In an anarcho-capitalist society there is no government and, accordingly, no clear-cut distinction between inlanders (domestic citizens) and foreigners. This distinction comes into existence only with the establishment of a government, i.e., an institution which possesses a territorial monopoly of aggression (taxation). The territory over which a government’s taxing power extends becomes "inland," and everyone residing outside of this territory becomes a foreigner. State borders (and passports), are an "unnatural" (coercive) institution. Indeed, their existence (and that of a domestic government) implies a two-fold distortion with respect to peoples’ natural inclination to associate with others. First, inlanders cannot exclude the government (the taxman) from their own property, but are subject to what one might call "forced integration" by government agents. Second, in order to be able to intrude on its subjects’ private property so as to tax them, a government must invariably take control of existing roads, and it will employ its tax revenue to produce even more roads to gain even better access to all private property, as a potential tax source. Thus, this over-production of roads does not involve merely an innocent facilitation of interregional trade – a lowering of transaction costs – as starry-eyed economists would have us believe, but it involves forced domestic integration (artificial desegregation of separate localities).
Moreover, with the establishment of a government and state borders, immigration takes on an entirely new meaning. Immigration becomes immigration by foreigners across state borders, and the decision as to whether or not a person should be admitted no longer rests with private property owners or associations of such owners but with the government as the ultimate sovereign of all domestic residents and the ultimate super-owner of all their properties. Now, if the government excludes a person while even one domestic resident wants to admit this very person onto his property, the result is forced exclusion (a phenomenon that does not exist under private property anarchism). Furthermore, if the government admits a person while there is not even one domestic resident who wants to have this person on his property, the result is forced integration (also non-existent under private property anarchism).