Since Oracle's Larry Ellison started hawking the national ID card (operated with Oracle's database software, of course), this story has been making the rounds.  Now there's talk of using your state driver's license as a backdoor ID card.  Critics fear and loathe the card, and with good reason.  Ellison and his government co-conspirators insist the card will be voluntary, just to speed our way through airport security and such, but that's a story we've heard before.  The new federal income tax of 1914 was only supposed to tax the richest Americans and never rise above 3 percent, but by the '30s FDR had harnessed this tool for massive government expansion to fund his New Deal.  Early supporters of Social Security said their SS numbers would never become universal identifiers.  Wrong again!  The list of government disingenuousness is extensive.

When showing your card is required before you can board a plane, rent a car, use the library, get a phone, buy a gun, enter the US, leave the US, buy a house, get a loan, see the doctor, buy medicine, or enroll your child in school, the opportunities for "denial of service" against those of whom the state does not approve are chilling indeed.  To many, a national ID card evokes memories of Nazi Germany, dramatized with endless "your paperz pleez" jokes, complete with bad German accents.  Governments' long histories of abuses has produced a cynical and paranoid public.

But the concept of a universal personal ID has merit.  In an advanced market society with a highly mobile population, many transactions require a degree of trust.  In pre-industrial societies, people usually knew each other personally or through reputation.  As mobility became more common, people carried letters of recommendation.  Today, having a trusted third party vouch for your identity and trustworthiness can lower the costs of commerce and create a more pleasant experience.

Buyers and sellers have a common interest in using such a card.  Airlines have an interest in knowing that you're not a terrorist.  Car rental companies want to know you're not going to steal their cars.  Your prospective employer needs to know you can do the work.  The bank needs to know that you're a good risk for a loan.  As an honest buyer, you want people to know you can be trusted and be comfortable dealing with you.

In a free society, private companies would spring up to offer ID cards.  Consumers would want a card for convenience, as they do credit cards.  Those needing to verify your identity would scan your card and communicate with the central database.  As the system became more advanced, biometric identification features would be added.  Issues of privacy would be settled through the marketplace.  Sellers have an interest in gathering as much information as possible on consumers for a variety of valid (to them) reasons, while consumers have an understandable desire for privacy.  ID card companies would learn to balance these competing interests in order to satisfy as many customers as possible.  In a diverse population, companies catering to specialized needs for security (at nuclear power plants, for example) or privacy concerns (for the congenitally paranoid) would emerge, just as we can buy food at mainstream superstores or health food shops.  If consumers in general reject the idea, or a substantial number of people refused to carry ID, the penalty would be nothing worse than loss of convenience.  Private companies would have every incentive to provide convenient service to honest cardholders.

Critics will say that the system would quickly become just as dangerous as the government model, since private companies are no more trustworthy than the government.  But while corporate executives can certainly be as venal as their government counterparts, competition forces them to protect their reputations and satisfy their customers.  Another criticism is that once such a system was operational, the government would require back door access to the software so we're back where we started with Ellison's national ID.  But that is a criticism of corrupt government policies, not a free market proposal.  Such a system should be opposed in a police state such as ours for that very reason.

Others would argue that powerful companies would collect and sell our private information behind our backs, just as credit card companies do today.  But if credit card companies sell our personal information it's because we, the consumers, don't insist otherwise by doing without the cards or taking our business elsewhere.  If there is no elsewhere, it can only be because the banks have been effectively nationalized by the Federal Reserve system, that capital markets funding new ventures have been seriously depleted by taxes and regulations, or the market for privacy is too small.  TRW's famously flawed credit rating system is for the convenience of sellers not consumers, so its problems don't apply where consumers opt for ID cards.

The issue of personal identification is only one area where government meddling has undermined a good idea.  Social Security is in part a nationalized pension and life insurance plan, FEMA weakens and replaces private disaster insurance, and the Peace Corps does nothing but missionary work for the state.  The list is seemingly endless.

Anarcho-capitalists argue that government itself undermines and replaces the natural order of voluntary social institutions which would otherwise provide police services, territorial defense (since you can't have national defense without a nation!), a judicial system, and a whole list of other functions which would be better provided by the free market.