Without a national ID (for example, Social Security numbers or driver’s licenses) how would banks and other institutions verify your identity for their services? How could they prove, for example, your claim to ownership of a piece of property or a car? How could they know you didn’t just steal or forge a deed or title?
A government-issued ID can always be forged. Already today, a thriving underground black market exists in forged Social Security cards, passports, and driver’s licenses.
Indeed, banks are losing so much money on forged ID and identity theft that many have started fingerprinting customers. With identification information, as in so many other areas, government does a very poor job.
As you have observed, identification — proving that someone actually is who he says he is, or has the qualifications he claims — is a vital need in a market economy. Private institutions have an enormous stake in being able to quickly and accurately insure the identities of customers who, in today’s global economy, may engage in transactions around the world.
In a libertarian society, banks and other financial institutions would establish the level of identity verification they needed to protect their interests, as has been the case in the past. Such institutions would have a strong interest in creating ways of identification that would appeal to — not offend or burden or harm — their customers.
Competition would quickly create new and innovative ways to meet this demand. We would expect to see the kind of constant innovation, low cost, ease-of-use, and concern for pleasing customers that we today see in other significantly unregulated areas of our economy, such as telecommunications, computers and the Internet.
People would be free to decide for themselves if they wanted to provide information in order to work with these institutions. Governments couldn’t force individuals to carry IDs. The most innovative and customer-pleasing solutions would be the most successful.
Finally, in a libertarian society there would be no danger of governments collecting vast databases of such information, a threat to our liberty.
There is a great need for identification services that aid consumers while protecting their privacy. Only the market — not government — can provide this.