"Classical liberalism has been in decline for more than a century." What is classical liberalism? "'[P]roperty, that is, private ownership of the means of production (for in regard to commodities ready for consumption, private ownership is a matter of course and is not disputed even by socialists and communists.)" (Hoppe quoting Ludwig von Mises, 1927 treatise, Liberalism: In the Classical Tradition). Hoppe sees that in the 20th Century, that liberalism was completely displaced by socialism.
Having stated that classical liberalism has been defeated by socialist falsehoods, Hoppe seeks to understand why that is so. He finds that the fault is not in the persuasiveness of socialist arguments, but is an "intelligible and systematic predictable...deconstruction...of liberal political theory...arising from [an] error [in liberal theory].
What is the error in liberal theory? The theory of government is the error. How was a government (even one that subjected the king to the same universal laws that applied to the populace) justified by the classical liberal (e.g. John Locke and Jefferson)? Those writers knew there would be criminals of all types among us and the criminals must be threatened with physical punishment. Doling out this punishment was the "unique function of government."
But the second idea does not necessarily follow from the first. It is true that protection services are needed and that parties may want to pay for these rather than undertake them themselves; however, it is not true that this can only be accomplished through a "compulsory territorial monopoly of jurisdiction [coupled with] the right to tax.....[T]he demand for protection...[could be provided] by specialized individuals or agencies [which] would arise ...[to] provide protection, insurance, and arbitration services to voluntary clients for a fee."
Hoppe sees the idea that "private property owners could...enter a contract which entitled another agent to compel anyone within a given territory to come to it exclusively for protection and judicial decision making, barring any other agent from offering protection services [in perpetuity as an inconceivable infringement on the very basis of liberty....Such an idea contradicts the very basis of the idea of all contracts],i.e., private property and individual self-ownership. No one rightfully can or likely will agree to render his person and property permanently defenseless against the actions of someone else."
Liberals recognize that they have created an internal contradiction by maintaining that people are and should be free, while simultaneously arguing that they are bound by an unbreakable contract that they, personally, did not enter into. They have attempted to overcome this contradiction "through the makeshift of 'tacit,' 'implicit' or 'conceptual' agreements, contracts or constitutions."
"Once the principle of government--judicial monopoly and the power to tax--is incorrectly accepted as just, any notice of restraining government power and safeguarding individual liberty and property is illusory....Motivated (as everyone is) by self-interest and the disutility of labor but equipped with the unique power to tax, a government agent's goal will invariably be to maximize expenditures on protection.... and at the same time to minimize the production of protection." Such as system will always and everywhere lead to increasing tax and declining protection.
It further follows that the "traditional liberal preference for and attachment to local (decentralized and territorially small) government is inconsistent and contradictory."
If one accepts the idea that government is just, then the "ancient idea of the universality of human rights and the unity of law is confused and... 'equality before the law,'...[is] transformed into a vehicle for egalitarianism," which such idea will necessarily lead to the destruction of human rights.
How does the acceptance of public form of governance and just (while repudiating the private hereditary form as unjust) lead to the destruction of human rights? In order to honor the principle of universal and equal human rights, entry into government is open to all, but as soon as one enters into government service, both "functional privileges and privileged functions exist." The government functionaries can raise their own compensation through increasing taxation without the consent of the citizens, i.e. their monopoly powers allow them to act in a unilateral fashion that would be impossible for a private service provider.
"[W]ith free entry into and public participation in government, the perversion of justice will proceed even faster. Instead of protecting preexisting private property rights, democratic government will become a machine for the continual redistribution of preexisting property rights in the name of illusory 'social security,' until the idea of universal and immutable human rights disappears and is replaced by that of law as positive government made legislation."
"Because of its own fundamental error regarding the moral status of government, liberalism actually contributed to the destruction of everything it had originally set out to preserve and protect: liberty and property.....If taxation is just, then more taxation is just also. And if democratic equality is just, then the expropriation of private property owners is just, too...." Liberals must recognize that no government is justified by a theory of contract. The protection services sought by the liberal can only properly be provided by private service providers.
What is the alternative to a democratic government? "[P]rivate property anarchism (or a private law society)...[as elaborated] by Murray Rothbard. It is a world of "unlimited secession, i.e. the unrestricted proliferation of independent free territories, until the state's range of jurisdiction finally withers away....[I]n complete contrast to the statist projects of 'European Integration' and a 'New World Order'--...[it would be] a world of tens of thousands of free countries, regions and cantons, of hundreds of thousands of independent free cities....[which] will give rise to a liberal renaissance."