Non-Market Coordination of Labour, Production, Distribution, and Exchange Necessarily Precedes, and is Continuously Required, to Sustain the Modern Market Economy:
The foundational premise is that, before you can have a modern market economy - the kind of impersonal, price-clearing trade at scale that Adam Smith described in The Wealth of Nations (and which is virtually synonymous with the modern nation-state) - you require the formal institutions that enforce contracts, protect property rights, and underwrite a stable medium of exchange. [1, 2]
However, to have such formal institutions, you first require people who will perform those roles and conduct that work - alongside a means of directing and coordinating both the people and their labour.
And this is what establishes the logical necessity of pre-market logic to coordinate and direct labour and production before the market can ever attempt to do so. For anyone to have time spare (from the necessity of subsistence farming) to be able to dedicate any of it towards staffing those institutions, society must already be producing an agricultural and material surplus - which in turn requires an existing division and specialisation of labour. Because society needs a division of labour just to build the institutional foundations that make a market possible in the first place, the market itself cannot be what coordinates that initial division of labour. [3, 4]
Throughout history, human societies have solved this pre-market coordination problem in different ways. Within small tribal units, labour was coordinated through personal, kinship-based reciprocity; across early agricultural empires, it was coordinated through overt physical bondage in the forms of slavery, tribute, and feudalism. Yet while these non-market logics could organise production, none of them could birth a modern market economy. Kinship reciprocity collapses beyond small networks of personal trust, while slavery and feudalism immobilise workers through direct domination - stripping people of the autonomy required to become free consumers and flexible market participants.
To generate a modern market economy, society required a different mechanism capable of scaling the reciprocal cooperation of the village across millions of strangers, without resorting to the physical bondage of feudalism or slavery.
And that mechanism was taxation - a form of legal coercion exercised by a sovereign authority who can mobilise labour, command resources, and ultimately create the demand for the very currency on which a modern market will run.
And this requires the issuance of tax credits (otherwise known as money). The sovereign authority and currency issuer first began by imposing a tax obligation (of n taxes) on their citizens, and then created specific jobs that people could perform to acquire the tax credits necessary to satisfy their outstanding tax obligations. [5, 6, 7]
Of course, taxation did not begin as an enlightened or benevolent force. For centuries of early statecraft, taxation operated as a violently coercive instrument of extraction - not far removed from the slavery, imperial tribute, and feudalism it existed alongside - used primarily by monarchs and warlords to provision armies and enrich ruling elites. Yet unlike direct physical bondage, taxation contained a crucial structural difference: by demanding payment in _currency_ rather than owning the worker's body outright, it preserved a space for human autonomy. And as societies progressed and became more civilised, this fiscal mechanism began to be utilised in far more **amicably coercive** ways - directing resources not merely toward the crown's barracks, but toward the foundational institutions of civil society.
By issuing currency toward public provisioning and reclaiming it through taxation, the sovereign manufactures the **diffused, impersonal trust** required for large-scale specialisation to begin. It is through this fiscal architecture that a widespread societal web of mutual expectation is woven amongst strangers: the farmer can focus on his crops because he trusts that the soldier will protect his land; the soldier protects the land because can expect that he will be fed and sheltered at night; and the soldier can also trust that there are practicing nurses who will be there to tend to his wounds if he is to get injured.
Rather than replacing the cooperative reciprocity of the village, sovereign taxation is the very mechanism that allows civil society to scale it to the level of a nation-state; because each has a tax obligation that they must fulfil to appease a superior physical power, and yet they are welcoming and amicable to such an arrangement because they can observe the results compared to the alternatives where no such tax obligation exists.
In the modern day, this is not a particularly relatable story, because the causal chain has mostly become invisible, especially since we do not exactly have tax obligations levied against us _before_ we find work. Yet, to the best of our historical and empirical knowledge, this market-preceding logic of compulsory taxation and public provisioning remains a permanent prerequisite for price-clearing markets to emerge and endure.
This is because, without the state continuously issuing currency, enforcing tax liabilities in that unit of account, and directing real resources toward non-market foundations (courts, schools, healthcare, and infrastructure), the private market would lose both the stable money it trades with and the social system of capable people it trades within - two foundations that market logic can never provide for itself.
Firstly, it would lose its money, because a price-signalling market cannot bootstrap its own universal unit of account. Left purely to market logic, any private commodity-money fluctuates in value like a speculative asset, and its acceptance in trade remains fragile. It is only through the non-market compulsion of taxation that a currency acquires a permanent, universal baseline of demand - allowing it to transcend its primary role as a tax credit and become a stable unit of account and medium of exchange for private trade.
Secondly, it would lose its people - because, ultimately, the market cannot build its own foundations because it cannot create its own participants. Unlike commodities, human beings are not produced in factories in response to price signals for profit. Price-clearing markets only respond to _effective demand_ - desires backed by existing purchasing power - in pursuit of short-term, capturable returns. Yet human beings enter the world with zero purchasing power, and require nearly two decades of continuous care and investment before they can ever enter the market to work or trade. Because meeting these existential, non-discretionary needs across an entire population is inherently unprofitable, citizens must first be raised, educated, kept healthy, protected, and socialised outside of market logic - by a web of families, communities, and public institutions.
The market uses productive, healthy, literate, and law-abiding citizens, but it does not manufacture them - ensuring that non-market coordination remains the permanent prerequisite for private trade.
And embracing these facts is the most productive thing that capitalism could ever do. Because, when a market economy forgets its own origin story, it begins to treat the social sphere as a parasitic burden - rather than a structural foundation.
Dissolving the Public–Private Dichotomy and the False Conflict Between the State and the Market:
Under the illusion that private wealth is entirely self-generating, it seeks to minimise taxation, starve public institutions, and subject healthcare, education, and justice to the short-term logic of profit. In doing so, the market begins to saw off the very branch it is sitting on - slowly eroding the health, literacy, and institutional trust of the workforce and consumers that it relies upon to function.
Conversely, when a society recognises that social coordination precedes the market, the false war between the public and private sectors dissolves. Funding teachers, nurses, courts, and infrastructure is no longer mischaracterised as a "drag" on the economy, or an act of charity paid for after the market has done its work. Instead, it is understood for what it truly is: the primary investment that makes private enterprise possible in the first place.
A business cannot innovate if its workforce is chronically ill or poorly educated; entrepreneurs cannot take risks if contracts are unenforceable or infrastructure is crumbling. And thus a flourishing market economy does not require a retreating state; it requires a competent sovereign that continuously replenishes the human, social, and institutional capital which private enterprise then has the privilege to utilise and draw upon.
So, once we understand that a sovereign currency issuer does not need to "extract" money from the private market in order to build society's foundations (because state provisioning and taxation are what create and anchor the currency in the first place), our entire economic outlook changes.
The central question of politics is no longer "How much public education, healthcare, and infrastructure can the private market afford to fund?" Instead, the question becomes: "How do we mobilise our real resources and labour to build the strongest possible human and institutional foundation for our market economy?"
The True Macroeconomic Circuit, and Reconceptualising the True State–Market Boundaries:
Once we ask the right question, the true macroeconomic circuit comes into view: first, the sovereign authority issues currency to fund the workers and enterprises that enable fruitful social reproduction. Next, a portion of each individual's newly earned currency is reclaimed to settle the tax obligation levied against them (which helps to anchor the demand for the currency, and thus its value). Finally, the surplus financial wealth that remains in the hands of households and firms becomes the very purchasing power that funds the private market economy.
This reveals that the sovereign’s net spending is the private sector’s net financial surplus. So, when a government obsessively pursues austerity - slashing public provisioning while maintaining high tax extraction - it does not merely starve schools, hospitals, and courts of the financial resources necessary for adequate operation; it actively drains the private market of the net financial assets required to buy goods and services too. Deprived of state-issued purchasing power, households and businesses are forced to turn to commercial banks where they must take on ever-increasing loads of private debt just to keep the market turning. Starving the social foundation does not make the private market leaner or stronger - it instead renders it fragile, indebted, and prone to crisis.
Does this mean a sovereign state can simply issue limitless currency without consequence? Not at all - and this is where taxation asserts its secondary modern role. While a currency-issuing state never faces a financial constraint, society always faces real resource constraints - as there are only so many trained nurses, skilled builders, megawatts of energy, and tonnes of steel available at any given moment - just as a nation's capacity to produce and sell exports will affect its capability to import critical resources without also importing inflation.
If combined public and private spending exceeds what our workers and enterprises can physically produce, the result is inflation. Modern taxation, across income, corporate profits, unearned asset appreciation, and consumption, is what drains excess purchasing power when competing demands outstrip finite real resources and ensuring those resources can be prioritised for more systemically vital non-discretionary and foundational needs, instead of being used to bid up prices to satisfy discretionary desires.
Understanding this sequence gives us a clear blueprint for where the boundary between state and market belongs. We should never subject either the prerequisites of market participation or finite, non-reproducible bottlenecks to the logic of for-profit ownership. Healthcare, education, basic security, and justice are not ordinary commodities to be rationed by price; nor can spatial land, natural resources, and natural monopoly infrastructure (like water, energy, and transport grids) be privately monopolised. Because these are the foundational inputs that allow citizens to enter the market as equals, allowing private gatekeepers to own them only breeds predatory market power pricing - making social reproduction unaffordable and productive enterprise artificially costly.
Conversely, when society guarantees its social foundations publicly and holds its physical bottlenecks in common trust, the private market is finally freed to do what it actually does best: generating useful price signals where competition is possible, demonstrating financial discipline, improving reproducible production, rewarding genuine innovation, and discovering operational efficiencies.
This is why the public and private sectors can work so well together when coordinated competently - provided the boundary between them respects the limits of contractibility.
Whilst non-reproducible bottlenecks and foundational goods cannot legitimately be owned for profit, private enterprise can still operate under public charter where the profit motive genuinely aligns with the public interest. Crucially, this mechanism must be restricted to commodified, physically verifiable deliverables - such as laying fiber networks, constructing transit lines, or installing renewable energy grids. For these discrete technical assets, the state can deploy reverse auctions, inviting private firms to compete within strict engineering and access mandates. In these domains, market discipline excels: profit is derived from engineering ingenuity, logistical innovation, and material efficiency - allowing the public to reap cost savings on outputs whose quality can be objectively measured before payment is cleared.
Conversely, we must strictly exclude high-touch, relational commons, such as healthcare, elder care, child welfare, primary education, and custodial justice, from competitive tendering. Because human care, compassion, and dignity cannot be fully codified in a procurement contract, subjecting these services to the lowest bidder predictably incentivizes "quality shading": cutting corners on unmeasurable human labor, suppressing front-line wages, and gaming administrative metrics to extract a margin. By deploying market competition solely where outcomes are physically deterministic and keeping our high-touch social reproduction under direct public administration, society harnesses private technical efficiency without compromising the human foundations that make the market possible in the first place.
The Real Failures Are Thus Political:
Of course, recognising the indispensable role of the sovereign brings us face-to-face with an uncomfortable reality: it reveals the state as an extraordinarily powerful institution, or at least, an institution capable of extraordinary utility - if only it makes the right decisions. Too often at present, it does not. The reason our foundations feel neglected is rarely a lack of sovereign capacity, but a failure of political direction, because modern electoral dynamics (driven by short-term campaign cycles, sectarian partisanship, regulatory and oligarchic capture, cronyism, and the pursuit of popular support over long-term outcomes) systemically misalign the incentives of (often corrupt and/or incompetent) governments with the genuine interests of their citizens.
It is obvious though that we cannot simply abolish the need for social coordination - so we have no other choice but to perfect it. The next great frontier of political economy is not privatising the state, but pioneering democratic innovations; redesigning our political and administrative institutions so that the government becomes genuinely aligned, competent, effective, efficient, accountable, and autonomous.
So, Here's What I Believe That We Must Do About It: Constitutional Reform to Democratise the Sovereign and Finance:
In this section, I will attempt to separate between the broad diagnosis of ‘what’ I believe needs to change, and my more personal opinions and conjectures on the alternative mechanisms which could underpin more specifically ‘how’ we might practically engineer those outcomes.
Even if one disagrees with the exact suggestions below, I hope to bring awareness and spark debate around the existence of alternative frameworks, concepts, ideas, systems, and mechanisms which could be adopted.
Firstly, at a structural level, we must cure electoral short-termism, partisan gridlock, and the polarising incentives that make even broadly popular, long-term investments so difficult to implement - transforming the roles of our elected officials from ideological combatants into executive administrators and diplomatic representatives of the state.
My favoured mechanism to achieve this, would be to transfer much of the core agenda-setting and policymaking authority to permanently institutionalised, sortition-based bodies of citizens, who would be equipped with genuine sovereign power. By entrusting democratic deliberation to a stratified, representative sample of the public itself, elected politicians are no longer tasked with warring over ideology, but are instead employed to administer the citizenry's instructions at home and represent the state on the world stage.
However, because ordinary citizens drawn by lottery are not domain specialists, a sortition assembly is vulnerable to manipulation by self-interested and/or biased civil servants and facilitators who draft briefing papers and select the expert witnesses in ways that quietly steer the outcome towards their desires. And so, to ensure the assembly remains genuinely sovereign, its epistemic architecture must be built on three constitutional safeguards: adversarial briefing models (where competing analytical teams cross-examine each other’s assumptions in plain language - rather than relying on a single "consensus" narrative); autonomous investigative power (equipping citizens with an independent budget to commission outside research, alongside legal subpoena powers to compel raw departmental data and summon frontline workers or whistleblowers); and staggered, overlapping tenures paired with a dedicated citizen oversight chamber - ensuring that institutional memory is passed directly between cohorts so a permanent bureaucracy can never simply outwait and outmanoeuvre a rotating public.
Secondly, I believe it is important to realign electoral incentives, so that elections select unifying, competent administrators - rather than divisive and popularist politicians who encourage the electorate to turn against each other.
This goes hand-in-hand with the first recommendation of implementing sovereign sortition-based bodies of citizens, because such bodies would already inherently guarantee true proportional representation of the electorate within government, which would allow us to shift the focus of elections towards the competence and broadest cross-societal appeal of a single coherent party, to encourage politics to be about consensus-building and constructivism rather than the polarising partisanism that often results from plurality voting (such as FPTP) and the incoherent, fragmented and tribal sectarianism that often results from the ‘proportional representation’ promised by ordinal methods (like STV or IRV).
My preferred voting method would be a simple cardinal method, like STAR voting.
Thirdly, we must sever the link between private wealth and political power so that these administrative and diplomatic offices remain completely free from oligarchic capture.
Practically, this can be achieved by banning all corporate, trade association, and foreign political donations entirely, capping individual private donations at a modest egalitarian ceiling, and publicly funding elections through egalitarian mechanisms such as "democracy vouchers".
Fourthly, we must permanently police the boundary between the commons and the market, ensuring that neither the human prerequisites of market participation nor finite, non-reproducible bottlenecks are enclosed for private rent extraction.
To make this operational, our economic governance must look beyond narrow antitrust enforcement toward a comprehensive constitutional settlement: legally ring-fencing foundational public goods from privatisation, enforcing strict public-utility and common-carrier mandates on natural monopolies, and using land-value and resource taxes to reclaim the unearned economic rent extracted from finite land and natural assets.
And finally, at a structural level, we must end the state’s institutionally self-imposed financial capture - stopping commercial banks from pumping credit into unproductive asset speculation, while preventing private bond markets and offshore currency speculators from holding public provisioning hostage.
As a practical overhaul of our banking, fiscal, and monetary architecture, a competent sovereign should use targeted credit guidance to steer domestic bank lending away from land and monopoly bottlenecks toward real innovation and productive enterprise; directly coordinate its central bank and treasury (so that funding our social foundations is never subjected to the veto of financial markets); and deploy well-targeted capital flow management whenever necessary in the public interest - insulating the nation's currency from predatory speculation and destabilising capital flight to safeguard its foreign exchange health and domestic purchasing power.
In the end, a thriving market economy depends on a thriving social foundation - and that foundation depends on a democracy worthy of the power it wields. We should not demand for a smaller and weaker state; what we should demand is a smarter constitution to democratically steer an adequately and proportionately sized one.