PART III
THESIS: THE MARKET STATE IS SUPERSEDING THE NATION-STATE AS A CONSEQUENCE OF THE END OF THE LONG WAR
The end of the Long War has been quickly followed by the emergence of a new constitutional order. This new form is the market-state. Whereas the nation-state, with its mass free public education, universal franchise, and social security policies, promised to guarantee the welfare of the nation, the market-state promises instead to maximize the opportunity of the people and thus tends to privatize many state activities and to make voting and representative government less influential and more responsive to the market. The United States, a principal innovator in the development of the market-state, must fashion its strategic policies with this fundamental constitutional change in mind.
Homage to a Government
Next year we are to bring the soldiers home
For lack of money, and it is all right.
Places they guarded, or kept orderly,
Must guard themselves, and keep themselves orderly.
We want the money for ourselves at home
Instead of working. And this is all right.
It's hard to say who wanted it to happen,
But now it's been decided nobody minds.
The places are a long way off, not here,
Which is all right, and from what we hear
The soldiers there only made trouble happen.
Next year we shall be easier in our minds.
Next year we shall be living in a country
That brought its soldiers home for lack of money.
The statues will be standing in the same
Tree-muffled squares, and look nearly the same.
Our children will not know it's a different country.
All we can hope to leave them now is money.
—Philip Larkin
CHAPTER TEN
One has already to know (or be able to do) something in order to be capable of asking a thing's name.
—Ludwig Wittgenstein*
DIFFERENT CONSTITUTIONAL orders are responsive to different demands for legitimacy. Legitimating characteristics, such as dynastic rights, that are sufficient for one constitutional order are inadequate for another. The reason that the constitutional order of the nation-state is undergoing a transformation is that it faces a crisis of legitimation. When the American state changes to reflect a new constitutional archetype, † it will do so in response to demands for new bases for legitimacy, demands that arise in part as a consequence of the strategic innovations that won the Long War. In light of this new constitutional form of the State, the Americans will desire an appropriate national security paradigm. The reason the United States needs a new national security paradigm is that the Wilsonian internationalism‡ that guided us throughout the Long War was derived from the constitutional order of the nation-state. Obviously, Wilsonian internationalism was not the only option available to nation-states as diverse as Fascist Italy and Communist China; perhaps less obviously, determining the rough shape of the new constitutional form the United States is in the process of adopting will not by itself determine how and when the U.S. should use force in international affairs. That determination will require an examination of the special situation of the United States, a unique state with unique advantages and burdens.
These three subjects—the source of the constitutional crisis of legitimation and the nature of the new constitutional order; the practical choices a State faces in defining a national security paradigm; and the crafting of such a paradigm that is compatible with that order and responsive to our particular position—are the subjects of the three final chapters of Book I.
THE CRISIS OF THE NATION-STATE
As we saw in the historical narratives of Part II, the nation-state is a rela-tively recent structure. Indeed, the modern State itself is of fairly recent vintage in the life of civilized mankind, dating as it does from roughly the end of the fifteenth century.1 Before that period European governance divided jurisdiction among ecclesiastical authorities, independent cities, feudal rulers (whose own relationships were far from simple), and various oligarchies. Only when a strategic threat to the wealthy and sophisticated cities of Italy provoked a crisis of survival did these societies turn to the institutional bureaucratization of governing authority that became the modern state. The reification of the State that resulted conveyed to a state structure the two characteristics of sovereignty that had hitherto exclusively been possessed by the person of the prince—a monopoly on the legitimate use of violence domestically (the role of lawgiver) and the independence of will in foreign affairs (the right of sovereignty).
We then saw a series of changes in the structure of states, a morphology of constitutional orders or archetypes. These changes culminated in the form of the nation-state late in the nineteenth century. It was only then that the idea took hold that a State is properly—that is to say, legitimately— formed by the boundaries of its national people and not simply by the conquered or inherited territory of rulers. At each stage in this morphology, constitutional change was accompanied by strategic innovation, as those states that were able to consolidate power within a unitary jurisdiction of taxation, regulation, and administration developed new strategies or copied the strategic breakthroughs of their competitors. It was the strategic successes of the European state that made its archetypal constitutional structures the models for the world until finally the most recent form—that of the nation-state—was turned against a receding form, the colonial state-nation, and the European model became global and virtually universal.*
Why should it be that now, at the moment of its most widespread adoption, this model should be superseded? We have seen how the constitutional archetype of the nation-state presented states with three competing options: fascism, liberal parliamentarianism, and communism. The unresolved issue as to which of these options would best assure the legitimacy of the nation-state caused the Long War to persist for most of this century; now, at the moment of resolution, why would a new constitutional question be put to the conflict-weary states of the world?
It was only in 1989 that Francis Fukuyama wrote:
What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of postwar history, but the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government.†
How can it be that, so soon after this historic success, the fundamental form of the nation-state, of which the liberal democracies are a triumphant exemplar, would metamorphose into a new archetypal model? The reason lies in the Long War itself and the strategic innovations by which that war was won by the liberal democracies.
The nation-state has accumulated various responsibilities. The legitimating promises of earlier, preceding constitutional forms are often inherited by successive archetypes as entrenched expectations and entitlements. The princely state promised external security, the freedom from domination and interference by foreign powers. The kingly state inherited this responsibility and added the promise of internal stability. The territorial state added the promise of expanding material wealth, to which the state-nation further added the civil and political rights of popular sovereignty. To all these responsibilities the nation-state added the promise of providing economic security and public goods to its people. The failure of the Soviet Union to live up to this expectation, as much as any other cause, contributed to its delegitimation in the eyes of its nation. Very simply, the strategic innovations of the Long War will make it increasingly difficult for the nation-state to fulfill its responsibilities. That will account for its delegitimation. The new constitutional order that will supersede the nation-state will be one that copes better with these new demands of legitimation, by redefining the fundamental compact on which the assumption of legitimate power is based.
Three strategic innovations won the Long War: nuclear weapons, international communications, and the technology of rapid mathematical computation. Each has wrought a dramatic change in the military, cultural, and economic challenges that face the nation-state. In each of these spheres, the nation-state faces ever increasing difficulty in maintaining the credibility of its claim to provide public goods for the nation.
SECURITY
The State exists to master violence: it came into being in order to establish a monopoly on domestic violence, which is a necessary condition for law, and to protect its jurisdiction from foreign violence, which is the basis for strategy. If the State is unable to deliver on these promises, it will be changed; if the reason it cannot deliver is rooted in its constitutional form, then that form will change. A State that could neither protect its citizens from crime nor protect its homeland from attack by other states would have ceased to fulfill its most basic reason for being.
The Long War was characterized by many strategic innovations, two of which are especially pertinent to the problem of maintaining external and internal security. First, the Long War was a total war, that is, a struggle in which war was waged directly on the civilian societies supporting the states at war. Without the “total participation [of the belligerent populations] in field and factory as well as in the armed forces, the struggle could not be carried on at all.”2
The strategy of total war is, as has been noted, characteristic of the nation-state. Indeed in the constitutional transition that accompanied the American Civil War, we can observe one state (the Confederacy) that represented an earlier order (the state-nation, whose strategies are indistinguishable from those of Napoleon) fighting another state (the Union) that came to stand for a new insurgent order, the nation-state, whose strategies (such as Sherman's March to the Sea) prefigure those of the Long War. The nation-state mobilizes the total resources of the society in pursuit of its political goals, and it is the nation of its adversary that it attacks in order to achieve victory.
In November 1917 Georges Clemenceau was summoned, at age seventy-six, to be prime minister of France in the midst of World War I. His speech to the Chamber of Deputies was composed the night before he assumed office. He wrote with a quill, at his bedside table, wearing a small silk cap. He began, “Nous nous présentons devant vous dans l'insigne pensée d‘une défense integrale…” for he had long been a critic of the previous administration's divided command arrangements, in which the Allies were responsible for their own sectors. But then he scratched out “défense” and replaced it with “guerre.” Not “total defense” but “total war.”
This famous address to the chamber reflected the new perspective and responsibility of the nation-state (of which Clemenceau, in opposition to the French imperialists of his day, was a passionate advocate). To a packed chamber (Winston Churchill was in the gallery) Clemenceau said,
We present ourselves before you with the unique thought of total war… These Frenchmen whom we are forced to throw into battle, they have rights over us. They want none of our thoughts to be diverted from them, they want none of our acts to be foreign to them. We owe them everything, with no reservation. All for France bleeding on its glory, all for the apotheosis of law triumphant.3
Similarly, in October 1941, President Franklin Roosevelt decided to produce an atomic bomb. Hitler4 and Stalin5 and the Japanese cabinet6 made similar decisions. Of these decisions there was little public knowledge at the time. But such decisions are entirely consistent with the entire strategic pattern of the nation-state.
Certainly since Grant and Sherman, American commanders had accepted that modern wars—which is to say wars between modern societies capable of fielding and supporting vast modern armies—would not be won by the elegant Napoleonic maneuvers of a Lee or Jackson, isolating, distracting and dividing armies in the field, but by the relentless destruction of a society's ability to carry on. The theory of strategic bombing holds that air power will accelerate this process by leapfrogging the lines of defense and directly attacking the supporting society… The atomic bomb was developed [by the United States and the United Kingdom] as a weapon that, like other counter-city incendiary bombs, could be used to compel the Axis political structure to collapse.*
Even though the development of nuclear weapons brought the strategy of the nation-state to its apogee of effectiveness—“the apotheosis of law triumphant”—and ended the Long War by stalemating the superpower military conflict, these weapons will progressively undermine the nation-state's ability to protect the nation from foreign attack. Even if most states cannot expect to match the American arsenal, an increasing number will have access to a variety of low-cost launchers, nuclear warheads, and other weapons of mass destruction. Of course such states would not be able to win an all-out war with the United States, Britain, Russia, France, or China (the largest members of the nuclear club), but by threatening to use such weapons against U.S. forces abroad, or her regional allies, or even against American continental territory, such states can paralyze American policy.
As one commentator has observed, “Certainly had Saddam Hussein been possessed of a working nuclear arsenal, the United States would have been far less willing to station half a million troops, a sizable fraction of its air forces, and a large naval armada within easy reach of Iraq's borders,”7 an observation that will not be lost on most world leaders. The consequence of this development for the projection of conventional forces is profound. It's not so much that nuclear weapons render the promise of security to the citizens of the nation-state unbelievable per se; rather it is that only the possession of weapons of mass destruction can hope to validate that promise, with the unavoidable result that no nation-state can afford to be without the protection of such weapons, because their conventional forces are utterly vulnerable to threats from the states that do possess these weapons. With the Long War ended, once the nuclear umbrella of the United States ceases to be extended to cover Japan, Germany, and other states against attack, the drive to acquire weapons of mass destruction will become irresistible. Widespread nuclear proliferation may take time, and there are enormous domestic barriers in the developed world to proliferation to major states such as Germany and Japan. But the arrival of nuclear weapons to regional powers—Israel and Iraq, North and South Korea, India and Pakistan, the Central Asian former Soviet states and the non-Russian Slavic ones, Iran and others—will inevitably engage all the major states. In such a world, over whom is the United States supposed to extend its nuclear protection? For without this guarantee, the nation-states once protected will seek their own nuclear weapons. When this happens, the citizens of every nation-state that possesses such weapons become a target for nuclear attacks against which there is no defense, precisely because there is no other way to use force successfully against such states. This is an historical experience with which Americans have long lived, and one that has so greatly contributed to the demise of the nation-state here. Then the nation-state faces an impossible dilemma: if it does not have nuclear weapons, it cannot guarantee the security of its citizens from foreign attack; if it acquires such weapons, its civilian population will be specifically targeted for annihilation. Finally, it must also be noted that the presence of nuclear weapons in the arsenals of states motivates the development of other weapons of mass destruction—such as chemical, biological, and cyber weapons—as options that are less costly to obtain and the origin of whose use is easier to disguise. Here too it is the decisive impact of nuclear weapons in the Long War that now drives this development.
I will write in a subsequent section about the failure of the nation-state to provide internal security against crime and terrorism. For now, let me suggest that this is a consequence of the national character of nation-states, which isolates and alienates substantial minorities of their citizens even to the point of defining some criminal behavior in essentially ethnic ways. For example, why in the West is marijuana criminalized but martinis are not? Why is polygamy criminalized but not divorce? The ethnic focus of the nation-state, its pervasive analogy to the family, creates a role for antisocial elements, “misfits,” that is connected to violence because violence is the currency of the state. In every society there are such people, and such groups; in the nation-state they become the enemy of the State (and vice versa), because the State itself is fused to a national conception of the culture. Nevertheless, without the Long War and the strategic concept of total war the horrors of present urban life might not have come into being, for much of contemporary crime is a kind of protowar against the State, waged against civilians. Groups of bored and armed young men, quasi-mercenaries (as in Colombia) or quasi-soldiers (as in Somalia), are not so different in kind from the small bands that fought the wars of the Middle Ages, except that in the Middle Ages chivalry to some degree tempered the impact on noncombatants, whereas today “terrorists”—as the nation-state calls them—specifically target civilians.8 Bandits, robbers, guerrillas, gangs have always been part of the domestic security environment. What is new is their access to mechanized weapons, another product of the technological environment of the Long War, and the unique political role of such groups, which pits them against noncombatants as a means of war against the State itself.9 Against these threats, the nation-state is too muscle-bound and too much observed to be of much use. The mobilization of the industrial capacity of a nation is irrelevant to such threats; the fielding of vast tank armies and fleets of airplanes is as clumsy as a bear trying to fend off bees.
WELFARE
The revolution in modern communications that began with the telegraph changed warfare and virtually ensured the emergence of the nation-state.* Ultimately, developments in communications technology also were decisive in the Long War. It has been argued, by Mary Fulbrook among others, that it was the manifest incompetence of the East European regimes, as reflected in the implicit contrasts made available by West European television to the publics of those regimes, that ultimately delegitimated the governments of the Warsaw Pact.12 Eric Helleiner's book, States and the Reemergence of Global Finance: From Bretton Woods to the 1990s, 13 convincingly argues that the government policies of nation-states have played a decisive role in the stunning globalization of commodity pricing, interest rates, and the availability and pricing of credit.14 I should like to connect these works of scholarship by suggesting that it was the change in the nature of the states fighting the Long War, a change brought about in part by communications technology, that moved those states gradually and then rapidly to shift away from controls on the private movement of capital and ultimately to permit the virtually uninhibited flow of capital among developed states. Very simply, the victorious Western nation-states of the Long War, plus West Germany and Japan, by relying on the market to allocate resources efficiently within their domestic economies effectively extrapolated this approach to all the states of their alliance. What had been true within a single state proved true among states. The attempt to control currencies and investment in the socialist states turned out to be a crippling mistake, draining away investment that might have been indifferent to the human rights shortcomings of such regimes, and walling those states off from international trade that required convertible currency. The nation-state, which had established its reputation as a provider of welfare to the nation by guaranteeing a unified national market and providing protection against foreign competition and access to foreign markets, was supercharged when the liberal democracies applied the same principles to their interstate trade and finance. The effect of the reduction on direct controls and taxes on capital movements, the liberalization of long-standing regulatory constraints on financial services, the expansion of relationships with offshore financial harbors, and the disintermediation that accompanied these steps made states much wealthier. At a price.*
The price these states were compelled to pay is a world market that is no longer structured along national lines but rather in a way that is transnational and thus in many ways operates independently of states. At the micro level, this is true of the multinational firm, which moves its location to optimize conditions for its operation, taking into account the nation-state only as a source of tax breaks and incentives to be sought, or as a nettle of regulations to be avoided. Far from being dependent on the local government, these corporations are seen as providing desperately needed jobs and economic activity, so that the state is evaluated on whether its workforce has the necessary skills, and whether its infrastructure has been suitably configured to attract the corporation. At the macro level, this development applies to capital flows, in the face of which every country appears powerless to manage its monetary policy. Walter Wriston, the former chairman of Citibank, described and defended the process of capital decontrol as follows:
The gold standard [of the nineteenth century], replaced by the gold exchange standard, which was replaced by the Bretton Woods arrangements, has now been replaced by the information standard. Unlike the other standards, the information standard is in place, operating, will never go away and has substantially changed the world. What it means, very simply, is that bad monetary and fiscal policies anywhere in the world are reflected within minutes on the Reuters screens in the trading rooms of the world. Money only goes where it's wanted, and only stays where it's well treated, and once you tie the world together with telecommunications and information, the ball game is over. It's a new world, and the fact is, the information standard is more draconian than any gold standard… For the first time in history the politicians of the world can't stop it.15
Approximately four trillion dollars—a figure greater than the entire annual GDP of the United States—is traded every day in currency markets. The consequences of these trades for the economic well-being of any particular nation-state can be decisive. There is a grotesque disparity between the rapid movement of international capital and the ponderous and territorially circumscribed responses of the nation-state, as clumsy as a bear chained to a stake, trying to chase a shifting beam of light.
Finally, communications—in the broadest sense of that term, encompassing all human logistics—have increased the dangers posed by transnational threats (like those of new diseases once confined to remote incubators, or wounds to the global environment that once took centuries to materialize, or abrupt population shifts and migrations that were once locally confined, to take but three examples). Moreover, the global communications network itself presents a new and fraught fragility as to which merely national protection is pathetically inadequate.
The most important consequence of these developments is that the State seems less and less credible as the means by which a continuous improvement in the welfare of its people can be achieved. Many states, including most notably the United States, have experienced considerable difficulty in achieving stability even regarding their own budgets. Their difficulties with chronic deficits and ever-mounting debt are instructive. Of course there is nothing wrong with a state taking on debt. Every corporation does this. If taxes can be analogized to equity contributions, then it can properly be said that a state should maintain the balance of debt and equity it thinks appropriate at any given time. During the development of the American West, and during the Second World War, the U.S. government acquired debt as an even greater proportion of its national wealth than today. What marks the current period as different is the way in which the funds thus acquired have been used: the proceeds of this borrowing have been returned as consumption—that is, to improve the immediate welfare of the people—rather than to fund investment in infrastructure; and much of that consumption has been expatriated as earnings to foreign firms. A nation-state government simply finds itself unable to either balance its budget (because it cannot reduce welfare outlays to all sectors) or redirect the proceeds of its borrowing, because only by borrowing money can it continue plausibly to claim that it is bettering the welfare of its people, much as the manager of a Ponzi scheme, by distributing to investors the proceeds of fresh participants, can continue to claim that his stock portfolio is thriving. Such policies have an inevitable end, as everyone recognizes. There is no reason why a state cannot grow out of its deficit, but to do so, however, it will have to increasingly abandon the objective of the government's maintaining the ever-improving welfare of its citizens.* That is, it will have to change the crucial element of the basis for its legitimacy as a nation-state. As we will see in a later discussion, this is precisely what the Bush administration in the United States and the Blair government in Great Britain were in the midst of doing at the beginning of the twenty-first century.16 From this perspective President Reagan and Prime Minister Thatcher were among the last nation-state leaders. Although they offered radically new policies, they appealed to the same basis on which to judge those policies—whether they improved the welfare of the people—as did their great welfare-state predecessors. Bush and Blair, however, are among the first market-state political leaders. They appeal to a new standard—whether their policies improve and expand the opportunities offered to the public—because this new standard reflects the basis for a new form of the State.
Although it may surprise many readers, the corporation was a nation-state vehicle to improve the welfare of its citizens. Replacing the great trusts and partnerships of the state-nation, the corporation bureaucratized the management of business, making it feasible for the State, through regulation, to temper the profit motive with concern for the public welfare, replacing the enterprising if ruthless entrepreneur with the modern manager. This varied in degree from nation-state to nation-state, but through-out the First World the corporation was the legal structure by which the political objective of improving welfare was grafted onto the market.
The revolution in debt financing of the 1980s dramatically changed this. By mobilizing hitherto uninvolved shareholders and drawing on capital raised by high-yield (junk) bonds that promised—and delivered—excellent rates of return, wave after wave of mergers and takeovers transformed the management of large corporations. The “fat” that new managers were able to squeeze out of the companies they took over in order to pay the interest on the debt by means of which they had bought a controlling percentage of shares, in some measure came from the nonprofit, public welfare role of the corporation. Huge savings did not accrue through shutting down private dining rooms, whatever the corporate raiders said. Savings on this scale came from downsizing and layoffs. The productivity gains made possible by the computer chip and the immediacy of information brought about by the revolution in communications combined to replace corporate managerial control (which tended to favor stability over enhanced competitiveness) with control by the capital markets. The corporation had failed to maximize the opportunities of its shareholders because it insulated business decisions from competition. Indeed there was really no way that even the most enlightened managers could both protect the welfare of the community and create the lean, nimble enterprises capable of prevailing in the global marketplace.
CULTURE
The third promise of the nation-state was that it would protect the cultural integrity of the nation. Whether this applied to national liberation movements in Third World colonies whose cultures had been suppressed or to ethnic groups like the Czechs or Poles, who found themselves submerged within a larger national culture, or to the Germans, whose culture was fragmented among many states, or to the Italians, to whom all of these disabilities at one time applied, the nation-state promised a wholeness. One nation, one state.
Here too the strategic innovations of the Long War played a transformative role. Mass electronic communications made possible mass ideological propaganda on a scale and of an immediacy hitherto impossible. Of course propaganda has long been a military tool: Napoleon's battle dispatches no less than his calls for liberty and equality were studiedly drafted to move public opinion. Romanticizing war-making served his political goals. Napoleon did not believe that public opinion would decide the issue at Waterloo or Austerlitz or Borodino, however. By contrast, the morale of the entire nation is crucial to the prosecution of twentieth century warfare. That is why the morale of any enemy public—as opposed to the morale of the army and its ruling elites for Clausewitz and Napoleon—must be crushed by the nation-state at war. For the same reason the morale of one's own nation must be inspired and reassured.17 The globalization of communications, however, wrests control of this morale from the instrumentalities of the nation-state. Foreign broadcasts, for example, are the primary news source for 60 percent of educated Chinese, despite the efforts of the People's Republic of China to control the content of information going to its public. Access to the Internet will inevitably increase this figure.
On behalf of the victorious nation-states of the Long War, propaganda has been chiefly directed at advertising the ideology of democracy, equalitity, and personal freedom. With respect to democracy, it may be that, in the words of one analyst, such advertising has persuaded “too much,”18for few nation-states can provide examples of the kind of democracy that is propagandized. In any case, it is well-documented that the publics of the Western democracies do not generally believe in many of the practical constitutional underpinnings of the parliamentary states. For example, the publics in the United States and the United Kingdom do not believe in an adversarial political system (“Why can't the politicians put partisan differences aside and do what's best for the country?”); they do not believe in the protection of criminal rights (“If he's not guilty, why do you think he was arrested and indicted? A criminal should not go free on ‘technical' grounds”); they do not believe in the adversarial role of lawyers (“If we could just sit down without the lawyers, we could sort out our differences. A lawyer only wants you to hear his side of the story”) and cannot bring themselves to believe that an ethical attorney would defend a client he believed to be guilty or take a position on a legal question solely because it was in his client's interest to do so* Americans, by significant majorities, believe there should be prayers in the public schools, that news reporters should be forced to reveal their sources when presented with a subpoena, that a refusal to testify on one's own behalf is tantamount to a confession of guilt, and that politicians generally—though not, it should be noted, one's own congressman—are professional liars and that federal judges should not have life tenure—all attitudes that are considerably at variance with the constitutional operation of the system that, taken as a whole, Americans revere.
Nor can the nation-state assure equality, if by that is meant the equal treatment of different cultural communities. The boundaries of the states of the world do not, and could not, coincide with the various cultural communities that make up their populations, communities that are bound by common religion, language, or ethnicity, because these communities themselves are often overlapping and multiple but seldom coextensive. Moreover, the nation-state is, oddly, the enemy of “nations” as such, or ethnicity, because, at least in its most popular form, it must ally one, and only one, ethnic group with the State, which also must be unitary, with one and only one sovereign. Bismarck's nation-state, not Lincoln's, has generally been the model for the world.
Or to put it another way, we will inevitably get a multicultural state when the nation-state loses its legitimacy as the provider and guarantor of equality. And this legitimacy it must lose if equality is understood as an equality among ethnic groups. This is apparent in such appalling but doubtless well-intended experiments as the Australian adoption and relocation of Aboriginal children, as well as the useful but regrettable American practice of affirmative action. In both cases, a dominant national group is setting the terms of assimilation on the basis of which the State will assure equality to individuals and, by setting those terms, implicitly denying equal status to the group that is thought to be in need of assistance. Without affirmative action, the presence of some ethnic groups will be diminished in some meritocratic professions and institutions; with affirmative action, many will be confined to a second-class status that is re-enforced by the hostility of those who are displaced. Either way, it is the cultural standards of “merit” that set the terms of the debate, that is, that require “affirmative” action in the first place, or that seek to block that action on grounds that it is unjust.
These two opposing but interacting phenomena—the oppression of minority groups by the nation (that is, by the dominant ethnic group with whom the State is identified) and the resistance to an assimilation that might overcome oppression—are damaging to the legitimacy of those nation-states that are based on the promise of assuring equality among all national members.* As a result, it is increasingly difficult in multicultural, multiethnic states to get consensus on public-order problems and the maintenance of rule-based legal action, which are core tasks of the State.
Finally, the techniques of mass propaganda also threaten the claim of the State to ensure the conditions of freedom.19 This is most easily seen in the immense power of the modern electronic media and the press. More than any other development it is the increased influence of the news media that has delegitimated the State, largely through its ability to disrupt the history of the State, that process of self-portrayal that unites strategy and law and forms the basis for legitimacy. This perhaps is most egregiously evident in phenomena like the digitized re-creation of President Kennedy's assassination in a movie “showing” a government plot to kill the president, but it is also evident in the nightly news broadcasts, where confident and placid presenters portray the political events of the day as repetitive, formulaic entertainments. Journalists themselves soon become the important characters in the historical narrative portrayed by journalism; politicians and officials merely provide the props. The story of government becomes the story of personalities in conflict with the media itself, and the story of official evasion and incompetence unmasked by the investigative entrepre-neurs of the news business.
The press and electronic media, far more than the drab press releases of any government, are the engines of mass propaganda today, and it should be borne in mind that the press, when it is not controlled by the State, is driven by the need to deliver consumers to advertisers, 20 and whether State-owned or not, is animated by the conditions of competition among all news media. Whatever the individual aspirations of its reporters and editors, the ideology of media journalism is the ideology of consumerism, presentism, competition, hyperbole (characteristics evoked in its readers and watchers)—as well as skepticism, envy, and contempt (the reactions it rains on government officials). No State that bases its legitimacy on claims of continuity with tradition, that requires citizen self-sacrifice, that depends on a consensus of respect, can prosper for very long in such an environment. It must either change so as to become less vulnerable to such assaults, or resort to repression. Some nation-states do the latter; the liberal democracies, whose claims to ensure civil liberties are as much a part of their reason for being as any other functions, cannot do this. At best they can manipulate information and resort to deception, thus poisoning the history on which they themselves must ultimately depend. This is the province of the “spin doctor” whose role in government has become correspondingly more important.
International telecommunications are also responsible for the exposure of human rights abuses and the resulting demands on the nation-state that it obey laws not solely of its own choosing. In the war in Kosovo, to take a single example, NATO entirely bypassed both the U.N. Charter and the laws of Yugoslavia in order to stop ethnic cleansing by Serb officials who could claim, doubtless correctly, that they were only obeying the orders of a lawfully elected government in Belgrade. It now appears that even reconciliation commissions cannot confer effective amnesties for acts by officials within their own countries. They may, it seems, be prosecuted after all by courts in other countries as happened to General Pinochet when he ventured abroad for medical treatment. These developments show no sign of abating.
There are other strategic innovations that arose during the course of the Long War that will have an important effect on shaping the new constitutional archetype that will succeed the nation-state. Foremost among these innovations was the introduction of the computer. It was an early computing device and a team of mathematicians, for example, that allowed the British and later the Americans to read the classified communications of the Nazis and the Japanese during World War II.21 This permitted the strategic deceptions at Normandy and at Midway without which the war certainly could not have been won at the time and in the dramatic way that it was won by the Allies. The Long War did not merely co-opt but actually caused this technology to be developed. The Internet, for example, a system of linked computer networks, was the outgrowth of an American defense agency effort to create a communications system that would survive a nuclear attack.
Computer technology has decentralized the availability of information and at the same time opened up new channels of information to the nation-state. More information now flows to every public official than he or she can possibly assimilate. Computer accessibility to government and government information has had the ironic effect of so overloading officials that they must ignore more pleas for audiences and reply perfunctorily to more appeals than any despot making his progress through a crowd of peasants.
Moreover, insofar as computer technology has breached the security of the State and ever more widely distributed the information government once claimed to possess solely, it has contributed to the decline in prestige of the State. The Xerox copier not only threatens national currencies; it threatens the currency of the bureaucracy, which is the control of the flow of information. What national leader can be confident, as he faces a live interview, that the confidential memo he saw yesterday will not be thrust in his face if he denies its contents today? This may be an important contribution to openness and honesty in government, but it cannot be a step that strengthens the nation-state, a structure that must often maintain itself by taking decisions and then, and only then, persuading its public. Most dramatically, the Internet will frustrate government attempts to use law to enforce moral rules—the very raison d'être of the nation-state. Canada, for example, was unable to enforce its strict blackout rules on the news coverage of sensational criminal trials; Singapore, despite searches of tens of thousands of files, has not been able to stem the receipt of pornography.22 Espionage using electronic file transfers—that is, replacing the “dead drops” of spies that were concealed in hollowed-out trees with the parking of computer files on nonsecure e-mail sites—allows a single agent to turn over more information to his control in an instant than could be analyzed in a decade. The nation-state is maddened by such developments and, like the bear with painful dental caries in Milosz's memoir, becomes dangerous to itself and others in its frustration.
These various developments, and others, have led to a disintegration of the legitimacy of the nation-state. In summary, no nation-state can assure its citizens safety from weapons of mass destruction; no nation-state can, by obeying its own national laws (including its international treaties) be assured that its leaders will not be arraigned as criminals or its behavior be used as a legal justification for international coercion; no nation-state can effectively control its own economic life or its own currency; no nation-state can protect its culture and way of life from the depiction and presentation of images and ideas, however foreign or offensive; no nation-state can protect its society from transnational perils, such as ozone depletion, global warming, and infectious epidemics. And yet guaranteeing national security, civil peace through law, economic development and stability, international tranquility and equality, were the principal tasks of the nation-state. Developments born in strategic conflict can, however, as they have done before, also lead to a regeneration of the State. What would a new constitutional order look like?
THE EMERGENCE OF THE MARKET-STATE
The State has proved itself to be a remarkably resilient institution, periodically transforming its structure. When faced with mortal threats, states have resorted to the expedient of constitutional change, remaking themselves when strategic innovations by their competitors threatened to overwhelm them or when internal stresses enlivened by these strategic developments threatened disintegration from within. In our own era we are witnessing the emergence of the market-state and the shift to that form from the constitutional order of the nation-state that has dominated the twentieth century. The strategic innovations by which the Long War was won have forced each of the great northern-tier powers to adapt. Some—like the states of former Nazi Germany and the former Soviet Union—have adapted so profoundly that we might say that constitutionally they were obliterated, to be replaced by different kinds of states.
The market-state is a constitutional adaptation to the end of the Long War and to the revolutions in computation, communications, and weapons of mass destruction that brought about that end. As the Long War made abundantly clear, the conception and production of the most qualitatively superior forces required not merely an industrial society but a creative society, with the capital to exploit that creativity. Now that creativity and capital has been turned against the nation-state itself.
What are the characteristics of the market-state? Such a state depends on the international capital markets and, to a lesser degree, on the modern multinational business network to create stability in the world economy, in preference to management by national or transnational political bodies. Its political institutions are less representative (though in some ways more democratic) than those of the nation-state. The Open Markets Committee of the Federal Reserve and the electronic referendum (to take two extremes) are more characteristic of the market-state than the elegant electoral representative institutions envisioned by Hamilton and Madison or the mass election campaigns of Roosevelt and Johnson. Like the nation-state, the market-state assesses its economic success or failure by its society's ability to secure more and better goods and services, but in contrast to the nation-state it does not see the State as more than a minimal provider or redistributor. Whereas the nation-state justified itself as an instrument to serve the welfare of the people (the nation), the market-state exists to maximize the opportunities enjoyed by all members of society. For the nation-state, a national currency is a medium of exchange; for the market-state it is only one more commodity. Much the same may be said of jobs: for the nation-state, full employment is an important and often paramount goal, 23 whereas for the market-state, the actual number of persons employed is but one more variable in the production of economic opportunity and has no overriding intrinsic significance. If it is more efficient to have large bodies of persons unemployed, because it would cost more to the society to train them and put them to work at tasks for which the market has little demand, then the society will simply have to accept large unemployment figures. Mark Tushnet has noted this development:
Small-scale programs with modest aims characterize the new constitutional order: any deficiencies in the provision of health care or in income security after retirement are to be dealt with by market-based adjustments rather than ambitious redistributive initiatives. Similarly, poverty is to be alleviated by ensuring that the poor obtain education and training to allow them to participate actively in the labor market, rather than by providing generous public assistance payments.24
If the function of law in the nation-state is process-oriented, churning out impartial rules and regulations to promote desired behavior, the market-state pursues its objectives by incentive structures and sometimes draconian penalties, not so much to assure that the right thing is done as to prevent the social instability that threatens material well-being. The market-state is classless and indifferent to race and ethnicity and gender; its yardstick for evaluation is the quantifiable. Indeed, to a far greater extent than the nation-state, the market-state is culturally accessible to all societies: the statistics and media images that carry its messages do not require proficiency in any particular natural language.
If the nation-state was characterized by the rule of law—and as we shall see in Book II, the society of nation-states attempted to impose something like the rule of law on international behavior—the market-state is largely indifferent to the norms of justice, or for that matter to any particular set of moral values so long as law does not act as an impediment to economic competition. The cliché “level playing field” captures this concern. Does this agnosticism make the market-state an ideal form for the varying states of the world, including the diverse Third World, where values differ greatly from those of the developed world and from each other, or is it ill-suited to states, like Iran or Saudi Arabia, that wish the State to embody the cultural values of the people (that do not want a “level playing field” for all competitors) ? In either case, the market-state's essential indifference to culture poses some difficulties for the operation of the State. Fore-most among these is the fact that it will be much harder to get the publics of such states to risk their lives and fortunes on behalf of a state that is no longer the champion of their cultural values. The sense of a single polity, held together by adherence to fundamental values, is not a sense that is cultivated by the market-state. This cultural indifference does, however, make the market-state an ideal environment for multiculturalism.
Operating through the state-nation, the State sought to enhance the nation as a whole. In the era of the nation-state, the State took responsibility for the well-being of groups. In the market-state, the State is responsible for maximizing the choices available to individuals. This means lowering the transaction costs of choosing by individuals and that often means restraining rather than empowering governments. Thus we see measures like the proposal to limit the percentage of GDP taken by government, and other forms of capping the tax rate, and actions by courts that have struck down affirmative action plans25 or limited the federal power to regulate commerce and disallowed certain criminal sanctions (like those against contraception or abortion).26
In the market-state, the marketplace becomes the economic arena, replacing the factory. In the marketplace, men and women are consumers, not producers (who are probably offshore anyway).
What can a hospital attendant, or a schoolteacher or a marriage counselor or a social worker or a television repairman or a government official be said to make?… More important than the producers… are the entrepreneurs—heroes of autonomy, consumers of opportunity—who compete to supply whatever all the other consumers want or might be persuaded to want… competing with one another to maximize everyone else's options.27
Some entrepreneurs will fail; all consumers will find their options limited, to varying degrees, by their resources. But both failure and limitation are necessary to choosing; there can be no real choices without the possibility of getting it wrong, and indeed choice itself is a consequence of scarcity.
Is governance easier in the market-state, because so much less is demanded of it, or more difficult because the habits of the good citizen are lost? Perhaps both. As is frequently pointed out, contemporary political reporting is not presented against an historical background of complex competing values, but increasingly in terms of the power relationships of the personalities involved, as if politics were like a simple sporting event—who's winning and who's losing, or, as shown by the little arrows in a popular news magazine, who's up and who's down. This is characteristic of the market-state, with its de-emphasis on the programmatic and legalistic aspects of governance.
And is this not what politics is—not simply how it is reported—in the market-state? When the publics of nation-states, to say nothing of their leading individuals, believed wholeheartedly in the mere materiality of their history—that they were in the grip of vast causal forces, economic, psychological, sociological, over which they had no control—then politics for the public, like ethics for the individual, became mainly a matter of protecting the interest of the group within which one found oneself. When the publics of market-states come to believe that their histories are chosen, a matter of interpretation, deconstruction, and sometimes cosmetic reconstruction, then politics, again like ethics, becomes a matter of insurance—quantifiable and probabilistic. On the other hand, a meritocracy where no one can remember what the moral bases for merit were, but where it can be measured and ruthlessly assessed nonetheless, promises a competitive dynamism that few nation-states could match today.
Recent movements in American jurisprudence—law and economics, feminism, critical legal studies—all agree on this first principle: power is the basis for legal decisions. Whatever the intellectual merits of such movements, a society that is strongly influenced by them is going to have a hard time finding nurses or teachers or soldiers without devoting vastly more financial resources to their recruitment and retention. And yet the diversion of more resources to the human services sector by the State is far less likely in a society that values entrepreneurial, material success above all. “The market is not a good setting for mutual assistance, for I cannot help someone else without reducing (for the short term at least) my own options.”28 On the other hand, teamwork and harmony are far better indicators of an organization's long-term prospects for success than many other indices, and so such a society may well excel at encouraging those institutions that are best able to motivate persons to cooperate.
Long before the time of princes, long before there were states, “everywhere was an America,” John Locke wrote. By this he meant a world entirely free of any civilized institutions, as he believed America to have been when Columbus discovered it for European society, a world, that is, of opportunity, a world to be made. Perhaps we now stand at a similar moment of discovery.
The market-state is, above all, a mechanism for enhancing opportunity, for creating something—possibilities29—commensurate with our imaginations. The rocket technology developed to deliver weapons in the Long War has propelled man into a perspective from space; his communications technology, also developed for strategic reasons, has sent back an image from that perspective.30 I am inclined to think that something of the market-state's indifference to fate and sensitivity to risk is related to this reorientation, where the illusion of limitless opportunity meets the reality of choice.
Similarly, the decoding of human genetic material will change the way we look at excellence and achievement. We are inclined to forget that the doctrine of the divine right of kings rested on an admiration amounting to awe for the fatalistic assumption of chance; it was discredited when Enlightenment thinkers shifted the basis for the evaluation of that doctrine from one of the grateful acceptance of divine providence (for who could know better than God who should rule), which is actually confirmed by the apparent randomness of inherited merit, to a more self-confident, huma-istically centered basis in the rational assessment of ability. We are at present undergoing a similar shift as the basis for human assessment in the various competitions of the meritocracy shifts from a passive acceptance of inherited abilities to a quest for the enhanced, or engineered, faculties made possible by molecular biology. Here, too, the market-state's apparent indifference to the state's role in ensuring justice fits the new, wide open landscape of apparent opportunity. A State that tried to sort out who should be allowed to grow taller or be endowed with perfect pitch would soon find itself hopelessly overcommitted financially or the center of group warfare; in other words, it would find itself in the situation of the nation-state at present. The market-state, with its sublime indifference to such questions and its refusal to guarantee outcomes, is more survivable in the new world of genetic technologies. These technologies have the power to enhance autonomy as never before, freeing men and women from their own genes, and providing choices only dreamt of until now.
In each of the phase transitions that we observed in the history of the modern state, a new form of strategic vision emerged to accompany the new constitutional order. As the State moved to state-nation from territorial state, for example, arguments derived from the premises of collective security arose to accompany those arguments that derived from the balance of power that, in a previous transition, had emerged to dominate other, earlier strategic arrangements. In this way, states added to the array of available strategic programs, as earlier strategic visions were replaced and decayed into mere policies.
What strategic motto will dominate this transition from nation-state to market-state? If the slogan that animated the liberal, parliamentary nation-states was to “make the world safe for democracy” (the security paradigm that decayed into the policy of democratic enlargement, among others), what will the forthcoming motto be? Perhaps “making the world available,” which is to say creating new worlds of choice and protecting the autonomy of persons to choose.
Universalizing opportunity, however, does not mean making every state rich; nor does it even mean making sure no state becomes poorer. Rather, it means the opening up of opportunities on the largest scale possible in the expectation that this will maximize the growth of wealth generally. It may require that every state refrain from steps that would make any other state poorer to a degree greater than the gain in enrichment taken as a whole, but this is not as onerous as it may at first appear. For example, the state that develops a substitute for oil may well make another state, one that produces oil, poorer. But the gain in the total enrichment of the global environment is greater than the loss, because there are now two sources of energy supplies where before there was only one. A state need not be required to subsidize the growth of other states—as perhaps the oil-producing states once did when oil prices were artificially low—even if a rise in prices may harm some states while benefiting others, and even if the total balance sheet of world wealth is static, i.e., only a transfer of wealth is accomplished, one without net growth to the world taken as a whole. For in this case, the state that became poorer is not poorer than it would have been had the subsidy never occurred. Some states are going to be poorer in a world of market-states, but they need not be poorer than they would have been absent the emergence of the market-state; indeed, within the world of nation-states, the poorest states are already getting poorer.
The transition to the market-state is bound to last over a long period and put into conflict the ideals of the old and new orders. It should be emphasized that just what particular form of the State ultimately emerges from this process cannot confidently be predicted. It is a failure of imagination, however, to assume that the only thing that will replace the nation-state is another structure with nation-state-like characteristics, only larger. It is in some ways rather pathetic that the visionaries in Brussels can imagine nothing more forward-looking than equipping the E.U. with the trappings of the nation-state. Just now, it seems to be the Euro, a currency that, like all currencies, will be reduced to an accounting mechanism in the face of the ubiquitous Visa card. The key idea of the modern state is the exclusiveness of its jurisdiction. It is natural that commentators then should infer from the exclusivity of membership in the E.U. that jurisdictional exclusiveness must follow, but this rather misses the point of the modern state's development in the first place, its ability to deliver legitimacy. Facing the pressures described in this chapter, the State is likelier to resort to the pattern of accommodation and change we have seen in earlier periods than to self-destruct by dissolution into a larger mass. If the E.U. were to persist in its current course, it would be attempting to thwart the emergence of a market-state. Instead, it may be that the Union itself will adapt, enabling rather than attempting to suppress this new constitutional order.
It should also be emphasized that I have not argued, and do not wish to argue, that the State has changed in the precise ways it has because of strategic challenges to itself. Many elements in the development of the State account for the fact that it has changed in exactly the ways it has; moreover, the State might have innovated in other ways; the innovations that did occur might have occurred anyway. I claim only that a coherent and helpful account can be given of the constitutional changes the State has undergone in periods of strategic threat, and of the strategic innovations that accompanied the new constitutional orders that have emerged. That said, what guesses can we make about how states will adapt to this new form?
The market-state will live within three paradoxes: (i) it will require more centralized authority for government, but all governments will be weaker, having greatly contracted the scope of their undertakings, having devolved or lost authority to so many other institutions, including deregulated corporations, which are in but not of the State, NGOs (nongovernmental organizations such as the Red Cross, the MacArthur Foundation, the Natural Resources Defense Council), which are in but not of the market, and clandestine military networks and terrorist groups, which set up proto-markets in security and function as proto-states at war; (2) there will be more public participation in government, but it will count for less, and thus the role of the citizen qua citizen will greatly diminish and the role of citizen as spectator will increase; (3) the welfare state will have greatly retrenched, but infrastructure security, epidemiological surveillance, and environmental protection—all of which are matters of general welfare—will be promoted by the State as never before. These three paradoxes derive from the shift in the basis of legitimacy from that of the nation-state to that of the market-state. Let me speculate about possible policies for one state, the United States, within this new constitutional order.
SECURITY
Some consequences of the strategic innovations that won the Long War require a stronger and more centralized government than before. For example, nuclear weapons strategy, clandestine intelligence collection, and covert action sometimes require a level of secrecy that is incompatible with open government or even the relation been parliamentary oversight and the citizenry that links government to the people. Unless the president has the authority to launch nuclear weapons, the system of assured annihilation is changed into a very different scheme of risk taking that might well tempt an adversary into making threats—or executing them—in the hope of paralyzing the United States. It is simply absurd to think that a system of nuclear deterrence could be maintained if the president had to go to Congress for a declaration of war before launching a retaliatory or pre-emptive strike. But how can the difficult problem of nuclear command and control be reconciled with the new constitutional demands of the market-state for transparency and citizen participation? The answer may lie in changing our expectations about what legitimate delegation consists in and accepting very broad predelegations of authority, as it were, that can be withdrawn by the normal statutory process but that otherwise remain in place. This changes the burden between the branches of government, admittedly; after such a predelegation, the Congress would have to muster a two-thirds majority to remove power from the president by overriding his veto of legislation repealing the delegation, should he choose to resist. We are already moving from a system in which the State is the principal actor on behalf of the nation to one in which the State is the facilitator of practical affairs. The market-state seeks a role as enabler and umpire, and shuns the role of provider and judge. Broad legislative delegations—such as “fast track” trade authorizations and the consolidated budget—are above all simply practical and efficient. Increasingly, the justification for state action will turn on its relation to minimizing transaction costs. Redistributive and meliorist policies will come under intense attack on these grounds.
This decoupling of state apparat and national community is consistent with developments in war itself. If war becomes again, as it once was, an affair of states rather than of peoples—if it becomes, in Michael Howard's words, “denationalized”—this may not be such a bad thing. It is true that this move tends to isolate the executive from the body politic, making it “a severed head conducting its intercourse with other severed heads according to its own laws.”31 There will be little sense of the mass participation that characterized the Long War and that united nationalism and militarism in the creation of the nation-state. But if this is no longer a military necessity, should our constitutional forms continue to demand it? Can participation be supplanted by mere observation, coupled with Internet opinion polling, rather than voting and serving? What seems likeliest is that expectations will change, ultimately corresponding to the change in strategic requirements that no longer require vast armies of conscripts—though again I note that the precise way in which this accommodation will play out is not predestined.
Other responsibilities of the market-state may also lead to a similar delegation of power, e.g., the monitoring of epidemics and diseases, of inter-national migration, of terrorism, of espionage, and of threats to the environment. All of these spheres of governmental activity are ill-suited to effective oversight by the market. Some depend on maintaining the secrecy of crucial information, while others require a single governmental voice in a dialogue with other governments. In both cases, transparency and public knowledge are sacrificed.
The successful discharge of the responsibilities just discussed is only possible in a constitutional system with a powerful, centralized, and, above all, trusted executive. Innovations of the 1970s, like the independent counsel, or detractions from the unitary executive generally, as well as the contempt with which claims of executive privilege are customarily greeted, are hardly compatible with the kind of decisive executive demanded by the market-state. It's not that the president must be above that law: that would be utterly and obviously contradictory of the principles of the American constitution. Nor should the presidency be inferior to the judiciary, the Congress, or the press, the executive's principal competitors. It's rather that our expectations about what the law should be have been shaped by the endgame of the nation-state and its close identification of the State with the nation. When these expectations change, the glamour and prestige of the presidency will suffer. As an institution, it will find itself in competition with the media to a greater degree even than with its traditional competitors in the other two branches. It will be important to ensure that the president's ability to govern, in the limited areas of responsibility given to the market-state, be enhanced. Fragmenting the constitutionally unitary executive branch can scarcely be a positive step in the direction of enhanced presidential authority.
Some areas of responsibility are amenable neither to complete determi-nation by market processes nor to handling by the federal government. These might devolve to the states and localities with the expectation that they will be delegated to associations, NGOs, nonprofit foundations, charities, and the like that operate with the greatest legitimacy at the local level because participation seems more available to local citizens.
The important difference between the devolving federal state and the local state is that the latter can experiment in the market. In some local states genetic research, abortion, and sexual orientation will be largely unregulated; in others, regulations governing these activities will be enforced by market actors licensed by the local state; and in some states the regulations will be enforced by police sanction. What is all too clear, however, is that a federal police presence is far too unwieldy, too nonlocal to handle the single issue most American citizens fault their government over, the issue of crime. If there was any doubt about this, it was settled in the public's mind by the U.S. government's handling of the Branch Davidian case in Waco, Texas, where eighty-one persons, thirteen of them children, died as a consequence of the government's efforts to serve a warrant.32 Nor has the continuing futility of the government's “war” on drug use redeemed its prestige.
The devolution and the licensing of private firms to enforce regulations are troubling in a society that has steadily moved to make its criminal laws nationally uniform and to restrict the legitimate use of force to trained men and women acting under strict official discipline. In this, however, as in much else the United States can more easily adapt to such devolution than other states. Its system of federalism provides a ready structure for devolving power out of Washington; virtually all law enforcement is already a matter of state jurisdiction. Moreover, the Second Amendment to the U.S. Constitution—aptly termed by one distinguished constitutional scholar “the embarrassing second amendment”33 for the discomfort it causes persons who are accustomed to supporting both gun control and civil liberties—reflects a fundamental, residual locus of armed force in the people themselves.34 If, as Martin van Creveld speculates, “the day-to-day burden of defending society from low-intensity conflict will be transferred to the booming security business,”35 this mixture of devolution and privatization will become commonplace in the market-state. This is a harrowing prospect, but one with which we may have to learn to cope.
We will also have to cope with the increasing willingness of corporations to sell sensitive military technology to potentially dangerous foreign states. American, French, German, and British companies have all done so and, despite the fact that some of them have been exposed and their officers even indicted, these practices are likely to continue. Indeed many companies vigorously lobby their governments to permit these sales, lifting restrictions against technology transfers as a mere concomitant to deregulation and the drive for market share. Nor can the international banking system's critical support for the operations of denationalized terror networks be ignored. The nation-state was poorly situated to cope with this informal, virtual treasury as receipts and disbursements leapfrogged national regulation. It remains to be seen whether the market-state, with its sensitivity to any costs imposed on transactions by regulation, will do any better.
POLITICS AND REPRESENTATION
The emotional fusion between the People and the State begun by the state-nation and reconceptualized in the nation-state was intensified by the Long War. Governments undertook responsibilities in entirely new areas of the social and economic activities of their citizens, and the nation endorsed the actions of the State through a variety of means, including a vastly expanded voting franchise, an institutionalized role for labor unions, and greatly increased taxation. In the market-state, both sides of this reciprocal equation will change: there will be fewer formal mechanisms for endorsement by the public and the State will undertake to do less.36
Though I shudder to think so, I believe we can expect more reliance on the plebiscite, the initiative, and the referendum, especially as these become so easy and cheap to undertake once interactive cable television becomes universal in the United States. To some extent, we are already living under such a regime. What I have in mind is not the extensive use of referenda at the state level37 but rather the heavy reliance on frequent polling by American office holders. These are a kind of virtual-reality referenda, allowing the politician to test the results of a proposal. Like aircraft landing simulators, these polls give guidance to the politician without his actually putting himself at risk by calling for a referendum that he would have to support (or oppose), 38 and with the results of which he would then have to live.
At the same time, the market-state does not suffer from the acute shame experienced by the nation-state when the subject of campaign finance is discussed. When Chief Justice Earl Warren wrote that “Congressmen do not represent interests or trees, they represent people,”39 he was expressing an axiom of the nation-state. Doubtless he believed it, but it would be hard to maintain this view in light of today's functional patronage of candidates by contributors. If there are any readers innocent of this process, it goes like this: campaigns are funded by contributions from persons and groups with interests in the behavior of the candidate if she (or he) is successful. These campaigns are far too expensive to be funded by any candidate personally save the wealthiest individuals, and even these, if they are successful, lose no time in paying themselves back through postcampaign fund-raisers. Politicians of unquestioned rectitude, who would not dream of accepting a bribe—a payment for their personal benefit in exchange for a vote or action on behalf of the payor—have long now accustomed themselves to promising assistance (and sometimes votes) to persons and groups who give them money in the full expectation that the word of the politician is good. Their very rectitude is, ironically, the door opener to the contributor, because it guarantees the payee will deliver as promised. Whether there is anything wrong with this I am hesitant to say. Shouldn't the right-to-life candidate's campaign be the beneficiary of the funds collected to promote a right-to-life policy? Shouldn't the congressman anxious to alleviate unemployment in his district vote for a public works project there, and isn't such a man a suitable person for local business interests to support? But there persists a disquiet among those who believe the civics lessons of the nation-state, which hold that the votes of the public ought to be the only coin of the political realm. I believe a time will come in the transition from nation-state to market-state in which we will reflect on our current fund-raising practices with revulsion and an amazement that we tolerated them for so long.
But that does not mean that we will replace these practices, which seem so violative of the ethos of the nation-state; it is likelier that we will keep the practices and change the ethos. The market-state is not so squeamish. Indeed, its civics lessons hold that there should be no limits on campaign spending from any source so that the true opportunity costs of a candidate's defeat are reflected in the probability of his victory. The market-state merely tries to get the “best” person for the job in the way that universities try to get the “best” students: they set up a market that selects persons on the basis of predictions about their subsequent success. Fund-raising is to governing what SATs and high school grades are to college grades, accurate (if circular) predictors of a later performance that is, in the era of the “permanent campaign,” a repetition of the test itself. Governance becomes a matter of maintaining popularity, which requires further advertising, which requires further fund-raising. The candidate who is tied to important interests by virtue of his fund-raising is precisely the person whose vote will most closely reflect those interests. The more money he raises, the more attractive the candidacy, because successful fund-raising reflects the relationship between the importance of the interests he represents and his ability to represent them (as those interests judge it—and who are better placed to do so than they?). And this is just as well, because initiatives, plebiscites, and referenda are, like all elections, very expensive. The more frequently they come, the greater the match between economic interests and public policy; indeed, this is one of the attractions of the market-state. That this places enormous power in the hands of the media only underscores the change in its constitutional role with the emergence of the market-state.
We can expect an improvement in the quality of the civil service as taxpayers come to demand better performance from government and to appreciate the need for better compensation in order to secure that performance. Like the rise in tuition costs—which is mainly a matter of responding to the increased expectations of students in the context of fixed faculty productivity—a rise in government costs is almost unavoidable. Government bodies do not make decisions more efficiently, for example, because they have computers any more than professors give better comments on essays because these comments are composed on a word processor. This rise in costs will perhaps be counterbalanced by a narrowing domain of the matters we allocate to government. With respect to those responsibilities that governments of market-states retain, we shall expect better performance.
WELFARE
The nation-state undertook to be responsible for economic planning for the society, income redistribution, and democratic accountability, and it promised to underwrite (in varying degrees) employment, health care, education, and old-age security. The nation-state is rightly thought of as a new constitutional order, for not only are these responsibilities a significant departure from those of the state-nation, they also reflect the unique source of the nation-state's legitimacy, its promise to provide for the material well-being of the nation. This promise was made by parliamentary, communist, and fascist governments alike. The market-state need make no such commitments because its relationship to its society is formed on a different basis.
It is obviously true, however, that single-parent families, declining literacy, teenage pregnancy, and drug, alcohol, and tobacco abuse, represent significant economic costs to a society. Apart from the lost productivity of workers who put themselves in, or find themselves in, such difficult situations, there is the tremendous cost involved in providing family subsistence (or day care), unemployment compensation, medical insurance, remedial education, and so forth. Ought not the market-state to be concerned with these problems, even if the reason for its concern is different from that of the nation-state? It depends on how effective you think the state—any sort of state—is in addressing such issues.
The nation-state, it is implied by some critics, created its budget problems because in undertaking to improve the welfare of all of its citizens, it both hobbled the opportunities for its most productive workers (through regulatory and redistributive legislation) and inadvertently crippled its neediest and least productive workers by tying them to programs that locked them into a cycle of dependency. Thus, it is alleged, the state became progressively less able to pay a bill that wasn't worth paying in any case. If there appears to be a consensus today that none of the problems listed in the paragraphs above—teenage pregnancy, drug abuse, etc.—could actually be cured by massive government programs, let alone by those that are likely actually to be initiated, 40 this reflects a profound shift in the expectations we believe can be imposed on the State.
The first casualty of this shift in opinion is the legitimacy of the nation-state. The State cannot covenant to improve the welfare of all of its citizens if it is generally believed that there are a great many persons in desperate straits whom government cannot—and, for various reasons, perhaps should not—attempt to assist. In the face of such a consensus of delegitiation, the acceptance of a new constitutional order becomes virtually an imperative and the shape of that order must be one that is compatible with that consensus. Thus the second casualty of this shift in view of the basis of the State is any large-scale effort by government to address social dysfunction (though it is assumed by market-state ideology that increased opportunity means increased wealth, and that this will ameliorate many social ills).
It may be that we can expect in the United States (and elsewhere) the sharp and permanent diminishment of the welfare state, with its safety net of public housing, free medical care, aid to dependent children, and unemployment allowances. Whether or not these programs are cut back, a simple refusal to maintain their ever-increasing costs with ever-increasing funding will in the not-too-distant future reduce their ameliorative impact significantly. At the same time, regulatory reform will proceed at a quickened pace. Regulation can be viewed, from an economic perspective, as a tax41 no less than direct taxes. Either a business can be taxed to pay for garbage removal or it can be required to remove its own garbage: either way, it pays. In a situation of perfect information there is no difference in the effect on the ultimate allocation of resources whether the tool of regulation or taxation is used. The difference occurs when deregulation is accompanied by tax cutting. Thus regulatory reform is not merely an effort to unchain innovative entrepreneurs and to remove noisome and idiotic rules from the workplace; when coupled with tax-lowering politics, it is also part of a larger effort to reduce the percentage of GDP taken by government (directly or indirectly).
For that portion of the nation-state's agenda that cannot be offloaded by the market-state, there is the alternative of privatization. In the American context, this term does not mean auctioning off state-run commercial enterprises (like British Rail) to private investors, but rather contracting out traditional government duties. In some cases, such as operating prisons and hospitals, this is simply a roundabout way of introducing more careful financial accountability and more efficient practices into public enterprises. But in other cases—notably education—it amounts to a more profound change. The nation-state was inevitably hostile to private education (many nation-states banned or attempted to ban private schooling) because it tends to remove such an important cultural experience from the inclusive objectives of the national agenda. In the market-state, however, with its skepticism about government and its compact with individual choice, the prospect of turning over education to parents is welcomed enthusiastically. Voucher systems—which effectively use the state as a tuition collector, rebating the collected fees to private and public schools that are chosen by parents—are likely to become the standard, not the exceptional, means of school selection. The default rule will perhaps always provide some publicly managed schools—though federalism makes possible the option of doing away with public schools entirely—but the days of virtually universal mass public education, like the similar experience of universal military conscription, are probably unlikely to continue. The voucher scheme is precisely the sort of expansion of opportunity the market-state undertakes to provide: more options, less coercion by law.
These speculations about how the market-state will play out in the United States must not be taken to obscure the point that different cultures will adapt the market-state in different ways. The Soviet Union, Great Britain, and Fascist Japan were all nation-states, after all, no matter how greatly their policies and politics differed. Different cultures will adapt the market-state in distinct ways. The American emphasis on individual rights, a laissez-faire business and trading system, and restless personal freedom will take the market-state in one direction; other societies will find the market-state just as adaptable to preferences for group responsibility, a state-inflected market, and long-term social stability.
The United States is remarkably well situated to become a market-state. Its multiculturalism, its free market, and its diverse religious makeup—all of which resisted the centralizing efforts of the nation-state—and, above all, its habit of tolerance for diversity give it an advantage over other countries in adapting its state to this new constitutional order. Insofar as the American people are able to resist calls to take back the state in order to unify the culture and reform dissenters, the agnosticism of the market-state will be well accepted. Nostalgia aside—which I feel more than most—t is important to identify which cultural and political struggles are simply hangovers from the dying nation-state and its resistance to the form of the new market-state and which are genuine choices that the market-state brings to life.*