No End to the Nation-State, Thanks.

I came across a Parag Khanna editorial in the New York Times that starts of documenting the CIA’s “Alternative Worlds” scenario – one of which is a so-called “non-state world” – and culminates in some kind of weird romance about the Silk Road days of yore when prosperous traders were the lifeblood of the Arabian Peninsula.

I need to make two quick points, one positive and the other normative. Khanna’s principal charge is that this “non-state world” is already here. The emergence of special economic zones, Dubai, and Hong Kong as centers of international commerce somehow hark the end of the international system as we know it:

A quick scan across the world reveals that where growth and innovation have been most successful, a hybrid public-private, domestic-foreign nexus lies beneath the miracle. These aren’t states; they’re “para-states” — or, in one common parlance, “special economic zones.”

Across Africa, the Middle East and Asia, hundreds of such zones have sprung up in recent decades. In 1980, Shenzhen became China’s first; now they blanket China, which has become the world’s second largest economy.

The Arab world has more than 300 of them, though more than half are concentrated in one city: Dubai. Beginning with Jebel Ali Free Zone, which is today one of the world’s largest and most efficient ports, and now encompasses finance, media, education, health care and logistics, Dubai is as much a dense set of internationally regulated commercial hubs as it is the most populous emirate of a sovereign Arab federation.

This complex layering of territorial, legal and commercial authority goes hand in hand with the second great political trend of the age: devolution.

In the face of rapid urbanization, every city, state or province wants to call its own shots. And they can, as nations depend on their largest cities more than the reverse.

Mayor Michael R. Bloomberg of New York City is fond of saying, “I don’t listen to Washington much.” But it’s clear that Washington listens to him. The same is true for mayors elsewhere in the world, which is why at least eight former mayors are now heads of state.

Scotland and Wales in Britain, the Basque Country and Catalonia in Spain, British Columbia in Canada, Western Australia and just about every Indian state — all are places seeking maximum fiscal and policy autonomy from their national capitals.

There’s a good argument that as urbanization proceeds and technology improves, cities ought to have more autonomy in local decisions. But that’s hardly true right now. Mayor Bloomberg can say whatever the hell he wants but, as it happens, he has to listen to Washington. It is the American people from the Dakotas and Carolinas that signed into law Dodd-Frank, which will regulate New York City’s largest and most important export. It was a Federal Judge that ruled against stop-and-frisk, and Bloomberg wasn’t even able to strongarm the state judiciary when it came to his ban on Sugary drinks.

If there’s one city-within-a-nation that has the political and economic clout, it’s New York City. If there’s one man to exploit that, it’s Bloomberg. And it’s not really worked out all too much in his favor. Indeed, since the death of Benjamin Strong, economic power has shifted from New York City to Washington, where the most important financial and economic decisions are made. And as shitty as the government in DC may be, they represent the people of the United States, not New York.

Let’s take the more surprising example of India, which as far cry from “autonomous cities”. Take a look at this McKinsey report (which, as far as they go, is pretty good) on India’s Urban Awaking. One of the clearest detriments to progress in urban India is the abject disempowerment of the urban voter. Few Indian cities – aside from New Delhi, which is its own state – have a more-than-ceremonial mayor. City politics are dominated by the Chief Minister of encompassing state. That means local action in Chennai is dominated by the mess-of-a-women that is Jayalalitha. And it’s no better in the more “advanced” cities of Bombay or Bangalore. Local politics is slave to rural concerns.

The money is in the cities, but the votes are in the country. National pro-urban policies are in complete disrepair, while India’s urban taxpayers fund the world’s largest welfare program for the villagers. It’s a good program as far as redistribution goes, but horrible in its effect on the productivity and progress – modern commerce – about which Khanna speaks. Not only does it come with the inefficiencies of taxes in general, but it engenders a culture of demechanization as the Indian government wants to guarantee maximum employment in the shittiest jobs as far as they are in the country.

A city-state? I think not.

And sure, there will always be a Dubai, Singapore, or Hong Kong. But as far as commerce go, the whole of the United States doesn’t do too badly. We’re the most economically free country, save two Asian city-states with a population less than New York City, and that counts for something. Power is also concentrated at the national level. As far as international politics go, who even cares what the Sheiks in Dubai want? It’s all about Obama, Putin, Assad, and Jinping. These are people who derive their powers from a national electorate.

But there’s a deeper, more normative problem, with Khanna’s assessment:

The Arab world will not be resurrected to its old glory until its map is redrawn to resemble a collection of autonomous national oases linked by Silk Roads of commerce. Ethnic, linguistic and sectarian communities may continue to press for independence, and no doubt the Palestinians and Kurds deserve it.

And yet more fragmentation and division, even new sovereign states, are a crucial step in a longer process toward building transnational stability among neighbors.

The classical world is gone. And thank god for it. It’s not like being born anywhere in Arabia is great today, but it is infinitely better than it was when Islamic culture ruled the world. It’s too easy to think about the “more cultured” days of our classical past.

At a more analytical level, nation states are key to economic mobility and prosperity. Think about what Dubai, Singapore, and Hong Kong represent – other than a gleaming success story of Khanna’s brave new world. They represent inequality and exclusivity. They represent don’t represent talent as much as wasted talent. Indeed, each of them almost solely represents all that was wrong with the world in 2008. Finance is key to a modern economy, and no one is going to deny it. But it would be a brutal joke to say that the kind of nonsense exported from these “modern city-states” is anything like what America (and, ugh, Britain) once did. It’s a joke to assume the real innovation comes from real estate in Dubai instead of modern ways to improve livelihoods in the heart of India and Africa (not the urban fringes thereof).

Within a nation state, because of fiscal union, someone can dream of settling in the country, but also making it to Manhattan. What kind of dream does Dubai represent in the world – other than young American grads that want a consulting gig for two years so they can party a little harder.

  1. TravisV said:

    I think you forgot to give this post a title……..

  2. ‘ It is the American people from the Dakotas and Carolinas that signed into law Dodd-Frank….’

    No, they did not. You need to break yourself of the habit or repeating soothing cliches. Government is not the personification of the public interest, it is the amalgam of special interests and intellectual fashions. As such, the only defense the ‘American people’ have is the one written into the Constitution by the Founding Fathers; faction countering faction.

  3. Handle said:

    The other things the city states have going for them is military alliance with, and protection provided by, a large and powerful nation state. The Gulf Cooperation Council exists for a reason. When US military preeminence fades with our capacity to afford a comparative qualitative and quantitative advantage over our rising peer competitors, the notion of a truly independent city state in the midst of parrying giants will seem even more laughable.

  4. GT said:

    “And as shitty as the government in DC may be, they represent the people of the United States, not New York.”


    Representative government is one of the foundational lies that enable the political class to parasitise the productive segment of society (the other foundational lie is that the political class can shift output towards some imaginary social optimum by remediating market failures – despite the non-existence of an interpersonally-comparable measure of utility).

    I take it you’ve never read Arrow’s 1950 paper – (A difficulty in the Concept of Social Welfare – The Journal of Political Economy, Vol. 58, No. 4. (Aug., 1950), pp. 328-346).

    Seriously, it reflects badly on you that you reveal yourself to being 60 years behind the curve… a seminal paper on the failure of the ‘democratic’ (will of the largest interested minority) system to reflect social preferences (or the ‘general will’ if you prefer the cartoon gibberish spouted by Rousseau).

    From there, you might want to investigate the Gibbard-Satterthwait Theorem (that all voting systems are exlcusionary or corrupt) and Hölmstrom’s Theorem (that it is not possible to have a set of agents that reach a Pareto optimum without violating a budget constraint).

  5. ralph said:

    GT and Patrick — get off the precision bugaboos. Of course there is corruption and of course there’s no such thing as a “representative body” that isn’t riven with interests and equivocations, qualifications, and corruption. That said, what many countries have got is an intermediated system that, as far as can be known, combines the better aspects of “popular will representation” as well as “intrinsic drags on enacting that will” as a restraint on unbridled passions destroying the state itself and therefore whatever will it represents.

    Whatever. Of course you’re not wrong about some of these items, but for the most part, they simply point out why it’s not possible to perfectly reflect any “common will”. Duh. The question is how to strike a good, sustainable balance, not whether it’s a perfect reflection of common will.

    That said, Ashok, you say:

    “The classical world is gone. And thank god for it. It’s not like being born anywhere in Arabia is great today, but it is infinitely better than it was when Islamic culture ruled the world. It’s too easy to think about the “more cultured” days of our classical past.”

    My question to you is, can you give me some sense of what you’re thinking of when you say, “infinitely better”? The reason I say this is that if by this you mean that the general standard of living has risen, because… modernity…. I’d say, well, maybe. But if by this you mean that NEVER has “arabia” been ruled better — and by arabia you mean specifically the Arabian Peninsula but not more — well, maybe, but I think you’re on shakier ground. What, precisely, do you mean by this phrase?

    I think the rest of your post is quite good: everyone wants to imagine the possibilities for change in the world, but sometimes the excitement for such change gets in the way of thinking clearly about things.

    Keep it up!

    • GT said:

      “Precision bugaboos?” You’re implying that a system that claims the right to monopolise force on the basis that it reflects the popular will and serves the general welfare, doesn’t really need to show that it can do either – but still retains the right to kill anyone on its patch who refuses to comply with its edicts.

      And if it can be shown, irrefutably, that under any conceivable selection mechanism for the cadres of the parasite class, that the system can neither determine the ‘popular will’, nor predict with any precision whether or not a given policy will advance ‘social welfare’ – as Arrow showed, and as Gibbard-Satterthwait reinforces – you’re still prepared to claim that the system has a credible and logically-defensible basis.

      There is no need to ‘strike a balance’ if the (claimed) fundamental objective can not possibly be attained.

      Frankly, the ‘strike a balance’ stuff shows the cognitive capacity of a bag of hammers. It’s the logical equivalent of ‘epicycles’ in astronomy, supernaturalism in cosmogony, and the Divine Right of Kings in political theory – simply assert “Well, OK, so the data shows that the system I support is bullshit… but it’s what’s here, so let’s not change it.”

      Also, there is an implied assertion in such a claim, that society ‘needs’ leadership – which fails to understand the intertemporal dynamics of creating a concentration of easily-acquired wealth and power: moral hazard, adverse selection… things that economics has known about for two centuries – political competition attracts sociopathic megalomaniacs becausee they have a comparative advantage (no qualms about lying, misrepresenting, or even using the state’s goons to crush dissent in the limiting case). When you only need to fool the bottom quarter of the IQ curve and 25% of the rest (to get to the 37% that most ‘popular mandates’ actually achieve) and you’re prepared to say anything to do so… well, you know how that ends: parasitic sociopaths in charge.

      The (lack of) thinking your “Let’s not get caught up in ‘precision'” argument entails, kept humanity stultified for centuries – parasites who claimed to be the sole intermediaries between the supernatural and the mundane contended amongst themselves for power and wealth… while progress stopped for almost a millennium (and such progress as there was stemmed almost entirely from dissenters). Membership of the Jesus Cult – often, but not always, in a specified form – was mandatory in the West then, just as membership of the State is mandatory now (you can’t live on a bit of dirt that a State claims to own without being ‘included’ in its livestock). And it was based on a similar set of lies from a similar set of people.

      And so it is now: the same psychotypes that gave us the Borgias, Bellarmine, Robespierre and the auto da fé, form the political class. They are not there to ‘determine the public will’ or to ‘advance the general welfare’ – they have their own ambitions – as evidenced by the fact that they retire FAR richer than is possible given their salaries and any sensible assumptions about savings rates and rates of return. Google “principal-agent problem”: again, part of the firmament of economics since late in the last millennium (the key reference papers are Rees’ 1985 papers in the BER, but as a concept it’s been understood that political players have their own agendas since forever – arguably back to Aristotle).

      As Carl Sagan quipped: extraordinary claims require extraordinary evidence.

      The claim that the State serves the public welfare or the public interest, and that democracy is remotely capable of reflecting social preferences (or that ‘social preferences’ is even a logically-meaningful construct), are jointly EXTREMELY extraordinary – even ignoring rampant corruption, abuse, and inefficiency. And there’s no evidence for them, and abundant evidence against (as well as the wrinkle of their claims being logically impossible).

      Going a step further, the claim that the State therefore has the right to force those who do not wish to participate in its funding or its activities, is even more extraordinary (note: the sole economic support for a State is predicated on remediation of public-goods problems – I can step you through that theory in excruciating detail, but suffice it to say that (1) Harberger triangles measure dollar value, which is not utility, and utility is the objective; (2) even if they did, there is the ethical/moral problem of force).

      The State also has intrinsically-negative intertemporal consequences for the ‘social balance sheet’ as a result of mismatches between the ‘investment’ horizons of its cadres (politicians) and society at large: long-horizon decisions are made by people with short horizons – something as dumb as can be imagined (it’s similar to, but worse than, financing a long-term project with short-term money).

    • ‘… what many countries have got is an intermediated system that, as far as can be known, combines the better aspects of “popular will representation” as well as “intrinsic drags on enacting that will” as a restraint on unbridled passions destroying the state itself and therefore whatever will it represents.’

      What countries?

      • ralph said:

        the US is, of course, a VERY conservative example, in that we drag any popular pressure into politics with 27,000 points of veto; nonetheless, it is an example of a system with longevity that does in fact slowly respond to strong mass social needs and pressures. I could wave a hand at Western Europe, of course, and then there are other places around the world that do interesting jobs at all this.

        I expect, of course, that you’ll respond by correctly pointing out all the violence and interest group capture and corruption. None of this would be wrong at all, and I’m likely to agree with your particular arguments, because I share them.

        You, in response, are to inform us all how a better system could not only (1) reflect whatever we take to be the popular will vastly better in the abstract BUT (2) how we might get that system in the world we really live in and (3) even if you could get it, how it was supposed to protect itself from counterrevolution once in place but without resorting to the same tactics we already know and love in our own world (NSA, police violence, gendered violence, race-based infrastructure disinvestment and violence, the list goes on).

        Absent any attempt to get at that, and you’re just enjoying an afternoon at the blogs. I am totally up for a better way to get the real interests of people up front and center. But it turns out to be a harder problem than people think it is, simply because the history of the world demonstrates that if it were easy, we’d have already done it.

        And everyone would have moved to live there. States are violent gangsters. But you need to figure out which violent gangsters you want, and once you got them, how do you keep them within their bounds? Good luck.

      • That’s what I thought, you have no countries.

      • ralph said:

        That’s it? That’s all you got? There are no countries with systems where parts are worth pursuing? OK.

      • Excuse me, I asked you what countries YOU were referring to, and you named none. Except for the U.S.A., which would seem to have missed the point that I made that the system we have isn’t in fact that.

        I.e., the ball is in your court to show countries where politics isn’t just an amalgam of special interests and intellectual fashions that are opposed to the ‘general welfare’.

  6. ralph said:

    Aw, GT, that’s just a crapload of red herrings for our afternoon consumption and you know it. If you think that somehow I **like** the corruption, imbalance, attenuation of will, and so on that characterizes **any** human attempt to reflect “common will” at any one moment, there’s no point in talking to you or anyone else! Of course I’d like our human institutions to reflect what I take to be a more faithful representation of what I think mass will might be.

    But that turns out to be difficult for the reasons those works CITE as well as any number of others as well. Your list is hardly exhaustive at all, and you know it as well as I. If you want to discuss any particular “democratic republican” failure, I’m way to the left of almost anyone I know; it’s not about desire.

    Instead, I see the claim being this: We have a bunch of systems that attempt to either promote or restrain popular will. Turns out that, for restraint of popular will, the U.S. has some fairly reasonable “constraints” — the system basically has been through the tests of catastrophic civil wars and world wars and done well for longevity and slow-moving but reasonably fundamental social improvement in a lot of areas.

    That said, it was built on death and annihilation, like all states are, so we have to cope with that and what it means as well. I call it as I see it.

    No, the “precision bugaboo” I have in mind here is the idea that because we can identify so many areas in which our institutions either thwart the popular will — insofar as we know what it is — or are captured by so many interests who themselves thwart the popular will, we can have no statement at all about whether our current world is somehow a dramatic improvement on what Ashok referred to as “the classic world”. (Which I take to be a shorthand for, “a long, long time ago when well killed the popular will and didn’t ask questions and had no real economic trading system terribly important to the majority of humans it served.”)

    You wanna decide that, unless we **completely free the popular will” at all times and places that we cannot discuss states as being better or worse across time and space, feel free. I’ll step out of that conversation. We have the world we live with and have to improve it without, at the same time, destroy what it has done well. That’s a hard thing to do.

    As to Ashok’s point: if you want to qualify his statements to “And as shitty as the government in DC may be, they represent the generalized, corrupted, and filtered interests of the political regions of the United States, not those of New York.” I’m totally fine with that. But if that’s what you want to say, then I’d say to you not only that I agree but that you are an extremely ingenerous reader. Is that what you want to say?

    • GT said:

      I think my understanding of the flaws in the concept of the ‘popular will’ (and your misunderstanding of them or willingness to ignore them) is what drives our disagreement: you think that there is a discernible ‘popular will’, and that it is politically valid to advance that ‘popular will’ in some or other direction (fingers crossed that it’s in a direction that you find palatable… what if it’s not? What if [GodwinAlert]Hitler[/GodwinAlert] came to power through the ballot plus a coalition? Oh, wait….)

      What Arrow showed is that aggregating individual ordinal preferences will not lead to a ‘social welfare’ function that has necessary attributes for a valid welfare function; specifically, transitivity.

      Transitivity in preferences is not a small issue: ask what it means if the aggregate social welfare function takes a form whereby
      policy A is preferred to policy B, AND
      policy B is preferred to policy C, AND
      policy C is preferred to policy A.

      What it implies is that the phrase ‘popular will’ is, like most 3-4 syllable political tropes, a nonsense that does not admit of serious consideration. From there it’s just a fluffy hand-waving trope used to justify whatever some clique wants implemented – with the costs to be borne by the rest of society.

      Having a ‘bunch of systems that attempt to promote or restrain popular will’ is about as sensible as having a bunch of systems for determining the colour of the Easter Bunny, or determining what the invisible Sky Wizard thinks about genital mutilation: it is not that such an endeavour will not attract those who claim to be able to discern an ‘answer’ – it’s that he question itself is fundamentally flawed. To fiction-quote Dr Johnson (as depicted in “Blackadder”): “it would be like fitting wheels to a tomato: time consuming, but ultimately pointless”.

      You mention that the US State has ‘survived’ both sui-generis slaughter (the prevention of secession) and inter-State slaughter (when the US intervened – late – in European and Pacific conflicts that posed zero threat to the US land mass or population). So what? Church hegemony survived wide-scale slaughter for fifteen centuries – that did not mean that it did not need to be sloughed off in order for human society to make progress.

      And you seem to be claiming that the State deserves praise for “slow-moving but reasonably fundamental social improvement in a lot of areas” – the post hoc ergo propter hoc fallacy best embodied in Overlord Obama’s Stalin-esque “You didn’t build that” atrocimacy.

      Again, it’s possible to draw informative historical parallels with the period where the Church dominated economic, social and political life. The same sorts of people claimed credit for such progress as was made (despite being actively hostile to progress) and claimed also that, if they were not in charge, Dat Ol’ Debbil would stalk the earth and life be worse. And nothing was further from the truth.

      To people like me, progress/improvement is never a surprise: everybody seeks happiness, and part of the process of doing so involves systematically trying to get more output using less input (thus creating more surplus). The profit motive is the core engine of technological progress: if .gov was actually capable of spotting (and funding) activity that genuinely exhibited increasing returns, it would be able to be voluntary and still run a surplus!. That’s another way that economic literacy helps one know that ‘industry policy’ is a lie: industries favoured by .gov seldom last longer than the subsidies – if .gov was a venture capital firm, it would go out of business.

      As technology has expanded since the Industrial Revolution, basic (caloric and shelter) needs have become relatively easier to satisfy.That gives more scope for ‘supernumerary’ activity: the 95% of people who are not sociopaths – who experience empathy – will widen their circle of ‘give a shit’ as resource competition becomes less life-threatening. The ‘law of demand’ works for ‘altruism’, you see.

      But as the capacity of the system to furnish basic needs expands, the ‘other 5%’ – the high-functioning sociopaths – spot the opportunity to (a) foist their opinions on the rest; and (b) live parasitically on the rest of the system.

      Initially they are open about things (“We won the war, so this stuff is now ours: give us some of your wheat or we’ll axe your head”), but as time passes they concoct a story (“God says I’m in charge” or “Y’all got to vote”). And over time, the share of ‘surplus’ output that these vermin take, grows. (So across the OECD, G/GDP – the share of total government expenditure as a proportion of GDP – has risen from 7% in 1912, to 47% now).

      So the fact that ‘social improvement’ has been ‘slow-moving’, actually has a lot to do with the State
      (a) taking large chunks of surplus output by force or the threat of force (thus preventing re-investment in highest-alternative-use projects – which reduces the rate of technological advancement);
      (b) periodically setting large swathes of the earth ablaze in their idiotic, negative-expected-value pissing contests (wars); and
      (c) stymie-ing otherwise-profitable activity in the same way that the Church sought to protect itself and its cronies from advances in science.

      You mention institutional capture: how about don’t have institutions that rely on force or fraud? That’s where the future lies – whether the State wants it or not. Just as the printing press led inexorably to the “freedom of conscience” movement, the Enlightenment and the end of Church hegemony, the internet is leading, equally inexorably, to the exposure of the lies at the root of the theory of the State.

      You might be aware that something approaching 1/6th of humanity live, work and interact – voluntarily – in places where there is effectively no government: no ‘law enforcement’ to speak of, no .gov enforcement of contract (much like the law merchant). I’m talking about the 1 billion ‘squatters’ who have migrated from villages to shanty-towns, world-wide.

      These shanty towns are case studies in anarchic systems – and they are also the most rapid mechanism ever devised for becoming less-poor, which is why 1.5 million people a week make that journey to what we call ‘slums’. Life there is not as comfortable as life in the West, of course – but the counterfactual is not ‘life in the West’ but ‘life in the village you came from’: we in the developed world have a head start equal to several dozen generations’ worth of technological development (even though that development has been retarded by the cancer of government)… whereas LDC development has been retarded as a matter of policy by our political class (when they weren’t being outright slaughtered – again, not due to interpersonal violence, but doe to State-authored violence).

      I don’t know what “ingenerous reader” means. Does it mean that if someone writes something that is nonsense, you’re supposed to refrain from criticism on the basis that it might have been ‘well intended’?

      Sorry, no sale: that’s the opposite of the ‘marketplace of ideas’, and reflects the “give everybody a trophy for participating” world-view that has been a disaster in public educaiton, add has resulted in half of the adult population being unable to read properly (see OECD and Statistics Canada (2011) Literacy for Life: Further Results from the Adult Literacy and Life Skills Survey: Table 2.3 [p 61] gives the level 4/5 (grouped) breakdown by country, and shows that 40% of adults in the West can’t understand the instructions on a bottle of prescription medication).

      (As an aside: what happens when a century and a half of .gov education generates those WOEFUL results? Calls for bigger State education budgets! Again, the opposite of what ‘failure’ entails in the non-government-favoured segments of society).

      • ralph said:

        now THAT’s a novel. I’ll digest when I get a moment, but I appreciate the effort that went into your reply.

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