Oldie but goodie from Mises blog. Archived comments below. See also LewRockwell.com cross-post.
One of my many favorite Hoppe quotes, from his Banking, Nation States and International Politics: A Sociological Reconstruction of the Present Economic Order, Review of Austrian Economics, (Vol. 4 Num. 1), 1990, which explains why the relatively rich, Western countries, which have relatively liberal internal economic policies, would tend to be militarily more powerful, and thus more aggressive, than developing states.
The need for a productive economy that a warring state must have also explains why it is that ceteris paribus those states which have adjusted their internal redistributive policies so as to decrease the importance of economic regulations relative to that of taxation tend to outstrip their competitors in the arena of international politics. Regulations through which states either compel or prohibit certain exchanges between two or more private persons as well as taxation imply a non-productive and/or non-contractual income expropriation and thus both damage homesteaders, producers or contractors [i.e., those that cause wealth to come into existence]. However, while by no means less destructive of productive output than taxation, regulations have the peculiar characteristic of requiring the state’s control over economic resources in order to become enforceable without simultaneously increasing the resources at its disposal. In practice, this is to say that they require the state’s command over taxes, yet they produce no monetary income for the state (instead, they satisfy pure power lust, as when A, for no material gain of his own, prohibits B and C from engaging in mutually beneficial trade). On the other hand, taxation and a redistribution of tax revenue according to the principle “from Peter to Paul,” increases the economic means at the government’s disposal at least by its own “handling charge” for the act of redistribution. Since a policy of taxation, and taxation without regulation, yields a higher monetary return to the state (and with this more resources expendable on the war effort!) than a policy of regulation, and regulation with taxation, states must move in the direction of a comparatively deregulated economy and a comparatively pure tax-state in order to avoid international defeat.