&gt; the producer may have an opportunity to stockpile enough force to mount a realistic defense.<p>I think you are heavily underestimating capacity of armies. Hardware that modern armies operate is absolutely horrific and knowing how to use it most effectively is the only thing they do.<p>Capitalists know how to make money not use military hardware and I don&#x27;t think anyone could stockpile enough weaponry without any government organization noticing to carve out any sort of tax independence.<p>Closest to what you are imagining is mafia carving out tax independence from government in Mexico or wherever. But then you have another problem if government is too weak to prevent you from stockpiling weapons, it&#x27;s also too weak to prevent your competition from stockpiling weapons and that&#x27;s way worse for the business than being taxed (even heavily).<p>&gt; ... to mount a sustained defence against cooperating producers.<p>Why do you things producers would cooperate? They can cooperate to some degree but they want to get ahead of each other. Having armed competition would be horrible.<p>You might potentially imagine scenario, where produces stockpile weapons, unite to abolish government (and army) that due to weakness haven&#x27;t noticed the stockpiling and haven&#x27;t defused situation and haven&#x27;t stockpiled accordingly. Then they either fight among themselves or not and become new government and army (because it&#x27;s easier to tax than to manufacture and sell, when you have an army). So even in catastrophic scenario everything is back to status quo.<p>If you like SF I recommend &quot;Beggars in Spain&quot;. Nice vision about what might happen if 1% gets immensely more productive then the rest of humanity.<p>&gt;  leaving the private sector as the only viable and legitimate provider. This could also undermine the legitimacy of public institutions perhaps?<p>I know it&#x27;s popular fantasy to think that governments are legitimized by services they provide to (poor) people. While in truth they are legitimized by armies that hide behind, them that give illusion by being civilly controlled in exchange for inordinate amount of resources.