Libertarianism = Feudalism?

Huh? How is saying the state shouldn't restrict the non-violent acts of business owners the same thing as saying that there should be no police to stop people from using violence against business owners?

Even libertarians agree that property rights should be protected from violent theft or coercion. The problem isn't that somebody else wants a piece of your shop, it's that, most people have already given away a piece of their shop. People are social creatures, most of us have a tendency to follow a leader. So, even without the threat of violence, simply through normal social means, powerful groups and organisations emerge. They need to be kept in line by the state, otherwise they threaten the state's ability to keep the peace. Once an organisation becomes more powerful than the state, it is the de facto state. At which point, the experiment in libertarianism is over.

The Civil Rights Act is a great example of this. Both sides were organised. So, the issue of whether or not a particular individual was allowed into a particular restaurant stopped being a matter of negotiation between business owner and customer, and was instead a small part of a massive conflict between large groups of people. These little conflicts could not be resolved by bargaining because the agents involved were not pricing the costs of their actions according to the rational behaviour of a selfish individual. Instead, the individuals were highly valuing the well being of their group, promoting their group's values even to the point of becoming engaged in violence and endangering themselves.

If the state had not acted, and had simply attempted to keep the peace, what would have happened? Most likely a lot of violence would have broken out, much of it beyond the capacity of the state to control. What is the libertarian way of dealing with a civil war? I can't imagine.

I think really what is needed isn't smaller government, but better incentives and competition within government structure. Imagine if the people got to vote on the budget. Maybe not on how much taxes were collected, but on where the money went. Imagine if there were many smaller government departments that had semi overlapping functions, or functions of oversight over other departments. Imagine if setting up a government department was something anyone could do, like running for political office, and all you had to do was get some money voted your way during the budget vote. That way we would have a kind of free business like structure with regards the implementation of public policy, but we could still have policies that regulated and shaped the nation.