The arrival of the World State
The era of globalization has marked the end of the dominance of the nation state. During this transitional period we are experiencing turmoil. We have entered a period of a new logic which requires new answers, answers we are not yet ready to give. The nation state has been outgrown as a political organism; it has lost much of its power and many of its resources. The turmoil will not calm down until a successful new supranational political body manages to replace the power vacuum left by the nation state. For Europeans this is likely to be a future version of the EU with increased powers. How long it will be before this Union becomes an efficient governing instrument for all Europeans citizens is hard to foresee. At present the EU is suffering from lack of popular support and an inability to make decisions effectively. Other continents are developing their own versions of supranational political unions. They are all trying to make up for the political deficit caused by globalization. Only through supranational co-operation can the nation state hope to regain its political power. Only then can it fully come to grips with its economic problems. Until then we shall have to live in a world where economics has the upper hand over politics.
In future we shall see more publicity campaigns instigated by multinationals to influence people to vote against anything that weakens their position, as the American healthcare industry did when Obama set about healthcare reform. It happens through the process we call lobbying, a political mechanism whereby private-sector companies can offset democratic preferences through donations and financial support (bribes and favours). This is the reason why some banks were saved and others sacrificed. It was not primarily a matter of assets, but of trust, which is ultimately very much a question about personal relationships. For example, Henry Paulson, former Secretary to the Treasury, had previously been chief executive of Goldman Sachs, so Goldman Sachs was calling the shots.
In the next phase we can expect increasing co-operation between political and economic unions, for instance between the EU and MERCOSUR.80Ultimately only a World State (the model for which model is still the United Nations, however fragile that organization may seem at the moment) can hope to be effective in returning power to a democratically-elected public body or institution. This is a struggle for the 22nd century, at the earliest.
For three centuries Europe and the Western world have had no real competition. During this period it has been possible to develop and indulge in all kinds of political ideologies, without ever losing the lead position. Japan was the first non-Western country to understand and imitate the scientific-industrial logic of the Western world; but Japan did not have sufficient firepower, not enough resources, to challenge the West single-handedly. It has had to accept US military and economic dominance. That was however a foretaste of the geoeconomic era. Now China has become the first nation to offer a real challenge to the West, not just economically, but politically, ideologically, and soon also militarily. Unlike Japan, china has got the necessary firepower.
Some see this in terms of China arriving. Others see it as China reviving, after three centuries of sleep. Now it wants to regain its old position as the centre of the world. On one hand this means that we in the West no longer have the luxury of indulging in political ideologies. Intellectual spin-offs from the French Revolution have had their day. All our efforts will need to be devoted to the technological-industrial race - if we want to continue as a leading civilization, that is. On the other hand, Chinese leadership will not necessarily be so bad. It could imply greater political stability and fewer military interventions. Unlike the USA, China has no taste for military adventurism. Harmony is the ideal, not the cowboy.
Only implementation of a World State will mark the end of the era of globalization where political outcome will be the results of economic strength. Only then can there be no more large-scale wars, no more cut-throat competition between nation states and multinationals. Instead there will be elections and parliamentary discussion, which will trigger a different kind of power struggle, between individuals and organizations. The State will then again be able to provide a safety-net for those who stumble. It will not mark the end of self-interest or competition: we must assume that companies will continue to compete after the world is united politically, if that ever happens, but competition will occur in more organized forms.
A number of forces work against globalization in the long run. The strains on the planet are too great, the distribution of goods is unfair, and we are seeing increased collaboration among private-sector and public-sector organizations which might imply that politics will at some point get the upper hand over economics again. This scenario, however, lies in what we must call the unforeseeable future; and even then there would be competition between individuals, simply because that seems to be human nature. Socialization can only change some of this and only slowly, over time. True, we will soon be able to breed humans to match our ideal by selecting among DNA sequences, but even then one must assume that some will want golden retriever-like babies while others will want alsatians.
The move towards ever-larger political bodies will not solve all the nation state's problems. For instance, it will do nothing to bridge the gap between voters and politicians; on the contrary, it is likely to make the gap wider. Instead, the development of the nation state will need to be supported by two new levels of organization; one supranational, as discussed above, the other local. Both of these developments can be seen as responses to failure by the nation state to meet the future demands of its citizens. Supranational bodies are needed to regain control over the economic sphere. Development of smaller political units or local-level structures is needed to re-establish the political contract with the people, in order to regain trust and support for the political agenda - to make people feel that they matter and are listened to. After decades of centralism, which has led to massive bureaucratic inefficiencies and corresponding cynicism among voters, there is a feeling that society needs to renew its contract with the voters, in something like a modern version of Rousseau's Social Contract. This cannot be done on the supranational level. In China it was Deng Xiaoping who introduced direct local elections. In China today there are direct elections for village leaders in some 1 million villages and elections for the local people's congresses. Popular complaints often remove these elected officials from their seats.
The region is in many places replacing the nation state as an identity marker. So, we don't come from Sweden, but from Skäne or from Smäland. Instead of strong national economies we see the reappearance of strong regional centers, like Catalonia in Spain, Rhone-Alpes in France, Baden-Württemberg in Germany, and Lombardy in Italy. Competence today is more and more centered in clusters attached to certain regions. This development makes sense also for the multinational enterprise, which will choose to site its business in a specific region rather than in a specific country. It will cultivate contacts with local authorities, rather than with national governments. Many of these new regions are also transnational, that is, they pay less attention to national borders than to economic realities. Examples are found on the French-German border, and between Skäne in Sweden and the Copenhagen region.
The competition between regional and national influences is not always friendly. A number of regions are striving for full or at least increased autonomy against the will of their nation states, in some cases violently. In Europe we have violent secessionist attempts by the Basques on the Spanish-French border (ETA) and in Corsica (FNLC). Members of both organizations see the supranational level as an answer to perceived oppression by the nation state. Nonviolent campaigns are occurring in Brittany, Catalonia, Wales, Scotland, Lombardy, and Venice, and to some extent among the Lapp or Sami people of northern Scandinavia. All these regions enjoy greater autonomy than most other regions of Europe.
In the end the nation state will have to come to terms with voters' need for more local geographical and cultural identities if its wider, supranational ambitions are to succeed. There must be development in two directions at once: one towards larger political entities, and one towards smaller entities. Voters will want a more direct form of democracy; they want a bigger say in political decisions that affect their lives. Here, Switzerland has been showing the way for centuries.
We often see the nation state as the one true, or natural, political structure: something fixed, like a destination or terminus. Of course that is not true. Our political borders are subject to continual change and sometimes develop into smaller units, sometimes into larger ones. We remember that the Ancient Greeks lived in city-states, and Italy and much of the rest of Europe was divided into small States during the Renaissance. The regional system can be seen as a continuation of the break-up of empires into ever-smaller political units. In this perspective nation states are only one stage in the long-term evolution of political-geographical units. The Europe of 1914 was dominated by three big blocs: Germany, Austria-Hungary, and Russia. Today the area they covered has become some twenty autonomous States. The formation of these political entities has been changing and continues to change with the changing needs and constraints set by their population. By and large we have been moving towards ever-smaller politically-autonomous units for a century already, more or less without anyone planning it. It seems rather to have been happening as a natural process of human social and political evolution.
Likewise, globalization is not a conscious policy adopted either by national governments or by multinationals. It is not a social, political, and economic process that anyone has sat down to think through and then implement. As such it has no ideological father, either. Rather, it is very much a development which has emerged as an unplanned consequence of increased competition and new technologies. It is true that we are not puppets in this game; but we do not fully control it either. We are more akin to helmsmen in a storm.
We have transferred power from nation states to international institutions (EU, UN, World Bank, IMF, UNESCO, World Trade Organization, NATO, but also non-governmental organizations like the Red Cross and Amnesty). These decisions have been made as our needs for better forms of organization have evolved. Allowing the nation-state system to retain a monopoly on political decisions would have made our societies increasingly ineffective. In the future, new structures must be built which can both control free-market capitalism and also secure the political rights and express the will of all citizens. How long the geoeconomics era lasts will depend largely on the ability of these new international institutions to develop and gain in influence. Over the past decade they have faced challenges from some quarters; but others see them as an important development to fight the world's growing poverty (see e.g. Stiglitz 2006: 19-25).
Until the current financial crisis, we were in a largely unrestrained economic race. The global marketplace allowed companies to grow ever bigger, and our political organs were only too glad to encourage that development. From now on there are likely to be more restrictions on the financial industry. But this will not alter the logic of our system of economic growth through trade. It will not make the multinationals any less relevant to economic growth.
We are witnessing a new form of colonialism, this time led not by the State but by private-sector companies, directly assisted by more or less self-imprisoned nation states, as the State has set the rules only to be trapped in them. Their joint strategies have come to express two sides of a single plan: profits for the multinational, and taxes for the State. This development is most marked in countries with relatively liberal trade policies. The USA is a special case here, where politics in practice is in the hands of the multinational enterprises. There are no real independent politics separate from corporate interests, only individual voices of protest, and these are seldom heard or sound irrelevant to the bulk of voters, like remarks emanating from the ivory tower of academia. The people Obama represents are not those who criticize this system in general, but those who are less well off today than they were a few years ago, those who feel things have been going downhill, who have perhaps lost their homes and jobs. The logic of the free market has not been challenged, not even the brand has been touched. And the gospel is a long-familiar one ("change"); only the evangelist is new. If Obama does not solve his voters' problems they, the squeezed middle classes, will soon change horses again; not that it makes much difference where they place their bets.
The globalization process is not a strategy devised between two harmonious parties, the public and private sectors. It is the nation state that depends on the multinational, not vice versa, and they are playing a sort of cat and mouse game. For instance, politicians know that multinationals use bribes to win contracts, but they do not respond to this before they have to, that is before there is a scandal, some incident which comes to public attention via the mass media. Then there will be a brief reaction, some official exchange of words, and after that everything will go back to how it was before. The political establishment is not naive, but it knows that the agenda will always be set by the logic of economic interests. Members of that establishment are often trapped in the middle, between voters and corporations, not wanting to express allegiance to either one in fear of an immediate reaction by the other. If a multinational enterprise is dissatisfied with a nation state, it can relocate. It can set up its factory in another country or another region, and it can transfer its profits to a third country, say to Switzerland, which does not allow foreign governments to retrieve information about banking clients unless they are suspected of fraud, and even then puts great difficulty in the way. When UBS signaled that it was going to need to pass information to American tax authorities about accounts belonging to US citizens, most of the money was transferred to Credit Suisse, another Swiss bank. There is a market for everything, and all these markets are becoming ever more efficient.
In this race for power, the multinationals are getting ever stronger, the nation states weaker. As a result the economic size of the former, and the personal wealth of their owners, often exceed the gross national product of many countries.81Consequently these owners' actions and visits often matter more to people in general than the actions and visits of prime ministers or presidents, since they mean real investments and new jobs. Political leaders can seldom promise this kind of growth. Instead they will often choose to promote their multinational enterprises in a joint effort, as when we see diplomatic planes filled with business executives. Foreign ministries often function rather like errand-boys for their multinationals, with their royal family as head salesmen. In many Western monarchies there are unofficial estimates suggesting that having a royal family makes economic sense. Royal schedules are often as full as those of chief executives, and their pay, or allowance, often lower.
The largest concentration of multinationals is found in the USA, followed by Japan, the UK, France, Germany, and Sweden (Atlas der Globalisierung 2003: 30-1). In many of these countries business life has achieved quasi-independence from the nation state. Financial markets area striking example. Their products are transferred to all corners of the world within seconds, virtually without anyone noticing the transactions or knowing where they originate. If the nation states cannot bring the world's tax havens under control, there may soon be very little dirty money visible: just money.
The super-rich constitute their own social class, consisting of people who pay little attention to national identities and borders. If they like Paris, they will go and live there for a while, if they want to gamble they will fly to Las Vegas or Macao in their private jets, or they will be off to any other part of the world, treating the world as a giant a la carte menu. You would not know they were there, if it were not for the long rows of private jets parked at the airport. Governments are losing influence not only over major companies but also over economic policies. The exception is when these same people and companies falter and need help. Then they will get financial support, by describing the impact their bankruptcy would have on the common good; or, as we say now, "too big to fail" - in other words, the bigger you are, the more failures you are allowed to get away with. This is even contrary to traditional Western moral, which says that the older you are the more responsibility you should take.
All this does not mean that the nation state is on the way out, or that it is about to be entirely replaced by an inter-regional political system (Ohmae 1995). The nation state will go on playing an important role, in areas which have not yet been taken over by other entities: making and enforcing laws and regulations to provide a framework for the operation of the free market, building and maintaining infrastructure, and providing social security for a growing number of citizens excluded from productive society. The nation states have also taken an active role in fostering small businesses and in supporting their companies overseas. These things make the nation state currently more a partner than a competitor. The present situation is not one of naked conflict between multinationals and nation states, but one of gradual shifting power, in which both entities recognize that they depend on the other.
Besides, there are many problems with the multinational-enterprise system which might alter the equation at any time. For one thing, the multinational is not the perfect money-making machine it would like us to think, but consists of people of flesh and blood, who feel national identity, pride, and sometimes even social responsibility. All multinational owners have their special attachments. As they get richer they will acquire more non-economic objectives, in line with the goal of self-actualization from Maslow's hierarchy of needs. They are eventually going to want to give things away and help others. That is why it is often more important for a nation state to win a multinational's heart than to chase after its taxes, factories, and offices.
Likewise, a tax refugee or a criminal on the run in exile may enjoy sitting on a sun-lounger and sipping pina coladas for a year or two, but sooner or later his money will run out and/or he will start to feel homesick. Then he will want to come home. That is when we should tax him, if he still has the funds. Coming home should come at a price. Above all we should make our citizens feel more responsible for the nation's future. We should make clear that citizenship means not just that one has rights, but that one also has obligations, duties. To achieve this we need a new political structure. This can come only through a period of new crisis.