PART III
THESIS: A NEW SOCIETY OF MARKET-STATES IS BEING BORN.
The challenges facing the society of states are a direct consequence of the strategic innovations that won the Long War. The ways in which the various basic forms of the market-state cope with these challenges will structure the conflicts of a new society. We must act with this development in mind, accepting conflict where it is necessary to avoid cataclysmic war or the breakdown of the global superinfrastructure, and creating institutions that will legitimate the new society of market-states.
The Terrorist, He's Watching
The bomb in the bar will explode at thirteen twenty.
Now it's just thirteen sixteen.
There's still time for some to go in,
And some to come out.
The terrorist has already crossed the street.
The distance keeps him out of danger,
And what a view—just like the movies.
A woman in a yellow jacket, she's going in.
A man in dark glasses, he's coming out.
Teen-agers in jeans, they're talking.
Thirteen seventeen and four seconds.
The short one, he's lucky, he's getting on a scooter,
But the tall one, he's going in.
Thirteen seventeen and forty seconds.
That girl, she's walking along with a green ribbon in her hair.
But then a bus suddenly pulls in front of her.
Thirteen eighteen.
The girl's gone.
Was she that dumb, did she go in or not,
We'll see when they carry them out.
Thirteen nineteen.
Somehow no one's going in.
Another guy, fat, bald, is leaving, though.
Wait a second, looks like he's looking
For something in his pockets and
At thirteen twenty minus ten seconds
He goes back in for his crummy gloves.
Thirteen twenty exactly.
This waiting, it's taking forever.
Any second now.
No, not yet.
Yes, now.
The bomb, it explodes.
—Wislawa Szymborska
CHAPTER TWENTY-FOUR
THE ECONOMIC ORTHODOXY of nation-states counseled state intervention in the national economy as a necessary means of achieving growth and other goals. Economic regulation was part of this orthodoxy and fitted the ethos of nation-states that relied so heavily on law. Market-states will have their own economic orthodoxy and their own distinctive tools.
Eventually, all the leading members of the society of market-states may come to accept views similar to these: that capital markets have to become less regulated in order to attract capital investment and that capital has to become more global in order to achieve the maximum returns on investment; that labor markets have to become more flexible in order to compete with other, foreign labor markets and to keep jobs at home that depend upon producing products at a cost that can compete with the products of states that have lower labor costs; that if the world economy is to grow, access to all markets has to be assured and trade has to become less regulated; that a state's trade policy will have to become more free if that state's goods are to be able to penetrate foreign markets and thus participate in this growth; that government subsidies, spending, and welfare programs have to be managed in order to permit more investment in infrastructure and to allow greater private saving (which will lower the cost of investment); and that tax policy has to provide incentives for growth in order to attract enterprise and to maximize innovation and entrepreneurship. Early in the twenty-first century, it seems not unlikely that virtually all major states will accept for themselves the fundamental assumptions that Margaret Thatcher and Tony Blair urged for Britain and that Bill Clinton and George W. Bush urged for the United States, and furthermore that they will accept that if these states do not heed those recommendations, the United States, the United Kingdom, and other states will gain a decisive advantage over them.
If a market-state fails to provide tax incentives for capital formation and capital retention, domestic investment will either not take place or will flee along with foreign investment; if investment goes elsewhere, then innovation and productivity gains will go with it, so that the products that are its result will be cheaper and better than those produced at home; if the products of other states are more competitive, then jobs will be lost to those states; if jobs are lost, then tax revenues will fall, and unemployment and welfare costs will become unsupportable. Ever higher taxes will produce ever lower revenues. The state that resists liberalizing its labor markets in order to protect high-wage jobs will end up with no jobs to protect; the state that resists cutting back on welfare will find it has to cut back anyway when revenues fall and that it now has even larger welfare bills to pay as unemployment climbs; the state that attempts to protect its domestic industries by refusing to liberalize its trade policy will find that those industries are locked out of other markets and in any case are uncompetitive, so that domestic prices stay high and the domestic standard of living falls; the state that tries to restrict capital flight will be shunned, and the state that inhibits capital imports will be ignored. That too will raise the cost of production and depress the standard of living in another turn of this vicious circle. If Mikhail Gorbachev could get this message in the 1980s the secure leader of the richest and most powerful socialist nation in the world—it will not be lost on anyone else.
Moreover, the market-state promises a “virtuous” circle to those states that copy its form and obey its strictures. The privatization of state-owned firms brings immense capital gains to the state as it liquidates vast monopolies; this windfall supplements the savings from cuts in welfare programs and thus lowers deficits, which leads to less inflation, which attracts capital and lowers the borrowing costs required to finance deficits, which in turn lowers the deficits still further, which permits lower taxes, which can produce more savings, which can enable more investment, which produces more funds for research and development, which enhances productivity, which lowers prices thus making exports more competitive, which creates jobs while lowering the cost of living for the consuming public. In the underdeveloped world, such policies mean higher growth owing to comparative wage advantages, which growth leads to a more educated population, which brings more women into the workplace, which leads to lower birth rates, which enhances political stability, which means greater macroeconomic prudence, which leads to more foreign investment, which finances still more growth, which tends to liberalize authoritarianism, which encourages personal autonomy.
The new orthodoxy of the market-state will surely play out in several competing formulations. In the following pages I will speculate about these different versions and describe what they might look like in the future. Like different race cars, they all compete in the same race, meet roughly the same specifications, and are governed by the same rules, but they approach the common competition with different drivers who use different tactics.
In Washington, for example, state intervention is anathema. The state can never adjust prices as quickly and as efficiently as the market, and every state intervention skews the price function to some degree. Moreover, the democratic, representative, deliberative state is slow-moving and cumbersome—just the sort of institution one wants where human rights are at stake or in a society where it is difficult to achieve consensus across many cultural communities but one that is deadly to innovation and the nimble reactions required to take advantage of changes in the marketplace. All market-states take as their legitimating charter that they are responsible for maximizing the opportunities of their citizens. In Washington, this means providing infrastructure (including intangible infrastructure like education and the means of enforcing agreements) and relying on private enterprise to maximize the abundance of consumer choice and minimize the costs to the consumer of exercising choice.
In Tokyo, by contrast, maximizing opportunity means protecting domestic industries so that future generations will have a full array of employment opportunities, subsidizing research and development so that future opportunities for innovation will be practicably exploitable, and restricting the import of capital so that the government remains in control of its capital allocation.
In Berlin, maximizing opportunity means ensuring social and economic equality among citizens, using the corporation as a stakeholder for the public interest so that the opportunities available to communities, workers, and future generations are maximized rather than maximizing the short-term profits of shareholders.
Because the market-state secures political legitimacy through the active pursuit of opportunity for its citizens but declines to specify the goals for which opportunity is to be used, there will be different models whose advocates can plausibly maintain that their constitutional strategy best maximizes opportunity. For example, consider these contrasts between the Tokyo and Berlin models: education financed privately versus public education; high savings rates versus low savings; low currency values versus high currency values; low interest rates versus high interest rates on corporate borrowing; high interest rates versus low interest rates on consumer loans; personal sacrifice versus a higher quality of life; long working hours versus leisure consumption. Either set of choices can plausibly be said to maximize opportunity, depending on what that opportunity is for and what it consists in. What is more difficult to maintain is a set of choices that skips around, pairing high leisure consumption (which maximizes the freedom of choice for one's pleasure) with personal sacrifice (which maximizes the freedom of the society as a whole). So these choices tend to fall into discrete sets.
THE ENTREPRENEURIAL MARKET-STATE
Labor relations under this model are confrontational as well as sectoral—a new experience for market-states such as China that have not previously permitted voluntary and competitive labor organizations. Because wages are low and because the relocation of investment is entirely unfettered, labor unions are weak. Job creation is achieved at the cost of job security. Local industries are largely unprotected from foreign competition, which tends to make the firms that survive hardy, agile, and attractive to foreign capital. Interest rates are maintained at a relatively high level in order to encourage foreign investment and to suppress inflation. Considerable income disparities are tolerated on the grounds that everyone is richer owing to the booming economy that such freewheeling competition can provide, and it is certainly true that, in terms of personal consumption and standard of living, the entrepreneurial market-states outperform all comparable states (that is, they exceed the improvement in consumer standards of living achieved by states that began with comparable levels of development).
Immigration is robust under the Entrepreneurial Model because it freely imports highly paid talent as well as low-wage workers, which tends to suppress labor costs and keep capital from going abroad. By contrast the Mercantile Model shuns immigration; indeed cultural homogeneity is almost a prerequisite for its successful operation. The Managerial Model is ambivalent: open to “guest workers” but hostile to new citizens. The Entrepreneurial Model tends to loosen the identification that citizens feel with the larger polity: autonomy and individual achievement are so prized and the consumption of particular goods so meaningful an act of self-definition that the citizens of these states “invent” their citizenships, identifying themselves with those subgroups within the state with whom they share a consumption pattern. This exacerbates the problems of social cohesion that every market-state faces. These effects are acutely felt in the entrepreneurial states that have all-volunteer military forces, federal political structures, strictly meritocratic promotion ladders, and multicultural media. Both the mercantile and managerial states, by contrast, retain conscription for military service (though with force levels vastly reduced from those of the twentieth century), affirmative action for certain social groups, and varying degrees of state control of the media.
The basic ethos of the Entrepreneurial Model is libertarian: the conviction that it is the role of society to set individuals free to make their own decisions. This ethos counsels minimal intervention in the economy as well as in the private lives of its citizens. Privatized health care, housing, pensions, and education as well as low taxes and low welfare benefits all characterize such states. Regulation on behalf of special interests is discouraged. Indeed, responsibility for regulation of any kind is largely abdicated in favor of policing by the market, which responds with extensive information to the consumer, who is expected to look out for himself. That doesn't necessarily mean that the environment is not protected or that labor is exploited: companies soon discover that they will be rewarded for “green” policies and penalized if they are discovered to have engaged in exploitative labor practices. It simply means that the role of government in protecting the public has to some extent been taken over by the media and by private groups acting on the information from, and in concert with, the media.
THE MERCANTILE MARKET-STATE
This model relies upon a strong central government to protect national industries, subsidize crucial research and development, and steer certain important enterprises toward success. Artificially low prices are set for export goods and artificially low interest rates are maintained that depress currency values. This would lead to capital flight except that capital flows are also regulated by governments and forced savings are extracted from all incomes. Under the Mercantile Model, the opportunities available to the consumer, which have been exalted under the Entrepreneurial Model, are sacrificed to the long-term opportunities of the society. These societies are able to maintain social cohesion—to a far greater degree than entrepreneurial market-states—in part because income disparities are suppressed, variations in take-home pay between manufacturing workers and service workers are rationalized, and elaborate social welfare subsidy systems, including public housing and access to education, are put in place for those—this must be emphasized—who are eager to work. It is important for the states that follow this model to monitor the collusion between the large corporate structures endemic to this model and their bureaucratic allies. Otherwise, the predictability sought and prized by this model will also bring potentially crippling inefficiencies and even corruption. Educational curricula must be tempered by some sense of the demands of the market; otherwise far too few persons will emerge from the educational system with the skills that fit them for employment (a problem that plagues he Managerial Model as well, though the latter's difficulties stem not from a refusal to give technical training so much as a willingness to underwrite costly studies with no professional future).
Mercantile market-states have achieved impressive growth rates: Singapore and Hong Kong have higher living standards than the United Kingdom. But this has not been accomplished through the efficient use of scarce resources. In terms of sheer efficiency, Taiwan, South Korea, and Hong Kong are in about the same productivity class as Egypt, Greece, Syria, and Cameroon. Rather, the mercantile states have succeeded by mobilizing the labor of the total society, and by encouraging very high accumulations of capital. Investment is subsidized and promoted in these states, and although exports generate considerable revenue for investment, it is savings by individuals, corporations, and governments that account for the high levels of investment in Taiwan, South Korea, Singapore, and Japan. Thus although this model may attract adherents because of its historic record of high growth, there is a limit to the performance a state can wring from increased inputs of capital and labor without increased efficiency.
There are several challenges that face this model wherever it has been adopted: opening up domestic markets to foreign competition; reforming the banking sector to bring greater scrutiny to credit transactions; allowing access to cheaper credit for smaller firms that are usually restricted to rela-tively high priced domestic finance and letting the cost of capital to the few dominant firms rise.
All of these challenges confront the inefficiencies of concentrated economic power that is a notable feature of the Mercantile Model. For example, the Korean version is characterized by the concentration of power in four great companies (Samsung, Hyundai, Lucky-Goldstar, and Daewoo) that together account for over half of that country's exports and a third of its sales. These companies are both the instruments of and the beneficiaries of government policy. Yet between 50 percent and 60 percent of the equity of the top thirty companies in Korea is held by the founding families. In Japan, the largest six great companies account for over half the total assets of all listed enterprises. Furthermore, some three-quarters of all shares are mutually held between companies and their financial institutions.
THE MANAGERIAL MARKET-STATE
This form of the market-state (often called the Soziale Marktwirtschaft) consists of three basic elements: free and open markets within a regional trading framework, a government that provides a social safety net and manages a stringent monetary policy, and a socially cohesive society. Private property and private enterprise are valued, but their constitutional status is dependent upon their contribution to the public good. Labor relations are broad and participatory. Workers sit on corporate boards. Strong national unions negotiate contracts across whole sectors of the economy rather than by individual company or factory. They bargain with all-encompassing owner federations that are empowered by law to hold their member companies to the terms of the deals that are struck, overriding shareholder objections. Multinational corporations are required to share their strategic plans with elected workers' councils. Regulations require companies to consult labor on all major decisions. This tends to pacify workers who in other societies have rebelled when low-wage jobs were exported because workers expect that the profits from offshore production will eventually be repatriated to finance high-wage jobs at home, making exports more competitive.
The “stakeholder company,” a key concept in this model, seeks to reflect the priorities of workers, managers, communities, vendors, and environmentalists on something like parity with the interests of shareholders. Corporate ownership is closely held in the largest and most important industries, usually through a centralized commercial bank. As the largest holder of both equity and debt in such a company, the bank can exercise a close scrutiny over corporate decisions and can afford to take a long view of corporate strategies, in contrast to those companies that raise money in the equity markets. This enables corporations operating within this model to garner the so-called patient capital necessary for long-range success. Publicly financed institutions promote the transfer of technology from defense research and development to the private sector. Technology diffusion is further encouraged within the regional trading organizations on which this model greatly depends.
If the object of the mercantile state is to ensure social stability, the goal of the managerial state is to achieve social equality. The class divisions that wracked the state-nations of Europe and gave birth to fascism and communism within the nation-state are suppressed by every legal instrument that can be brought to bear by this form of the market-state. Private and sectarian schools are often outlawed; estate taxes at death approach the confiscatory; modern versions of the eighteenth century “window tax” are reintroduced to discourage opulence.
Government intervention in the economy under the Managerial Model tends to occur on the labor side to a greater extent than on the capital side, in contrast to the Mercantile Model. Training and retraining programs often take as much as 2 percent of GDP (as compared with .25 percent under the Entrepreneurial Model).
Taxes for such states are high, sometimes peaking at over 70 percent of GDP (40 percent payroll taxes were not uncommon), and there are sizable value-added taxes (VAT) and consumption taxes, though these vary considerably. Not many of the world's states can afford generous welfare provisions, although it should be pointed out that, just as mercantilism is not confined to Asian societies, managerialism is not confined to the wealthy continent of Europe. India—whose subcontinent has the largest concentration of poverty and illiteracy in the world—is attempting a decisive move toward the Managerial Model of the market-state. A complex system of entitlements, including free rural electricity, subsidized fertilizers, cheap water irrigation schemes, subsidized university education, and cheap food, as well as a bewilderingly complex system of ethnic and class preferences on behalf of certain minorities and lower castes, all incline India toward this model. Turkey and Egypt may also be considered candidates for this model that lie outside the central zone of European prosperity.
To a far greater degree than the other two models of the market-state, managerialism uses legal regulation to enforce standards of conduct, including the use of potentially heavy fines. Liability rules, as well as the social safety net levels of the late twentieth century, are difficult for the managerial market-state to modify. Interest groups, such as pensioners, consumers, lawyers, and advocates for the beneficiaries of welfare subsidies, make any ratcheting down of these benefits hard to achieve. As a result, innovation is slowed—even in areas, like Europe, where technological innovation ought to be at its greatest.
Advocates of the Managerial Model are not economically naïve. Rather they recognize that all-out economic competition tends to leave some persons behind and that this alienation from the economic system breeds crime, family breakdown, alcoholism and drug addiction, even illness on the job. These advocates calculate that it is cheaper to prevent the costs of these maladies than to try to compensate for them after they have manifested themselves. This attitude of giving priority to social cohesion is shared by those who favor mercantilism but with this difference: while mercantile states try to guarantee a job for every person (or at least every male) and provide little in the way of welfare programs, managerial states provide jobs only for the most productive workers—at good pay—and generous welfare for the rest.
Thus, even though the United States has been more successful at creating new jobs (maintaining an unemployment rate at about half that of the E.U.), this has been achieved at the expense of real wage levels. Accordingly, each model must contend with its own sort of alienation: the lowest paid workers in the United States are vastly worse off than high wage earners, while the unemployed in Europe can get by on welfare benefits alone but have little prospect of a job. By contrast, the Mercantile Model maintains artificially high employment rates, at wages that reflect far less disparity between the highest and lowest paid. The unavoidable cost is in productivity and efficiency, which sets the stage for a new kind of alienation, that of the young from the old.
With its appeal to universal hedonism, the Entrepreneurial Model appears almost acultural, particularly in contrast to the family-oriented, hierarchy-honoring Mercantile Model, and even in contrast to the larger, transnational bureaucratic zones of the Managerial Model that prize human rights to a greater degree. The Entrepreneurial Model claims to be pluralistic, nonjudgmental, and open to many cultural forms, and indeed states as diverse as Thailand and Peru are pursuing this model. But it does hold that every such state must guarantee human rights—by which it means the opportunity to express essentially individual values—a free press, an unfettered political opposition, even the secret ballot (which may perhaps be said to be a Protestant, that is, individualist, form of confes-ssion). Adherents to mercantilism maintain that its human rights are communitarian rather than individualistic; that its political system seeks harmony rather than division—that respect and reverence are a truer expression of its cultural values—and therefore these states attempt to minimize the public expression of opposition.
At the beginning of the twenty-first century, it is to be hoped that informal private networks that cross international lines—for example, the large multinational corporations developed in the twentieth century, or the extensive social networks developed by overseas Chinese in East Asia and the United States, or global nongovernmental organizations—will supply the links necessary to prevent the growing divergence of the three models of the market-state. Because divergence is principally a function of domestic politics, it tends to accelerate, however, when national leaders take unpopular steps in order to enhance international cooperation or when they blame competing models for “keeping interest rates high” (the Managerial Model) or “failing to get control of consumption and thus exporting inflation” (the Entrepreneurial Model) or “exploiting foreign markets while closing their own” (the Mercantile Model).
Each of these versions of the market-state claims to be the unique and final expression of the constitutional archetype of the market-state. In this way, these claims are reminiscent of the three ideological forms of the nation-state (parliamentarianism, communism, and fascism) that competed during the Long War. For just this reason, leaders ought to be wary of domestic conflicts that threaten to become crises of legitimation. At present these conflicts chiefly arise from the debate surrounding globalization. As with the twentieth century, such domestic crises can move the champions of each form to seek a universal international adherence.
The Long War ended in 1990. Like the other great epochal wars whose true identity and shape only became apparent in retrospect, the Long War followed a period of constitutional stability in the relations among the various states of the great powers. A single constitutional archetype dominated that stable period, the form of the imperial, patriotic state-nation. This was the constitutional model of Napoleon no less than of Castlereagh, and of George Washington no less than of Tsar Alexander III. Axiomatic legitimacy accrued to any state that followed this model. But when a new archetype arose—the nation-state of Lincoln, Bismarck, and Cavour—constitutional conflicts within all states began to arise, culminating in the seventy-six-year struggle I have called the Long War. Like other epochal wars, even those that antedate the modern state like the Augustan War, the Long War was a struggle that determined what form of constitutional government would succeed to the legitimacy of the dying archetype. The Charter of Paris in 1990, signed by the United States, the United Kingdom, France, Germany, and the Soviet Union, and obligating the signatories to maintain democratic, representative institutions, marked the beginning of the peace that the Treaty of Versailles had been unable to deliver.
This Charter also obligated its signatories to adopt market methods of allocation and thus this international constitution contained within it the seeds of a new international order.
The strategic innovations that won the Long War and culminated in the Peace of Paris have set in motion constitutional changes that will move states away from the archetypal form of the nation-state that emerged in the second half of the nineteenth century toward the market-state that is today emerging in the United States, the European Union, East Asia, and elsewhere. This new archetype will manifest itself in several actual forms, none of which is yet fully realized. Following the pattern of the earlier periods chronicled in Part II, we want to ask: Can we study the strategic innovations that won the Long War (nuclear weapons, international communications, and electronic computation) in order to gauge their effect on the constitutional development of this new society of states? Or, to put it in broader terms, how will developments in weapons technology, the globalization of culture, and the liberalization of trade and finance challenge the society of market-states?
WEAPONS OF MASS DESTRUCTION
NUCLEAR PROLIFERATION
Usually nuclear proliferation is discussed as a threat to one nation, or to a group of nations that are allies. In this section we shall be concerned with the systemic consequences of proliferation, just as we earlier discussed the systemic effects of other strategic innovations in other eras. But perhaps initially one ought to question whether nuclear weapons did in fact play a decisive role in winning the Long War.
It is evident that the German surrender in 1918 did not destroy fascism. Indeed, owing to the infirmities of the Versailles process, fascism may have been inflamed by the false peace of 1918. What was required was the discrediting of this alternative in the eyes of its most dynamic advocates, Germany and Japan. In Germany's case, nuclear weapons played an important delegitimating role because they were not acquired by the Nazi state. Had the V2s that landed on London in the last year of the European battle been available earlier, none of the decisive engagements in Europe—the Normandy invasion, the tank battle at Kursk, the removal of the Nazis from North Africa and proximity to the Near East—could have taken place. Had they carried nuclear weapons the outcome of the war would surely have been different. Germany had the technical expertise and the technocracy to pursue the development of such weapons and faced the necessity to do so. But Germany lacked capital to divert to nuclear development on the scale of the U.S. Manhattan Project, and its political establishment was unwilling to entrust to non-Party scientists such a commitment of resources and decision making, even if those resources could have been found. When the war in Europe ended, Allied investigators determined that the Germans were still four or five years away from a testable fission weapon. That Germany could be so thoroughly defeated by “races” that were inferior to the warrior Volk of Teutons, and that this defeat could be sealed by the technical achievement of American invention and engineering that exploded over the fascist state of Japan: these facts made the pretensions of fascism seem pathetically inadequate. Had Germany acquired nuclear weapons, the pathos would have lain elsewhere.
In the case of Japan, the issue of the role of nuclear weapons in ending the conflict is still much debated.1 At this remove we are inclined to forget that Japan's land forces were still largely intact in 1945. The bulk of these forces were in China and had never been defeated. A negotiated peace before the atomic attacks, conceding a postwar role to the emperor, would have had the same effect as the German surrender in 1919: infecting the society with the historical claim of a “stab in the back” by politicians and diplomats who betrayed the armed forces, and encouraging a revanchist movement that alone could lay legitimate claim to Japanese nationalism. Whether one believes that credible peace offers were actually available to the United States before the atomic attacks on both Hiroshima and Nagasaki, one must consider the strategic goals of the Long War to determine whether such a negotiated surrender would have brought peace. The Japanese people had been bombed on an horrific scale for months. They remained disciplined and intensely loyal to their regime, and showed no signs of giving up. Far from there being any significant political opposition to continuing the war, the only evidence of an internal revolt came after the atomic attacks, when a military coup was attempted to reversethe Japanese offer of surrender. What was required, and what only the second atomic attack seems to have delivered, was the complete discrediting of the regime's promises to win a negotiated peace through stiff resistance to an American invasion. I have never been persuaded of the moral position of those who would have urged continued nonnuclear bombing of the Japanese people for an extended period of months, accepting also the American casualties that would have ensued in an invasion, as preferable to the atomic attacks on the two Japanese cities. The only alternative to this carnage would have been a half-life for fascism, in a kind of negotiated twilight. And that is precisely what the Long War was fought to eliminate.*
In the case of the Soviet Union and the defeat of European communism, nuclear weapons were also decisive. First, American nuclear weapons neutralized the effect of the Red Army in Europe and the geopolitical fact that Europe's strongest ally was an ocean away. Whether or not the USSR would have invaded West Germany—and without the U.S.-backed guarantee of West Germany's defense, one can think of many occasions on which this option might have proved attractive to the Soviet bloc—the fact that this invasion was made unlikely gave the Western states of Europe the time to solidify parliamentary institutions, build prosperous market economies, and unite among themselves rather than renew their traditional conflicts as one state after another was picked off by neutralist, socialist movements. Second, nuclear weapons ultimately created the superpower context of mutual vulnerability, which rendered continuing competition both highly expensive and militarily fraught. This military stalemate gave the political systems of the Warsaw Pact states time to collapse of their own inner inefficiency and self-disgust. These systems would have been far less scrutinized by their publics in the context of warfighting. Third, the nuclear dimension of the conflict kept the United States engaged in Europe, and this engagement provided the engine that drove changes in U.S. strategy in this era, always keeping pressure on the Soviet state and innovating as the Soviet threat changed. But for the vulnerability of the United States to Soviet nuclear weapons, it would have been too tempting to seek refuge in the isolationism that is so much a part of the American political tradition. In the nuclear era, there was nowhere to hide.
Thus I think it can be demonstrated that the strategic innovation represented by the development and deployment of nuclear weapons played a decisive role in ending the Long War and that, as we saw in Book I, this will have important constitutional effects on each of the states that fought that war. For the society composed of these states, the most profound impact is the restructuring required to deal with such weapons, for they cannot now be uninvented.
The problems that nuclear proliferation pose for the society of market-states arise from this question: is the possession of whatever weapons a state can acquire and deploy an attribute of sovereignty? For if it is not, then by what right do certain states possess weapons of such awful magnitude? And if it is, how can there ever be measures both appropriate and practical to limit the deployment of such weapons? And finally, even if having a nuclear weapons capability is a condition to which any state may aspire, does the possibility of a widespread nuclear proliferation pose such a threat to the peace and survival of the society of states that what hitherto was a state's sovereign right—the right to deploy the weapons of its own choosing—must now be rethought?
Nuclear weapons made a decisive contribution to the end of the Long War because their staggering ratio of destruction to attrition makes them virtually impossible to defend against. There are some targets of nuclear attack that can be defended against ballistic missiles—missile silos or underwater vessels, for example—but the nuclear weapon itself is so devastating that thus far methods of defense against its delivery to most targets are rendered absurd. Thermonuclear weapons can inflict such damage that even if virtually all the delivery systems used in an attack on a city were deflected, a single warhead arriving at its target would make further defense pointless. The enormity of this threat has obvious implications for individual states: the security of the United States is, on the one hand, at an all-time high, given its dominant economy and the pre-eminence of its armed forces, and on the other hand, at an historic low because the detonation of a handful of weapons launched from anywhere on the globe could utterly destroy it. “Counterproliferation” is at the top of the U.S. security agenda today, having moved from the periphery of the national security consciousness, along with the protection of the environment and of human rights, to the center of American concerns. What, however, is the importance of counterproliferation to the society of states, when some members may gain from acquiring such weapons, and none currently possessing such technology seem eager to give those weapons up?
A state's deployment of nuclear weapons can be either stabilizing or destabilizing for the international system. This is largely a function of the mechanics of deterrence, and thus it ought to be the policy of the international state system to deny nuclear weapons to some states, just as certain unstable geological regions are unsuitable for nuclear reactors. A nuclear weapons state can be reinforcing for the security of the society of states when its capabilities do not introduce multipolarity into the system, when its intentions do not threaten the legitimate constitutional sovereignty of other states* (unless it is attacked), and when its political culture is stable enough to ensure the endurance of such benign intentions. A nuclear weapons state imposes unacceptable risks on the system of deterrence when it threatens to make other states nuclear targets for geopolitical objectives that are incompatible with the maintenance of the current state system† or for geostrategic goals that are incompatible with the stability of the system of nuclear deterrence.‡ In either case, the unpredictability of nuclear attack increases, with potentially devastating consequences for populations and states.
This observation helps us answer the sovereignty question: no state that does not derive its authority from representative institutions that coexist with fundamental human rights can legitimately argue that it can subject its own people to the threat of nuclear pre-emption or retaliation on the basis of its alleged rights of sovereignty because the people it thus makes into nuclear targets have not consented to bear such risks. At a minimum, the Peace of Paris stands for this. One inference from this rule is that no such state therefore has a sovereign right to impose such threats on other peoples either.
For the same reason, such a state has no sovereign right to develop weapons of mass destruction generally. This argument turns around the usual rationale for the acquisition of nuclear weapons. States claim that they must deploy these weapons in order to deter attacks on their peoples. And there is a good deal of truth to this: the United States would doubtless not have bombed Japan with nuclear weapons if Tokyo could have retaliated in kind. But the acquisition of nuclear weapons also increases the risk of attack by pre-emption or by a disguised attack (so that the threat of retaliation cannot successfully deter). Each state must decide for itself how to resolve this calculus of risks. A state without representative institutions and effective guarantees of basic human rights has no way to win consent to such a decision.
A state that derives its legitimacy from representative institutions free of coercion can demand that other states recognize its right to acquire nuclear weapons, but though a state has this right, it ought to be dissuaded from acquiring these weapons when their deployment is destabilizing for the international system. When does this occur, and just how can this dissuasion be accomplished?
Thus far I have implied a link between proliferation and deterrence, suggesting that the society of states as a whole can determine when proliferation poses a systemic threat by asking whether a state's acquisition of nuclear weapons strengthens or weakens the prevailing system of nuclear deterrence. That system is currently underpinned by United States nuclear forces. It rests on the assumption that the United States will not use nuclear weapons as a means of aggression, but that it will actually destroy another state if that state cannot be otherwise dissuaded from attacking a state protected by the American nuclear deterrent. If the United States were to change its policies in either aspect, the current system of deterrence would be difficult to sustain, as formerly protected states raced to arm themselves and formerly deterred states began to explore the rewards of coercion.
This present system would be gravely undermined by multipolarity—the acquisition of a third superpower nuclear arsenal—for two reasons. First, multipolarity introduces a complexity that tends to weaken American commitments by blurring the identity of the states to be deterred: in a tripolar or n-polar world, responsibility is diffused. The persuasiveness of the argument, often heard in the United States during the Cold War, that the United States must act to suppress international violence or parry aggression, because if the United States doesn't, no one else will, fades in a multipolar world. The sheer complexity of deterrence in a multipolar world, coupled with an understandable American willingness to let other powers take up burdens long carried by the United States, creates a situation similar to that of the paralyzed crowds that attend emergencies. Second, the system of deterrence is stressed whenever a crisis triggers the threat of the use of nuclear weapons to deter aggression: such crises call the American bluff and require the United States to run potentially fatal risks to enforce dissuasion. Multipolarity can only increase, perhaps exponentially, the number of nuclear crises. We could have had another system of nuclear deterrence, perhaps managed by other powers, but this is the one we have, and this is the system bequeathed us by the Long War.
The link between nuclear proliferation and nuclear deterrence is too seldom drawn. In part this is a sociological phenomenon: the deterrence theorists tend to be interested in strategic studies and are often from military backgrounds; they are more curious about targeting and weapons development, and more informed about the formerly “central” balance between the superpowers than about “weapons of mass destruction” per se. The nonproliferation experts tend to be more interested in arms control than in strategic options, more conversant with the design of nuclear reactors and the processes of the nuclear fuel cycle than with the design of missiles and nuclear delivery systems, more global in orientation. In part, this disjunction is an intellectual phenomenon: the categories of thought are put in different terms, have different vocabularies. Theories of deterrence do not tell us which restraint agreements, like the Nonproliferation Treaty (NPT), will slow down proliferation; nonproliferation theories, on the other hand, more or less assume that any deployment of nuclear weapons is necessarily an evil, and that their use can never be justified. This largely unbridged chasm is a costly one because the strategic issues brought to the fore by the end of the Long War are pre-eminently questions of voluntary restraint, and thus the advocates of environmental protection and arms reduction can, perhaps for the first time in this era, realistically expect cooperation from the strategic sector.
Or should one say it is the second time? For there is an historic link between proliferation and the prevailing system of deterrence, and it is this link that principally accounts for the enormous success of nonproliferation efforts since the coming of nuclear weapons. The most important thing to be said about nuclear proliferation is not that it did happen in Israel, or India, or even France, but rather that it didn't happen in Japan or Germany; and the main reason it failed to take place in those two states was that the American nuclear guarantee to those countries provided a measure of deterrence sufficient to make it unnecessary for them to deter other states.
This is a controversial assertion. Sometimes it is claimed that Japan, because it had been the subject of nuclear attack, would never acquire such weapons. This may be, but it is equally possible that, precisely because it felt aggrieved over the Hiroshima and Nagasaki bombings, Japan might consider itself uniquely privileged to deploy the one weapon that would best ensure that this would never happen again. From time to time Japan has confirmed its pledge to forgo the development of nuclear weapons; the Japan Defense Agency has steadfastly maintained, however, that the bar against aggression in the Japanese constitution does not proscribe nuclear weapons so long as these do not exceed the minimum needed for defense.2 The Indians have shown the world how a single election can quickly be translated into a policy of nuclear weapons acquisition and deployment. The election in Japan of a similarly nationalistic party could have similarly fateful consequences.
The Germans are also said to be unlikely candidates for nuclear proliferation. They, like the Japanese, are supposed to be acutely sensitive to the anxieties they arouse in their neighbors, and it is true that, in the late 1950s, when the Germans discussed the option of a nuclear weapons program, French and British sensitivities were sufficiently aroused to head off this idea. It was ultimately the American role in German defense that dissuaded the Germans, however, who doubtless appreciated the fact that French and British forces in Germany could hardly have withstood a Warsaw Pact assault without using nuclear weapons. Absent the American nuclear guarantee, it is even doubtful that West Germany would have remained in the Western Alliance, with consequences that we can easily imagine.
What has kept Japan and Germany from going nuclear, when proximate states like China and France did so; when they possessed the wealth, ambition, and skill to do so; when they faced the threat of mortal attack on the front lines of the Cold War? It was the assurance provided by the American nuclear umbrella and the positioning of American troops in forward bases such that any invasion would quickly engage them and thus would immediately commit the United States and in all likelihood involve the use of nuclear weapons to protect her forces. Reviewing the period since 1945, Lawrence Freedman has concluded that “the critical variable [that accounts for nonproliferation to Germany and Japan and the acquisition of weapons by India, China and France] is the prevailing alliance structure… Drawing on the deterrent power of another may carry fewer risks as well as lower costs than a drive for a national capability. The incentives for proliferation grow with the lack of a reliable superpower protector.”3 How can this lesson be applied to stem the proliferation of these weapons in the era we are now entering?
If deterrence is a key to nonproliferation, then what regime of weapons deployment might lend the most stability to the international system? Perhaps the most famous proposal that links deterrence to proliferation was made by Kenneth Waltz. In “The Spread of Nuclear Weapons: More May Be Better” Waltz suggested that widespread nuclear proliferation would in fact enhance stability, as various nuclear armed states paired off, just as the United States and the USSR had done.4 This would result in a profusion of bipolar systems—India/Pakistan, Israel/Iraq, Ukraine/Russia—rather than a multipolar world. Waltz well recognized the acute danger posed by multipolarity. In “a multipolar world there are too many powers to permit any of them to draw clear and fixed lines between allies and adversaries” while at the same time there are so few (not every state can afford a superpower's arsenal) that the action of any single power is likely to engage the security of others. In a world of dancing partners, each conflict twirling around the international ballroom, however, it is perfectly clear who is to be embraced and who ignored. Multipolarity is neatly avoided.
But is this description entirely plausible? If it is true for India/Pakistan, what about India/China/Pakistan? Or Israel/Iraq/Iran? Or even Japan/ Russia/China? Waltz must assume that each new nuclear state has but a single nuclear-armed adversary, and also that each such state actually has such an adversary, because otherwise the temptation to coerce nonnuclear states would potentially upset the stability of the proliferated international regime. And if Waltz is proved wrong (once we have brought a heavily dispersed and proliferated nuclear world into being), how would we go back to the position we are in today, which might then appear to have been a golden age?
A second suggestion follows directly from Freedman's observation that “nuclear proliferation is most likely to occur where external guarantees have come to be doubted, as in the Middle East, or barely exist, as in South Asia. Acquiring a nuclear capability is a statement of a lack of confidence in all alternative security arrangements.”5 Recognizing this, some commentators have proposed extending the U.S. nuclear guarantee to those former states of the Soviet Union, or former members of the Warsaw Pact, that might otherwise become nuclear powers. In the absence of such a guarantee these states might acquire nuclear weapons in response to the Russian nuclear capability, and then, in response to each other, much as Pakistan developed weapons in response to India, once India had itself responded to the nuclear weapons of China, which initially was reacting to the nuclear capability of the United States and the USSR.
Such proposals have an air of unreality to those of us who lived through the “decoupling” debates that periodically seized the Atlantic Alliance from the late 1950s until the late 1980s. Briefly, these debates arose from European skepticism that the United States, in the event of an attack on its European allies, really would risk nuclear retaliation directed at the American homeland by fulfilling its nuclear pledges to its allies. The European theatre, it was feared, would be “decoupled” from the continental United States if the United States reneged on its promises, or “uncoupled” if those pledges were fulfilled, making Europe a nuclear battleground, while the American and Soviet homelands were kept as tacitly (or even explicitly) agreed-upon sanctuaries. Regardless of the grounds for such doubt—and one may recall Sir Michael Howard's witty observation that, where nuclear risks are concerned, it takes a great deal more to reassure an ally than to deter an adversary*—if these doubts were enough to move France to develop its own deterrent, how could they possibly not assail Ukraine or Belarus? Even if the United States could be induced to make such pledges, how could they be believed in the absence of the kind of American ground forces that underwrote the U.S. pledge to West Germany? And what, in such an event, would be the likely reaction of Russia, whose nuclear attitude remains vastly more significant than even that of the most ambitious potential proliferatee?
Yet a third approach comes from Margaret Thatcher. At a speech in Fulton, Missouri, commemorating Winston Churchill' famous Iron Curtain address there, Lady Thatcher said:
The Soviet collapse has aggravated the single most awesome threat of modern times: the proliferation of weapons of mass destruction…. If America and its allies cannot deal with the problem directly by pre-emptive military means, they must at least diminish the incentives for [rogue states] to acquire new weapons in the first place. That means the West must install effective ballistic missile defences that would protect us and our armed forces, reduce or even nullify the rogue state's arsenal, and enable us to retaliate.6
I think we may assume, with Thatcher, that “it is probably unrealistic to expect military intervention to remove” those weapons of mass destruction that are in hostile hands. What, then, about missile defense as a parrying technology to nuclear proliferation? Is it really sensible to think that providing the great states of the West with ballistic missile defenses would actually discourage a “rogue state” to a greater degree than the assurance of nuclear annihilation that would surely follow such an attack already deters them today? To believe this assumes a psychological hypersensitivity to the mere possibility of failure on the part of the leaderships of Iraq, Iran, and North Korea that seems incompatible with their characters, insofar as we know them, and an indifference to survival that these leaders, though they may seek it in their recruits, do not prominently display themselves. To the contrary, Martin van Creveld, in his study Nuclear Proliferation and the Future of Conflict, concludes:
There seems to be no factual basis for the claims that regional leaders do not understand the nature and implications of nuclear weapons; or that their attitudes to those weapons are governed by some peculiar cultural biases which make them incapable of rational thought; or that they are more adventurous and less responsible in handling them than anybody else.7
The real strength of Thatcher's proposal lies, as the last sentence in the passage quoted from her speech discloses, in the hope that a sound defense would enable retaliation, thus removing the possibility of successful extortion by the rogue states. Yet the day in which any states vying for “rogue” status could disable retaliation through accurate preemption is, thankfully, far off.
An alternative approach was reflected in the Clinton administration's efforts at “counterproliferation.” This was a multifaceted policy whose central method combined U.S. pledges not to use nuclear weapons with various arms control schemes like the Nuclear Nonproliferation Treaty, renewed with great effort, and the Missile Control Technology Regime (MCTR), whose enforcement has so bedeviled American relations with China and other states.
If I am correct in arguing that deterrence is crucial to the successful pursuit of nonproliferation, then the administration's policy could have been at most a partial success. A sincere pledge of no-first-use of nuclear weapons would scarcely reassure those states that feel the need to acquire nuclear weapons to protect themselves from us (as to which Iraq's recent experience with American conventional arms is exemplary) nor buck up those states who fear such attacks from others and look to us for protection. Israel, to take one case, can hardly be expected to renounce her nuclear weapons in light of a pledge by the American president not to use nuclear weapons first to protect it. Counterproliferation is, rather, the response of a political community that seems to have only the ideas that were in play before the end of the Long War; in that respect, the Clinton administration's nonproliferation strategies were no worse than those of its immediate predecessor.
Let us return to the criteria proposed to enable the international community to determine when nuclear proliferation is unacceptable. Then perhaps we can see which of these proposals, or others, might successfully enforce the rules implicit in those criteria. The first proscription was against multipolarity. This suggests that a principal task of any nonproliferation regime must be to prevent Germany and Japan from “going nuclear.” The second proscription was against the aggressive use of nuclear weapons, and the third, against proliferation to states so unstable that aggression might suddenly become attractive as a means of consolidating domestic power. These suggestions imply that states recently or currently engaged in aggression or threats of aggression against others are unwholesome candidates for the possession of nuclear arsenals—such states as Syria, Iraq, Libya, and North Korea. And states like Indonesia, owing to its political instability, ought to be on a watch list. As to others, there may be strong reasons to discourage their acquisition of nuclear weapons, but proliferation to such states is not necessarily critical to the system as a whole. It may be unsettling for Peru if Chile begins a nuclear program, or for Turkey if the Greeks do. But these developments do not threaten a systemic collapse of deterrence, even if they are cause to activate the diplomatic efforts of states that have influence in those regions.
For Germany and Japan the question of reassurance is more problem-tic in some ways now than it was before the end of the Long War. For the Japanese, the prospect of a North Korean nuclear device is no more threatning than a Chinese nuclear capability, with which they have lived for some time. The real anxiety arises from what might ensue if the Americans confronted either North Korea or China. Thus the Americans are in the paradoxical position of having to tread softly where northeast Asian nuclear proliferation is concerned, precisely to avoid a far more dangerous proliferation should the Japanese become alarmed by a turn of events toward crisis. In the case of Germany, the problem is exacerbated by the prospect of an E.U. nuclear capability. If NATO should falter, then such a capability could repolarize the nuclear world—the second Rome, as it were,* that seems so dear to the hearts of many in Brussels and Paris. Here the American role is not the decisive one. Rather it depends upon E.U. members, especially the British and French, to argue for, paradoxically, the maintenance of independent but modest proliferated deterrents, such as France and the United Kingdom currently deploy, rather than for a specifically E.U. nuclear force. These examples of nuclear proliferation can act as inoculations against an E.U. nuclear virus. French behavior on this matter has thus far not been entirely encouraging. There have been many reports of French efforts, at present quiescent, to seduce the Germans into a nuclear partnership.
For both Germany and Japan, the utility of antiballistic missile defenses can be very high, both as a hedge against nuclear attacks (or missile attacks with other warheads of mass destruction) and, just as important, as a means of reassuring their respective publics that a national deterrent is not necessary. Thatcher's program of ballistic missile defense development makes a great deal more sense in this antiproliferation role, than as a force for states already possessing nuclear weapons. To the extent that the United States supplies technical assistance for such defenses, this will require a modification of the Antiballistic Missile (ABM) treaty. This is, I believe, well worth the diplomatic cost.8
The contribution of international law to preventing major-state proliferation is limited. Germany and Japan are states with representative institutions that can legitimately claim the rights of sovereignty to choose the means of their own protection. Insofar as the peace and stability of the entire international system is jeopardized by the multipolarity such proliferation brings in its wake, there are grounds for condemnation and perhaps even some sort of sanctions, but these are the sort of steps that isolate rather than reassure a state and thus tend to radicalize the domestic politics of a democratic state with problematic consequences for its security policy. Rather the role of international society, and its rules, is as a benchmark: it tells us what steps are disfavored, but it does not tell us what to do once these fateful steps have been taken. The renewal of the prophylactic Nonproliferation Treaty (NPT) must be taken as an important accomplishment, although the treaty doesn't specify effective remedies for its violation. Both Japan and Germany are signatories, and despite hard bargaining to the contrary, no new American nuclear guarantees to other states were extracted as a price for the agreement. Such guarantees—particularly to the former Warsaw Pact states and the states of the former Soviet Union—would have run the risk of undermining the tie that binds Germany to the West, because these guarantees put Germany in the position of an unwilling, and unarmed, co-guarantor who might be dragged into a nuclear conflict. We should not want to put Germany in the situation that Japan now finds itself in with respect to the American guarantee to South Korea.
Major-state proliferation that risks multipolarity is the most important, but not the most intractable, part of a nonproliferation agenda for the society of states. That dubious status is reserved for the medium-size state that is a party to a long-standing dispute and feels the necessity of acquiring nuclear weapons, either for an advantage in that dispute or to protect against its adversary's gaining an advantage by a timely nuclear deployment of its own. India and Pakistan, Israel and Iraq, Brazil and Argentina, China and Taiwan, Iran and its several targets—all either have nuclear weapons or have at one time had active programs to acquire such weapons. Insofar as such states develop a capacity to deter Western intervention, they check the West's power to enforce international norms, as we saw in the Gulf War. This, too, is a threat to the society of states, because the West—and particularly the United States—underwrites the stability of that society.
There are two ways we might approach such a problem: we could expect the great market-state powers to choose sides in each potential conflict, ad hoc, and give those great powers a free hand to resolve matters by mediation or force; or we could set up rules that specify sanctions (including force) whenever the acquisition of nuclear weapons violates international understandings like the NPT and the MTCR, or is done in contemplation of international aggression. The successful Gulf War action was an amalgam of both approaches, but so was the Bosnian debacle. The latter experience suggests that relying on the West to act forcibly outside immediate threats to its well-being is impractical, even when it is clear that such inaction can ultimately reduce the West's ability to deter or to act.
To date, the only successful examples of active counterproliferation are the Israeli and coalition attacks on Iraq in 1981 and 1991, respectively. These can hardly provide a precedent for action generally. It is more likely that the buyout of North Korean nuclear capacity, should it prove successful, will provide a model for the future. Certainly the South African renunciation of its nuclear program seems to fit within a market-state paradigm—exchanging military power of dubious utility for economic relationships that promise development and investment. But what of the “rogue state”? Is it realistic to think that radical states can be bought off?
Perhaps not. But in such cases, who is really at risk? Is the system at risk? Libya threatens Chad; it does not really threaten Italy, which is a member of NATO, or the United States, which has evidenced its wiillingness to retaliate and whose means, which once deterred the Soviet Union, ought to be adequate to deter Libya. Iran threatens Israel, Iraq, and Saudi Arabia—but Israel and Saudi Arabia are protected by U.S. weapons, including nuclear weapons, which the U.S. administration has stated were in readiness during the Gulf War in case Saddam Hussein resorted to weapons of mass destruction. Only North Korea poses a challenge to the international system as a whole, not because it threatens South Korea— which is also protected by the U.S. nuclear deterrent—but for the ironic reason that it can provoke the United States to reactions that will themselves destabilize the system of deterrence, by overreacting or by withdrawing, either of which could propel Japan into developing its own nuclear option. No set of legal rules can help much here: it is a matter of prudence and wisdom in the formation and execution of policy. Nor can the international society of states do much as a group because so much turns on the policies of one state, the United States, which, after all, committed the first act of nuclear proliferation at Alamogordo.
Perhaps the best argument for a credible, if limited, ballistic missile defense lies not in its impact on “rogue states” so much as in its reassurance to potential proliferatees that fear attacks from such states. Such defenses reduce the extortion value of nuclear threats. The actual operation of missile defense systems, however, will bring new and complex problems of international coordination. These can be greatly eased by the sharing of U.S. air surveillance and early warning capabilities. Indeed, the provision of information by the United States in order to enable missile defense may play as large a role in the twenty-first century as the provision of extended deterrence did in the twentieth. What is needed is an institutional mechanism for sharing and protecting this information.
That brings us to the two other acute threats to a stable security system of market-states, Russia and China. They pose the most signficant concerns in the immediate future precisely because their own constitutional forms are still at issue and because they are both nuclear powers. Insofar as the society of market-states can help bring about a domestic transformation in the constitutional form of these states, it ameliorates the nuclear problem. In the meantime, these proto-market-states are likely to be among the most serious violators of the bans on the sale of missile technology and fissile material. Financial and political assistance to domestic parties in these states that wish to pursue admission and acceptance into the society of market-states is an apt investment for that society.
The market-state will face nuclear threats that are as novel and as market-driven and decentralized as it is. Nuclear terrorism, both on a large scale, involving attacks or threatened extortion against nuclear reactors, and on a micro level, using the nuclear materials commonly found in hospitals, universities, and laboratories, is more likely than an attack using a nuclear warhead. Still, the active international trade in weapons delivery systems and even fissile material will experience the same heady change in the scope of its markets, the speed of its transactions, and the astounding return on investment that the international market has provided other commodities, especially illicit ones. At some point it will simply be impossible to keep up with the nuclear weapons trade, which is at once lucrative and easily concealed. We missed a chance to slow this down when the United States failed to take up a suggestion that Soviet missiles simply be bought intact and destroyed rather than dismantled. This failure led to new opportunities for the diversion of nuclear fissile material, but some dispersion would have taken place at some time in any case. This is a proliferation of a different kind, less statist and all the more difficult to manage for that reason. The society of market-states will find it difficult to police such proliferation because intelligence sharing is as politically and strategically fraught for the market-state at peace as it was for the nation-state at war.
Deterrence and reassurance are the keys to the prevention of nuclear proliferation to states; they offer little in the way of help vis-à-vis transnational, stateless aggressors. This is the most difficult part of a nonproliferation agenda. If such organizations can be denied a state sanctuary, however, it will be difficult for them to assemble and deploy nuclear weapons on any scale that might disturb the system of stable deterrence, though they may be able to wreak a terrible destruction nevertheless. There may be a useful analogy, however: if the contribution of deterrence to nonproliferation is primarily that of reassurance, then the entire battery of market-state mechanisms for reassurance—surveillance, missile defense, redundancy of critical infrastructure, even market programs as mundane as insurance—should prove helpful. Ultimately only a global coalition that shares intelligence and information can hope to forestall terrorist attacks using nuclear weapons. We are in a race against time: can the new society of market-states develop technologies of information collection—like nanosensors, for example, that detect nuclear traces—and habits of cooperation before terrorists deploy nuclear devices in an attack?
CHEMICAL WEAPONS
The materials needed in order to create chemical weapons are far more widely available than those required for nuclear devices and the techniques of manufacture are vastly simpler. For these reasons, chemical weapons are often called the “poor man's nuclear weapons.” As with so many substitutes imposed by poverty, however, the “poor man's alternative” provides nothing like the satisfaction of the real thing. Although chemical weapons are ritually referred to as weapons of mass destruction, the lethality they bear is not all that “mass.” Chemical weapons would cause a small fraction of the deaths caused by nuclear or biological weapons. To take a single example: 100 kilograms of anthrax distributed in an aerosolized weapon by a cruising airplane would cause 300 times the fatalities that would occur if the same plane carried 1,000 kilograms of sarin gas.
Insofar as treaty regimes are useful in achieving the goals of nonproliferation, the ratification of the Chemical Weapons Convention provides a heartening case of politics in the market-state. Large chemical companies, concerned about the impact of the treaty on their enterprises if the United States stayed outside the treaty regime, were able to bridge the partisan gap in the U.S. Senate that has stymied so many other measures. On the other hand, it must be recognized that renouncing chemical weapons makes U.S. reliance on nuclear weapons that much greater9 and the consequence of this enhanced reliance could be a contraction of the willingness of other states—potential proliferatees—to rely on American security guarantees. Suppose for example that chemical weapons were used against a state that the United States had pledged itself to protect. The previous American position, no first use of chemical weapons, would have at least permitted retaliation in kind. Once the Chemical Weapons Convention came into force, requiring the destruction of American stockpiles and proscribing their use, however, retaliation (and hence deterrence) have depended upon a commitment of American conventional forces or nuclear attacks, as to both of which potential allies might have some skepticism. As is so often the case with respect to arms-control agreements—the landmines movement comes to mind—the United States is simply not in the same position as other states, at least as long as it continues to assume global security responsibilities, and therefore should not be shamed by charges of hypocrisy when it fails to adopt regimes that it urges on others.
BIOLOGICAL WEAPONS
The tactical use of microorganisms and toxins as weapons has been attempted by many warring parties, including aboriginal Americans who tipped their arrows in amphibian-derived poisons. Fomites—entities that harbor and transmit disease—have been used to spread infection since antiquity. During the fourteenth century siege of Kaffa, a Genoese cathedral city on the Black Sea, the attacking Tatar force was struck by plague. They catapulted their diseased cadavers into the besieged city in an attempt to start an epidemic in 1347—or perhaps to trigger a collapse of morale within the city walls. An outbreak of plague did ensue and Kaffa fell. Ships carrying refugees from Kaffa are thought to have begun the second plague pandemic in Europe.
Smallpox was deployed as a weapon against Native Americans by the British in the eighteenth century.10 During the French and Indian War, Sir Jeffrey Amherst proposed the use of this weapon in order to reduce the tribes hostile to the British. When smallpox broke out at Fort Pitt in 1763, a Captain Ecuyer gave blankets and a handkerchief from the smallpox hospital to Indians and recorded in his journal, “I hope it will have the desired effect.” A smallpox epidemic did follow, although it is impossible to isolate the cause.11
The formulation of Koch's postulates12 and the development of modern microbiology in the nineteenth century led to the isolation and production of specific pathogens. In the ensuing years, many states attempted to develop pathogens and weaponize them. In World War I, Germany pursued an ambitious program using attacks on livestock in neutral countries and poisoning animal feed for export.
Japan conducted biological warfare research from 1932 onwards in occupied Manchuria. Prisoners were injected with anthrax, meningitis, cholera, and plague. At least 10,000 are said to have died. Eleven Chinese cities were attacked using contaminated water and food supplies. Pathogen cultures were also sprayed from airplanes. Plague was developed by allowing laboratory fleas to feed on plague-infected rats; these fleas were then harvested and were released by aircraft over Chinese cities. Fifteen million fleas are reported to have been released per attack.
During the same period, the British experimented with weaponized anthrax off the coast of Scotland. It was the discovery of the Japanese program at the end of World War II, however, that galvanized research in the United Kingdom, the United States, and the USSR. Japanese scientists were granted immunity from war crimes prosecution in exchange for extensive debriefings. During the Korean War the U.S. program expanded, and full-scale production of pathogens for weapons began in 1954. As part of a biological countermeasures program, American cities like New York and San Francisco were surreptitiously used as laboratories to test aerosolization. The offensive program was unilaterally terminated by President Nixon in 1969, and in 1975 the United States ratified the Biological and Toxic Weapons Convention. This treaty prohibits the development, production, and retention of microbial or other biological stockpiles in quantities that have no justification for prophylactic purposes.
Unlike the Chemical Weapons Convention, however, the Biological and Toxic Weapons Convention has no provisions for verifying compliance. It is now widely conceded that several signatories have violated the Convention's provisions. For example, the KGB weaponized the lethal toxin ricin by producing small metallic pellets that were cross-drilled, filled with the poison, then sealed with wax that would melt at body temperature. The pellets were discharged by a spring-loaded weapon disguised as an umbrella. By this means the Bulgarian dissident Georgi Markov was assassinated in London in 1978 and at least six other persons were murdered. In 1992 President Yeltsin disclosed that the Soviet Union had pursued its biological warfare program in violation of the Convention and confirmed that an outbreak of anthrax in 1979 had been caused by an accidental release of spores from a biological weapons facility.
The scope of the Soviet program, as described by a defector, 13 embraced more than 55,000 scientists and technicians. Yeltsin promised to suspend these activities; a 1995 report, however, concluded that between 25,000 and 30,000 persons were still engaged in various related programs.
The Iraqi program, while on a different scale, is known to have been extensive, and may have produced up to ten billion doses of anthrax, botu-linum toxin, and aflatoxin. UNSCOM, the UN agency set up after the Gulf War to discover and dismantle Iraq's programs of weapons of mass destruction, concluded that biological agents had been weaponized in considerable variety, including 155 mm artillery shells, 122 mm rockets, aircraft bombs, missile warheads, and aerosol tanks. UNSCOM was unable to determine, however, whether these weapons had been destroyed.
Today, it is thought that China, Egypt, Iran, Libya, Taiwan, Israel, and North Korea have active biological weapons programs.14 Public sources have estimated that between 10 and 25 countries possess or are seeking biological weapons. Unlike nuclear and chemical weapons, biological agents are easy to make and conceal and they are inexpensive. They can be produced in facilities that are also involved in legitimate scientific and pharmaceutical activities. These programs can flourish despite rigorous export control regulations because the same agents that furnish lethal weapons are also naturally occurring microorganisms and toxins. Similarly, the dual nature of biological agents makes verification of treaty commitments against weaponizing these agents virtually impossible. Finally, the advanced nature of the Soviet program and the temptation to market its fruits to other states presents a scenario every bit as disturbing as that involving Russian nuclear devices.
This duality of use—biology as medical science/war weapon—that so bedevils control regimes also, however, holds the possibility for at least tempering the problem. The Soviet program turns out to be readily convertible to peaceful uses, in a way that its nuclear weapons program is not. One commentator has asserted that many of the Russian biological weapons facilities can be readily converted to biomedical research work and vaccine production, providing employment to a large number of scientists and technicians.15 In a highly creative approach, another commentator has argued that trade regimes and nonproliferation regimes can be carefully crafted in order to attract and enmesh a new tier of states that have been recently endowed with advanced technological capabilities, including the capacity to manufacture weapons of mass destruction.16 This approach plays on the new market-state and its intertwining of security and commercial links among states such that the transparency so crucial for market development can also be used to prevent clandestine military development.
At present, however, it is hard to get security analysts to pay much attention to biological weapons. To persuade them to pay more, we must first answer the question: if these weapons are so easy to deploy and so lethal, 17 why haven't we seen more of their use?*
The two sets of consumers for such weapons are military commanders and terrorists. For commanders, biological weapons are too slow to affect operations at the front (it may take days or weeks for an enemy soldier to sicken, during which he can do a lot of damage) and too unpredictable18 (because the wide diffusion of virulent agents can infect one's own troops).† For terrorists, the same features of biological weapons cut the other way: delay allows perpetrators time for escape, and an agent like smallpox is terrifying to the public because it is unpredictable owing to the fact that it is communicable. Communicability poses its own threats, however; it may be some time before the terrorists know whether they are themselves infected and are infecting others (their colleagues, for example) unintentionally. Accordingly, many biological weapons programs have mainly focused on anthrax spores that enter the lungs and hatch bacteria that multiply rapidly within the body but don't infect anyone else.
Genetic engineering, however, may be able to make biological weapons far more useful to both the commander and the terrorist. It should be possible to design a virus that would disproportionately afflict members of a particular ethnic group, giving safety to attackers from a different group.19 Genetic engineering could also match a particular virus with an effective vaccine so that the aggressor would be immunized; or piggyback two agents, one quick and confined and the other latent and communicable. This sort of engineering will allow for the cloning of vast quantities of both traditional pathogens and new designer agents; these could be created quickly and cheaply, while their antidotes might take decades to develop. Such frightening prospects also hold within them some hope: the revolu-tion in genetics might also provide framework vaccines and antidotes that can be quickly modified and rapidly produced.
If biological weapons were used today against a civilian population, the public health systems of any of the major countries would be quickly overwhelmed. Our best strategy lies in recognizing the new and distinct nature of this threat and strengthening the public health surveillance systems,* as well as the intelligence collection capabilities, that can quickly detect and possibly thwart such attacks.
IMMIGRATION AND HUMAN RIGHTS
THE GLOBALIZATION OF CULTURE
Progress in international communications that occurred during the Long War—beginning with the radio and culminating in the satellite-borne signals of global television—was decisive for that war. It may be unlikely that forces of the size that invaded Normandy, vastly larger than anything in the past, will ever be marshaled in an amphibious assault in the future, but it is also clear that only modern telecommunications could have made such an enterprise possible. The great naval campaigns of the Pacific were enabled by a communications network of staggering complexity, involving the coordination of distant fleets, air assaults, and landings combining all arms of the American forces. And, too, it is difficult to overestimate the role of Churchill's stirring addresses to the British public or Roosevelt's Fireside Chats in rallying public opinion, which is a crucial element in mobilizing the popular resources of the nation-state necessary to execute strategies of mass warfare and to withstand mass civilian suffering. The most critical role played by these technologies, however, came at the endgame of the Long War. It was the irrefutable comparison between life in the West and in the Soviet bloc, made possible by modern communications, that utterly demoralized the communist leaderships and so alienated their peoples.†
Nor did this communication go in one direction only. Dissident groups in Poland, Czechoslovakia, and elsewhere were able constantly to expose the actions of the police states under which they labored. The Helsinki Accords gave dissidents an international standard of human rights against which to measure the acts of the Soviet bloc; modern communications made it possible to report these evaluations. An equally important line of communication was the limited travel to the West accorded citizens of the Warsaw Pact states. The bloc actually began to hemorrhage with a mass migration of German citizens through Hungary in 1989.
These two phenomena—immigration and human rights—that are connected to innovations in communication also pose two major challenges to the society of market-states. Immigration on a scale never hitherto seen in peacetime bears a relationship to the market-state different from that it bore to the nation-state. The nation-state could effectively seal its borders because it had the duty of protecting the ethnic nation for whose benefit it was constituted.20 The market-state is more ambivalent about such matters because it can so usefully employ the lower-cost labor of new immigrants to increase the productivity of the society. Moreover, in its multicultural form—like the United States—the market-state must deal with new immigrants who can call upon political groups to whom they are ethnically allied, as well as upon an American political consciousness that is wary of policies favoring exclusion.
It is global communication, both logistically and in images, that drives this immigration. As the market-states of the developed world increase their wealth, they become the target of immigration for peoples of the Third World whose demographic dynamics could quickly overwhelm the capacity of any state to assimilate them. Furthermore, the abandonment of the integrative function of the nation-state, which sought to transform immigrants into versions of the pre-existing national group of the country to which they had come, means that large, unassimilated ethnic groups are now without the resources of the State that would enable them to be assimilated. Maximizing the opportunities of its citizens means that the market-state must leave it to those citizens to determine what cultural attachments they wish to form. Even market-states that do not embrace the multicultural variation chosen by the United States may still face the reality of large knots of unassimilated immigrant communities within their midst, and thus face also the choice of according them full democratic privileges—and risking the loss of civil cohesion—or denying them the right of equal democratic status.
Thus again the ironic intertwining of immigration and human rights: the communications media that bring glamorous images of the developed states to those living in wretchedness also bring to those in comfort images of the suffering and cruelty visited on the less fortunate. Perhaps this latter development is really a benefit: the states of the developed world must welcome the opportunity to deploy their resources in ways that benefit the oppressed and the poor—this, after all, can justify our good fortune. But polities that are emotionally whipsawed by the most affecting shows of suffering are ill-equipped to devise long-term policies to help anyone. One month's poster child gives way to another. The Kurds had languished under oppressive and genocidal rule since the seventh century until CNN* brought attention to their plight in Iraq, but soon thereafter attention shifted to the suffering of Muslims in Bosnia.
Lacking the political focus that enables sustained attention to a problem, the publics of the developed states must soon grow disillusioned with humanitarian efforts altogether. Sooner or later there will be analysts who will explain that any help will create dependency, that aid, however well intentioned, actually makes things worse, and so on. In a world of suffering, the dimensions of which are necessarily beyond complete cure because they are essentially comparative, fed by international communications that so vividly and increasingly display the contrast between rich and poor, the society of market-states is ill-suited for helping. Each state is, after all, competing for the skills of learned castes who, unlike the individual bearers of capital under the nation-state, can take their knowledge with them (or withhold it). To become either the most welcoming refuge for the poorest or the chief ministering angel to the Third World is to consign one's state to a steadily degenerating competitive position vis-à-vis other market-states. We can expect moves among some members of the society of market-states to require others to take immigrants, provide aid, or change their human rights policies, thus breeding conflicts among states.
To simply ignore suffering and the denial of human rights in other states, however, is also destructive, depriving states of their moral basis. Of course it may be that the citizens of such states will wall themselves off psychologically, in much the way they can wall themselves off architecturally, from the unassimilated poor in their own countries. This renders the market-state an attractive target, however, to civil disorder as well as to international terrorism.
There are many other problems created for the State by the explosion in communications technology: the privacy interests of individuals and the protection of the family from offensive intrusion are examples. Immigration and human rights, however, are different because they do not admit of single-state solutions. Only coordinated action within the society of states can treat these particular problems effectively and with an attention to their interconnection. These problems bring unusual strains to market-states because they are called upon to devise cooperative solutions even though the salience of the market—which is indifferent to such concerns and hostile to the transaction costs such solutions impose—is especially high within such states.
THE LIBERALIZATION OF TRADE AND FINANCE
ECONOMIC DEVELOPMENT AND THE ENVIRONMENT
The introduction of the computer21 and the mathematics on which high-speed computation is based played a decisive role in defeating fascism and communism in the Long War. No history of the Second World War can give anything like an accurate account if it was written before the revelations about Allied code breaking that began to appear in the 1970s. Nor can any political history of the Cold War omit the phenomenal growth of the developed economies, especially Japan and the United States, that occurred as a result of the introduction of microchip technology. Although, as observed above, the percentage of the American workforce devoted to manufacturing has dropped with the precipitousness that earlier occurred with respect to agricultural workers, the percentage of U.S. GDP contributed by manufacturing has not changed in a significant way. The enormous growth in productivity that accounts for this fact can be largely attributed to the products of the computer revolution. It is not that computer operators have replaced clerk-typists, or even that new computer-based products have given a shot of adrenaline to consumer demand comparable to that of the automobile in an earlier period. Rather it is that a new source of wealth has been discovered: the application of vast amounts of information rapidly applied to the tasks of work. Not only did this greatly enrich the United States and Japan, but it created explosive markets for the products of an entirely new list of economic players on the world scene—Korea and Taiwan, among others—as well as enabling the renovation of the Western European infrastructure that had begun the Industrial Age.
The introduction of the computer was a strategic innovation* that was productively married to the American doctrine of containment. This doctrine proposed that communism would collapse of its own steadily increasing deterioration if it could be prevented from actually seizing other states (by invasion or subversion). This required that the noncommunist states be made strong through increasing prosperity and effective alliances. It proved to be an effective strategy for the noncommunist society of nation-states, and yet some of the innovations that made it succeed were ultimately destructive of the power of the nation-state itself. But for the development of the computer, George Orwell might well have been right about the power of communications technology to observe and control national populations. Instead, this technology decentralized the power of institutions, including the State, so that the objects of control slipped out of the hands of governments altogether. George Gilder gives this example:
A steel mill, the exemplary industry of the industrial age, lends itself to control by governments. Its massive output is easily measured and regulated at every point by government. By contrast, the typical means of production in the new epoch is a man at a computer work station, designing microchips comparable in complexity to the entire steel facility, to be manufactured from software programs comprising a coded sequence of electronic pulses that can elude every export control and run a production line anywhere in the world.22
Regulation by law—the characteristic method of the nation-state—is both losing its effectiveness because of this technology and becoming more costly because the technology of computers has conferred greater value on intellectual capital, which flees from regulation wherever possible.
Indeed some of the core concepts that enabled the nation-state to attempt to manipulate its economy through regulation have become vacuous under the pressure of the mobility made possible by computing technology. The notion of the trade balance that has long been held to be crucial to the nation-state depends upon our being able to value the goods and services exchanged in international trade and to assign these values to a particular state. Where the most valuable good is information, which is highly mobile and cannot be measured in these terms, however, it is fruitless to measure trade balances precisely because they are limited to the measurable. One example is the printed book: for a publisher in one nation-state, “foreign earnings” from such a book in another state may account for a large share of total revenue, even though no actual books are exported. This is because it is more profitable for the publisher to sell derivative copyright licenses than to ship books abroad. As Peter Drucker points out, “the most profitable computer ‘export sales' may actually show up in trade statistics as an ‘import.’ This is the fee some of the world's leading banks, multinationals and Japanese trading companies get for processing in their home office data arriving electronically from their branches and customers around the world.”23
Moreover, computing technologies have made possible the complex logistics of transnational value-adding production.
The dress a customer purchases at a smart store in San Francisco may have originated with cloth woven in Korea, finished in Taiwan, and cut and sewed in India according to an American design. Of course a brief stop in Milan, to pick up a “Made in Italy” label, and leave off a substantial licensing fee is de rigueur before the final journey to New York.24
In such circumstances, what sense does it really make to consider this an Italian export? We accept, conventionally, that it matters if the company exporting from Milan is U.S.-owned; the company earnings will be repatriated and can be measured. But suppose it simply can't be determined what country's investors own the exporting company, and to what degree the country that finally exports a product to the United States is the source of value? This casts doubt on the very notion that the world can be subdivided into national economies. And if this is so, then monitoring one of the key functions of the nation-state is erased to nothingness.
Walter Wriston asks:
How does a national government measure capital formation, when much new capital is intellectual? How does it measure the productivity of knowledge workers whose product cannot be counted on our fingers? If it cannot do that, how can it track productivity growth? How does it track or control the money supply when the financial markets create new financial instruments faster than the regulators can keep track of them? And if it cannot do any of these things with the relative precision of simpler times, what becomes of the great mission of modern governments: controlling and manipulating the national economy?25
Monetary and fiscal policy are the two great levers available to the State to manage its national economy. By manipulating the value of its currency, a state can raise or lower interest rates, stimulate or suppress growth, increase exports or imports. In a world of floating exchange rates, however, states do not set the value of their currencies with respect to an external standard—such as the gold standard, or a basket of values related to interstate economic comparisons like the European Monetary Standard— but rather are judged by the market as if currency were any other commodity, like soybeans or petroleum.* In such an environment, the computer has made possible the instantaneous judgment by the market as to the value of any particular currency because it allows hundreds of thousands of investors to voice their demand decisions through computer-assisted transactions vastly in excess of the demand for money required by purchases of goods and services. As Wriston, the former head of one of the world's largest banks, noted, “[u]nlike all prior arrangements, the new system was not built by politicians, economists, central bankers or finance ministers. No high level international conference produced a master plan. The new system was built by technology.”26 As of this writing, the amount of dollars trading per day exceeds the total GDP of the American economy annually; only a tiny fraction of this is available to central banks trying to manipulate this trading.
Wriston asked, “What becomes of the great mission of modern governments?” The reply must be: the mission changes. The market-state ceases to base its legitimacy on improving the welfare of its people, and begins instead to attempt to enable individuals to maximize the value of their talents by providing them with the most opportunity to do so. “Be everything you can be” replaces “A chicken in every pot.”27
The market-state has shifted its mission to respond to the new circumstances in which the nation-state found itself. Market-states composing a society of such states reflect the consequences of the strategic changes that won the Long War; with respect to rapid computation, two kinds of challenges arising from this history are paramount: (a) the possibility of a trade war among the developed northern-tier states and/or a trade collapse between North and South, and (b) the transnational problems of protecting the environment. Both of these challenges to the society of market-states are attributable to the revolution in information technology—North-South discrepancies in wealth resulting from a dramatic change in the terms of trade have been further accentuated by it—and yet both problems can benefit from this technology.
CONFLICTS ARISING FROM INTERNATIONAL TRADE
TRADE WARS
The society of market-states will be dominated by three important actors, much as the Cold War was dominated by two. Europe will be the world's largest market and the largest trader; Japan will be the world's largest creditor, as it is now, with a GDP that approaches that of the United States; the United States will remain the world's most powerful single economic state, the possessor of the world's reserve currency,* and the market with the largest GDP.
Since the end of World War II, economic relations among these three actors have been largely guided by the Long War objectives they shared and the security alliances that served those objectives. Indeed there was relatively little direct collaboration between Japan and Europe, as both saw their futures as linked directly to Washington. German redevelopment occurred, perhaps could only have occurred, within the nuclear and conventional strategic guarantee of NATO. This relationship tempered economic competition in both directions: the Americans were anxious to develop a strong ally as a bulwark against communism; the Germans were eager not to alienate the Americans and be abandoned in the center of Europe, astride the division between East and West. Germany realized that its long-term goal of reunification could only take place under American sponsorship; America understood that a neutral West Germany would not only demoralize the remaining noncommunist European states, but would cease to be the driving economic engine of European recovery within what was then the European Economic Community (EEC). The EEC itself was strongly endorsed by the United States as offering the best prospect for European growth and stability.
With respect to Japan, the intertwining of economic development and security guarantees was even tighter. Japan faced at least three potentially lethal adversaries in the western Pacific and was largely unarmed; she therefore depended upon the United States to underwrite her survival as an independent state. At the same time, the United States was an avid mentor, encouraging economic development. Here too Washington believed that its own struggle against communism would be best served by a dynamic, capitalist economy in an allied state. For its part, Japan attempted to pacify U.S. alarm over growing American trade deficits, in order not to upset existing security arrangements. As C. Fred Bergsten observes:
The United States and its allies… frequently made economic concessions to avoid jeopardizing their global security structures. Cold War politics in fact sheltered the economic recoveries of Europe and Japan, and America's support for them. The United States seldom employed its security leverage directly in pursuit of its economic goals; indeed, security and economic issues remained largely compartmentalized in all of the industrial democracies.28
Bergsten concludes that the end of the Cold War will “sharply heighten the prospect of a trade war”29 among these three northern-tier communities. For each of the world's principal market-state actors, the overriding security concerns that muted its economic conflicts have receded, and there are substantial incentives to play a rougher game. In Europe, efforts to deepen the European Union (bringing about greater political centralization within the E.U.) and widen it (expanding E.U. membership to Central and Eastern European states) mean that imports to the European market are likely to decline. Preferential access to markets within the E.U. will act to deliberalize global trade. Even with Great Britain within the E.U., the historically mercantile trading policies of France and the consistent German demand for a strong euro—with all this entails for the other E.U. members' monetary policies in a single currency environment—will drive the demand for strong external barriers against the United States and Japan. A strong euro makes German exports less marketable and makes foreign imports more threatening; if the other E.U. states are required to adopt deflationary monetary policies, then it is difficult to see how they could maintain liberal trading policies with either Japan or the United States.
For their part, the United States and Japan are locked in a kind of codependency. The Japanese have a large investment in American firms* and hold a large amount of American external debt.30 Indeed Japan can be said to have financed the U.S. budget deficit for over a decade. Without this ready buyer of American debt—Japan is now the world's largest creditor state and holds between one-quarter and one-half of all U.S. debt to foreigners—interest rates in the United States would have increased, choking off growth. The alternative, a rapid and precipitous tax increase, would have had the same effect, drawing liquidity out of the American economy at a vertiginous rate. There was, in reality, no other short-term alternative. At the same time, Japan has been dependent on the vast American market to supplement consumer demand at home. Only this fertile opportunity has permitted Japan to maintain full employment despite a sluggish domestic economy that has failed to generate new jobs. Without exports to the United States, Japan would have unemployment rates similar to those of Western Europe—9 percent to 11 percent at this writing—and higher in the politically sensitive smokestack industries that are facing ruthless competition from states such as South Korea.31 Like two persons trapped in a bad marriage, the United States and Japan have grown increasingly hostile to one another precisely because each blames the other's unwillingness to reform for its own troubles. There are powerful political voices in both countries that find popular support in bashing the other. Any significant recession in either state would result in calls for an aggressive protectionism—but against whom?
Strategic studies in history, as well as contemporary game theory, suggest that a multipolar system is an unstable configuration.32 Two parties will inevitably coalesce, leaving the third in a highly threatened position. The incentive that drives war is usually the desire to prevent a steadily worsening position. In such circumstances it hardly matters to the society of states which coalition forms—there are plausible scenarios for all three possibilities. Europeans and Americans have strong cultural bonds; the United States and Japan have, as we have observed, strong economic links that are acutely sensitive to severance; Japan and Europe have similar protectionist attitudes, and similar models of close cooperation between banks and industries with government planning and support.
Nor would a trade war necessarily take on the overt, violent manifestations of previous wars. If that were so, then perhaps the underlying strategic strength of the United States would assert itself toward harmony (though it is just as possible that Germany and Japan would react by developing nuclear weapons). Rather it is more likely that trade conflicts in the twenty-first century will be fought with covert means for which governments could deny responsibility. So-called logic bombs, which are planted in computer software, could disrupt and even cripple the economic behavior of any of the advanced states. The “choke points” so beloved of strategists from Mahan onwards, the closing of which could interdict sea-borne supplies, may now take on a less geostrategic and more cyberstrategic aspect. In a tripolar world of disguised, privatized attacks, against whom does one retaliate? And if retaliation becomes uncertain, of what real significance is it that a state has the power to retaliate, this power having lost any deterrent effect?
The nation-state is peculiarly vulnerable to such attacks because they appear to come from the private sector and not directly from a rival state. With its sharp division between state activities and private ventures, nation-states have difficulty—as we have seen in the case of covert state-sponsored terrorism—dealing with threats that do not obviously come from other states. A society of market-states could better cope with such attempts at extortion. The emergence of the intense economic competition that characterizes market-states, however, might also combine with another strategic innovation of the Long War, the development of weapons of mass destruction, in a particularly threatening mode.
Consider, for example, the possibility of using biological (and possibly chemical) weapons not against the military targets of the nation-state, but against the economic targets of the market-state. Suppose an adversary raw materials producer—say China—attempted to gain market share in corn exports by dramatically weakening U.S. corn production. There are corn-seed blights, such as fusarium graminearum, that could be clandestinely sprayed over the U.S. Midwest from commercial airliners flying the polar route from Beijing to Chicago or St. Louis.33 If this hardy spore were disseminated in winter, the blight would be present in the soil at the time for spring planting. The resulting corn-seed blight would crush the U.S. crop. Hogs and cattle would become too expensive for many farmers to feed. The United States would be forced to import corn for the first time in its history. Food prices would skyrocket with immense profits to those states that could still produce. If, as Shintaro Ishihara predicts, “the twenty-first century will be a century of economic warfare,” the means of prosecuting such warfare will arise from the innovations that won the Long War.
Information technologies are the product of the synergy evident in two of the Long War's strategic innovations, international communications and rapid computation. These technologies enable private companies to elude and even punish nationalist attempts by governments at controlling the market. As a result, market-states are compelled to avoid measures that are anticompetitive if these states are to maintain the basis for their legitimacy, because only the most efficient responses to the demands of the international market will maximize the opportunities available to consumers and producers. Patently “protectionist” moves to manipulate that market—as Japan, Europe, and the United States have all attempted—are, in fact, counterproductive because the information technology available to the private sector can easily counterbalance any national efforts to govern the market. Two examples will suffice.
In order to stimulate exports, Japan has manipulated the yen, depressing its value. The domestic Japanese economy, however, has not responded to this stimulus, even at interest rates that are at historic lows. With a huge dollar surplus, the Japanese have been forced to overinvest in United States assets even though Japanese financial experts, and the Central Bank, knew these assets were overvalued and would have to be marked down. The United States attempted a similar effort to boost exports in the late 1970s by depressing the value of the dollar. American exports rose sharply, but here too the domestic economy failed to pick up. Indeed it fell into a recession, producing high unemployment figures and high inflation. In both cases international markets in the yen and the dollar absorbed the manipulative efforts of governments, without producing a domestic stimulus.
Only economic activity that actually enhances wealth—as judged by its contribution to the valid information devoured by the market—produces growth. Neither the Japanese nor the U.S. model for economic management is necessarily better (despite current appearances to the contrary), as we will see in the next chapter, because each must be measured not only in terms of economic performance but also with respect to the culturally idiosyncratic needs of very different societies. Neither a mercantilist, export-driven policy with an emphasis on capital formation and protection nor a free-trade, consumer-oriented, debt-financed policy is a priori superior. Either policy can succeed*and has—so long as it does not defy the source of wealth within the society of market-states, valid information, by attempting to manipulate that information through regulatory, fiscal, and monetary policies. Corruption and cronyism, on the one hand, and concern for the disruptive effects of free trade on workers or protected sectors like farming, on the other, can motivate states to perpetrate such distortions.
Enhanced technologies of computation and communications will further accelerate the shift to the market-state that maximizes opportunity (which is an information good) and the shift away from the nation-state that maximizes welfare. This movement, however, may provide the best inoculation against trade wars. A nation-state only wishes to improve its relative position, in order to be able to control its environment and thus bring a better life to its people than its ideological competition; a market-state attempts to improve its absolute position, because only in so doing can it maximize the opportunities available to its citizens. For this reason, nation-states were actually more likely to wage trade wars and market-states more likely to concentrate their energies on more aggressive competition—though we must bear in mind that the two strategies are by no means mutually exclusive.
NORTH-SOUTH CONFLICTS
The long-term decline in the demand for raw materials that began in the late 1970s has inevitably had important effects for the states of what was once called the Third World. If, for example, raw-materials prices had not collapsed in these years, Brazil would have had an export surplus almost 50 percent higher and would have had little difficulty in meeting the interest payments on its foreign debt. Indeed, if raw-materials prices had remained at 1973 or even 1979 levels, there would have been no debt crisis for most debtor countries, especially in Latin America.34 More important, the terms of trade—the ratio between the prices of manufactured goods and services and the prices of raw materials—are at present as unfavorable to the underdeveloped, raw-material-producing states as they were in the deflationary period of the Great Depression.
This is partly the result of abundant harvests and greater efficiencies in producing raw materials. It is also the result of the smaller—and shrinking—component that raw materials make up of finished products. An IMF study concludes that the amount of raw material needed for a given unit of economic output has been declining at the rate of 1¼ percent per year since 1900.35 In 1984 Japan consumed only 60 percent of the raw materials consumed for the same volume of industrial production in 1973.36
Several factors are responsible for this change. Industrial production is switching away from products like automobiles (40 percent of whose cost is in raw materials) to microchips (1 percent to 3 percent). Automobiles and other traditional goods are themselves using cheaper, artificial materials (steel is being replaced by plastics made of raw materials with half the cost of steel); fiberglass cables can transmit as many messages over 50 – 100 pounds of cable as are carried by one ton of copper wire.
Additionally the comparative advantage of low labor costs in the underdeveloped world is increasingly of less significance as labor costs themselves amount to a smaller percentage of total manufacturing costs. Partly this is due to increasing automation and the replacement of manual labor by machines, including robots. But this change in the components of production costs is also due to the shift from industries that were labor-intensive to those that are information- or knowledge-intensive. The manufacturing costs of the semiconductor microchip are estimated to be about 70 percent intellectual (research, development, testing, marketing) and less than 12 percent labor. About the same figures obtain for pharmaceuticals, whereas even the most highly robotized automobile plant would still find about 20 – 25 percent of its costs consumed by labor. Because raw-materials earnings and profits from labor-intensive industries are used to provide the capital for industrialization, one can wonder on what basis development can take place in the Third World when these avenues are denied them. Peter Drucker notes:
In the rapid industrialization of the nineteenth century, one country, Japan, developed by exporting raw materials, mainly silk and tea, at steadily rising prices. Another, Germany, developed by leap-frogging into the “high-tech” industries of its time, mainly electricity, chemicals, and optics. A third, the United States, did both. Both routes are blocked for today's rapidly industrializing countries—the first because of the deterioration of the terms of trade… the second because it requires an infrastructure of knowledge and education far beyond the reach of a poor country… Competition based on lower labor costs seemed to be the only alternative; is this also going to be blocked?37
The potential consequence for the society of states is a disjunction between one group composed of market-states and a second group of states whose underdevelopment hampers their making a constitutional transition to the new form. Of course, at any moment in the story of consti-tutional change, there are always examples of different models being simultaneously pursued. Many Third World states (such as Taiwan, Jordan, or Guatemala) did not become nation-states until almost the end of the era of the nation-state itself, but most had long been nation-states (though some, such as Saudi Arabia and Brunei, resemble much earlier constitutional forms).
The consequence for the society of states can be profound, however, because the unassimilated states will be unable to participate effectively in the multistate institutions and practices that this new constitutional form creates. The relationship between the G-7 and the Group of 100 (proto-market-state institutions) scarcely parallels that which exists between the U.N. Security Council and the General Assembly (with regard to nation-states). Unlike nation-state institutions with virtually universal membership based on the political equality of states, there is a price of admission to the society of market-states (though there may be “scholarships” for some). Some states will be left behind. With no stake in the system as a whole, and following a different archetype for the very basis of legitimacy of the State, these unassimilated states may form a competing, retrograde society, or simply become solipsistic, venomous states, alternately dedicated to isolation from the rest of the world and to its destruction.
TRANSNATIONAL PROBLEMS OF THE ENVIRONMENT
So much important work has been done to bring to the attention of the public the inherently transnational nature of environmental problems that it hardly seems necessary to stress that the society of market-states, like that of nation-states before it, will have to devise ways of coping, as a collectivity, with these matters. Here I want only to discuss two issues: environmental problems that have the potential for disconcerting the society of states, and the contribution that rapid computation, perhaps in conjunction with telecommunications, can make to the resolution of these problems.
Three major environmental events have occurred since 1970 that manifested this potential to bring about rapid and profound disquiet: the AIDS epidemic, the nuclear core accident at Chernobyl, and the scientific confirmation that the earth's ozone layer is being destroyed. Each of these events arose as a function of the interactions among the states of the new global economy, the mass movement of peoples and products, the transfer of previously familiar technologies to new settings, and the development of new technologies and materials.38 Part of what is disconcerting about these three events is precisely their links to this new world; the eruption of Mount Saint Helens perhaps had a greater environmental consequence than any of the three, but it did not have their unsettling quality.
Acquired Immunodeficiency Syndrome (AIDS)
AIDS is the physical condition of malaise leading to death that occurs as a consequence of an attack on a human being's immune system by the human immunodeficiency virus (HIV). Its origin remains obscure, but it seems to have bridged the gap of space and culture from West Africa to the developed states in the late 1970s. One plausible explanation is that it was the result of the transfer to human beings of a retrovirus previously found in monkeys, through the use of hypodermic needles that were employed to inject monkey blood and plasma into human beings as part of a cultural ritual. This theory of origin, if true, places AIDS among those other diseases with a technological component, such as toxic shock syndrome (caused by the superabsorbency of a tampon) and Lyme disease (caused by the changing ecology of suburban growth, reforestation, and the altered demographics of deer populations), the Hanta virus, the zebra mussel contamination in the Great Lakes, and the discovery of radon in homes.
Other infectious diseases have exposed residents of the temperate zones to tropical infections owing to increased travel in both regions, the global sources of the food supply, and the ever-increasing number of human hosts within which viruses may proliferate. Whatever its origin, AIDS has been widely spread among heterosexuals in the developed world by the use of hypodermics, and by sexual practices among both heterosexuals, mainly in underdeveloped states, and homosexuals in all states.
Its disconcerting nature has to do with at least three factors: first, such epidemics were widely believed to have been relegated to the past by modern antibiotics; second, AIDS has been invariably fatal, striking the young and otherwise healthy with a grim inexorability; third, although AIDS has been largely confined to groups that, for differing reasons, can be marginalized from the mainstream culture of the developed states, yet it has the potential to overwhelm the populations of those mainstream cultures. AIDS is now the leading cause of death among Americans under the age of twenty-one.
In 1976, the historian William McNeill, writing about the role of plagues in the past, presciently observed that
it now requires an act of imagination to understand what infectious disease formerly meant to humankind, or even to our grandfathers. Yet as is to be expected when human beings learn new ways of tampering with complex ecological relationships, the control over microparasites that medical research has achieved since the 1880s has also created a number of unexpected byproducts and new crises.39
Thus AIDS is probably not the last of such disconcerting diseases. Unexpected outcomes of recombinant DNA activities, toxins developed for the purposes of biological warfare, obscure parasites sprung from their remote geographical niches, or even familiar viruses that have developed strains resistant to modern antibiotics are all candidates for the plagues of the twenty-first century. They pose a unique challenge for the society of market-states, as threatening in its way as the challenge posed to Christian faith by the bubonic plagues of Europe because developments in molecular biology—fueled by abundant investment made possible by the financial liberalizations of the market-state—have given many persons a faith in technology and in its ability to grant something like immortality to human beings.
The society of market-states will have to confront its fundamental ordering principle, the market, at a juncture where the market works poorly, the decision to whom to give life-saving medical care. If each state decides on its own, in the manner of current states, then some persons will be excluded from care because they are not members of the preferred groups of recipients, while others will be excluded for lack of personal or institutional resources. If, on the other hand, some multinational market is set up, then the wealthy from one country will sop up the health resources of others, as in the example of richer persons buying kidneys and other organs from impoverished donors.40
The encouraging fact is that a society of market-states will be better prepared to evaluate, analyze, and treat such diseases because it will most efficiently allocate resources to the task and have a worldwide charter to do so. The mere fact of a state boundary will not stand in the way of ad hoc groups, authorized by the society of such states, who act to protect the world from an apocalyptic pestilence. But this too will test the legitimacy of that system, as it assumes authority—by what right?—that the peoples of the world have not given it by any recognizable plebiscite, or other method approved by the nation-state. Moreover, actions by a society of market-states will inevitably bring the values of the market to bear—espe-cially pricing—on goods (such as life itself) that we have tried to treat as priceless.*
Chernobyl
Chernobyl was not the first such health event to result from the introduction of dangerous technologies into contemporary life. The nuclear release at Three Mile Island; the chemical releases at Seveso, Italy; the explosion at Bhopal, India; and the pollution of the water table at Love Canal in the United States all come to mind.
The disturbing nature of these events is traceable to their origin in the malfunctions of human-designed and -maintained machines. Unlike the infectious retrovirus, the operations of a nuclear reactor are well understood. Similarly, the effects of the toxic gas used in the production of pesticides at Bhopal were perfectly predictable. In such cases, a series of human errors and equipment failures combined to bring about the disaster. At both Chernobyl and Bhopal there was little oversight or effective regulation. Mandated safety standards by the state were ignored owing partly to a lack of the technical and institutional resources necessary to achieve compliance.
This sort of crisis strikes at a weak point in the political superstructure of the society of market-states, its moral vulnerability. At Bhopal, Chernobyl, and elsewhere, the lives of persons whose economic worth was negligible were put at risk in order to provide cheap chemicals to agriculture or cheap power to electricity consumers. So long as it is profitable to do so, we can expect multinational corporations to draw the calculus of safety no more expensively than the global possibilities of relocation demand, and we can expect state enterprises to do the same (because even though they cannot relocate, they must compete against the global multinationals).
Here too, however, there is hope. Chernobyl was a national failure, prompted as much by the shortcomings of Russian technology as by the inevitability of accidents. The society of market-states would be able in principle to deploy technicians within a global market, denying dangerous technologies to those states that do not provide adequate safeguards and helping poorer states to maintain the complex equipment that may be located there.
Chlorofluorocarbons
Chlorofluorocarbons (CFCs) are synthetic chemical compounds first developed in 1928 to replace the hazardous refrigerants, such as ammonia, methyl chloride, and sulfur dioxide then in use.41 By the 1970s CFCs—nontoxic, nonflammable—had completely transformed the refrigeration industry, replacing chemicals in refrigerators and launching the fledgling air-conditioning industry. Eventually CFCs were adopted as propellants in ubiquitous aerosol spray cans for everything from whipped cream to hair spray.
When, in 1974, two scientists published a technical paper suggesting that CFCs might threaten the environment, the world was producing almost a billion kilograms of CFCs a year, with the amount doubling every five years. These scientists hypothesized that CFCs were slowly drifting upward into the stratosphere where, having broken down molecularly, they were releasing chlorine atoms that destroy stratospheric ozone, causing higher levels of ultraviolet radiation to reach the surface of the Earth. This might lead to a deadly rise in the occurrence of skin cancers.
Robert Kates picks up the story here and sketches the ironic turn of events that ensued:
Urged on by activist scientists and a concerned Congress, U.S. media took the lead in spreading the alarm. They devoted an extraordinary amount of coverage to CFCs in 1975 and helped to fix inexorably in the public mind the image of frivolous spray cans blasting holes in the sky. The prospect of increased cancer risk lurked just offstage. Local political action and consumer boycotts against products containing CFC propellant spread rapidly. By the time the U.S. government officially banned CFC propellants in 1978 the action was virtually superfluous: Domestic use had already fallen precipitously, solely on the basis of an as yet unproved hypothesis…. A decade after the initial surprise, the threat of ozone depletion had been all but forgotten by the media, politicians and the public. After dropping somewhat, worldwide CFC production climbed back above its 1974 level. [It was only] the discovery of a… hole in the ozone layer in 1985 [that] put the issue back onto the public agenda.42
The unnerving aspect of the ozone case lies in its grotesque transformation of something ordinary and benignly mundane into something unexpectedly malignant. Similar shifts have occurred with respect to cigarette smoke, asbestos fibers, and lead in paint and gasoline. In the market-state, there are powerful lobbies with a stake in persuading the public and public officials that there is really nothing to worry about, and a no less powerful media and public interest alliance anxious to detect an alarming new crisis as frequently as possible. The lobbies depend upon companies whose sale of the dubious substance is threatened, but the media and public-interest groups also have a material stake in the matter, because the market-state requires that they make their way on the basis of public contributions,* which requires an ever-escalating hyperbole to stimulate giving. In the ozone-depletion case, public reaction first outran and then lagged behind the science of the matter.
The society of market-states is vulnerable to such threats to the environment and yet in some ways better equipped than the society of nation-states to deal with them. This new society is vulnerable because it places such a high value on the autonomy of the market. CFCs are, after all, a cheap and otherwise safe method of refrigeration and vapor propulsion; there will be some countries that choose to continue their use, noting along the way that because their impact is so minor compared to that of market giants like the United States, little harm will result to the atmosphere. Global marketing will allow the transfer of such products to those countries whose publics are not so sensitive (or who feel they cannot afford to be sensitive) to charges of environmental degradation.
At the same time, the global corporation is itself vulnerable to reports in its major markets disclosing practices it would like to confine to marginal markets. Boycotts, not laws, led to the original decline in CFC use in the United States. The problem is how to organize the actions of the society of market-states in much the way nation-states were able to mobilize multilateral legal regulation. Law will continue to be a resource available to state but it will occupy a very different role in the world of market-states than it did in the world of nation-states.
The Long War was won by strategic innovations that we might nowadays call the development of weapons of mass destruction, the globalization of communications, and the international integration of finance and trade. These strategic innovations have brought with them new challenges that now face the society of states that the end of the Long War is bringing into being. Three fundamental choices confront the society of market-states with respect to each of these challenges. Until they have been made, we will live in a period of transition.
These choices are (1) regarding weapons of mass destruction: (a) whether to attempt affirmatively to check the proliferation of such weapons, through extended deterrence, and to suppress proliferation through ad hoc intervention, or (b) whether to rely on multilateral arms-control agreements, accepting as inevitable that some proliferation will occur outside these agreements, or (c) whether to rely on the wholesome effects of internal liberalization through economic growth and mutual deterrence to contain this proliferation; (2) with respect to the globalization of communications: (a) whether to address the linked issues of immigration and human rights by encouraging a global network of economic growth premised on the transparency of sovereignty, or (b) whether to cultivate the fragmentation of states within “umbrella” megastates, or (c) whether to strengthen the protection of national cultures and the regionalization of international law; (3) with regard to the international integration of finance and trade: (a) whether to increase the absolute wealth of the society of market-states, taken as a whole, without regard for distributional effects, or (b) whether to manage growth with an eye to short- and medium-term distributional effects, or (c) whether to encourage economic stability through growth tempered by a regard for long-term balance.
Some market-states will doubtless attempt to mix and match these alternative policies but as a general matter one or another set of mutually supporting policies—(a/a/a) or (b/b/b) or (c/c/c)—will rise to dominance in each state because these options reflect different views of state sover-eeignty. A state that relies on pre-emption to thwart nuclear proliferation is all the more likely to support transparency in sovereignty when it comes to human-rights violations. A state that is anxious to preserve the cultural integrity of its minority groups is unlikely to pursue economic strategies that shred the social contract. Inevitably, one of these sets of approaches—entrepreneurial, managerial, or mercantile—will dominate the constitution of the society of market-states, because a society of states that pursued policies that were inconsistent with respect to state sovereignty would produce an incoherent and unstable constitution.
Which model of the market-state is best? I would answer by recalling the moving scene* in Act III of Gotthold Lessing's dramatic poem, “Nathan the Wise.” Lessing was a German author of the Enlightenment;† the play is his last major work.
Nathan, a Jew, is summoned before Saladin, the great Muslim warrior. Saladin asks him which religion is the true one—Islam, Christianity, or Judaism—hoping to trap Nathan into either denying his own faith or insulting Islam by implication, in which case his property will be confiscated.
In reply, Nathan narrates the parable of the Three Rings.‡ A wise king possessed a ring, the wearer of which was said to be beloved of God and man. He had three sons, to each of whom he promised the ring. When the king died, each heir was given a ring, and all three rings appeared to be identical to that of the old king. When the sons went to the royal judge and demanded to know which ring was the real one, the judge said to them:
Your father, the king, wore a ring of which it was said that the wearer would be beloved of God and man. Each of you has been given a ring. Wear your rings. Do your best to be beloved of God and man. Let your rings descend to your heirs. Then someday, some future judge will assess your work and know whether you had the right ring.§43
While it is likely, as we will see in the following chapter, that states may choose different forms of the market-state—and experiment with hybrid forms—each state must decide on the basis of the constraints on its resources, its heritage, and its destiny what archetypal form best confers legitimacy.