Frederic C Lane, a historian specializing in the history of the Republic of Venice, published in 1958 an article on the relation between violence and State capacity for rent extraction.
Principles of the protection rent: surplus and deficits
The State is the organization that claims the monopoly of violence on a territory. The cost of provisioning a security service decreases by acculturation to legitimize State power.
In the theater that is history, each actor has his interests and his objectives:
The prince wants to maximize surplus by charging tax for protection while reducing the cost of its provision,
Protection consumers want to minimize the tax charged to them,
Protection suppliers want to maximize protection cost, which is their income.
It is historically observed that the cost of protection increases when suppliers of legitimate violence are close to power. On the other hand, if a monarch pays for his army, he will seek to reduce costs to obtain a surplus.
Depending on who controls the government, Mr. Lane observes the following trends:
Persistent budgetary surplus if a hereditary monarch controls the State
Lower costs and taxes if productive agents control the country
Budget deficit and cost increase if State agents are in control
Mr Lane also advances the concept of protection rent, which he opposes to the Ricardian rent. The Riccardian rent corresponds to the advantage provided by more productive land or a better building to its owner. The protection rent corresponds to the advantage that an economic operator derives from a lower protection cost than paid by its competitors.
For example, the merchants of Venice armed vessels capable of defending themselves to be able to pass through ports that were less safe but had the lowest tariffs. While this was possible for maritime trade, economic activity on land gave rise to higher levels of protection rent given the higher extraction capacity of the local Lord.
Historical perspective
Mr Lane offers a vision of 1000 years of European history in four paragraphs:
Viking raids in 900AD caused a collapse of the established order and a reorganization of very localized protective services. The protective cost is very high and there is little surplus. The difference between a baron and a brigand is held.
In 1200, the feudal order was organized and legitimized by religion. The cost of protection decreases and extraction becomes more organized. Special zones are created to attract trade.
The merchants organize maritime transport to arbitrage protection rent. This activity is risky and profitable. With the development of trading posts, it gave birth to the instruments of capitalism. Insurance, company common stocks, and bonds are invented to finance maritime trade which is protection rent arbitrage. The merchant class enriches itself more than the protection providers. The Riccardian rent to shipowners is higher than the protection rent (taxes) raised by the prince.
Industrial innovation becomes even more profitable than protection rent arbitrage. Bonds and common stocks now help finance industrial innovation.
Along the way, the historian notes the predatory behavior of the protection supplier, whose customers are desperate to escape to avoid the forced purchase of this service. For instance, Egyptians were trying to flee into the desert of the Ptolemaic era. Before 1807, Serfs in Prussia fled to West Germany.
FC Lane wrote while President Eisenhower warned of the emerging military-industrial complex, and Henry Kissinger published a bestseller where he suggested special budgets for the "Strategic Air Command" and for the development of tactical nuclear weapons.