The great German sociologist Franz Oppenheimer (1864-1943) wrote in his masterpiece “The State” that there exists only two principal ways of acquiring wealth. The first way is to engage in production and to exchange that good for the product of another producer in a mutually beneficial trade. This is the way of production and exchange: The way of the free market. Oppenheimer called this method the “economic means” of obtaining wealth.
The second way to acquire wealth is to appropriate the property of another without his consent. In other words, to steal, expropriate, loot, plunder, and depredate. Unlike the economic means, this method is not mutually beneficial. The thief benefits at the expense of the producer. Moreover, it clearly has a hampering effect on production and therefore harms the production of wealth, and thus the standard of living, in the long term. Oppenheimer very astutely called this parasitic method the “political means.”
Oppenheimer then brilliant goes on to define the state in terms of the political means. The state, according to Oppenheimer, is the institution of the political means. In other words, the state is the organisation of regularised and legalised coercive plunder. The state does not acquire wealth through production and exchange; it acquires wealth through the expropriation of private property. And this description of the state cannot be refuted or denied for the state ultimately rests upon the instrument of taxation.
This is the essential insight of Oppenheimer’s marvellous book. And I implore every libertarian to read it.