political utility of the nation-state

This post has taken me awhile, but I think it's worthwhile. Inherent in any discussion of a nation-state's policies, from societal safety nets to immigration, is an understanding of the nation-state and its proper role. This post argues that the "value-added" by the nation-state is declining, and in turn, the values of local governance and international institutions are growing. I argue that the historical experience of the nation-state has effectively "nationalized" popular understandings of fairness and self-interest, and that these understandings are increasingly inappropriate.

To begin, it's important to understand that the United States, like most nation-states, was created to respond to an external oppressor. The colonies integrated their governance only so far as absolutely necessary for defeating the British. The nation-state is built for this zero-sum militaristic competition. This zer- competition rewarded size, and the more resources that could be brought under the leadership of a singular decision-making body, the better the nation-state would do in the competition.

Zero-sum competition not only led to societies growing in size to the point of becoming the modern nation-state, but also brought about the creation of the market economy. As Robert Reich put it, the king wanted more silver to prosecute his wars, and allowed for greater economic freedom in a mercantilist trade system, which eventually created independent pillars of wealth and power, forcing the king to eventually allow greater political freedom, which, in turn, begat the free market system.

Mercantilism fit neatly within the zero-sum militaristic competition model, as trade was perceived as a weapon to accumulate a larger slice of the fixed economic pie that made up the world. But clearly, mercantilism has fallen out of fashion. It's come to be understood that trade can, and usually does, benefit all parties (to varying degrees), and that economic prosperity is not a zero-sum game; quite the contrary, trade is a non-zero-sum game, where each nation-state benefits from the economic success of other nation-states.

The market economy erodes the value of the nation-state because the market economy thrives on cooperation both internally and externally, i.e., trading with a guy from Ontario or Detroit depending on who is giving you the better deal. Meanwhile, the value of the nation-state depends on high internal cooperation, and low external cooperation. If you don't differentiate between dealing in Ontario or Detroit, then what's the purpose of having a different nation-state for each location?

The nation-state has historically convinced its citizens of its value by taking on an external enemy, such as the British, the Nazis, Soviet Union, etc. Within the perspective of zero-sum militaristic competition, the ideas of national interests and national fairness maintain a certain logical consistency. In a game of nation-state survival, your interests extend only so far as your borders, or at the most, the borders of your allies. Furthermore, fairness applies only to the citizens of the nation-state.

While that zero-sum competition still exists to some degree, I argue that it's been diluted by the increase of non-zero-sum cooperation, wherein those national notions of self-interest and fairness are NOT logically consistent. Outside of zero-sum nation-state competition, the foreigner is not an adversary for the citizen anymore than any of his fellow citizens -- the national border no longer divides the citizen's interests and sense of fairness.

Does this all mean that I think the nation-state has outlived its use? Not entirely. While the nation-state inhibits exchange across borders, it has facilitated exchange within the nation-state. Europe is just now catching up to the United States in picking apart the economic barriers, brick-by-brick, constructed in between the tiny nation-states. The nation-state has value in lowering transaction costs and promoting exchange (and, of course, providing for the common defense of the member states). I am calling into question the role of the nation-state as the de facto level for policy action to advance one's interest or sense of fairness.

Whereas the powerful nation-state best serves the interests of the citizen in the day of zero-sum competition, a dynamic federalism best serves the citizen in our world today. In addition, I have mentioned 'fairness' along with interests in this post for a purpose. Many of our policy debates, from welfare to healthcare to immigration to free trade, end with one side claiming that it is only fair to "fix" the economic system to provide jobs or services for relatively poor Americans, even if it comes at the expense of much poorer foreigners. This mindset is a remnant of historical zero-sum competition that has no place in a discussion of trade with poor and well-meaning foreigners. Justice should know no borders.

I'll end with an analogy. Let's say you're in charge of a business. The nation-state mindset would lead you to hire your family and friends, while the market mindset would prompt you to throw open your doors to the world, and higher whoever seemed like they would be most productive. Even though you share a kinship with your family and friends, you appreciate that it is not "fair" to pass over a hard-working, smart employee for your less talented, lazy cousin. Favoring your kin is neither fair nor in your self-interest, because your interests and sense of fairness are not "kin-based," nor tribal, nor ethnic, nor national.

In a post in the (hopefully) near future, I will spell out the implications of this non-zero-sum mindset with regards to policy. Specific attention will be paid to how policies can be crafted to advance citizens' self-interest without offending their sense of justice. I should also consider the alternative view of the nation-state put forth by Robert Reich and state where I believe he gets it wrong.

For a sneak peek, I agree wholeheartedly with Will Wilkinson's theory:

"For my part, I have a fairly radical ideal theory of a cosmopolitan liberal global order of trade, migration, and peace. I think the “nation state-as-primary-moral-community” assumption at bottom of most modern liberal arguments for the welfare state (and in many libertarianism-in-one-country arguments, for that matter) is morally backward." Read more!

the food crisis explained

The Financial Times features some of the best economists and political scientists in the world, and recently, it's been the universally-celebrated Paul Collier talking sense in their Economists' forum. One of my first posts lauded Collier's terrific analysis of global poverty and general strife in his book, The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It." (Link to Amazon).

Collier is back once again to explain the why there is a food crisis, what stands in the way of an adequate food supply, and what should be done about it. (Hat tip: Alex T at MR)


First, Collier explains the why:

"Why have food prices rocketed? Paradoxically, this squeeze on the poorest has come about as a result of the success of globalization in reducing world poverty. As China develops, helped by its massive exports to our markets, millions of Chinese households have started to eat better. Better means not just more food but more meat, the new luxury. But to produce a kilo of meat takes six kilos of grain. Livestock reared for meat to be consumed in Asia are now eating the grain that would previously have been eaten by the African poor."

Next up, a realistic solution:

"The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market."

But, of course, there is a catch:

"Unfortunately, large-scale commercial agriculture is unromantic ... We laud the production style of the peasant: environmentally sustainable and human in scale."

Collier notes that we grew out of this perception of manufacturing (who dreams of owning a small manufacturing "ranch"?), and have enjoyed the manufacturing wealth since.

Yet this romanticism has taken root in agricultural development:

"In Africa, which cannot afford them, development agencies have oriented their entire efforts on agricultural development to peasant style production. As a result, Africa has less large-scale commercial agriculture than it had fifty years ago. Unfortunately, peasant farming is generally not well-suited to innovation and investment: the result has been that African agriculture has fallen further and further behind the advancing productivity frontier of the globalized commercial model."

In case you thought it couldn't get worse, Africa is the victim of more than one breed of romanticism:

"Our longstanding agricultural romanticism has been compounded by our new-found environmental romanticism. In the United States fears of climate change have been manipulated by shrewd interests to produce grotesquely inefficient subsidies for bio-fuel. Around a third of American grain production has rapidly been diverted into energy production."

Collier also reserves some blame for the European Commission, which has its own bio-fuels policy, albeit less "effective" and thereby less damaging. More damning is the EU's ban on the "production and import of genetically modified crops has obviously retarded productivity growth in European agriculture: again, the best that can be said of it is that we are rich enough to afford such folly. But Europe is a major agricultural producer, so the cumulative consequence of this reduction in the growth of productivity has most surely rebounded onto world food markets. Further, and most cruelly, as an unintended side-effect the ban has terrified African governments into themselves banning genetic modification in case by growing modified crops they would permanently be shut out of selling to European markets."

But wait, there is one more nail in the coffin for food supply. Export-restrictions in grain-exporting countries, a product of "the internal tussles between the interests of poor consumers and poor producers, the interests of consumers have prevailed. Governments in grain-exporting countries have swung prices in favour of their consumers and against their farmers by banning exports."

The effect is that grain-exporting countries have lower prices, but less grain is produced than would otherwise be produced, reducing the overall food supply, and greatly raising the prices for grain-importing countries.

What's the main takeaway?

"Unfortunately, trade in agriculture has been the main economic activity to have resisted being subject to global rules. We need stronger and fairer globalization, not less of it."

I like this piece for a few reasons -- it's comprehensive, it's straightforward -- but I especially take note of Collier's condemnation of romanticism. It's similar to what I've been trying to get at in the "moralizing" series of posts, and it demonstrates the shallowness of thinking on the left as well as the right. I'm reading Jane Jacobs' "Death and Life of Great American Cities" right now, and she strikes me a similar thinker, one who is able to see the err of well-intentioned, but entirely unintellectual pursuits. Read more!