Three options for the nation state

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Three options for the nation state

New Perspectives Quarterly v. 17 no2 (Spring 2000) p. 13-15

LOS ANGELES -- There are three possible outcomes of the modern state as it faces the challenges of globalization:.

1 A return to nationalism and the cutting off from globalization as happened in 1914. Vertical ties would then triumph over horizontal links. We know this is possible because it has already happened twice -- once before World War I and secondly after the Great Depression in the 1930s. Nationalism and domestic introversion could now be rising. Displayed by Seattle protestors circling the meetings of the WTO, it festers in intra-European disputes about beef and US-European differences over bananas and genetically altered foods. And while Western nations quarrel over such minutiae, the Third World rejects a new "eco-imperialism" which seeks to impose limits on its economic development. Sensitive nations resent the influence of the world market and international institutions like the WTO. If these concerns are not addressed, tariffs may rise and economic closure ensue. In time military conflict could come back as newly mercantilist economies re-establish the well-worn fetishes of territoriality.

2 A second outcome heralds the growing decline of the state as a protector of individuals and groups. The growing irrelevance and ineffectiveness of political authority may lead to what Marx and Lenin predicted -- the withering away of the state. But their view was that under communism and extreme social altruism, a state would not be necessary. People would produce to serve other people’s needs as members of a string quartet play harmoniously in unison. But in musical compositions, there is always a written score. Contemporary globalization follows no such plan, and international corporations can exploit markets and labor to their hearts’ content. The whole trend of modern democratic politics since the 19th century would then be reversed. That trend has favored protection of individuals and groups by the state against the untrammeled volatility of the market. And under conditions of extreme globalization, they will not get that protection.

Trading and economic relationships could then yield to a new form of medievalism -- with competing foci of loyalty: state, corporation, religion, or regional locale (such as the European Union). In this struggle, competing but not territorially based corporations would take the place of states. Loyalty to the firm -- with early-morning salutes by workers at Mitsubishi as the norm -- would become a worldwide phenomenon. One version would be like that of Dutch and British East India companies -- commercial entities with private armies competing for economic markets and sources of raw materials on a global basis -- without exercising full political authority.

If economics totally displaces politics, corruption and vote-buying will prevail. Administrative, judicial and political outcomes would then be available for purchase. The social contract would be destroyed. Public goods would everywhere give way to private goods. Those who find this tolerable may not fully realize that unless there is impartial regulation of the market, private goods will ultimately disappear as well. Economic growth will flounder and an ungoverned and unregulated society will collapse into anarchy. A new world federation could in theory emerge out of this chaos, but it has never occurred before and certainly cannot confidently be predicted now.

3 But such apocalyptic outcomes are by no means inevitable. Since the 1980s, states have regenerated themselves to cope with the challenges of globalization. They know they cannot control all economic outcomes: their jurisdiction is too limited to direct the international economic forces that may come to determine their fates. But they have not given up. Instead, new virtual states have accepted the challenge and based much of their production overseas. They are riding the crest of globalization, inventing a new form of rapid technological development in high level services -- research and development, product design, financing and marketing. They increasingly rely on production abroad instead of exports. They thereby reduce costs and increase their competitiveness against other nations. In so doing, states have come to understand the lesson taught by the virtual corporations in Silicon Valley -- that decentralizing production results in 50 percent higher returns. Among countries, Hong Kong, Singapore, Taiwan, Switzerland -- and increasingly Israel, England and even Germany have pursued such virtual strategies. The United States is not far behind with more than 70 percent of its GDP in services and only 18 percent in manufacturing.

But virtuality can create uncertainties. If your manufacturing industry is largely located elsewhere, you cannot indulge in wholesale military quarrels with your neighbors. You depend upon open sea lanes and communications links which may be cut. You need continuing access to raw materials and even labor forces which may be found somewhere else. Key elements of technology and software may be produced abroad. Peace benefits virtual states. Their very interdependence of production -- far greater than the past interdependence of trade -- assures more rapid growth.

As virtual or "head" nations concentrate on research and product design, new manufacturing or "body" nations develop to do the production. For each virtual state, there is a manufacturing equivalent like China, India or Mexico, and commodity nations like Saudi Arabia, Kuwait, Azerbaijan and Kazakhstan. The three types are knit together in a network of functional relationships which benefit each but leave them all incomplete. Body nations depend on their link with head nations. Raw material producers can do nothing without connections to manufacturing powerhouses. In every case, autonomy stems from the ability to switch associates from time to time. In the new anatomic surgery, bodies can change their heads and heads their bodies.

In the developed world, virtuality does not forestall dissatisfaction. Virtual states require new risk-taking elites who are willing to aim for higher growth and productivity at the expense of economic certainty and stability. In the future, Keynesian-style welfare policies will be only for the faint hearted. Virtual states also need energetic and entrepreneurial governments that can work with foreign corporations, labor and factors of production to achieve economic growth. They will thrive on uncertainty as Singapore, Taiwan and the Netherlands have done in the search for technical innovation and markets.

What about their populations? Some groups will change jobs frequently, move to other cities and foreign countries, learn new technologies and languages. Adaptable worker/managers will chart an ecumenical existence in many regions of the world. But their less educated compatriots will be tied to routine occupations in the backwaters of commerce. Governments will lose support among the disaffected, and ethnic and religious challenges may disturb the normal economic process. Governments can only retain loyalty by explaining that their citizens need to learn and be adjustable in a worldwide economy which no nation controls. People must have lessened expectations of public welfare but higher anticipations of private gain. They will exchange comfort for challenge.

In this process the new and dynamic states of Southeast Asia will lead the way. Americans will follow in their wake, with the smaller trading nations of Europe right behind. Education will take the place of manual toil, and governments will compete to recruit the best human capital. Countries will become internationalized as Latinos, Asians, North Africans and Eastern Europeans migrate to find jobs in response to increasing labor shortages. Rewards will go to the swift and the industrious, but loyalty to new virtual states will not decline. Governments will no longer be expected to offer universal welfare -- the ultimate safety net. Instead, they will act as business consultants -- the McKinseys and Andersons of the political world -- teaching modern peoples to become individual entrepreneurs.