decentralization are essential reasons for its prosperity and economic strength, direct or indirect democracy has little or nothing to do with it, contrary to much-hailed Swiss folklore. Rather, the opposite is true.

Democracy means majority rule and is therefore a form of socialism or communism. Private property becomes common property. A majority decides what belongs to me or not and what I am allowed to do with it or not. And democracy legitimizes and promotes what the tenth biblical commandment forbids: Envy and egalitarianism. It allows majorities to encroach and enrich themselves on the property of others, it breeds ill-will, and it creates a class of persons (politicians) who spend time procuring majorities for the purpose of enforcing various “popular” spoils: of expropriation and redistribution measures for their own benefit and that of their supporters. A democratic environment is thus always and everywhere a burden and threat to private owners and especially to all productive entrepreneurs engaged in private enterprise. (This is not the case only if the members of, for example, a cooperative or an association have unanimously agreed on a majority decision-making procedure regarding the management of their—and only their—common cooperative property.)

But the threat posed by democracy and the majority principle to property owners and economic entrepreneurs can vary: it is greater the larger the decisive majority, and vice versa. Accordingly, it does the least damage at the village-local level. There, where everyone knows everyone else, it is difficult to find majorities for expropriation and redistribution measures. Even more so when the advocates of such measures do not remain anonymous, but have to show their faces in public votes. For where one regularly encounters and has to look into the eyes of the persons whose property one wants to tamper with, one is reluctant to give public expression to this desire. On the other hand, the larger and more anonymous the majority, and the more impersonal the victims of their decisions, the more all moral inhibitions to covet the property of others fall away.

In fact, village democracy, in which the majority decides only on local matters, generally has a lower degree of compulsory levies and redistributive measures than urban democracy. Cantonal democracy, which deals with cantonal and local issues, is usually more “leftist”—more levying and spending or redistributive—than local democracy. Large cantons tend to be more left-wing than small ones. And by far the greatest extent of compulsory taxation and redistribution of all kinds is the result of “general” democratic elections and majority decisions affecting all of Switzerland. Occasionally the decisions of the indirect-democratic authorities are thereby counteracted and overruled by referendum, by direct democracy, but this does not change the stated tendency that an expansion of democracy (e.g. with the introduction of women’s suffrage) is accompanied by an increasing left- or left-green shift of the entire political spectrum. And thus with a progressive hostility to private property, an increasing burden on economic entrepreneurship and, conversely, a steady growth of the entire parasitic state superstructure. To be sure, Switzerland is still noticeably lagging behind the surrounding EU states in this seemingly unstoppable march toward socialism. But here, too, the influence of left-green political forces promoting this march has been steadily growing, as can be easily seen from the outcome of various referenda.

In order to reverse this tendency (if one wants to do so) and to promote the Swiss economic power instead of further weakening it continuously, it is therefore urgently advisable to refrain from any further “strengthening of democracy” (keyword, e.g.: voting rights for foreigners, reduction of the voting age), whether indirectly or directly. The majority principle is a socialist principle and it promotes socialism. And it also promotes political centralism. Because if a majority decision qua majority decision enjoys special dignity, then a larger majority (keyword: EU) is obviously even more worthy than a smaller one. Instead, it is necessary to reflect on the true secret of Swiss success, its internal decentralization, and to direct all efforts towards transferring more and more of the competences and powers, which have been democratically arrogated by the central state in the course of time, back to the various cantons and localities. And if, for nostalgic-folkloric reasons, one cannot completely abandon democracy, then at least decentralized: cantonal and local democracy must be strengthened against—and at the expense of—the central, all-state version.