Institutionalized Theft
Last updated: 2026-08-18
This article is part of the Intermediate course on Libertarianism and the Austrian School of Economics -> Social Democracy
NOTE: It is necessary to have read the chapter on -> State Interventions before reading this article in order to understand it correctly.
From the perspective of Natural Law or Iusnaturalism and the Austrian School of Economics, “institutionalized theft” is not an anomaly of the system, but its foundational characteristic.
Murray Rothbard (1926–1995) defines the State as the only entity in society that obtains its income through physical coercion (taxes), which constitutes a systematic violation of the Non-Aggression Principle (NAP).
However, the modern State, especially under the rhetoric of social democracy, needs to legitimate this continuous extraction of wealth. To avoid the frontal rejection that a rise in general taxes would generate, the political class designs more sophisticated and opaque mechanisms. The creation of “special funds” is the tool par excellence for this, operating under a scheme that can be broken down into three phases:
1. The Moral Alibi (The appeal to emotion):
The politician rarely asks for money explicitly to finance his power structure.
Using tools of informal logic, he creates a narrative of urgency.
The imperative need for a fund is argued in order to “fight poverty,” “promote energy sovereignty,” “subsidize regional development,” or “protect the environment.”
This moral excuse disarms the taxpayer’s resistance, since the state propaganda apparatus claims that opposing fiscal coercion is equivalent to opposing the noble cause itself.
2. The Legal Structure (The Bureaucratic Vehicle):
Instead of depositing the extracted money in the general treasury —where it would be subject to the debate of the National Budget and to certain constitutional audits—, a parallel legal figure is created.
In Argentina, the perfect historical example is the “public trust funds” (the true “black boxes” of politics).
These entities or trusts collect specific fees or taxes and operate outside the central administration, guaranteeing almost absolute autonomy and an alarming lack of transparency to the officials appointed by hand to administer them.
3. The Covert Extraction (The “Curro”):
Once the fund is capitalized with the capital seized from the productive sector, the transfer of rents toward the bureaucratic elite and business corsairing begins.
Politicians do not need to take the money physically; the extraction is institutionalized under a mantle of administrative legality:
- Overbilling and Directed Tenders: The fund contracts works, inputs, or services from “friendly” firms at values far above those of the market. The difference returns to the political class as kickbacks (coimas) or as financing for electoral campaigns.
- Parallel Bureaucratic Structures: Thousands of militants are hired under the figure of “advisers,” “directors,” or “consultants” of the fund, using the taxpayer’s money to maintain the clientelist and partisan apparatus at the expense of general productivity.
- Cross Subsidies and Forgiven Loans: Credits are granted at unreal rates to privileged entrepreneurs who, through political complicity, are later liquified by inflation or directly forgiven, socializing losses and privatizing gains.
Economically, as Ludwig von Mises would explain, these funds destroy capital on a massive scale.
They completely alter Economic calculation because resources are no longer allocated according to the marginal utility that individuals decide peacefully in the free market, but according to the whim, the need to retain power, and the convenience of the state bureaucracy.
This article is part of the Intermediate course on Libertarianism and the Austrian School of Economics -> Social Democracy
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