international analysis and commentary

Digital geopolitics and political risk


As Lord Salisbury said, in the late 1800s, “Our officials are walking in a dream, in superb unconsciousness, believing that what had been must be.” Officials today seem no less blind to the reality of constant change. Even as the world dramatically transitions from the bipolar Cold War era, through the very brief unipolar moment (ended by Iraq and Lehman Bros) and into today’s world of complex multipolarity, a second major geopolitical revolution is taking place: the nation-state itself is losing steam as an institution.


In today’s post-industrial economy, it is evident that world politics is under radical restructuring. Even in terms of the old indices of hard power, the GAFAs (Google, Apple, Facebook, and Amazon) are bigger than Germany’s economy.

More precisely, the very model of nation-state has come under attack. The attack comes from below – in the form of a deteriorating level of trust by the people towards their elected or unelected representatives in the guise of the dramatic re-emergence of global populism – as well as from above, as our leaders fail to provide appropriate policy answers in an ever more globalized world. With the nation-state’s apparent inability to withstand twenty-first century challenges, how then can our modern world move forward?


THE FAILURE OF THE NATION-STATE. The nation-state simply isn’t working very well anymore. Even as its staying power seems beyond dispute, it is not delivering effective global governance. This paradox explains much of what ails our present world, why “nothing seems to be working”. Indeed, the present record of the nation-state – undoubtedly the dominant vehicle for global governance today – seems to have missed the mark at every turn.

Recently, there has been a collapse of nation-states in the developing world, creating governance black holes that have led to catastrophe in places like Somalia, Iraq, Syria, and the Democratic Republic of the Congo. However, it is also in the supposedly well-governed developed world that the nation-state has showed its glaring inadequacies. Be it the Lehman Brothers crisis (which unleashed the global Great Recession), the endless, endemic euro crises of the European Mediterranean countries, or the calamity of America’s adventurism in Iraq replete with botched intelligence and disastrous post-war planning the nation-state seems to be showing its age. It is not delivering on its grandiose claims to facilitate both global governance and political and economic stability for its own people.

Nevertheless, despite having failed miserably at every turn recently, it does not look like the nation-state is about to be replaced. Contrary to the fevered imaginings of European Federalists, the nation-state cannot simply be wished away as an annoying anachronism of a bygone age. Rather, the dirty little secret at the heart of our new era is that all the rising powers — be they China, India, South Africa, Indonesia, or Brazil — are more sovereigntist, more nationalistic, and more determined to preserve their national prerogatives than even the United States (long the bane of post-national dreamers). Indeed, it is the supposedly modern, post-nationalist European experiment that seems to be in terminal decline. Both intellectual defenders of the nation-state and its critics seem to be largely wrong at present. As things stand today, we live in a bewildering world, where the nation-state is not working very well but where a replacement is not yet standing in the wings.


TECHNOLOGY AS A DRIVER IN GLOBAL GEOPOLITICAL PROCESSES. Mankind’s political, scientific and technological progress operates on the principle of escalation. Technology solves problems but it also gives rise to new ones. The more technology we have at our disposal, the more technology we need to deal with the consequences. We invent ever more sophisticated techniques of food production, only to follow up with ways to contain overpopulation… Instead of plotting man’s scientific evolution as linear progress, one can more usefully explain it as a series of emergency measures to deal with the disastrous consequences of the previous big invention.

This thought – applied here to science and technology – can and should be applied more broadly. The success of the nation-state itself has given rise to new challenges for which the nation-state structure can no longer provide acceptable answers. As a result, we must conclude that the architect Reinier de Graaf was right: “Modern history condemns us to a permanent rat race against the consequences of our own creativity. We progress but only toward an ever-larger need for progress. To stop that progress is ultimately to doom humanity.” And the statement, which de Graaf so eloquently applied to technology, applies equally to the international political system that governs our world order. The nation-state solved many problems that the old world order was incapable of dealing with — following the Thirty Years’ War, after all, there was never again a major religious war in Europe — but in doing so it also created new ones.

Challenges to the nation-state largely emanate from its own historical success. Advances in technology through the twentieth century and into our present day – often made possible by the nation-state itself (through radio, television, computer technology and the internet) – has brought an unparalleled transparency.


TRANSPARENCY AND ITS DISCONTENTS. For our discussion, the most important implications of this newfound transparency are twofold. Firstly, transparency has made it clear to everyone how much living standards differ around the world. This has fueled the global migration crisis, which has emerged as a seminal challenge in nation-states the world over. Secondly, the human fallibility and foibles of our elected or unelected political elite are on display as never before. This has fueled the populist challenge in many countries.

These two primary and seminal challenges for today’s global governance (until recently never even thought of) are the result of the success of technology, succored by the nation-state itself. We must again look to technology to overcome them, if we are to stay ahead in de Graaf’s endless technological race.

In the seed of the success of the nation-state lies the severest challenge to the very institution itself. The success story of the nation-state was to create a globalized world in which prosperity for many improved dramatically. However, from at least the middle of the nineteenth century, nations created issues and challenges for humanity which are no longer national but global. A look at today’s world reveals this truth. Those risks to humanity that are hardest to solve are no longer national: they require global responses. Military conflicts are no longer clear-cut wars between countries trying to eliminate their enemies’ national armed forces and to occupy enemy territory. Military wherewithal in the shape of nuclear weapons is no longer just a danger to the local population in war zones but is a threat to the very survival of mankind.

Pollution is no longer just destroying national rivers or forests but is causing weather patterns to change and water levels to rise, thereby impacting emerging market economies based in the Pacific and the Indian Oceans as well as elsewhere. Religious differences are no longer just impacting the border between two countries but engulfing the entire world in a struggle for a different Weltanschauung. Diseases are no longer a local or even a national or regional threat but – thanks to easy travel – have become a global issue.


THE WORST OF ALL WORLDS. Any look at the major headlines over the past few years confirms the above. For all its power to win the war in Iraq largely on its own, the United States (by far the strongest nation-state in the world) failed miserably to win the peace without local Iraqi buy-in. The Lehman Brothers crisis painfully illustrated that national regulators were not up to understanding the global implications of those they regulated. The us Federal Reserve is statutorily constituted to only deal with American (that is, national) inflation and unemployment rates, and yet the dollar’s supranational dominance makes the Fed’s decisions assume a truly unprecedented global significance. Increasingly, the nation-state is reaching its limit in finding adequate responses to these global challenges.

In fact, the very foundation of national currencies and payment methods is being called into question by globalized capital markets which – through the use of new technology – are beginning to experiment with global non-national currencies (such as bitcoin and other encrypted electronic decentralized currencies). The nation-states’ success in creating international trade spawned global capital flows which, in turn, led to the creation of global currencies, which may now undermine the function of the nation-states and their central banks to issue, control and regulate finances.

While the nation-state is being challenged in supranational policy terms by global threats, its very inability to address those threats has frustrated their populations. People in developed nations are choosing increasingly to reject multinational institutions (see Brexit) and to turn slowly towards nationalism in a search for control of the decision-making process. It is the worst of all worlds. As problems become more transnational in nature, unelected, supranational institutions are increasingly reviled as anti-democratic, arrogant, and wildly unsuccessful.

It is this nexus – increasingly transnational problems coupled with widespread disillusionment about transnational entities – that further explains the rise of populism throughout Europe on the left and right. It would seem that what is needed is nothing less than a new world system. A new order to supplant the failing Westphalian one. A system that combines political legitimacy at the national and local levels with the ability to master the many supranational problems of today. Only a new global order – and a new ideology supporting it – can help us find solutions for global challenges. And that new order cannot be based solely on the discredited nation-state institutions, especially as those institutions are being rejected so forcefully by their own populations.


BACK TO THE FUTURE. THE NEW FEUDALISM. Ironically, the model to solve the many problems evident at the dawn of today’s multipolar age – to master the increasing limitations of the nation-state that have been so glaringly exposed – is to go back to the future. We need to revisit the very feudal age that preceded our system.

More coherent and effective supranational structures are called for at the top, in line with the old primacy of the feudal church. For example, a more effective G20 is necessary to deal with the many transnational aspects of the global financial and economic systems. Over time, a global but decentralized currency regulated outside the sphere of any particular nation-state should be introduced.

In Asia, the United States is no longer a sufficient force (for all its power) to manage and hedge against the rise of China. Instead, increasing the Quadrilateral (USA, Australia, Japan, India) grouping’s power to influence nation-states makes a great deal more sense. A Europe with a Eurozone finance minister and a mutualization of common debt (from now on though, not for what has been run up before) would tackle the ongoing challenges to the financial stability of the people of the continent. European nation-states need to agree to follow the same (rather stringent) fiscal policies to turn the Eurozone core into a true supranational community.

As this shopping list for increasingly effective supranational structures makes clear, we are agnostic about the ways to achieve them. In some cases, it will be through intergovernmental action (between nation-states), in others (like the Eurozone) the supranational institution will take on a life of its own.

With regard to challenges that threaten the very survival of mankind and of human civilization as we know it – such as the environment but also certain economic and trade aspects – the only way forward is for nation-states to gradually give up control and pass sovereignty over these issues to institutions that function above and beyond the nation-state.

In pragmatic terms, in any event, the goal is to return to the pre-Westphalian era, when more unified and effective supranational institutions existed to manage transnational problems. At the same time, even in this more feudal world, the nation-state is not going anywhere. Many people cleave to it precisely because they still feel strong allegiances to their countries. Crucially, such people feel – thanks to the nation-state – that they maintain some democratic and practical control. Nation-states will continue to have a dominant military function, play a major role in macroeconomics, and be the dominant force securing their own internal security. By concentrating on these key functions, they will also do them better. But over time, the nation-state will do less and less.

At the bottom of the global governance tree, localism — as was true during the feudal area — will come into its own again. In line with Thomas Jefferson’s brilliant insight, problems should always be solved at the lowest possible level. This is precisely because that level is closest to the people, so it helps secure the political legitimacy of policy solutions. As American Jeffersonians understood so well, by spreading power around, it is paradoxically magnified, thereby guaranteeing its legitimacy.

In short, everything from education to policing to infrastructure should be managed at as local a level as possible. Furthermore, as the feudal world well knew, it is here that people feel most connected to decision-makers: we may not know the President of the United States personally, but we certainly do know the head of the school board, say, and can thus heap all sorts of direct social pressure on him if he sends the kids to school in a blizzard. This accountability – the loss of which is exactly what populists are rightly bemoaning – has been eclipsed in the world of the nation-state. A feudal emphasis on localism can be the well-spring for a more legitimate, more broadly acceptable system of government.

There is little doubt that after 370 years the Westphalian system – dominated by the nation-state – is beginning to show its age. The irony is that the true antidote to what ails it may well be the very ancient answer that moves the modern world forward.