Nation-States Are Failing…Will a New, Feudal Order Replace Them?

global local

Is the nation-state is broken? How might it evolve and be superseded? Those are the questions that John C. Hulsman and Boris N. Liedtke ponder in this opinion piece. The co-authors believe that while the nation state is not going away anytime soon, it should be recast through a combination of stronger global and local institutions — an arrangement that has political roots going back some 350 years. Hulsman is president and managing partner of John C. Hulsman Enterprises, a global political-risk consulting firm. His new book, To Dare More Boldly: The Audacious Story of Political Risk, was published by Princeton University Press in April.  Liedtke is the distinguished executive fellow at INSEAD Emerging Markets Institute and has more than 20 years of experience in the financial sector. He was the CEO of the largest bank by assets in Luxemburg and board member for operations at the largest German fund manager.

The nation-state simply isn’t working very well anymore, even as its staying power seems beyond dispute.

It is this paradox that explains much of what ails our present world, why “nothing seems to be working.” Indeed, it is in the supposedly well-governed developed world that the nation-state has shown its most glaring inadequacies. Be it the Lehman Brothers crisis, the endless, endemic euro crisis, or the calamity of America’s adventurism in Iraq, the nation-state seems to be showing its age, not delivering on its grandiose claims to facilitate both global governance and political and economic stability for its people.

The model of the nation-state has come under attack from below – in the form of a deteriorating level of trust by the people towards their elected or unelected representatives – as well as from above, by failing to provide appropriate answers to an ever more globalized world.

But if the nation-state does seem to have flatly failed lately at every turn, that does not mean it 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, more wedded to jealously preserving their national prerogatives than is even the United States, long the bane of post-national dreamers. Instead, it is the supposedly modern, post-national European experiment that seems to be in terminal decline. As such, both intellectual defenders of the nation-state and its critics seem to be largely wrong at present.

Lessons from the Thirty Years’ War

Historians have long agreed that the Thirty Year’s war – ending in 1648 with the Peace of Westphalia – was the pivotal moment when the modern nation-state was born.

It is hard to adequately describe what a calamity the war was for the people of Central Europe, and especially Germans nestled in the Holy Roman Empire. It amounts to one of the bloodiest conflicts in all of human history, with an estimated eight million casualties of its ceaseless slaughter. Given the many great powers that joined the fray as the war proceeded (Sweden, Spain, France, Austria), in many ways the Thirty Years’ War amounts to the first true world war of the modern era. And just as was true following the carnage in 1918 and 1945, in 1648 diplomats assembled, determined to prevent such a disaster from ever happening again.

“If the nation-state does seem to have flatly failed lately at every turn, that does not mean it is about to be replaced.”

The Peace of Westphalia did nothing less than change the basic relationship between rulers and subjects. Up until now in the feudal world, people tended to have overlapping (and often competing) political and religious allegiances and loyalties.

However, after the acceptance of Westphalia, this system dramatically changed, as the local princes decided on the religious and political tenor of those they governed. If a prince was Protestant, his state was thought by all to be so too (and vice versa for Catholics). Other princes never again to such a large extent attempted to interfere with the domestic internal workings of another state, in an effort to avoid a further cataclysmic war; the concept of state sovereignty had been born.

Allegiances in the Holy Roman Empire were no longer decided by a mix of the supranational center in Rome, and by the many local German traditions of the empire, as had been the case up until 1618. Instead, while there was less uniformity at the supranational level, as the success of Protestantism led to the diminution in the power of the Vatican, nationalism emerged with the victory of the regional princes, just as supranationalism and localism waned. Our modern state system had been born, with the nation-state in the driver’s seat.

Countries and the relationships among them governed the world for the next 350 years. The world started to increasingly function along national borders with national taxes, national laws, national conscriptions, national education, languages following along largely national geographies, national governments, and national elections.

People were born with a national passport, attended national education that formed their opinion, engaged in national military service where they fought other nations, attended nationally funded universities, paid nationally imposed taxes and adhered to national laws until they passed away. Even in death, the nation-state was inescapable through the national process of death certification and taxes.

The institution of the nation-state served humanity well throughout these 350 years. Increasing life expectancy, the possibility to enjoy leisure time instead of fear (due to increasing internal domestic political stability), economic and population growth, the advancement of knowledge and science, and the incredible output of old and new forms of art are all testimony to the strength of the world order birthed at Westphalia.

The Nation-state’s Zenith Has Passed

Yet, the success of the nation-state has given rise to new challenges for which its structure can no longer provide acceptable answers. While the nation-state solved many problems that the old feudal order was incapable of dealing with — following the Thirty Years’ War there was never again a major religious war in Europe — in doing so it created new ones.

The success story of the nation-state was in creating a globalized world in which prosperity for the many improved dramatically. However, from at least the middle of the 19th century, nations created issues and challenges for humanity, which are no longer national but global.

Any look at the major headlines in the past few years confirms this. For all its power to win the war in Iraq against Saddam Hussein largely on its own, the U.S. (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 U.S. Federal Reserve is constituted to deal with American inflation and unemployment rates, even as the dollar’s supranational dominance makes their decisions possess a truly and unthought-of global significance. Increasingly the nation-state is coming to its limit in finding adequate responses to global challenges.

While facing these challenges from above, the nation-state is equally being threatened from below with a rejection by its people of its political ruling class. Advances in technology, through radio, television and later computer technology – and in particular the internet – has brought an unparalleled transparency.

The most important implications of this transparency are twofold. Firstly, transparency has made it clear to all the differing living standards of the world. Secondly, the human fallibility and foibles of our elected political elite are on display as never before.

“The institution of the nation-state served humanity well throughout these 350 years.”

The former has had and will continue to have wide ranging global implications. Specifically, this has already contributed to West’s victory in the Cold War (no one wanted to live in East Germany as opposed to Swinging London) three decades ago and is certainly a big factor behind the present immigration pressure which the U.S. and Europe are experiencing.

The fact that people in Syria, Mexico, parts of China, and the rest of the underdeveloped world can obtain a direct glimpse of the boundless riches of the Western world via the small screens of their internet-connected phones, makes the planet no longer unknowable. Pandora’s box is open – for good and ill – and people in economically-challenged regions are longing to reach the Nirvana they observe on their little screens.

Modern transportation technology has basically removed the “literal” barrier of entry that geography once posed. Planes, cars, ships, etc. have made it theoretically affordable for even the poorest human being to emigrate. It is only the administrative, physical, and commercial barriers erected by the nation-state – frequently using geography in its defense (desert between Mexico and the U.S.; the Mediterranean Sea between Europe and Africa) – that holds back this form of globalized immigration. Yet there is no solution in sight deterring the people from poorer regions desiring a better life through immigration.

So the nation-state’s erected barriers will continue to come under real and philosophical pressure. The question has to be asked: “What right does one human or society have to limit the free and peaceful movement of another through this world?” The nation-state has somehow established this blocking privilege through the creation of artificial borders based on historical events. Remove the nation-state from the equation and the answer becomes simple – “None.”

However, the transparency provided by technology has had equally far-reaching implications in the developed world, going far deeper than just an issue of foreign immigration. With the use of radio by the political elite politics became more accessible to the masses.

FDR perfected the use of radio during his 30 evening addresses between 1933 and 1944 which became known as the Fireside Chats, a great political achievement which welded the American people to his reform program. In 1960, CBS organized the first TV presidential election debate, which many credited as a turning point in favor of the young dashing John Kennedy against a tired-looking, make-up-less Richard Nixon.

“As problems become more transnational … unelected, supranational institutions are increasingly (and often rightly) reviled as anti-democratic, arrogant, and wildly unsuccessful, even as such institutions become more and more necessary.”

Finally, the entertainment value of the Trump period in the White House would certainly be substantially diminished without his many tweets to the masses, even though the information value might be suspect. Through voice, picture, and later internet, the nation-state’s representatives appeared ever more accessible to the American electorate.

All this meant that the average person felt closer to their leaders than ever before. They started to see them – warts and all – as more and more human. Their mistakes and errors became known, and endlessly documented. Leaders of nation-states became first fallible in the eyes of their electorate, then increasingly ridiculed. The mass media soon developed into a hunt for human “gossip” and less a means to facilitate political debate. The paparazzi were let loose on the political elite.

As the available media outlets multiplied and polarized alongside the prevailing views of their specific audience, they started to lose their journalistic objectivity. YouTube uploads and their followers became so numerous that many adjusted their content, based on the populism of “likes,” catering to specific desires and views. Preconceived ideas were strengthened and backed-up not by objectivity and researched facts but by selective sourcing of interpretation and subjectivity – the birth of “fake news”.

However, with every lie, with every cynical comment, with every tawdry personal peccadillo, the people increasingly rejected their political establishment. The unthinkable started to happen in democracies of the West. A real estate tycoon won the U.S. presidency with a slogan you can fit on a hat, “America First.” A lesbian investment banker became the leader of the opposition in the German Bundestag, representing a party that opposes same-sex marriages and argues for the protection of the national rights of the working class along lines reminiscent of German politics of the 1930s.

The entire French political elite and establishment – not just the presidency – was wiped out in less than two years by a young investment banker with virtually no public office experience. Theses upheavals are only imaginable in a world where “fake news” has replaced basic objectivity.

Driven by catastrophic political and economic failures such as the Iraq War and the Great Recession, certainly fired on by a sensational press, the people are fed up with their traditional political leaders, opening the door to the populists. The more these outsiders discredit the political institutions of the nation-state by comments and outrageous behavior and claims, the more valuable they become for the press as a precious tool for higher publicity and internet “hits.” An unhealthy feeding frenzy between the new political elite, the media and the people has been initiated and is starting to devour the very structure of the nation-state itself.

“A feudal emphasis on localism can be the well-spring for a more legitimate, more broadly acceptable system of government.”

Let us dispel all delusional hope that this new non-political elite is somehow better equipped to deal with the challenges to the nation-state or – even less so – our global threats, than the previous established elite. It is preposterous to imagine that investment bankers, traders and real estate tycoons, all political novices, are better suited for solving our complex political problems than anybody else. The most likely outcome is an even broader disillusionment of the electorate as the populists predictably fail, followed by an even more radical replacement of the old and new political elite. More sensationalism, more outrageous claims, and more radicalization made acceptable by fake news will drive the nation-state into the abyss.

The Real Problem

But while the nation-state is being challenged in supranational policy terms by global threats, as a result of the inability to address these challenges, the frustrated population of the the West has chosen to increasingly reject multi-national institutions (see Brexit) and to slowly turn towards nationalism as people feel they has lost democratic control of the decision-making process. It is the worst of all worlds; as problems become more transnational in nature, our present unelected, supranational institutions are increasingly (and often rightly) reviled as anti-democratic, arrogant, and wildly unsuccessful, even as such institutions become more and more necessary.

It would seem that what is needed is nothing less than a new world system, supplanting the failing Westphalian order, 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 today’s global challenges.

Back to the Future — The New Feudalism

Ironically, the best model for the new world we live in – to master the increasing limitations of the nation-state that have been so glaringly exposed – is to go back to the future, revisiting the very feudal age that pre-dated Westphalia.

For what is called for is more coherent and effective supranational structures at the top, in line with the old primacy of the feudal church. For example, in this case a far more effective G20 is necessary to deal with the many transnational aspects of the global financial and economic systems.

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 role and power of the Quadrilateral grouping of the U.S., Australia, Japan, and India makes a great deal more sense. A Europe with a Euro-zone finance minister and a mutualization of common debt (from now on, though not for what has been run up before) would better tackle the ongoing challenges to the financial stability of the continent, turning the euro-zone 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 this; in some cases, it will be inter-governmental (between nation-states), in others like the euro zone, the supranational institutions will take on a life of their own. For challenges that threaten the very survival of humanity and human civilization – such as nuclear war, the environment as well as certain economic and trade issues – the only way forward is for nation-states to give up control and pass sovereignty over these issues to global institutions that function above and beyond the nation-state. But in any event, the goal is to pragmatically go back to the pre-Westphalian era, where more unified and effective supranational institutions existed to mange trans-national problems.

At the same time, even in this more feudal world, the nation-state is not going anywhere; for many people cleave to it precisely because they still feel strong allegiances to their countries, and crucially believe they have some democratic and practical control over its outcomes. Nation-states will continue to have a dominant military role, play a major role in macro-economics, and be the dominant force securing their own internal security. But over time, the nation-state will do less, but by concentrating on these key functions, it will also do it better.

Crucially at the bottom of the global governance tree, localism — as was true during the feudal area — will also come into its own again. In line with Thomas Jefferson’s brilliant insight, problems should always be solved at the lowest possible level, precisely because it is closest to the people itself, and means the political and democratic legitimacy of policy solutions can be secured.

So everything from education issues, to policing, to infrastructure, should be primarily managed at this local level. Further, as the feudal world well knew, it is here that people feel most connected to decision-makers; we may not personally know the president but we do know the head of the school board and can heap all sorts of direct social pressure on him if he sends the kids to school in a blizzard. This accountability, which is exactly what populists are rightly bemoaning, has gone missing 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 more than 360 years, the old Westphalian system, dominated by the nation- state, is beginning to show its age. The irony is that the true antidote to what ails it – going back to the future and resurrecting feudal elements of the pre-Westphalian world by buttressing both supranational and local responses to today’s problems – can be the very ancient answer that moves the modern world forward.

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