It’s 2050. The US government just defaulted on its debt. It’s not meeting its social security payments. Hospitals are going down: they can’t operate without Medicare and Medicaid income. Old people line up outside the hospitals. Hospitals don’t service them. They can’t afford it. There's a run on the banks that held too many dollars. They are collapsing. All the governments around the world caught with too much US debt are defaulting. Those with their savings in dollars have been wiped out. They are looking at the last few decades of their lives like an empty ravine.
All of the problems accumulating for nation states are legitimate, and it may already be later than we think in the life-cycle. The problem not addressed, however, has to do with the fundamental attribute that makes a nation-state a nation-state: an asserted monopoly over the legitimate use of force. The means of mass-destruction (thus, mass-coercion and mass-obedience) are concentrated entirely in the hands of the current nation-states. Intersecting challenges like rival currencies and obstreperous (and aging) populations will dampen the marginal reach and ambition of nation-states - but until Google develops its own nukes or Apache helicopters, the nation-state isn't going anywhere. A recent, and relatively limited example of this effect recently played out in Syria; the populace fragmented into assorted warring tribes and suffered greatly, State services collapsed, outside actors put their thumbs on the scale this way or that, but when the music stopped, Syria was still there - because the State had the Migs and Hinds and T90's and Khaibar launch systems, and no known number of cyber-intrusions or nasty tweeting took those away...
- A sense of place/team/tribe seems to be an important part of the human psyche. That rootedness runs deep. The Anywheres will need that sense as much as others. Where will they get it?
- Taxes get paid by individuals. Taxing corporations and other legal fictions is just an attempt to disguise this fact. Residents are less mobile than legal fictions. Land is less mobile still. That's where taxation is headed. Further, taxing consumption makes more sense than taxing income, because consumption is the weight that someone put on a society. Income is the stuff that the individual contributes to that society. You want less of the former and more of the latter. Tax the yachts, not the capital gains that pay for them.
Interesting thoughts, so much to digest! A couple of immediate questions. 1. You don't address the fundamental function of nation states - the legitimate use of force to enforce the law. 2. The need for laws and courts to resolve disagreements and define permissible behavior between members of society. 3. The cultural memes and identities that connect and entangle the citizens of a nation state. Will the French really want to stop being French?
It seems that the Internet , Blockchain, and all the other information technologies are more about changing the mechanics of how a nation state may work, rather than eliminating the need for the nation state. Won't the U.S. government establish their own blockchain based currency and manipulate it's value? To an outsider (me) it looks like crypto currencies have their value manipulated regularly (Telsa will take Bitcoin for cars, so value of Bitcoin goes up, wait no Telsa won't take Bitcoin for cars. so value of Bitcoin goes down). Why would we be be better off with private companies/individuals manipulating a currency versus the government?
Love your articles, very stimulating ideas, please keep them coming.
Another very interesting article! Thanks for writing it. As nation states weaken, it's not clear what alternatives will replace them. Maybe networks of anywheres who can agree on provisional rules to guide shared interests. But also maybe libertarian anarchy, with rogue players exploiting systemic weaknesses to their benefit and many other's detriment, such as the rash of ransomware attacks on public entities like hospitals and utilities. I don't see how ransomware pirates exploiting the internet and blockchain to take down ICUs and sewage processing systems are an example of any positive post-nation state system. Btc holders may enjoy their freedom from government taxing and tracking, but the extreme fluctuations in valuation suggest that there is inherent instability in crypto-currency as a an alternative medium of exchange. Another concern with a post-nation state world is what will prevent global problems like pandemics, climate change, starvation, and poverty from becoming even worse? Why should the Elon Musks of the world care about these problems when they can hunker down on their island refuges or depart for Mars? I'm not disagreeing that we're seeing the unraveling of old-order nation states, I'm just worried about what will replace them... really worried the more I think about it!
Thanks for the fascinating piece. Indeed, seems like your last question - what will replace nation states? - is the key. An alternative that's attractive to most will be needed for change to happen.
For all the flaws, most people except the richest few would prefer to have health, education, social security, currency, normative processes, etc. managed by a democratically elected entity. Not to mention police, wars, nuclear weapons... All these new tech companies can do is maximise profit for their shareholders, in the short term, externalising as much as possible. Not sure they can provide all that a society demands.
The reformation had a positive message of liberation that resonated with the masses. Tech companies and blockchain are attractive alternative powers for a few, but for the rest of us, what good do they bring compared to governments and today's currencies?
You made some points I hadn't anticipated - like the aging population without retirement age increase. Good stuff.
Do you think that the nation states, like the US, will fracture before default? Will a state like California read the tea leaves and split off - potentially fracture further into multiple countries itself?
I'm inclined to believe that city-states and groupings of small countries are what come next. We end up with ~ 500 or 1000 countries and maybe the UN rises in importance for mediation.
Love your articles! But in this case I think there is a misunderstanding of the nature of money and its role in the nation state. Cryptocurrencies are NOT money because they aren't backed by anything.
By contrast FIAT money is a debt--ALL MONEY IS THE DEBT OF THE ISSUER.
SEE: Debt: The First 5,000 Years (David Graeber, 2012)
FIAT money is backed by taxes--taxes drive the currency. i.e. we seek to earn the nation's otherwise worthless FIAT money so that we can pay our tax obligations. (Chartalism: State theory of money)
FIAT money is just the federal government's IOU (debt). So the federal government has debt, but it doesn't 'borrow'--you can't borrow your own debt. And you can't run out of your own IOUs.
"[A] government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit." Alan Greenspan, Chair of US Fed (1996)
But what does the government 'owe'? It owes a tax credit--that's it. So the government 'debt' is simply the amount of money that has been created that has yet to be collected back in taxes. i.e. The federal government spends new FIAT money into existence; taxes simply reverse the process, thereby DESTROYING the money that the government previously created.
As the pandemic has shown us, the government is RESOURCE limited; NOT fiscally limited. It can't run out of its own money, but it can run out of things to buy (e.g. N95 masks, PPE, vaccines, etc.) So with respect to entitlements for seniors, the question is NOT how much money it will cost, but whether or not we can train enough doctors, nurses, caregivers, and build enough retirement homes, etc. to take care of our seniors.
"...there is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question is, how do you setup a system which assures that the real assets are created which those benefits are employed to purchase?" Alan Greenspan, Chair of US Fed (Mar 2, 2005)
The main problem with cryptocurrencies and gold standards is that the amount of is FIXED. But a growing economy requires a growing money supply. And growth is exponential, which is why debt growth looks so scary--it must also grow exponentially with the economy.
SEE: Princes of the Yen (Richard Werner)--a book and documentary on the rise and fall of Japan from the end of WWII to present day. Werner coined the term 'Quantitative Easing' when he was chief economist at Jardine Fleming in Tokyo during the 1990s.
Unlike the US, the Eurozone countries do not have the ability to 'print' a single Euro--this ability lies solely with the European Central Bank which lies outside the control of any government. This is why Greece, Italy, Portugal, and Spain went bankrupt. Likewise, Weimar Germany, Venezuela, Argentina, and Zimbabwe borrow in FOREIGN currency, which they have no ability to 'print', so they are also fiscally limited. TAKE HOME MESSAGE: Don't have obligations in someone else's currency!!!
Your article is fascinating, and the future you speculate about is exactly what Neal Stephenson wrote about in his books Snow Crash and The Diamond Age. The first depicts a world where federal governments still exist but neighborhoods are run by "franchise governments" that compete for citizens like corporations compete for customers and handle law enforcement even up to capital punishment, including local defense but with the federal government still existing to provide defense from rival nation-states. The latter takes place much later when this process has led to humanity being organized into "tribes" that are voluntary groups of geographically scattered colonies of those who want to live according to a particular culture (one example is Victorian). I highly recommend both as a vision of the evolution of nations states into scattered cultural groups, including some major failings of this arrangement.
Really interesting piece, and very thoughtful. It got me thinking about three areas nation states provide outside of typically finance (currency/trade/taxation) and what you think would rise to replace these functions:
1. Defense of territory/military. Nation states provide for defense and respond to conflict.
2. Investment/subsidy. Governments play a huge role in subsidizing private companies and innovation through investments in fundamental technologies (either direct or through tax relief), money for research at colleges/institutions and through subsidized production (particularly in agriculture).
3. Creation and enforcement of laws and property rights. Smart contracts through blockchain enable a chain of trust but who will mediate conflicts or enforce the rights of ownership when threatened? Who will create and enforce new laws that protect individual sovereignty?
Being part of the 200 million crypto community I would love to see an option for paying the subscription to Uncharted Territories in crypto. I was forced to use my credit card for doing so, which I regret. I hope you give us the option ASAP.
1. I do not agree when you say that the 200 million users who have bought crypto already have the alternative mindset. It is difficult to estimate how many of them follow the trend because it is fashionable but do not even know what the blockchain is (without mentioning all the institutional investors)
2. You say: 'But why can’t a community emerge where citizens around the world can pledge support to the politicians that do want climate change policies? Why can’t they make that pledge a public, automatic commitment on the blockchain?'
Up to certain extent this is already happening with Extinction Rebellion movement in UK and many other countries (or the international youth movement of Greta Thunberg)... both of which in my opinion follow other past regional/global movements like Arab Sping/15M/Occupy Wall Street.
Your great and deep article here reminded me of a fascinating if little known XXth Century scholar, Norbert Elias, who in his theory of civilization describes in details how historically the nation-state evolved as an advance in civilization after kingdoms. He also shows in his very clear prose writen in the 1940's-1960s why the nation-states have started failing. Elias then points to multi-states entities as the most likely next step in the evolution of human civilization, which the current convulsions of the UN/WTO/etc..., the USofA, the EU, as well as India (maybe) and definitely China as expanding continental entities, might well be part of.
Your piece read like the following part to his work, the one showing how things are indeed collapsing.
We are at that dangerous point of history when the new way of living is still not strong enough to venture out on its own, but not weak enough to be ignored by the existing powers: the nation states (in reality, the nation states at the top of the power heap).
Remember how snowden had to run to russia? I expect a lot of similar unsavory alliances with dictatorships and the like.
So now we get to see what happens when an entity that believes it is a nation state tries to impose its will on another in the age of the internet and modern warfare. Already we can see fissures developing in the Russian nation state narrative and the development of a coalition of forces opposing it in all sorts of ways.
How connected to the rest of the world are the Russian people and does this override their attachment the the idea of Russia as a nation state?
Are we dealing with Bad Vlad or Mad Vlad? What seems evident is that his model of reality is a fair distance away from the generally accepted reality of the rest of humanity. That doesn't matter as long as the two don't actually clash head on, or that the resolution of this conflict of realities takes long enough for him to adjust to it. 🤞
It’s been a few days and I’m still thinking about this piece. To your ultimate question, I do think we’ll see states create bubbles (civilization states? Empires? Treaty organizations?) big enough to wall off internet and maintain a semblance of control. There isn’t a palatable answer to the demographics.
But there is a lot to worry about at the individual level and how it seems we are destroying intermediate layers of peoples lives. To the point where nothing really matters between the family (if you are lucky enough) and the national level.
All of the problems accumulating for nation states are legitimate, and it may already be later than we think in the life-cycle. The problem not addressed, however, has to do with the fundamental attribute that makes a nation-state a nation-state: an asserted monopoly over the legitimate use of force. The means of mass-destruction (thus, mass-coercion and mass-obedience) are concentrated entirely in the hands of the current nation-states. Intersecting challenges like rival currencies and obstreperous (and aging) populations will dampen the marginal reach and ambition of nation-states - but until Google develops its own nukes or Apache helicopters, the nation-state isn't going anywhere. A recent, and relatively limited example of this effect recently played out in Syria; the populace fragmented into assorted warring tribes and suffered greatly, State services collapsed, outside actors put their thumbs on the scale this way or that, but when the music stopped, Syria was still there - because the State had the Migs and Hinds and T90's and Khaibar launch systems, and no known number of cyber-intrusions or nasty tweeting took those away...
Some points:
- A sense of place/team/tribe seems to be an important part of the human psyche. That rootedness runs deep. The Anywheres will need that sense as much as others. Where will they get it?
- Taxes get paid by individuals. Taxing corporations and other legal fictions is just an attempt to disguise this fact. Residents are less mobile than legal fictions. Land is less mobile still. That's where taxation is headed. Further, taxing consumption makes more sense than taxing income, because consumption is the weight that someone put on a society. Income is the stuff that the individual contributes to that society. You want less of the former and more of the latter. Tax the yachts, not the capital gains that pay for them.
Interesting thoughts, so much to digest! A couple of immediate questions. 1. You don't address the fundamental function of nation states - the legitimate use of force to enforce the law. 2. The need for laws and courts to resolve disagreements and define permissible behavior between members of society. 3. The cultural memes and identities that connect and entangle the citizens of a nation state. Will the French really want to stop being French?
It seems that the Internet , Blockchain, and all the other information technologies are more about changing the mechanics of how a nation state may work, rather than eliminating the need for the nation state. Won't the U.S. government establish their own blockchain based currency and manipulate it's value? To an outsider (me) it looks like crypto currencies have their value manipulated regularly (Telsa will take Bitcoin for cars, so value of Bitcoin goes up, wait no Telsa won't take Bitcoin for cars. so value of Bitcoin goes down). Why would we be be better off with private companies/individuals manipulating a currency versus the government?
Love your articles, very stimulating ideas, please keep them coming.
Another very interesting article! Thanks for writing it. As nation states weaken, it's not clear what alternatives will replace them. Maybe networks of anywheres who can agree on provisional rules to guide shared interests. But also maybe libertarian anarchy, with rogue players exploiting systemic weaknesses to their benefit and many other's detriment, such as the rash of ransomware attacks on public entities like hospitals and utilities. I don't see how ransomware pirates exploiting the internet and blockchain to take down ICUs and sewage processing systems are an example of any positive post-nation state system. Btc holders may enjoy their freedom from government taxing and tracking, but the extreme fluctuations in valuation suggest that there is inherent instability in crypto-currency as a an alternative medium of exchange. Another concern with a post-nation state world is what will prevent global problems like pandemics, climate change, starvation, and poverty from becoming even worse? Why should the Elon Musks of the world care about these problems when they can hunker down on their island refuges or depart for Mars? I'm not disagreeing that we're seeing the unraveling of old-order nation states, I'm just worried about what will replace them... really worried the more I think about it!
Thanks for the fascinating piece. Indeed, seems like your last question - what will replace nation states? - is the key. An alternative that's attractive to most will be needed for change to happen.
For all the flaws, most people except the richest few would prefer to have health, education, social security, currency, normative processes, etc. managed by a democratically elected entity. Not to mention police, wars, nuclear weapons... All these new tech companies can do is maximise profit for their shareholders, in the short term, externalising as much as possible. Not sure they can provide all that a society demands.
The reformation had a positive message of liberation that resonated with the masses. Tech companies and blockchain are attractive alternative powers for a few, but for the rest of us, what good do they bring compared to governments and today's currencies?
Really looking forward to your views on this.
Bravo! I've been waiting for this one.
You made some points I hadn't anticipated - like the aging population without retirement age increase. Good stuff.
Do you think that the nation states, like the US, will fracture before default? Will a state like California read the tea leaves and split off - potentially fracture further into multiple countries itself?
I'm inclined to believe that city-states and groupings of small countries are what come next. We end up with ~ 500 or 1000 countries and maybe the UN rises in importance for mediation.
Love your articles! But in this case I think there is a misunderstanding of the nature of money and its role in the nation state. Cryptocurrencies are NOT money because they aren't backed by anything.
By contrast FIAT money is a debt--ALL MONEY IS THE DEBT OF THE ISSUER.
SEE: Debt: The First 5,000 Years (David Graeber, 2012)
FIAT money is backed by taxes--taxes drive the currency. i.e. we seek to earn the nation's otherwise worthless FIAT money so that we can pay our tax obligations. (Chartalism: State theory of money)
FIAT money is just the federal government's IOU (debt). So the federal government has debt, but it doesn't 'borrow'--you can't borrow your own debt. And you can't run out of your own IOUs.
"[A] government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit." Alan Greenspan, Chair of US Fed (1996)
But what does the government 'owe'? It owes a tax credit--that's it. So the government 'debt' is simply the amount of money that has been created that has yet to be collected back in taxes. i.e. The federal government spends new FIAT money into existence; taxes simply reverse the process, thereby DESTROYING the money that the government previously created.
As the pandemic has shown us, the government is RESOURCE limited; NOT fiscally limited. It can't run out of its own money, but it can run out of things to buy (e.g. N95 masks, PPE, vaccines, etc.) So with respect to entitlements for seniors, the question is NOT how much money it will cost, but whether or not we can train enough doctors, nurses, caregivers, and build enough retirement homes, etc. to take care of our seniors.
"...there is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question is, how do you setup a system which assures that the real assets are created which those benefits are employed to purchase?" Alan Greenspan, Chair of US Fed (Mar 2, 2005)
The main problem with cryptocurrencies and gold standards is that the amount of is FIXED. But a growing economy requires a growing money supply. And growth is exponential, which is why debt growth looks so scary--it must also grow exponentially with the economy.
SEE: Princes of the Yen (Richard Werner)--a book and documentary on the rise and fall of Japan from the end of WWII to present day. Werner coined the term 'Quantitative Easing' when he was chief economist at Jardine Fleming in Tokyo during the 1990s.
Unlike the US, the Eurozone countries do not have the ability to 'print' a single Euro--this ability lies solely with the European Central Bank which lies outside the control of any government. This is why Greece, Italy, Portugal, and Spain went bankrupt. Likewise, Weimar Germany, Venezuela, Argentina, and Zimbabwe borrow in FOREIGN currency, which they have no ability to 'print', so they are also fiscally limited. TAKE HOME MESSAGE: Don't have obligations in someone else's currency!!!
Your article is fascinating, and the future you speculate about is exactly what Neal Stephenson wrote about in his books Snow Crash and The Diamond Age. The first depicts a world where federal governments still exist but neighborhoods are run by "franchise governments" that compete for citizens like corporations compete for customers and handle law enforcement even up to capital punishment, including local defense but with the federal government still existing to provide defense from rival nation-states. The latter takes place much later when this process has led to humanity being organized into "tribes" that are voluntary groups of geographically scattered colonies of those who want to live according to a particular culture (one example is Victorian). I highly recommend both as a vision of the evolution of nations states into scattered cultural groups, including some major failings of this arrangement.
Really interesting piece, and very thoughtful. It got me thinking about three areas nation states provide outside of typically finance (currency/trade/taxation) and what you think would rise to replace these functions:
1. Defense of territory/military. Nation states provide for defense and respond to conflict.
2. Investment/subsidy. Governments play a huge role in subsidizing private companies and innovation through investments in fundamental technologies (either direct or through tax relief), money for research at colleges/institutions and through subsidized production (particularly in agriculture).
3. Creation and enforcement of laws and property rights. Smart contracts through blockchain enable a chain of trust but who will mediate conflicts or enforce the rights of ownership when threatened? Who will create and enforce new laws that protect individual sovereignty?
Really interested in your thoughts!
Being part of the 200 million crypto community I would love to see an option for paying the subscription to Uncharted Territories in crypto. I was forced to use my credit card for doing so, which I regret. I hope you give us the option ASAP.
Tomas,
Great article.
A couple of points:
1. I do not agree when you say that the 200 million users who have bought crypto already have the alternative mindset. It is difficult to estimate how many of them follow the trend because it is fashionable but do not even know what the blockchain is (without mentioning all the institutional investors)
2. You say: 'But why can’t a community emerge where citizens around the world can pledge support to the politicians that do want climate change policies? Why can’t they make that pledge a public, automatic commitment on the blockchain?'
Up to certain extent this is already happening with Extinction Rebellion movement in UK and many other countries (or the international youth movement of Greta Thunberg)... both of which in my opinion follow other past regional/global movements like Arab Sping/15M/Occupy Wall Street.
Your great and deep article here reminded me of a fascinating if little known XXth Century scholar, Norbert Elias, who in his theory of civilization describes in details how historically the nation-state evolved as an advance in civilization after kingdoms. He also shows in his very clear prose writen in the 1940's-1960s why the nation-states have started failing. Elias then points to multi-states entities as the most likely next step in the evolution of human civilization, which the current convulsions of the UN/WTO/etc..., the USofA, the EU, as well as India (maybe) and definitely China as expanding continental entities, might well be part of.
Your piece read like the following part to his work, the one showing how things are indeed collapsing.
We are at that dangerous point of history when the new way of living is still not strong enough to venture out on its own, but not weak enough to be ignored by the existing powers: the nation states (in reality, the nation states at the top of the power heap).
Remember how snowden had to run to russia? I expect a lot of similar unsavory alliances with dictatorships and the like.
So now we get to see what happens when an entity that believes it is a nation state tries to impose its will on another in the age of the internet and modern warfare. Already we can see fissures developing in the Russian nation state narrative and the development of a coalition of forces opposing it in all sorts of ways.
How connected to the rest of the world are the Russian people and does this override their attachment the the idea of Russia as a nation state?
Are we dealing with Bad Vlad or Mad Vlad? What seems evident is that his model of reality is a fair distance away from the generally accepted reality of the rest of humanity. That doesn't matter as long as the two don't actually clash head on, or that the resolution of this conflict of realities takes long enough for him to adjust to it. 🤞
You got me at “crypto-Jews”, I thought it was a new cryptocurrency. Anyway, Great article!
It’s been a few days and I’m still thinking about this piece. To your ultimate question, I do think we’ll see states create bubbles (civilization states? Empires? Treaty organizations?) big enough to wall off internet and maintain a semblance of control. There isn’t a palatable answer to the demographics.
But there is a lot to worry about at the individual level and how it seems we are destroying intermediate layers of peoples lives. To the point where nothing really matters between the family (if you are lucky enough) and the national level.