"A state is a territorial monopolist of compulsion--an agency which may engage in continual, institutionalized property rights violations and the exploitation--in the form of expropriation, taxation, and regulation--of private property owners," begins Hoppe in Chapter 5.
There are two significant implications of the foregoing fact. One, the state will always seek to increase its exploitation. Two, the state will seek to expand its territorial monopoly. Because there can only be one monopolist in a geographic area, one can expect to see a tendency towards increasing centralization of power. While there are historical anomalies (the disintegration of the Austro-Hungarian Empire), the trend in the Western world has been continuously in the direction of centralization.
One can see that the US government exerts hegemony over Western Europe and even attempts to do so over the Pacific Rim countries. Often this is seen as a good--an opportunity for expanded and freer markets; however, Hoppe maintains that "[p]olitical integration (centralization) and economic (market) integration are two completely different phenomena." Because governments act by "taxing and regulating private property owners," all governments serve to reduce market participation and the formation of wealth, but those that tax and regulate most heavily have the greatest negative impact on market participants.
What does limit the propensity of the state to increase regulation and taxation? Competition between states for businesses and people to tax and to regulate is the only effective limitation of the state's propensity to increase exploitation. It's limitation of its own impulse to expropriate the productive capacity of its citizens leaves them free to develop greater wealth; however, if there is only one state, the "a fundamental rein on the expansion of governmental power is gone."
Even when highly centralized governments exist, a population may see that it is being exploited more than benefitted and seek to withdraw to a smaller, regional territory. Hoppe sees this as an enormously beneficial act. "Hegemonic domestic relations are replaced by contractual-mutually beneficial-foreign relations. Instead of force integration, there is voluntary separation...[which] leases to harmony and peace."
Secession always involves "a vote against the principle of democracy and majoritarian rule in favor of private, decentralized ownership." Further, once one group has seceded, it creates an opportunity for future migrations as more productive members of the social order leave the state.
There are foreseeable consequences arising when smaller units secede from the larger. Among the consequences are: (i) increased trade as smaller units are unlikely to be able provide for all of the needs of the people; (ii) monetary integration and the adoption of an international commodity money system (gold), which would bring an end to the greatest inflation seen in the history of the world which occurred during the 20th Century; and (iii) an increase in "ethnic, linguistic, religious and cultural diversity...[which] rather than stimulating social strife and cultural leveling...will promote peaceful, cooperative competition of difference, territorially separate cultures."
Hoppe's has an optimistic vision of the future of small, diverse, independent countries, integrated through free trade and a common commodity monetary system. He sees the potential for "a world of unheard of prosperity, economic growth and cultural advancement."