Jul. 3, 2021
Read time: 221 minutes and 11 seconds.
tags:When the payoff for organizing violence at a large scale tumbles, the payoff from violence at a smaller scale is likely to jump. Violence will become more random and localized. Organized crime will grow in scope. We explain why. Another logical implication of falling returns to violence is the eclipse of politics. There is much evidence that adherence to the civic myths of the twentiethcentury nationstate is rapidly eroding. The death of Communism is merely the most striking example. As we explore in detail, the collapse of morality and growing corruption among leaders of Western governments is not a random development. It is evidence that the potential of the nationstate is exhausted. Even many of its leaders no longer believe the platitudes they mouth. Nor are they believed by others.
- Page 3 (location ~ 38-44)
The Information Revolution As the breakdown of large systems accelerates, systematic compulsion will recede as a factor shaping economic life and the distribution of income. Efficiency will rapidly become more important than the dictates of power in the organization of social institutions. An entirely new realm of economic activity that is not hostage to physical violence will emerge in cyberspace. The most obvious benefits will flow to the “cognitive elite,” who will increasingly operate outside political boundaries. They are 3 already equally home in Frankfurt, London, New York, Buenos Aires, Los Angeles, Tokyo, and Hong Kong. Incomes will become more unequal within jurisdictions and more equal between them.
- Page 4 (location ~ 56-62)
The transformation of the year 2000 will not only revolutionize the character of the world economy, it will do so more rapidly than any previous phase change. Unlike the Agricultural Revolution, the Information Revolution will not take millennia to do its work. Unlike the Industrial Revolution. its impact will not be spread over centuries.
- Page 5 (location ~ 65-67)
When the ancients imagined the children of Zeus living among them they were inspired by a deep belief in magic. They shared with other primitive agricultural peoples an awe of nature, and a superstitious conviction that nature’s works were set in motion by individual volition, by magic. In that sense, there was nothing self-consciously prophetic about their view of nature and their gods. They were far from anticipating microtechnology. They could not have imagined its impact in altering the marginal productivity of individuals thousands of years later. They certainly could not have foreseen how it would shift the balance between power and efficiency and thus revolutionize the way that assets are created and protected. Yet what they imagined as they spun their myths has a strange resonance with the world you are likely to see.
- Page 7 (location ~ 103-108)
THE END OF NATIONS Changes that diminish the power of predominant institutions are both unsettling and dangerous. Just as monarchs, lords, popes, and potentates fought ruthlessly to preserve their accustomed privileges in the early stages of the modern period, so today’s governments will employ violence, often of a covert and arbitrary kind, in the attempt to hold back the clock. Weakened by the challenge from technology, the state will treat increasingly autonomous individuals, its former citizens, with the same range of ruthlessness and diplomacy it has heretofore displayed in its dealing with other governments. Increasingly harsh techniques of exaction will be a logical corollary of the emergence of a new type of bargaining between governments and individuals. Technology will make individuals more nearly sovereign than ever before. And they will be treated that way. Sometimes violently, as enemies, sometimes as equal parties in negotiation, sometimes as allies. But however ruthlessly governments behave, particularly in the transition period, wedding the IRS with the CIA will avail them little. They will be increasingly required by the press of necessity to bargain with autonomous individuals whose resources will no longer be so easily controlled.
- Page 9 (location ~ 135-145)
The growing power of organized crime is merely one reflection of this tendency. Multinational companies are already having to subcontract all but essential work. Some conglomerates, such as AT&T, Unisys, and ITT, have split themselves into several firms in order to function more profitably. The nationstate will devolve like an unwieldy conglomerate. Not only is power in the world changing, but the work of the world is changing as well. Microprocessing has created entirely new horizons of economic activity that transcend territorial boundaries. This transcendence of frontiers and territories is perhaps the most revolutionary development since Adam and Eve straggled out of paradise under the sentence of their Maker: “In the sweat of thy face shalt thou eat bread. “As technology revolutionizes the tools we use, it also antiquates our laws, reshapes our morals, and alters our perceptions. This book explains how.
- Page 11 (location ~ 162-169)
When this greatest tax haven of them all is fully open for business, all funds will essentially be offshore funds at the discretion of their owner. This will have cascading consequences. The state has grown used to treating its taxpayers as a farmer treats his cows, keeping them in a field to be milked. Soon, the cows will have wings.
- Page 12 (location ~ 176-178)
When the state finds itself unable to meet its committed expenditure by raising tax revenues, it will resort to other, more desperate measures. Among them is printing money. Governments have grown used to enjoying a monopoly over currency that they could depreciate at will. This arbitrary inflation has been a prominent feature of the monetary policy of all twentiethcentury states. Even the best national currency of the postwar period, the German mark, lost 71 percent of its value from January 1, 1949, through the end of June 1995. In the same period, the U.S. dollar lost 84 percent of its value.6 This inflation had the same effect as a tax on all who hold the currency. As we explore later, inflation as revenue option will be largely foreclosed by the emergence of cybermoney. New technologies will allow the holders of wealth to bypass the national monopolies that have issued and regulated money in the modern period. The state will continue to control the industrial-era printing presses, but their importance for controlling the world’s wealth will be transcended by mathematical algorithms that have no physical existence. In the new millennium, cybermoney controlled by private markets will supersede flat money issued by governments. Only the poor will be victims of inflation.
- Page 12 (location ~ 182-191)
We believe that the age of individual economic sovereignty is coming. Just as steel mills, telephone companies, mines, and railways that were once “nationalized” have been rapidly privatized throughout the world, you will soon see the ultimate form of privatization–the sweeping denationalization of the individual. The Sovereign Individual of the new millennium will no longer be an asset of the state, a de facto item on the treasury’s balance sheet. After the transition of the year 2000, denationalized citizens will no longer be citizens at all, but customers. The commercialization of sovereignty will make the terms and conditions of citizenship in the nationstate as dated as chivalric oaths seemed after the collapse of feudalism. Instead of relating to a powerful state as citizens to be taxed, the Sovereign Individuals of the twenty-first century will be customers of governments. These governments wilt be organized along different principles than those which the world has come to expect over the past several centuries.
- Page 17 (location ~ 252-259)
Transcending Nationality Before the nationstate, it was difficult to enumerate precisely the number of sovereignties that existed in the world because they overlapped in complex ways and many varied forms of organization exercised power. They will do so again. The dividing lines between territories tended to become clearly demarcated and fixed as borders in the nationstate system. They will become hazy again in the Information Age. In the new millennium, sovereignty will be fragmented once more. New entities will emerge exercising some but not all of the characteristics we have come to associate with governments.
- Page 19 (location ~ 284-289)
We put violence at the center of our theory of megapolitics for good reason. The control of violence is the most important dilemma every society faces. As we wrote in The Great Reckoning: The reason that people resort to violence is that it often pays. In some ways, the simplest thing a man can do if he wants money is to take it. That is no less true for an army of men seizing an oil field than it is for a single thug taking a wallet. Power, as William Playfair wrote, “has always sought the readiest road to wealth, by attacking those who were in possession of it.”
- Page 22 (location ~ 330-335)
Notwithstanding the points where our forecasts were mistaken or seem mistaken in light of what is now known, the record stands to scrutiny. Much of what is likely to figure in future economic histories of the 1990s was forecast or anticipated and explained in The Great Reckoning. Many of our forecasts were not simple extrapolations or extensions of trends, but forecasts of major departures from what has been considered normal since World War II. We warned that the 1990s would be dramatically different from the previous five decades. Reading the news of 1991 through 1995, we see that the themes of The Great Reckoning were borne out almost daily.
- Page 26 (location ~ 395-399)
We believe that Lane’s analyses of the competitive uses of violence has much to tell us about how life is likely to change in the Information Age. But don’t expect most people to notice, much less follow, so unfashionably abstract an argument. While the attention of the world is riveted on dishonest debates and wayward personalities, the meanderings of megapolitics continue almost unnoted. The average North American has probably lavished one hundred times more attention on 0. J. Simpson than he has on the new microtechnologies that are poised to antiquate his job and subvert the political system he depends on for unemployment compensation.
- Page 28 (location ~ 420-424)
and sizes observe one of the pretenses of the nationstate-that the views people hold determine the way the world changes. Apparently sophisticated analysts lapse into explanations and forecasts that interpret major historical developments as if they were determined in a wishful way. A striking example of this type of reasoning appeared on the editorial page of the New York Times just as we were writing “Goodbye, NationState, Hello. ..What?,” by Nicholas Colchester.11
- Page 28 (location ~ 426-430)
and sizes observe one of the pretenses of the nationstate-that the views people hold determine the way the world changes. Apparently sophisticated analysts lapse into explanations and forecasts that interpret major historical developments as if they were determined in a wishful way. A striking example of this type of reasoning appeared on the editorial page of the New York Times just as we were writing “Goodbye, NationState, Hello. ..What?,” by Nicholas Colchester.11 Not only was the topic, the death of the nationstate, the very topic we are addressing, but its author presents himself as an excellent marker to illustrate how far removed our way of thinking is from the norm. Colehester is no simpleton. He wrote as editorial
- Page 28 (location ~ 426-431)
The bird that falls asleep on the back of a hippopotamus does not think about losing its perch until the hippo actually moves. Dreams, myths, and fantasies play a much larger role in informing the supposed social sciences than we commonly think.
- Page 29 (location ~ 444-445)
These intuitive leaps begin with a perspective that takes the birth of Christ to be the central fact of history. They are compounded by the psychological power of large round numbers, which every trader will recognize as having an arresting quality. The two thousandth year of our epoch cannot help but become a focus for the imagination of intuitive people. A critic could easily make these premonitions seem silly, without even addressing the ambiguous and debatable theological notions of the Apocalypse and the Last Judgment that give these visions so much of their power Even within the Christian framework, the year 2000 can only seem the likely inflection point for the next stage of history if one overlooks errors of arithmetic. In strict logic, the next millennium will not begin until 2001. The year 2000 will be only the two thousandth year since Christ’s birth. Or it would be had Christ been born in the first year of the Christian era. He was not. In 533, when Christ’s birth replaced the founding date of Rome as the basis for calculating years according to the Western calendar, the monks who introduced the new convention miscalculated Christ’s birth. It is now accepted that he was born in 4 B.C. On that basis, a full two thousand years since his birth will be completed sometime in 1997. Hence Carl Jung’s apparently odd launch date for the start of a New Age.
- Page 34 (location ~ 517-527)
Now we sit at the threshold of another millennial transformation. We expect it to utterly transform the world, in ways that this book is meant to explain. You would be perfectly within your rights to doubt this, since no cycle that repeats itself only twice in a millennium has demonstrated enough iterations to be statistically significant. Indeed, even much shorter cycles have been viewed skeptically by economists demanding more statistically satisfying proof. “Professor Dennis Robertson once wrote that we had better wait a few centuries before being sure” about the existence of four-year and the eight-to ten-year trade cycles.’ 19 By that standard, Professor Robertson would have to suspend judgment for about thirty thousand years to be sure that the five-hundred-year cycle is not a statistical fluke. We are less dogmatic, or more willing to recognize that the patterns of reality are more complex than the static-and linear-equilibrium models of most economists.
- Page 38 (location ~ 568-575)
for the army to proclaim a new emperor. By the fourth century, even officers were Germanized
- Page 44 (location ~ 673-673)
A large part of the effort of military commanders, as historian Ramsay MacMullen has 30 documented, was devoted to pursuit of “illicit profits of their command.” ‘~ This they pursued by shaking down the population, what the fourth-century observer Synesius described as “the peace-time war, one almost worse than the barbarian war and arising from the military’s indiscipline and the officers’ greed.” 14 Another important contributing factor to Rome’s collapse was a demographic deficit caused by the Antonine plagues. The coil apse of the Roman population in many areas obviously contributed to economic and military weakness. Nothing of that kind has happened today, at least not yet. Taking a longer view, perhaps. the scourge of new “plagues” will compound the challenges of technological devolution in the new millennium. The unprecedented bulge in human population in the twentieth century creates a tempting target for rapidly mutating microparasites. Fears about the Ebola virus, or something like it, invading metropolitan populations may be well founded. But this is not the place to consider the coevolution of humans and diseases. As interesting a topic as that is, our argument at this juncture is not about why Rome fell, or even about whether the world today is vulnerable to some of the same influences that contributed to Roman decline. It is about something different-namely, the way that history’s great transformations are perceived, or rather, misperceived as they happen. People are always and everywhere to some degree conservative, with a small “C.”
- Page 47 (location ~ 709-721)
If you think about it carefully, it should be obvious that important transitions in history seldom are driven primarily by human wishes. They do not happen because people get fed up with one way of life and suddenly prefer another A moment’s reflection suggests why. If what people think and desire were the only determinants of what happens, then all the abrupt changes in history would have to be explained by wild mood swings unconnected to any change in the actual conditions of life. in fact, this never happens. Only in cases of medical problems affecting a few people do we see arbitrary fluctuations in mood that appear entirely divorced from any objective cause. As a rule, large numbers of people do not suddenly and all at once decide to abandon their way of life simply because they find it amusing to do so. No forager ever said, “I am tired of living in prehistoric times, I would prefer the life of a peasant in a farming village.” Any decisive swing in patterns of behavior and values is invariably a response to an actual change in the conditions of life. In this sense, at least, people are always realistic. If their views do change abruptly, it probably indicates that they have been confronted by some departure from familiar conditions: an invasion, a plague, a sudden climatic shift, or a technological revolution that alters their livelihoods or their ability to defend themselves.
- Page 49 (location ~ 745-755)
The fact that people tend to respond to costs and rewards is an essential element of forecasting. You can say with a high degree of confidence that if you drop a hundred-dollar bill on the street, someone will soon pick it up, whether you are in New York, Mexico City, or Moscow. This is not as trivial as it seems. It shows why the clever people who say that forecasting is impossible are wrong. Any forecast that accurately anticipates the impact of incentives on behavior is likely to be broadly correct. And the greater the anticipated change in costs and rewards, the less trivial the implied forecast is likely to be.
- Page 51 (location ~ 775-779)
Here are some summary points that you should keep in mind as you seek to understand the Information Revolution: 34 1. A shift in the megapolitical foundations of power normally unfolds far in advance of the actual revolutions in the use of power. 2. Incomes are usually falling when a major transition begins, often because a society has rendered itself crisis-prone by marginalizing resources due to population pressures. 3. Seeing “outside” of a system is usually taboo. People are frequently blind to the logic of violence in the existing society; therefore, they are almost always blind to changes in that logic, latent or overt. Megapolitical transitions are seldom recognized before they happen. 4. Major transitions always involve a cultural revolution, and usually entail clashes between adherents of the old and new values. 5. Megapolitical transitions are never popular, because they antiquate painstakingly acquired intellectual capital and confound established moral imperatives. They are not undertaken by popular demand, but in response to changes in the external conditions that alter the logic of violence in the local setting.
- Page 53 (location ~ 803-814)
With events unfolding many times faster than during previous transformations, early understanding of how the world will change could turn out to be far more useful to you than it would have been to your ancestors at an equivalent juncture in the past. Even if the first farmers had miraculously understood the full megapolitical implications of tilling the earth, this information would have been practically useless because thousands of years were to pass before the transition to the new phase of society was complete. Not so today. History has sped up. Forecasts that correctly anticipate the megapolitical implications of new technology are likely to be far more useful today. If we can develop the implications of the current transition to the Information Society to the same extent that someone with current knowledge could have grasped the implications of past transitions to farm and factory, that information should be many times more valuable now. Put simply, the action horizon for megapolitical forecasts has shrunk to its most useful range, within the span of a single lifetime. “Looking back over the centuries, or even f looking only at the present, we can clearly observe that many men have made their living, Often a very good living, from their special skill in 35 applying weapons of violence, and that their activities have had a very
- Page 54 (location ~ 822-832)
With events unfolding many times faster than during previous transformations, early understanding of how the world will change could turn out to be far more useful to you than it would have been to your ancestors at an equivalent juncture in the past. Even if the first farmers had miraculously understood the full megapolitical implications of tilling the earth, this information would have been practically useless because thousands of years were to pass before the transition to the new phase of society was complete. Not so today. History has sped up. Forecasts that correctly anticipate the megapolitical implications of new technology are likely to be far more useful today. If we can develop the implications of the current transition to the Information Society to the same extent that someone with current knowledge could have grasped the implications of past transitions to farm and factory, that information should be many times more valuable now. Put simply, the action horizon for megapolitical forecasts has shrunk to its most useful range, within the span of a single lifetime. “Looking back over the centuries, or even f looking only at the present, we can clearly observe that many men have made their living, Often a very good living, from their special skill in 35 applying weapons of violence, and that their activities have had a very large part in determining what uses were made of scarce resources.” FREDERIC C. LANE
- Page 54 (location ~ 822-833)
The elaborate shoreline of the Greek littoral meant that most areas of Greece were no more than twenty miles from the sea. This gave a decisive advantage to Greek farmers over their potential competitors in landlocked areas. Because of this advantage in trading high-value products, Greek farmers earned high incomes from control of only small parcels of land. These high incomes enabled them to purchase costly armor. The famous hoplites of ancient Greece were farmers or landlords who armed themselves at their own expense. Both well armed and well motivated, the Greek hoplites were militarily formidable and could not be ignored. Topographic conditions were the foundation of Greek democracy,
- Page 56 (location ~ 857-862)
The elaborate shoreline of the Greek littoral meant that most areas of Greece were no more than twenty miles from the sea. This gave a decisive advantage to Greek farmers over their potential competitors in landlocked areas. Because of this advantage in trading high-value products, Greek farmers earned high incomes from control of only small parcels of land. These high incomes enabled them to purchase costly armor. The famous hoplites of ancient Greece were farmers or landlords who armed themselves at their own expense. Both well armed and well motivated, the Greek hoplites were militarily formidable and could not be ignored. Topographic conditions were the foundation of Greek democracy, just as those of a different kind gave rise to the Oriental despotisms of Egypt and elsewhere.
- Page 56 (location ~ 857-862)
A modest understanding of the dynamics of climatic change in past societies could well prove useful in the event that climates continue to fluctuate. If you know that a drop of one degree Centigrade on average reduces the growing season by three to four weeks and shaves five hundred feet off the maximum elevation at which crops can be grown, then you know something about the boundary conditions that will confine people’s action in the future. You can use this knowledge to forecast changes in 37
- Page 58 (location ~ 879-883)
A modest understanding of the dynamics of climatic change in past societies could well prove useful in the event that climates continue to fluctuate. If you know that a drop of one degree Centigrade on average reduces the growing season by three to four weeks and shaves five hundred feet off the maximum elevation at which crops can be grown, then you know something about the boundary conditions that will confine people’s action in the future. You can use this knowledge to forecast changes in 37 everything from grain prices to land values.
- Page 58 (location ~ 879-883)
For example, it is no coincidence that the seventeenth century, the coldest in the modern period, was also a period of revolution worldwide. A hidden megapolitical cause of this unhappiness was sharply colder weather. It was so cold, in fact, that wine froze on the “Sun King’s” table at Versailles. Shortened growing seasons produced crop failures and undermined real income. Because of the colder weather, prosperity began to wind down into a long global depression that began around 1620. It proved drastically destabilizing. The economic crisis of the seventeenth century led to the world being overwhelmed by rebellions, many clustering in 1648, exactly two hundred years before another and more famous cycle of rebellions. Between 1640 and 1650, there were rebellions in Ireland, Scotland, England, Portugal, Catalonia, France, Moscow, Naples, Sicily, Brazil, Bohemia, Ukraine, Austria, Poland, Sweden, the Netherlands, and Turkey. Even China and Japan were swept with unrest.
- Page 58 (location ~ 886-892)
Microbes convey power to harm or immunity from harm in ways that have often determined how power was exercised. This was certainly the case in the European conquest of the New World, as we explored in The Great Reckoning. European settlers, arriving from settled agricultural societies riddled with disease, brought with them relative immunity from childhood infections like measles. The Indians they encountered lived largely in thinly populated foraging bands. They possessed no such immunity and 38 were decimated. Often, the greatest mortality occurred before white people even arrived, as Indians who first encountered Europeans on the coasts traveled inland with infections.
- Page 60 (location ~ 905-910)
Microbes convey power to harm or immunity from harm in ways that have often determined how power was exercised. This was certainly the case in the European conquest of the New World, as we explored in The Great Reckoning. European settlers, arriving from settled agricultural societies riddled with disease, brought with them relative immunity from childhood infections like measles. The Indians they encountered lived largely in thinly populated foraging bands. They possessed no such immunity and 38 were decimated. Often, the greatest mortality occurred before white people even arrived, as Indians who first encountered Europeans on the coasts traveled inland with infections. There are also microbiological barriers to the exercise of power. In Blood in the Streets, we discussed the role that potent strains of malaria served in making tropical Africa impervious to invasion by white men for many centuries. Before the discovery of quinine in the mid-nineteenth century, white armies could not survive in malarial regions, however superior their weapons might have been.
- Page 60 (location ~ 905-913)
Advantages and disadvantages of scale in violence. Another variable that helps determine whether there are a few large governments or many small ones is the scale of organization required to deploy the prevailing weapons. When there are increasing returns to violence, it is more rewarding to operate governments at a large scale, and they tend to get bigger. When a small group can command effective means of resisting an assault by a large group, which was the case during the Middle Ages, sovereignty tends to fragment. Small, independent authorities exercise many of the functions of government. As we explore in a latter chapter, we believe that the Information Age will bring the dawn of cybersoldiers, who will be heralds of devolution. Cybersoldiers could be deployed not merely by nationstates but by very small organizations, and even by individuals. Wars of the next millennium will include some almost bloodless battles fought with computers.
- Page 62 (location ~ 937-944)
Topography has been almost fixed through the whole of recorded history. Except for minor local effects involving the silting of harbors, landfills, or erosion, the topography of the earth is almost the same today as it was when Adam and Eve straggled out of Eden. And it is likely to remain so until another Ice Age recarves the landscapes of continents or some other drastic event disturbs the surface of the earth. At a more profound scale, geological ages seem to shift, perhaps in response to large meteorite strikes, over a period of 10 to 40 million years. Someday, there may again be geological upheavals that will alter significantly the topography of our planet. If that happens, you can safely assume that both the baseball and cricket seasons will be canceled.
- Page 63 (location ~ 966-972)
Climate fluctuates much more actively than topography. In the last million years, climatic change has been responsible for most of the known variation in the features of the earth’s surface. During Ice Ages, glaciers gouged new valleys, altered the course of rivers, severed islands from continents or joined them together by lowering the sea level.
- Page 64 (location ~ 972-974)
These concerns cannot be dismissed out of hand. Yet, taking a longer perspective, the more likely risk appears to be a shift toward a colder, not a warmer climate. Study of temperature fluctuations based upon analysis of oxygen isotopes in core samples taken from the ocean floor show that the current period is the second warmest in more than 2 million years.22 If temperatures were to turn colder, as they did in the seventeenth century, that might prove megapolitically destabilizing. Current alarms about global warming may in that sense be reassuring. To the extent that they are true, that assures that temperatures will continue to fluctuate within the abnormally warm and relatively benign range experienced for the past three centuries.
- Page 64 (location ~ 977-983)
The rate of change in the influence of microbes on the exercise of power is more of a puzzle. Microbes can mutate very rapidly. This is especially true of viruses. The 22 41 common cold, for example, mutates in an almost kaleidoscopic way. Yet although these mutations proceed apace, their impact in shifting the boundaries where power is exercised have been far less abrupt than technological change. Why? Part of the reason is that the normal balance of nature tends to make it beneficial for microbes to infect but not destroy host populations. Virulent infections that kill their hosts too readily tend to eradicate themselves in the process. The survival of microparasites depends upon their not being too rapidly or uniformly fatal to the hosts they invade.
- Page 65 (location ~ 983-989)
To live on ten thousand acres in a temperate climate today is a luxury allowed only to the very rich. A family of hunter-gatherers could scarcely have survived on less. They generally required thousands of acres per person, even in areas that were most fertile for foraging. This suggests why the growth of human populations during periods particularly favorable to farming may have created the basis for population crises. Because so much land was required to support a single person, the population densities of hunting-and-gathering societies had to be incredibly sparse. Before farming, humans were about as densely settled as bears.
- Page 69 (location ~ 1048-1053)
With minor differences, the human diet resembled that of bears. Foraging societies depended upon food gathered from the open countryside or from nearby bodies of water. Although some gatherers were fishers, most were hunters who depended for a third to a fifth of their food upon protein from large mammals. Other than a few simple tools and objects carried around with them, hunter-gatherers had almost no technology at their disposal. They usually had no way to effectively store quantities of meat or other foods for later use. Most food had to be consumed soon after it was gathered or left to spoil. That is not say, of course, that some hunter-gatherers did not eat spoiled food. Eskimos, as Boyden reports, “are said to have a particular liking for decomposed food.“4 He repeats the observations of experts that Eskimos” ‘bury fish heads and allow them to decay until the bones become of the same consistency as the flesh. They then knead the reeking mass into a paste and eat it’; they also enjoy the ‘fat maggoty larvae of the caribou fly served raw. . deer droppings, munched like berries … and marrow more than a year old, swarming with maggots’
- Page 69 (location ~ 1054-1062)
So long as population densities remained low, the foragers’ gods were not militant gods but embodiments of natural forces or the animals they hunted. The scantiness of capital and open frontiers made war in most cases unnecessary. There were few neighbors outside one’s own small family or clan to pose threats. Because foragers tended to roam in search of food, personal possessions beyond a bare minimum became an encumbrance. Those with few possessions necessarily experienced little property crime. When conflicts arose, the contending parties were often content to walk away because they had little invested in any given locale. Escape was an easy solution to personal feuds or exorbitant demands of other kinds. This does not mean that early humans were peaceful. They may have been violent and unpleasant to a degree we can scarcely imagine. But if they employed violence, it was mostly for personal reasons or, what may be worse, for sport. The livelihoods of hunter-gatherers depended upon their functioning in small bands that allowed little or no scope for a division of labor other than along gender lines. They had no organized government, usually no permanent settlements, and no possibility for accumulating wealth. Even such basic building blocks of civilization as a written language were unknown in the primeval economy. Without a written language there could be no formal records and no history.
- Page 71 (location ~ 1083-1093)
With no reason to earn and almost no division of labor, the concept of hard work as a virtue must have been foreign to hunting-and-gathering groups. Except during periods of unusual hardship, when protracted effort was required to find something to eat, little work was done because little was needed. There was literally nothing to be gained by working beyond the bare minimum required for survival. For the members of the typical hunting-and-gathering band, that meant working only about eight to fifteen hours a week. Because a hunter’s labor did not augment the food supply but could only reduce it, one who heroically labored overtime to kill more animals or pick more fruit than could be eaten before it spoiled contributed nothing to prosperity. To the contrary, overkill reduced the prospects of finding food in the future, and thus had a detrimental impact on the wellbeing of the group. That is why some foragers, such as Eskimos, punished or ostracized members of the band who engaged in overkill.
- Page 72 (location ~ 1102-1109)
Specialists in violence, the forefathers of government, increasingly devoted themselves to plunder and protection from plunder. Along with the priests, they became the first wealthy persons in history. In the early stages of agricultural societies, these warriors came to control a portion of the annual crop as a price of protection. In places where threats were minimal, yeoman farmers were sometimes able to retain a relatively large degree of autonomy. But as population densities rose, and competition over food intensified, especially in regions around deserts where productive land was at a premium, the warrior group could take a large fraction of total output. These warriors founded the first states with the proceeds of this rake-off, which reached as high as 25 percent of the grain crop and one-half the increase in herds of domesticated animals. Farming, therefore, dramatically increased the importance of coercion. The surge in resources capable of being plundered led to a large surge in plunder. It took millennia for the full logic of the Agricultural Revolution to play itself out. For a long while, sparse populations of farmers in temperate regions may have lived much as their foraging forebears had done. Where land and rainfall were ample, farmers harvested crops on a small scale without much violent interference. But as populations rose over a period of several thousand years, farmers even in thinly settled regions became subject to erratic plunder that sometimes must have left them with insufficient seed to replant the next year’s crop. Competitive plundering, or anarchy, was a possibility at one extreme, as well as unprotected communities living without any specialized organization to monopolize violence.
- Page 74 (location ~ 1125-1137)
PROPERTY The move to a settled agricultural society resulted in the emergence private property. Obviously, no one would be content to toil through whole growing season to produce a crop just to see someone else war along and harvest what he produced. The idea of property emerged a’ inevitable consequence of farming. But the clarity of private property concept was attenuated by the logic of violence that also accompanied introduction of farming. The emergence of property was confused by fact that the megapolitical power of individuals was no longer as equal had been in foraging societies, where every healthy adult male was a hunter as well armed as anyone else. Farming gave rise to specialization in violence. Precisely because it created something to steal, farming made investment in better weaponry profitable. The result was theft, much of it highly organized.
- Page 76 (location ~ 1154-1161)
In general, risk-averse behavior has been common among all groups that operated along the margins of survival. The sheer challenge of survival in premodern societies always constrained the behavior of the poor. An interesting feature of this risk aversion, explored in The Great Reckoning, is that it reduced the range of peaceful economic behavior that individuals were socially permitted to adopt. Taboos and social constraints limited experimentation and innovative behavior, even at the obvious cost of forgoing potentially advantageous improvements in settled ways of doing things.‘3 This was a rational reflection of the fact that experimentation increases the variability of results. Greater variability means not only potentially greater gains but more ominously for those at the very margin of survival-potentially ruinous losses. A great part of the cultural energy of poor farming societies has always been devoted to suppressing experimentation. This repression, in effect, was their substitute for insurance policies. If they had insurance, or sufficient savings to self-insure their experiments, such strong social taboos would not be needed to help ensure survival. Cultures are not matters of taste but systems of adaptation to specific circumstances that may prove irrelevant or even counterproductive in other settings.
- Page 79 (location ~ 1206-1216)
Lands tended to rent for a fixed fee, and the tenant absorbed the economic risk as well as a higher portion of the profit if the crop was good. Higher savings allow self-insurance of riskier behavior. Under such conditions, yeoman farmers could rise above the rank of peasantry and sometimes even accumulate independent wealth. The tendency for more market-like property rights and relationships to develop near the top of an economic hierarchy or, in rarer cases, across the whole economy, as societies emerged from poverty, is an important characteristic of social organization. It is equally important to note that the most common organization of agricultural society historically has been essentially feudal, with market relations at the top and the closed village system at the bottom. The great mass of peasants were tied to the land in almost all premodern agricultural societies. So long as agricultural productivity remained low, or higher productivity was dependent upon access to centralized hydraulic systems, the freedom and property rights of individual farmers at the bottom remained minimal.
- Page 80 (location ~ 1224-1231)
The collapse of Roman authority largely freed farmers in the countryside from taxes, which had sucked away “between one quarter to one third of the gross product of the land, without counting the various exactions suffered by small and middling landowners.” 18 The taxes were so onerous, sometimes enforced by execution, that desertion of property by owners was widespread. The barbarians mercifully allowed these taxes to lapse.
- Page 83 (location ~ 1263-1266)
Originally a personality of mediocre status raised above the peasant by his expensive horse and armor, the knight slowly improved his position in society until he became part of the nobility. Although knights remained the lowest rank of the upper class, knighthood acquired a unique cachet that made knighting an honor prized by the great nobility and even royalty. The cachet was primarily the product of the Church’s policy of Christianizing knighthood by sanctifying the ceremony of knighting and by sponsoring a code of behavior known as chivalry, a code perhaps violated more often than honored, but exercising incontestable influence on the thought and conduct of posterity.
- Page 86 (location ~ 1306-1311)
“Only a Poor Man Sells Land” The unsettled conditions of the late tenth century paved the way for the feudal revolution. Clustered crop failures and disasters led the yeoman farmers to sink into debt. When crop yields failed to recover, the freeholders faced a desperate situation. Markets always place the greatest pressures on the weakest holders. Indeed, that is part of their virtue. They promote efficiency by removing assets from weak hands. But in late-tenth-century Europe, subsistence farming was practically the only occupation. Families who lost their land lost their only means of survival. Faced with this unpalatable prospect, many or most of the freehold farmers decided to give away their fields during the feudal revolution. In the words of Guy Bois, “The only sure way for a peasant to hold on to the land he tilled was to concede ownership of it to the Church, so he could retain its usufruct.” 30 Others ceded some or all of their land to wealthier farmers in whom they had confidence, either friendly neighbors or relatives.
- Page 87 (location ~ 1323-1330)
Falling productivity not only placed poor farmers in a desperate economic dilemma; it also instigated an upsurge in predatory violence that undermined the security of property. Those without the resources to wrest a share of the available and inadequate supply of horses and fodder suddenly found that they and their property were no longer safe. To put their dilemma in contemporary terms, it was as if you were forced to arm yourself today with a new type of weapon, but the cost of doing so was $100,000. If you could not pay that price, you would be at the mercy of those who could. Within a few years, the capacity of the king and the courts to enforce order collapsed. 31 Anyone with armor and a horse could now become a law unto himself. The result was a late-tenth-century version of Blade Runner, a melee of fighting and plunder that the constituted authorities were powerless to stop. Looting and attacks by armed knights disrupted the countryside. It is by no means obvious, however, that all the victims of this pillage were the poor. To the contrary, the elderly, physically weaker, or ill-prepared among the larger landholders made more attractive targets. They had more to steal.
- Page 88 (location ~ 1335-1343)
In these desperate conditions, the Church helped to launch feudalism through its efforts to negotiate a truce in the violent countryside. Historian Guy Bois described the situation this way: “The impotence of the political authorities was such that the Church stood in for them in the attempt to restore order, in the movement known as ‘The Peace of God.’ ‘Councils of Peace’ proclaimed series of interdictions which were sanctioned by anathemas; vast ‘assemblies of peace’ received the oaths of the warriors. The movement originated in the French Midi (Council of Charroux in 989, Council of Narbonne in 990), then gradually spread…” 32 The bargain that the Church struck involved acknowledgment of the overlordship of armed knights in local communities in exchange for a cessation or tempering of the violence and looting. Land titles inscribed after the surge of violence in the late tenth century suddenly bore the title “nobilis” or “miles” as an indication of lordship. The nobility as a separate estate was created by the feudal revolution. Property transactions recorded to the same individuals only a few years earlier had listed no such distinction.33
- Page 89 (location ~ 1352-1360)
The observations of the great religious authority A. R. Radcliffe-Brown are directly relevant here. He pointed out that “the social function of a religion is independent of its truth or falsity.” Even those that are “absurd and repulsive, such as those of some savage tribes, may be important and effective parts of the social machinery.“34 This was certainly the case with the Church in the early stages of feudalism. It helped create rules, as only a religion could, that enabled people to overcome incentive traps and behavioral dilemmas. Some of these were moral dilemmas common to all human life. But others were local dilemmas, unique to the prevailing megapolitical conditions. The medieval Church had a special role to play in restoring order in the countryside in the final years of the tenth century.
- Page 90 (location ~ 1375-1380)
Partly because its farm managers were literate, the Church did a great deal to help improve the productivity of European farming, especially in the early stages of feudalism. Before the thirteenth century the farm managers of lay lords were almost all illiterates who kept records through an elaborate set of marks. Shrewd farmers though they may have been, they were in no position to benefit from any improvement in production methods that they could not invent themselves or see with their own eyes. The Church was therefore essential to improving the quality of grains, fruits, and breeding stock.
- Page 91 (location ~ 1392-1396)
The Church also helped incubate a more complex market. Cathedral construction, for example, differs in kind from public infrastructure, like bridges and aqueducts. In principle, at least, Church structures were used only for religious services and not as thoroughfares for commerce. Yet it should not be forgotten that construction of churches and cathedrals helped create and deepen markets for many artisanal and engineering skills. In the same way that military spending of the nationstate during the Cold War unintentionally helped incubate the Internet, so the building of medieval cathedrals led to spin-offs of other kinds, the incubation of commerce. The Church was a principal customer of the building trades and artisans. Church purchases of silver for communion services, candelabra, and artworks to decorate churches helped to create a market for luxury goods that otherwise would not have existed.
- Page 93 (location ~ 1416-1422)
Farming set humanity on an entirely new course. The first farmers truly planted the seeds of civilization. From their toil came cities, armies, arithmetic, astronomy, dungeons, wine and whiskey, the written word, kings, slavery, and war. Yet notwithstanding all the drama that farming was to add to life, the shift away from the primeval economy appears to have been roundly unpopular from its earliest days. Witness the account preserved in the Book of Genesis, which tells the story of the expulsion from paradise. The biblical parable of the Garden Of Eden is a fond recollection of the life of ease enjoyed by the forager in the wilderness. Scholars indicate that the word “Eden” appears to be derived from a Sumerian word for “wilderness.“42
- Page 94 (location ~ 1436-1442)
To speak of the coming death of politics is bound to seem ridiculous or optimistic, depending on your disposition. Yet that is what the Information Revolution is likely to bring. For readers reared in a century saturated in politics, the idea that life could proceed without it may seem fanciful, the equivalent to claiming that one could live merely by absorbing nutrients from the air. Yet politics in the modern sense, as the preoccupation with controlling and rationalizing the power of the state, is mostly a modern invention. We believe it will end with the modern world just as the tangle of feudal duties and obligations that engrossed the attentions of people in the Middle Ages ended with the Middle Ages. During the feudal period, as historian Martin van Creveld points out, “politics did not exist (the very concept had yet to be invented, and dates back only to the sixteenth century).” 2 The thought that politics, as we now know it, did not exist prior to the modern period may seem surprising, especially given that Aristotle had written an essay of that title in the days of Alexander the Great. But look closely. Words used in ancient texts are not necessarily contemporary concepts. Aristotle also wrote an essay entitled Sophistical Refutations, a term about as meaningless today as Politics was in the Middle Ages. The word simply was not in use. Its first known appearance in English dates to 1529. Even then, “politics” appears to have been a pejorative, derived from an Old French word, politique, used to describe “opportunists and temporizers.“4
- Page 96 (location ~ 1462-1473)
In a world where returns to violence were high and rising, the nationstate was a useful institution. But five centuries later, as this millennium draws to a close, megapolitical conditions have changed. Returns to violence are falling, and the nationstate, like the Church at the twilight of the Middle Ages, is an anachronism that has become a drag on growth and productivity. Like the Church then, the nationstate today has exhausted its possibilities. It is bankrupt, an institution grown to a senile extreme. Like the Church then, it has served as the dominant form of social organization for five centuries. Having outlived the conditions that brought it into existence, it is ripe for a fall. And fall it will. Technology is precipitating a revolution in the exercise of power that will destroy the nationstate just as assuredly as gunpowder weapons and the printing press destroyed the monopoly of the medieval Church. If our reasoning is correct, the nationstate will be replaced by new form of sovereignty, some of them unique in history, some reminiscent of the city-states and medieval merchant republics of the premodern world. What was old will be new after the year 2000. And what was unimaginable will be commonplace. As the scale of technology plunges, governments will find that they must compete like corporations for income, charging no more for their services than they are worth to the people who pay for them. The full implications of this change are all but unimaginable.
- Page 100 (location ~ 1524-1535)
Major changes in the underlying dynamics of power tend to confound conventional thinkers because they expose myths that rationalize the old order but lack any real explanatory power. At the end of the Middle Ages, as now there was a particularly wide gap between the received myths and reality. As Huizinga said of the Europeans in the late fifteenth century, “Their whole system of ideas was permeated by the fiction that 65 chivalry ruled the world.”’ This has a close second in the contemporary assumption that it is ruled by votes and popularity contests. Neither proposition stands up to close scrutiny. Indeed, the idea that the course of history is determined by democratic tallies of wishes is every bit as silly as the medieval notion that it is determined by an elaborated code of manners called chivalry.
- Page 101 (location ~ 1543-1549)
The honor of the medieval knight and the duty of the conscript soldier served parallel functions. The medieval man was bound by oaths to individuals and the Church in much the way that moderns are bound by citizenship to the nationstate. Violating an oath was the medieval equivalent of treason. People in late-medieval times went to extremes to avoid violating oaths, just as millions of modern citizens went to extremes in the World Wars, charging machine-gun nests to fulfill their duties as citizens. Both chivalry and citizenship added an extra dimension to the simple calculus that would otherwise deter unindoctrinated human beings from going onto a battlefield and staying there when the going got rough. Chivalry and citizenship both led people to kill and to risk death. Only demanding and exaggerated values that are strongly reinforced by leading institutions can serve that function.
- Page 103 (location ~ 1574-1581)
Seldom are wars so easily fought, or do rewards for those who bear the brunt of the fighting so far overshadow the possible costs that an army of economic optimizers could be recruited to rush out to the battlefield. Almost every war and, indeed, most battles have moments in which the tide could turn on a heartbeat. As students of military history are well aware, the difference between defeat and victory is often told by the valor, bravery, and ferocity with which individual soldiers take up their task. If the men doing the fighting are not willing to die over a piece of ground that would not be worth a fig once the battle stops, then they probably will not prevail against an otherwise evenly matched foe. This has important implications. The more effective sovereignties are in limiting defections and encouraging military effort, the more likely they are to prevail militarily. In warfare, the most useful value systems induce people to behave in ways that short-term rational calculation would rule out. No organization could mobilize military power effectively if the individuals it sent into battle felt free to calculate where their own best advantage lay, and join in the fight or run away accordingly. If so, they would almost 67 never fight. Only under the most propitious circumstances, or the most desperate, would the rational person care to engage in a potentially lethal battle based upon short-term cost-benefit analysis. Perhaps Homo economicus might fight on a sunny day, when the forces on his side were overwhelming, the enemy weak, and the potential rewards of battle enticing. Perhaps. He might also fight if backed into a corner by marauding cannibals.
- Page 104 (location ~ 1584-1596)
Before Nationality Unlike today, the concept of nationality played little or no role in establishing sovereignty in the Middle Ages. Monarchs, as well as some princes of the Church and powerful lords, possessed territories by private right. In a way that has no modern analogy, these lords could sell or give away territories or acquire new ones by conveyance or marriage as well as by conquest. Today, you could hardly imagine the United States falling under the sovereignty of a non-English-speaking Portuguese president because he happened to marry the former American president’s daughter. Yet something similar was commonplace in medieval Europe. Power passed by hereditary descent. Cities and countries changed sovereigns the way that antiques change owners. In many cases, sovereigns were not native to the regions in which their properties lay. Sometimes they did not speak the local language, or spoke it badly with heavy accents. But it made little difference to the ties of personal obligation whether a Spaniard was king of Athens, or an Austrian was king of Spain.
- Page 105 (location ~ 1606-1614)
For example, the Knights of the Star swore an oath never to retire “more than four acres from the battlefield, through which rule soon afterwards more than ninety of them lost their lives.” 15 The prohibition on even tactical retreat is irrational as a military strategy. But it was a common imperative of the chivalric vows. Before the Battle of Agincourt, the king of England issued an order that knights on patrol should remove their armor, on grounds that it would have been incompatible with their honor to withdraw from enemy lines if they were wearing their coat armor. It so happened that the king himself got lost and passed by the village that had been night quarters for the vanguard of his army. Since he was wearing armor, his chivalric honor forbade him to imply turn around when he discovered his mistake and return to the village. He spent the night in an exposed position. As silly as this example seems, King Henry probably did not miscalculate in thinking that he would have risked more in trespassing his honor by retreating, and thus setting a demoralizing example for his entire army, than he did by sleeping behind enemy lines. The history of the Middle Ages is filled with examples of prominent people fulfilling pledges that would seem ridiculous to us. In many cases, the actions proposed involved no objective connection to any benefit other than a vivid demonstration of the importance those undertaking them placed upon the vow itself. Among the common vows: to keep one eye closed, to eat and drink only when standing, and to become a self-imposed cripple by entering a one-person chain gang. There was a widespread custom
- Page 107 (location ~ 1628-1640)
Even though it would be centuries before the full logic of gunpowder weapons would be unleashed in the citizen armies of the French Revolution, an early hint of the transformation of warfare bygunpowder was the adoption of military uniforms in the Renaissance. The uniforms aptly symbolize the new relations between the warrior and the nationstate that went hand in hand with the transition from chivalry to citizenship. In effect, the new nationstate would strike a “uniform” bargain with its citizens, unlike the special, divergent bargains struck by the monarch or the pope with a long chain of vassals under feudalism. In the old system, everyone had a different place in an architectonic hierarchy. Everyone had a bargain as unique as his coat of arms and the colorful pennants he flew.
- Page 111 (location ~ 1695-1701)
Even the more perceptive thinkers of late-medieval society failed to appreciate the importance of commerce and other forms of enterprise outside of farming for accumulating wealth. To them, poverty was an apostolic virtue. They literally made no distinction between a wealthy banker and a beggar. In Huizinga’s words, “No distinction in principle was made in the third estate, between rich and poor citizens, nor between townsmen and country-people.“25 Neither occupation nor wealth mattered in their scheme, merely chivalric status. This blindness to the economic dimension of life was reinforced by churchmen, who were the ideological guardians of medieval life. They were so far from grasping the importance of commerce that one widelyapplauded !fifteenth-century reform program proposed that all persons of nonnoble status be required to devote themselves exclusively to handicrafts or farm labor. No role was contemplated for commerce whatsoever. 26 “The date 1492, conventionally used to separate medieval from modern history, serves as well as any other dividing point, for in the perspective of world history, Columbus’ voyage symbolizes the beginning of a new relationship’ between Western Europe and the rest of the world.“27 FREDERIC C. LANE
- Page 112 (location ~ 1715-1725)
The First Industrial Technology Just as the cannon was opening new economic horizons, the printing press opened new intellectual horizons. It was the first machine of mass production, a signature technology that marked the onset of industrialism. In saying this, we share the view advanced by Adam Smith in The Wealth of Nations that the Industrial Revolution had already happened well before he wrote. It had not reached maturity, to be sure, but the principles of mass production and the factory system were well established. His famous example of the pin manufacturers makes this case. Smith explains how eighteen separate operations are employed to produce pins. Because of specialized technology and the division of labor, each employee could make 4,800 times more pins in a day than an individual could fabricate on his own.28 Smith’s example underscores the fact that the Industrial Revolution began centuries earlier than historians conventionally assume. Most textbooks would date its origins to the middle of the eighteenth century. That is not unreasonable as a date for the takeoff stage in the improvement of living standards. But the actual megapolitical transition between feudalism and industrialism began much earlier, at the end of the fifteenth century. Its impact was felt almost immediately in the transformation of dominant institutions, particularly in the eclipse of the medieval Church.
- Page 114 (location ~ 1736-1746)
Mass production of books ended the Church’s monopoly on Scripture, as well as on other forms of information. The wider availability of books reduced the cost of literacy and thus multiplied the number of thinkers who were in a position to offer their own opinions on important subjects, particularly theological subjects. As theological historian Euan Cameron put it, “[a] series of publishing milestones” in the first two decades of the sixteenth century set the groundwork for the application of “modern text criticism to Scriptures.” 30 This “threatened the monopoly” of the Church “by questioning corrupt readings of texts which had been used to support traditional dogmas.“31 This new knowledge encouraged the emergence of competitive Protestant sects who sought to formulate their own interpretations of the Bible. Mass production of books lowered the cost of heresy and gave the heretics large audiences of readers. Publishing also helped destroy the medieval worldview. The greater availability and lower costs for information led to shifts away from a view of the world linked by symbolism rather than causal connections. “Symbolism’s image of the world is distinguished by impeccable order, architectonic structure, hierarchic subordination. For each symbolic connection implies a difference of rank or sanctity. . . . The walnut signifies Christ; the sweet kernel is His divine nature, the green and pulpy outer peel is His humanity, the wooden shell between is the cross. Thus all things raise the thoughts to the eternal…“32
- Page 117 (location ~ 1779-1790)
Religious observances in the late fifteenth century grew like programs proliferating in welfare states today. Not only did special benedictions multiply endlessly, along with the supply of saints and saints’ bones, but every year there were more churches, more convents, more monasteries, more friaries, more confessors (resident household priests), more preacherships, more cathedral chapters, more endowed chantries, more relic cults, more religious co-fraternities, more religious festivals, and new holy days. Services grew longer. Prayers and hymns grew more complicated. One after another, new mendicant orders appeared to beg for alms. The result was institutional overload similar to that characterizing heavily politicized societies today. Religious festivals and feast days proliferated on all sides. Religious services grew more numerous, with special festivals in honor of the seven sorrows of Mary, of her sisters, and of all the saints of Jesus’ genealogy.34 For the faithful to meet their religious obligations became increasingly costly and burdensome, much as the costs of remaining within the law have proliferated today.
- Page 118 (location ~ 1809-1817)
When some of its customers in the textile industry showed a preference for cheaper alum imported from Turkey, the Vatican attempted to sustain its monopoly pricing through canon law, declaring it sinful to use the less costly alum. Merchants who persisted in purchasing the cheaper Turkish product were excommunicated. The famous ban on eating meat on Friday originated in the same spirit. The Church was not only the largest feudal landholder; it also held major fisheries. Church Fathers discovered a theological necessity for the pious to eat fish, which not incidentally ensured a demand for their product at a time when transport and sanitary conditions discouraged fish consumption. Like the nationstate today, the late-medieval Church not only regulated specific industries to directly underpin its own interests; it also made the most of its regulatory powers to gain revenue for itself in other ways. Clerics went to special pains to promulgate regulations and edicts that were difficult to abide by. For example, incest was very broadly defined, so that even remote cousins and persons related only by marriage required special dispensation from the Church to marry. As this included almost everyone in many small European villages before the era of modern travel, selling waivers for incestuous marriages became a thriving source of Church revenue. Even sex within marriage itself was tightly circumscribed by ecceliastic regulation. Sexual relations between spouses were illegal on Sundays, Wednesdays, and Fridays, as well as 78 for forty days prior to Easter and Christmas. Further, couples were to abstain from sex for three days prior to receiving communion. In other words, married couples were forbidden to enjoy sex without an indulgence for a minimum of 55 percent of the days of the year. In The Bishop?s Brothels, historian E. J. Burford suggests that these “idiotic” regulations of marriage helped stimulate the growth of medieval prostitution, from which the Church profited mightily.35
- Page 120 (location ~ 1837-1852)
Indulgences The power to regulate arbitrarily is also the power to sell an exemption from the harm such regulations can do. The Church sold permits, or “indulgences,” authorizing everything from relief from petty burdens on commerce to permission to eat dairy products in Lent. These “indulgences” were not only sold at high prices to the aristocracy and the rich burghers. They were also packaged as lottery prizes much like the government-run lotteries of today to attract the pennies of the poor.39 The trade in indulgences increased as the Church’s expenditures outran its income. This led many to infer the obvious, that the institutional Church was using its powers primarily to raise revenues. As a contemporary critic put it, “[C]anon law was instituted solely for the 79 purpose of making a great deal of money; whoever would be a Christian has to buy his way out of its provisions.“40
- Page 122 (location ~ 1864-1871)
While the Church was the ideological defender of feudalism and critic of commerce and capitalism, like the nationstate today, it utilized every available marketing technique to optimize its own revenues. The Church operated a thriving business In the sale of sacramentals, including consecrated candles, palms blessed on Palm Sunday, “herbs blessed on the Feast of the Assumption, and especially the varieties of Holy Water.” 42 Like today’s politicians who threaten constituents with curtailed garbage pickup and other indignities if they decline to pay higher taxes, religious authorities in the fifteenth century were also prone to cutting off religious services to blackmail 80 congregations into paying arbitrary fines. Often the fines were imposed for some petty offense done by a few persons who need not even have been members of the congregation in question. For example, in 1436, Bishop Jacques Du Chatelier, “a very ostentatious, grasping man,” closed the Church of the Innocents in Paris for twenty-two days, halting all religious services while waiting for an impossibly large fine to be paid by two beggars.
- Page 124 (location ~ 1888-1896)
Five hundred years ago, the pope, Alexander VI, made even Giuho Andreotti and Bill Clinton seem like exemplars of integrity. Alexander VI was renown for his wild parties. As a cardinal in Siena, he staged a famous orgy to which only “Siena’s most beautiful young women had been invited, but their ‘husbands, fathers, and brothers’ had been excluded.“47 The Siena orgy was famous, but it later proved to be tame compared to those Alexander threw after becoming pope. Perhaps the most lurid of those was the so-called Ballet of the Chestnuts, which involved Rome’s “fifty most beautiful whores” in a copulation contest with the Church Fathers and other important Romans. As William Manchester describes it, “Servants kept score of each man’s orgasms, for the pope greatly admired virility…After everyone was exhausted, His Holiness distributed prizes-cloaks, boots, caps, and fine silken tunics. The winners, the diarist wrote, were those who made love with those courtesans the greatest number of times.“48
- Page 125 (location ~ 1908-1915)
To say simply that people believed in God could convey neither the intensity of their adherence nor the apparent ease with which medieval piety seemed to bed down 83 with sin. Belief in the efficacy of rites, rituals, and sacraments was so pervasive that it perhaps inevitably undercut the urgency of behaving in a virtuous way. For any sin or spiritual defect there was a remedy, a penance that would clear the slate, in what came to be a “mathematics of salvation.” 58 Religion became so all-pervasive that its sincerity necessarily began to flag. As Huizinga put it, “Religion penetrating all relations in life means a constant blending of the spheres of holy and of profane thought. Holy things will become too common to be deeply felt.“59 And so it was.
- Page 128 (location ~ 1960-1965)
The yield of crops under medieval conditions probably varied more with the weather and uncontrollable rhythms of infestation than from any marginal addition of labor beyond the minimum that the Church calendar accommodated. The larger problem of lost productivity did not fall so much in farming as in other areas. The Church’s demands on time were far less compatible with craft work, manufacturing, transport, commerce, or any other undertaking where productivity and profitability were likely to be crucially determined by the amount of time devoted to the task. It may not be a coincidence that the great transition at the end of the fifteenth century occurred at a time when land rents were rising and real wages for the peasantry 85 were in decline. Increased population pressures had reduced the yield from the common lands, often found surrounding rivers and streams, upon which peasants depended to graze their livestock, and in some cases, for fish and firewood. The whittling down of living standards placed increasingly urgent pressures on peasants to find alternative sources of income. As a result, “more and more of the rural population turned to small-scale manufacturing for the market, above all in textiles, in the process known as ‘putting-out’ or ‘proto-industrialization.’ “64 The ceremonial burdens on time imposed by the Church stood in the way of efforts by the more ambitious peasants to supplement their farming income by craft work, as indeed they inhibited any redeployment of effort in new economic directions.
- Page 131 (location ~ 2006-2018)
Their incentives probably led them to quickly outstrip the output of Church properties, which in theory usually did not accrue to anyone’s private profit. No doubt some of the more worldly prince-bishops husbanded their estates in ways indistinguishable from those of the lay lords. Yet the productivity of other Church properties would surely have suffered from failures of indifferent management by a huge, far-flung institution, whose drawbacks would have been similar to the drawbacks of state and communal ownership today. It is obvious, as well, that the seizure of the monasteries rearrayed resources that were no longer needed for the reproduction of books and manuscripts after the advent of the printing press.
- Page 133 (location ~ 2031-2036)
The ideological opposition of the medieval Church to capitalism was a drag on growth. The main ideological thrust of Church teachings was to reinforce feudalism, in which the Church had a large stake, as the largest feudal landholder. Consciously, or not, the Church tended to make religious virtues of its own economic interests, while militating against the development of manufacturing and independent commercial wealth that were destined to destabilize the feudal system. Injunctions against “avance,” for example, applied mainly to commercial transactions rather than feudal levies, and never to the sale of indulgences. The infamous attempts by the Church to fix a “just price” for items in commerce tended to suppress economic returns on those products and services where the Church itself was not a producer. The ban on “usury” was a signal example of the Church’s resistance to commercial innovation. Banking and credit were crucial to the development of larger-scale commercial enterprises. By restricting the availability of credit, the Church retarded growth.
- Page 133 (location ~ 2039-2046)
Huizinga described the prevailing attitude, in what could well be an important parallel with the Information Revolution: “Hatred of rich people, especially of the new rich, who were then very numerous, is general.“68 An equally striking parallel arose from a tremendous surge in crime. The breakdown of the old order almost always unleashes a surge in crime, if not the outright anarchy of the feudal revolution we explored in the last chapter. At the end of the Middle Ages, crime also skyrocketed as the old systems of social control broke down. In Huizinga’s words, “[C]rime came to be regarded as a menace to order and society.“69 It could be equally menacing in the future. The modern world was born in the confusion of new technologies, new ideas, and the stench of black powder. Gunpowder weapons and improved shipping destabilized the military foundation of feudalism, even as new communications technology undermined its ideology. Among the elements that the new technology of printing helped reveal was the corruption of the Church, whose hierarchy as well as rank and file were already held in low regard by a society that paradoxically placed religion at the center of everything.
- Page 137 (location ~ 2087-2096)
When failing systems have the power to do so, they often impose penal burdens upon those seeking to escape. Again, we quote The Cambridge Ancient History: “If the propertied class buried their money, or sacrificed two-thirds of their estate to escape from a magistracy, or went so far as to give up their whole property in order to get free of the domains rent, and the non-propertied class ran away, the State replied by increasing pressure.” This is worth remembering as you plan ahead. The twilight of state systems in the past has seldom been a polite, orderly process. We mentioned the nasty habits of Roman tax collectors in Chapter 2. The large number agri deserti, or abandoned farms, in Western Europe after the collapse of the Roman Empire reflected only a small part of a wider problem. In fact, exactions tended to be relatively mild in Gaul, and in the frontier areas comprise current-day Luxembourg and Germany. In Rome’s most fertile region, Egypt, where farming was more productive because of irrigation, desertion by owners was an even bigger problem. The question of whether to attempt escape, the ultimum refugium, as it was known in Latin, became the overriding quandary of almost everyone 91 with property. Records show that “among the common questions which used to be put to an oracle in Egypt three standard types were: ‘Am I to become a beggar?’ ‘Shall I take to flight?’ and ‘Is my flight to be stopped?’ “4 Clinton’s proposal says yes. It is an early version of an obstacle to escape that is likely to grow more onerous as the fiscal resources of the nationstate slip away. Of course, the first U.S. version of an exit barrier is more benign than Erich Honecker’s concrete and barbed wire. It also involves greater price sensitivity, with the burden falling only on “billionaires” with taxable estates above $600,000.
- Page 140 (location ~ 2135-2148)
If you accept the premise that people are or ought to be assets of the state, Honecker’s wall made sense. Berlin without a wall was a loophole to the Communists, just as escape from U.S. tax jurisdiction was a loophole to Clinton’s IRS. Clinton’s arguments about escaping billionaires, aside from showing a politician’s usual disregard for the integrity of numbers, were similar in kind to Honecker’s, but somewhat less logical because the U.S. government, in fact, does not have a large economic investment in wealthy citizens who might seek to flee. It is not a question of their having been educated at state expense and wanting to slip away and practice law somewhere else. The overwhelming majority of those to whom the exit tax would apply have created their wealth by their own efforts and in spite of, not because of the U.S. government. With the top 1 percent of taxpayers now paying 28.7 percent of the total income tax in the United States, it is not a question of the rich failing to repay any genuine investment the state may have made in their education or economic prosperity. To the contrary. Those who pay most of the bills pay vastly more than the value of any benefits they receive. With an average annual tax payment exceeding $125,000, taxes cost the top 1 percent of American taxpayers far more than they now realize. Assuming they could earn even a 10 percent return on the excess tax paid by each over a forty-year period, each $5,000 of annual excess tax payment reduced their net worth by $2.2 million. At a 20 percent rate of return, each $5,000 of excess tax reduces net worth by $44 million.
- Page 141 (location ~ 2151-2162)
Apparently neither the author nor many others had bothered to ask a fundamental question: What common characteristics of state socialism and welfare-state democracies led them to be the final contenders for world domination? This is an important issue. After all, dozens of contending systems of sovereignty have come and gone in the past five centuries, including absolute monarchies, tribal enclaves, prince-bishoprics, direct rule by the pope, sultanates, city-states, and Anabaptist colonies. Today, most people would be surprised to learn that a hospital management company, with its own armed forces, could rule a country for centuries. Yet something very like that happened. For three hundred years after 1228, the Teutonic Knights of St. Mary’s Hospital at Jerusalem, later united with the Knights of the Sword of Livonia, ruled East Prussia and various territories in Eastern Europe, including parts of Lithuania and Poland. Then came the Gunpowder Revolution. Within decades, the Teutonic Knights were expelled as sovereigns of all their territories and their Grand Master was of no more military importance than a chess champion. Why? Why did so many other systems of sovereignty dwindle to insignificance while the great struggle for world power at the end of the Industrial Age saw mass democracies lined up against state socialist systems? Unimpeded Control
- Page 144 (location ~ 2200-2210)
In the case of Western democracies, the story is less obvious, partly because we are accustomed to think of democracy in stark contrast to Communism. In terms of the Industrial Age, the two systems were indeed great opposites. But seen from the perspective of the Information Age, the two systems had more in common than you might suspect. Both facilitated unimpeded control of resources by government. The difference was that the democratic welfare state placed even greater resources in the hands of the state than the state socialist systems.
- Page 145 (location ~ 2220-2224)
But you probably have not heard much about a government controlled by its customers. Economic historian Frederic Lane laid the basis for a new way of understanding where the control of government lies in some of his lucid essays on the economic consequences of violence discussed earlier. Thinking about government as an economic unit that sells protection led Lane to analyze the control of government in economic rather than political terms. In this view, there are three basic alternatives in the control of government, each of which entails a fundamentally different set of incentives: proprietors, employees, and customers.
- Page 147 (location ~ 2245-2249)
Lane described the incentives of “the owners of the production-producing enterprise” as follows: An interest in maximizing profits would lead him, while maintaining prices, to try to reduce his costs. He would, like Henry VII of England or Louis XI of France, use inexpensive wiles, at least as inexpensive devices as possible, to affirm his legitimacy, to maintain domestic order, and to distract neighboring princes so that his own military expenses would be low. From lowered costs, or from the increased exactions made possible by the firmness of his monopoly, or from a combination, he accumulated a surplus 7 Governments controlled by proprietors have strong incentives to reduce the costs of providing protection or monopolizing violence in a given area. But so long as their rule is secure, they have little incentive to reduce the price (tax) they charge their customers below the rate that optimizes revenues. The higher the price a monopolist can charge, and the lower his actual costs, the greater the profit he will make.
- Page 147 (location ~ 2253-2260)
Lane was inspired to analyze the control of government in economic terms by the example of the medieval merchant republics, like Venice. There a group of wholesale merchants who required protection effectively controlled the government for centuries. They were genuinely customers for the protection service government provided, not proprietors. They paid for the service. They did not seek to profit from their control of government’s monopoly of violence. If some did, they were prevented from doing so by the other customers for long periods of time. Other examples of governments controlled by their customers include democracies and republics with limited franchise, such as the ancient democracies, or the American republic in its founding period. At that time, only those who paid for the government, about 10 percent of the population, were allowed to vote. Governments controlled by their customers, like those of proprietors, have incentives to reduce their operating costs as far as possible. But unlike governments controlled by either proprietors or employees, governments actually controlled by their customers have incentives to hold down the prices they charge. Where customers rule, governments are lean and generally unobtrusive, with low operating costs, minimal employment, and low taxes. A government controlled by its customers sets tax rates not to optimize the amount the government can collect but rather to optimize the amount that the customers can retain.
- Page 149 (location ~ 2274-2285)
Lane treats democracy in the conventional way in assuming that it brings violence-using and violence-producing enterprises “increasingly under the control of their customers.” q This is certainly the politically correct conclusion. But is it true? We think not. Look closely at how modern democracies function. First of all, they have few characteristics of those competitive industries where the terms of trade are clearly controlled by their customers. For one thing, democratic governments typically spend only a bare fraction of their total outlays on the service of protection, which is their core activity. In the United States, for example, state and local governments spend just 3.5 percent of their total outlays on the provision of police, as well as courts and prisons. Add military spending, and the fraction of revenues devoted to protection is still only about 10 percent. Another revealing hint that mass democracy is not controlled by its customers is the fact that contemporary political culture, inherited from the Industrial Age, would consider it outrageous if policies on crucial issues were actually informed by the interests of the people who pay the bills.
- Page 150 (location ~ 2289-2297)
Imagine the uproar if a U.S. president or a British prime minister proposed to allow the group of citizens who pay the majority of the taxes to determine which programs of government should continue and which groups of employees should be fired. This would deeply offend expectations of how government should operate, in a way that allowing government employees to determine whose taxes should be raised would not. Yet when you think about it, when customers really are in the driver’s seat it would be considered outrageous that they should not get what they want. If you went into a store to buy furniture, and the salespeople took your money but then proceeded to ignore your requests and consult others about how to spend your money, you would quite rightly be upset.
- Page 150 (location ~ 2297-2302)
In fact, one of the principal advantages arising from privatization of formerly state-owned functions is that private control usually makes it far easier to weed out unnecessary employment. From Britain to Argentina, it has not been uncommon for the new private managers to shed 50-95 percent of former state employees. Think, as well, of the basis upon which the fiscal terms of government’s protection service is priced. For the most part, you would look in vain for hints of competitive influences on tax rates according to which government services are priced. Even the occasional debates about lowering taxes that have interrupted normal political discourse in recent years betray how far removed democratic government has normally 98 been from control by its customers. Advocates of lower taxes sometimes have argued that government revenues would actually increase because rates previously had been set so high that they discouraged economic activity.
- Page 151 (location ~ 2310-2317)
magnitude of coercive force is more important than the efficient deployment of resources, as was the case prior to 1989, it is all but impossible for most governments to be controlled by their
- Page 153 (location ~ 2343-2344)
is to ask for permission from someone other than the person whose money is coveted. One of the ways that the Dutch were able to purchase Manhattan for twenty-three dollars’ worth of beads is that the particular Indians to whom they made the offer were not the ones who properly owned it. Getting to yes," as the marketing people say, is much easier under those terms. Suppose, for example, that as authors of this book we wanted you to pay not its cover price but 40 percent of your annual income for a copy. We would be far likelier to get permission to do so if we asked someone else, and did not have to ask you. In fact, we would be far more persuasive if we could rely instead upon the consent of several people you do not even know. We could hold an ad hoc election, what H. L. Mencken described, with less exaggeration than he might have thought, as “an advanced auction of stolen goods.” And to make the example more realistic, we would agree to share some of the money we collected from you with these anonymous bystanders in exchange for their support. That is the role the modern democratic welfare state evolved to fulfill. It was an unsurpassed system in the Industrial Age because it was both efficient and inefficient where it counted. It combined the efficiency of private ownership and incentives for the creation of wealth with a mechanism to facilitate essentially unchecked access to that wealth. Democracy kept the pockets of wealth producers open. It succeeded militarily during the high-water period of rising returns to violence in the world precisely because it made it difficult for customers to effectively restrict the taxes the government
- Page 155 (location ~ 2372-2384)
Because the obstacles to their cooperation are high, and the return to any individual for successfully defending the group’s common interests is minimal, millions of ordinary citizens will not be as successful in withholding their assets from the government as will smaller groups with more favorable incentives. Other things being equal, therefore, you would expect a higher proportion of total resources to be commandeered by government in a mass democracy than in an oligarchy, or in a system of fragmented sovereignty where magnates wielded military power and fielded their own armies, as they did everywhere in early-modern Europe prior to the eighteenth century. Thus a crucial though seldom examined reason for the growth of democracy in the Western world is the relative importance of negotiation costs at a time when returns to violence were rising. It was always costlier to draw resources from the few than from the many. A relatively small, elite group of rich represent a more coherent and effective body than a large mass of citizens. The small group has stronger incentives to work together. It will almost inevitably be more effective at protecting its interests than will a mass group.’ 5 And even if most members of the group choose not to cooperate with any common action, a few who are rich may be capable of deploying enough resources to get the job
- Page 160 (location ~ 2451-2461)
Because the obstacles to their cooperation are high, and the return to any individual for successfully defending the group’s common interests is minimal, millions of ordinary citizens will not be as successful in withholding their assets from the government as will smaller groups with more favorable incentives. Other things being equal, therefore, you would expect a higher proportion of total resources to be commandeered by government in a mass democracy than in an oligarchy, or in a system of fragmented sovereignty where magnates wielded military power and fielded their own armies, as they did everywhere in early-modern Europe prior to the eighteenth century. Thus a crucial though seldom examined reason for the growth of democracy in the Western world is the relative importance of negotiation costs at a time when returns to violence were rising. It was always costlier to draw resources from the few than from the many. A relatively small, elite group of rich represent a more coherent and effective body than a large mass of citizens. The small group has stronger incentives to work together. It will almost inevitably be more effective at protecting its interests than will a mass group.’ 5 And even if most members of the group choose not to cooperate with any common action, a few who are rich may be capable of deploying enough resources to get the job done.
- Page 160 (location ~ 2451-2461)
Nationalism Much the same can be said of nationalism, which became a corollary to mass democracy. States that could employ nationalism found that they could mobilize larger 105 armies at a smaller cost. Nationalism was an invention that enabled a state to increase the scale at which it was militarily effective. Like politics itself, nationalism is mostly a modern invention. As sociologist Joseph Llobera has shown in his richly documented book on the rise of nationalism, the nation is an imagined community that in large measure came into being as a way of mobilizing state power during the French Revolution. As he puts it, “In the modern sense of the term, national consciousness has only existed since the French Revolution, since the time when in 1789 the Constituent Assembly equated the people of France with the French nation.” Nationalism made it easier to mobilize power and control large numbers of people. Nationstates formed by underlining and emphasizing characteristics that people held in common, particularly spoken language. This facilitated rule without the intervention of intermediaries. It simplified the tasks of bureaucracy. Edicts that need only be promulgated in one language can be dispatched more quickly and with less confusion than those that must be translated into a Babel of tongues. Nationalism, therefore, tended to lower the cost of controlling larger areas. Before nationalism, the early-modern state required the aid of lords, dukes, earls, bishops, free cities, and other corporate and ethnic intermediaries, from tax “farmers” to military contract merchants and mercenaries to collect revenues, raise troops and conduct other government functions.
- Page 163 (location ~ 2489-2501)
Nationalism, in its early incarnations, came into play just prior to the Gunpowder Revolution. It continued to develop as the early-modern state developed, taking a quantum leap in importance at the time of the French Revolution. We believe that 106 nationalism as an idea of force has already begun to recede. It probably reached its heyday with Woodrow Wilson’s attempt to endow every ethnic group in Europe with its own state at the close of World War I. It is now a reactionary force, inflamed in places with falling incomes and declining prospects like Serbia. As we explore later, we expect nationalism to be a major rallying theme of persons with low skills nostalgic for compulsion as the welfare state collapses in the Western democracies. You haven’t seen anything yet. For most persons in the West the fallout from the death of Communism has seemed relatively benign. You have seen a drop in military spending, a plunge in aluminum prices, and a new source of hockey players for the NHL. That is the good news. It is news that most people who came of age in the twentieth century could applaud, especially if they are hockey fans. Most of the news that is destined to prove less popular is still to come.
- Page 164 (location ~ 2515-2524)
As de Soto put it in The Other Path, “Small interest groups fight among themselves, cause bankruptcies, implicate public officials. Governments hand out privileges. The law is used to give and take away far more than morality permits.” 21 A congress like that in Peru, entirely in thrall to special-interest groups, has all the moral stature of a gang of fences auctioning off stolen goods. It made the free market illegal, and consequently made the law ridiculous. As de Soto writes of the pre-Fujimori period: A complete subversion of ends and means has turned the life of Peruvian society upside down, to the point that there are acts which, although officially criminal, are no longer condemned by the collective consciousness. Smuggling is a case in point. Everyone, from the aristocratic lady to the humblest man, acquires smuggled goods. No one has scruples about it; on the contrary, it is viewed as a kind of challenge to individual ingenuity or as revenge against the state.
- Page 167 (location ~ 2550-2557)
While North Americans carried on as if Peru’s congress were the incarnation of freedom and civilization, the Peruvian people cheered. President Fujimori’s popularity shot up above 70 percent when he sent the congress home. And he was later reelected to a second term in a landslide. Most citizens apparently saw their legislature more as an obstacle to their wellbeing than as an expression of their rights. In 1994, real economic growth in Peru reached 12.9 percent, the highest on the planet. Deflation of Political Promises We saw Peru’s turmoil less as a throwback to the dictatorships of the past than as an early installment of a broader transition crisis. You can expect to see crises of misgovernment in many countries as political promises are deflated and governments run out of credit. Ultimately, new institutional forms will have to emerge that are capable of preserving freedom in the new technological conditions, while at the same time giving expression and life to the common interests that all citizens share. Few have begun to think about the incompatibility between some of the institutions of industrial government and the megapolitics of postindustrial society.
- Page 169 (location ~ 2579-2588)
Lane also recognized that while production of violence is not usually considered part of economic output, the control of violence is crucial to the economy. The primary role of government is to provide protection against violence. As he put it, Every economic enterprise needs and pays for protection, protection against the destruction or armed seizure of its capital and the forceful disruption of its labor. In highly organized societies the production of this utility, protection, is one of the functions of a special association or enterprise called government. Indeed, one of the most distinctive characteristics of governments is their attempt to create law and order by using force themselves and by controlling through various means the use of force by others."
- Page 177 (location ~ 2706-2711)
As we write, the megapolitical consequences of the Information Age are only beginning to be felt. The economic change of recent decades has been from the primacy of manufactures to that of information and computation, from machine power to microprocessing, from factory to workstation, from mass production to small teams, or even to persons working alone. As the scale of enterprise falls, so does the potential for sabotage and blackmail in the workplace. Smaller-scale operations are much more difficult to organize by unions. Microtechnology allows firms to be smaller, more footloose targets. Many deal in services or products with negligible natural-resource content. In principle, these businesses could be conducted almost anywhere on the planet. They are not trapped at a specific location, like a mine or a port. Therefore, in the fullness of time, they will be far less susceptible to being taxed, either by unions or by politicians.
- Page 178 (location ~ 2717-2723)
This is like stripping away the layers of an overripe onion. It may bring tears to your eyes, but don’t look away. We first examine the logic of extortion in the workplace, then extend the analysis to broader issues involving the creation and protection of assets, and the nature of modern government. To a greater degree than most people imagine, the prosperity of government, like that of unions, was directly correlated to the leverage available for extortion. That leverage was much lower in the nineteenth century than in the twentieth. In the next millennium, it will fall almost to the vanishing point. The whole logic of government and the character of power have been transformed by microprocessing. This may seem exaggerated when you first think about it. But look closely. The prosperity of governments has gone hand in hand with the prosperity of labor unions in the twentieth century. Before this century, most governments commandeered far fewer resources than the militant welfare states to which we have become accustomed. Likewise, unions were small or insignificant factors in economic life prior to this century. The ability of workers to coerce their employers into paying above-market wages depended upon the same megapolitical conditions that allowed governments to extract 40 percent or more of the economy’s output in taxes.
- Page 181 (location ~ 2769-2778)
2. Rising economies of scale led to very large enterprises. Early-nineteenth-century factories had been relatively small. But as scale economies increased with the assembly line during the twentieth century, the size and cost of facilities at the forefront of the production process rose rapidly. This made them easier targets in several ways. For example, significant scale economies tend to go hand in hand with long product cycles. Long product cycles make for more stable markets. This, in turn, invites predatory targeting of firms because it implies that there are longer-term benefits to capture. 3. The number of competitors in leading industries fell sharply It was not uncommon during the industrial period to find only a handful of firms competing for billion-dollar markets. This contributed to making these firms targets for union extortion. It is far simpler to attack five firms than five thousand. The very concentration of industry was itself a factor that facilitated extortion. This advantage was self-reinforcing because the firms coerced into paying monopoly wages were unlikely to face stiff competition from others who were not also burdened by above-market labor costs. Unions could therefore drain a considerable portion of the profits of such firms without exposing them to immediate bankruptcy. Obviously, if employers had routinely gone broke whenever they were forced to pay above-market wages, workers would have gained little by coercing them to do so.
- Page 186 (location ~ 2843-2854)
In 1940, 6 percent of the American workforce had blue-collar jobs.22 As a consequence, support for the use of extortion to raise wages spread among a large number who imagined they might benefit by it. This was illustrated by a 1938-39 study of the views of 1,700 people in Akron, Ohio, toward corporate property. The survey found that 68 percent of the CIO Rubber Workers had very little or no sympathy with the concept of corporate property, ‘while only one percent were found in the classification of strong support of corporate property rights." 23 On the other hand, not a single businessman, even a small proprietor, fell into the same category of “strong opposition to corporate property; 94 percent received ratings in the range of extremely high support for the rights of property.“2
- Page 188 (location ~ 2871-2876)
Information technology has negligible natural-resource content. It confers few if any inherent advantages of location. Most information technology is highly portable. Because it can function independent of place, information technology increases the mobility of ideas, persons, and capital. General Motors could not pack up its three assembly lines in Flint, Michigan, and fly away. A software company can. The owners can download their algorithms into portable computers and take the next plane out. Such firms also have an added inducement to escape high taxes or union demands for monopoly wages. Smaller firms tend to have more competitors. If you have dozens or even hundreds of competitors tempting your customers, you cannot afford to pay politicians or your employees much more than they are actually worth. If you alone tried to do so, your costs would be higher than your competitors and you would go broke. The absence of significant operating advantages in a given locale means that coercive organizations, like governments and unions, will inevitably have less leverage to exploit in trying to extract some of those advantages for themselves.
- Page 190 (location ~ 2908-2916)
the office and carry on a more traditional strike there. But even this may not be as simple as it would seem in the Information Age. The capacity of information technology to transcend locality and disperse economic functions means that for the first time employees and
- Page 193 (location ~ 2956-2958)
Even the early stages of the Information Revolution have made it far more obvious than it was in 1975 that skills and mental ability are crucial variables in economic output. This has already vaporized the once-proud rationalization for extortion of the capitalists by the workers that prevailed during the industrial period. The fantasy that unskilled labor actually created the value that seemed to be pocketed in a disproportionate share by the capitalists and entrepreneurs is already an anachronism. It is not even a plausible fiction in the case of information technology. When the programmer sits down to write code, there is too direct a line of attribution between his skill and his product to allow for much mistake about who is responsible. It is obvious beyond dispute that an illiterate or semi-literate could not program a computer. It is therefore equally obvious that any value in programs compiled by others could not have been stolen from him. This is why cries of “exploitation” by workers are now heard mainly among janitors. Information technology is making it plain that the problem faced by persons of low skill is not that their productive capacities are being unfairly taken advantage of; but rather the fear that they may lack the ability to make a real economic contribution. As Kevin Kelly suggests in Out Of Control, the “Upstart” car company of the Information Age may be the brainchild of “a dozen people,” who will outsource most of their parts, and still produce cars more carefully customized and tailored to their buyer’s wishes than 126 anything yet seen from Detroit or Tokyo: “Cars, each one customer-tailored, are ordered by a network of customers and shipped the minute they are done. Molds for the car’s body are rapidly shaped by computer-guided lasers, and fed designs generated by customer response and target marketing. A flexible line of robots assembles the cars.
- Page 195 (location ~ 2984-2998)
Not only will one individual be able to manifestly multiply his activities by employing an essentially unlimited number of intelligent agents. He or she will even be able to act after death. For the first time, an individual will be capable of carrying on elaborate tasks even if he is biologically dead. It will no longer be possible for either an enemy at war or a criminal to completely extinguish the capability of an individual to retaliate by killing him. This is one of the more revolutionary innovations in the logic of violence in the whole of history.
- Page 197 (location ~ 3018-3021)
For most of history, if not for most of human existence, the balance between protection and extortion has fluctuated within a narrow margin, with extortion always holding the upper hand. Now that is about to change. information technology is laying the groundwork for a fundamental shift in the factors that determine the costs and rewards of resorting to violence. The fact that intelligent agents will be available to investigate and perhaps retaliate in one fashion or another against those who initiate violence is merely a hint of this new vista in protection. Twenty-five years ago, the following statement would have been no more than the ranting of a crank: “If you kill me, I will sweep the money out of your bank accounts and give it to charities in Nepal.” After the turn of the millennium, it may not be. Whether it would prove to be a practical threat would be determined by factors of time and place. Yet even if the would-be miscreant’s accounts proved to be impermeable, there would surely be other costly mischief that an army of intelligent agents could impose in retaliation for a crime. Think about
- Page 198 (location ~ 3024-3032)
For all the variety of means of protection that have been employed historically, one method has dominated all others-the capacity to trump violence with violence, to call on greater force to overwhelm anyone who would assault you or steal your property. The question is where you can turn for such a service, and how you can motivate anyone to risk life and limb to help you battle thugs who might initiate force against you. Sometimes close relatives have answered the call. Sometimes tribal and clan-based groups have served as an unofficial police, responding to violence against any of their members with blood vendettas. Sometimes mercenaries or private guards have been employed to fend off attack, but not always as usefully as you might wish. The new intelligent agents of the Information Age, although their activities will be largely confined to cyberspace, add a new alternative. Their loyalties, unlike those of the mercenaries, private guards, and even remote cousins, will be beyond dispute.
- Page 199 (location ~ 3042-3049)
This is why anarchy, or “the war of all against all,” as Hobbes described it, has seldom been a satisfactory state of affairs. Local competition in the use of violence has usually meant paying higher costs for protection and enjoying less of it. Occasionally, freethinking enthusiasts for the market have suggested that market mechanisms alone would be sufficient to provide for policing of property rights and protection of life, 129 without any need for a sovereignty whatsoever.29 Some of the analytics have been elegant, but the fact remains that free-market provision of police and justice services has not proven viable under the megapolitical conditions of industrialism. Only primitive societies where behavior is highly stereotyped and populations are tiny and homogeneous have been able to survive without governments to provide the service of locally monopolizing protection through violence. Examples of anarchic societies above the level of the hunting-and-gathering tribe are few and ancient. They are all among the simplest economies of isolated rainwater farmers. The Kafirs in pre-Muslim Afghanistan. Some Irish tribes in the Dark Ages.
- Page 200 (location ~ 3060-3069)
Government is not only a protection service; it is also a protection racket. While government provides protection against violence originating with others, like the protection racket it also charges customers for protection against harm that it would otherwise impose itself. The first action is an economic service. The second is a racket. In practice, the distinction between the two forms of “protection” may be difficult to make. Governments, as Charles Tilly has pointed out, may perhaps be best understood as “our largest examples of organized crime.”
- Page 202 (location ~ 3085-3089)
Secondly, the new frontier will not be a duopoly, which invites collusion between the two authorities to compromise over their frontier claims. Such compromises tended not to be effective during the medieval period for two reasons: there were frequently sharp cultural gaps between the rival authorities; and more important, they lacked the physical capacity to impose a negotiated settlement, having insufficient military power on the ground. During the era of the nationstate, when national authorities did come to exercise sufficient military power to impose solutions, most march regions and vague frontiers disappeared. Border fixing became the norm. That is a stable solution if duopolists of violence face the prospect of dividing their authority over contiguous regions. But the competition in domiciling transactions in the cybereconomy will not be between two authorities, but between hundreds of authorities throughout the globe. For the territorial states to create an effective cartel to keep tax rates high will be all but impossible. This will be true for the same reason that collusion to enjoy monopoly prices in markets with hundreds of competitors does not work.
- Page 215 (location ~ 3288-3296)
Whatever the merits of any individual case, the example shows why attempts by governments to maintain a cartel for protection on the ground are doomed to failure. Unlike the medieval frontier, in which the competition was between two authorities only, the frontier in cybercommerce will be between hundreds of jurisdictions, with the number probably rising rapidly to thousands. In the age of the virtual corporation, individuals will choose to domicile their income-earning activities in a jurisdiction that provides the best service at the lowest cost. In other words, sovereignty will be commercialized. Unlike medieval frontier societies, which were in most cases impoverished and violent, cyberspace will be neither. The 139 competition that information technology is driving governments to engage in is not competition of a military kind, but competition in quality and price of an economic service-genuine protection. In short, governments will be obliged to give customers what they want.
- Page 216 (location ~ 3303-3311)
No matter how many governments try to enter cyberspace, they will be no more capable or powerful in that realm than anyone else. Ironically, attempts by nationstates to wage “information wars” to dominate or thwart access to cyberspace would probably only accelerate their own demise. The tendency toward the devolution of large systems is already powerful because of the fall away of scale economies and the rising costs of holding fragmenting social groups together. The irony of information wars is that they could well impose more of a shock to the brittle systems left over from the Industrial Age than to the emerging information economy itself. As long as essential information technology continues to function, cybercommerce could proceed in tandem with the struggles of information war in a way that could never happen in a territorial war. You could not imagine millions of commercial transactions taking place at the front in one of the twentieth century’s wars.
- Page 217 (location ~ 3316-3323)
The assumptions of the nationstate at war will make less and less megapolitical sense as the importance of information in warfare increases. Because it has no physical existence, cyberspace is not a realm in which magnitudes as we know them in the physical world carry any commanding importance. It does not matter how many programmers were involved in stipulating a sequence of commands. All that matters is whether the program functions. The Sovereign Individual may truly count for as much in cyberspace as does a nationstate, with its seat in the UN, its own flag, and an army deployed on the ground. In purely economic terms, some Sovereign Individuals already command investible incomes in the hundreds of millions annually, sums that exceed the discretionary spending power of some of the bankrupt nationstates. But that is not all. In terms of virtual warfare waged through the manipulation of information, some individuals may loom as large or larger than many of the world’s states. One bizarre genius, working with digital servants, could theoretically achieve the same impact in a cyberwar as a nationstate. Bill Gates certainly could. In this sense, the age of the Sovereign Individual is not merely a slogan. A hacker, or a small group of mathematicians, not to mention a company like Microsoft, or almost any computer software company, could in principle do any or all of the things that the Pentagon’s Cyber War Task Force has up its sleeves. There are hundreds of firms in the Silicon Valley and elsewhere that already have a greater capacity to wage a cyberwar than 90 percent of the existing nationstates.
- Page 219 (location ~ 3344-3356)
These powerful, unbreakable forms of encryption will be necessary to secure financial transactions from hackers and thieves. They will also be necessary for another reason. Private financial institutions and central banks will adopt unbreakable encryption algorithms when they realize that the U.S. government-and it may not be alone-has the capacity to penetrate current bank software and computer systems to literally bankrupt a country or sweep the bank account of anyone living almost anywhere. There is no technological reason why any individual or any country should leave his financial deposits or transactions at the mercy of the U.S. National Security Agency or the successors to the KGB, or any similar organization, licit or illicit. Encryption algorithms impenetrable by governments are not daydreams.
- Page 221 (location ~ 3376-3383)
“It is today possible, to a greater extent than at any time in the worlds’ history, for a company to locate anywhere, to use resources from anywhere to produce a product that can be sold anywhere.” MILTON FRIEDMAN
- Page 224 (location ~ 3423-3425)
Their dismissal of the economic potential of the Net is another proof that being technically well-informed is not synonymous with understanding the consequences of technology.7 Even the most technically expert observers in the past have frequently 147 failed to grasp the implications of new technologies. A British parliamentary committee, convened in 1878 to consider the prospects for Thomas Edison’s incandescent lamp, reported Edison’s ideas to be “good enough for our transatlantic friends, . . . but unworthy of the attention of practical or scientific men.” Thomas Edison himself was a man of great vision, but he thought that the phonograph he invented would be employed mainly by businessmen for dictation. Only a short time before the Wright brothers proved that airplanes would fly, the distinguished American astronomer Simon Newcomb authoritatively demonstrated why heavier-than-air flight was impossible.
- Page 228 (location ~ 3493-3500)
“The demonstration that no possible combination of known substances, known forms of machinery and known forms of force, can be united in a practical machine by which men shall fly long distances through the air, seems to the writer as complete as it is possible for the demonstration of any physical fact to be.” Soon after airplanes began to fly, another renowned astronomer, William H. Pickering, explained to the public why commercial travel would never get off the ground: “The popular mind often pictures gigantic flying machines speeding across the Atlantic and carrying innumerable passengers in a way analogous to our modern steamships. . . . [I]t is clear that with our present devices there is no hope of competing for racing speed with either our locomotives or our automobiles.”
- Page 229 (location ~ 3500-3505)
Information technology divorces income-earning potential from residence in any specific geographic location. Since a greater and greater portion of the value of products and services will be created by adding ideas and knowledge to the product, an ever-smaller component of value-added will be subject to capture within local jurisdictions. Ideas can be formulated anywhere and transmitted globally at the speed of light. This inevitably means that the information economy will be dramatically different from the economy of the Factory Age. We would concede to the critics that a recital of the tasks you could have undertaken through the Internet in 1996 might seem mundane. There is, after all, 148 nothing terribly revolutionary about reading an article about gardening on the Net, or buying a case of wine long-distance. However, the potential of the cybereconomy cannot be judged solely on its early beginnings, any more than the potential of the automobile to transform society could have been judged by what you could have seen around you in 1900. We expect the cybereconomy to evolve through several stages.
- Page 230 (location ~ 3514-3522)
A more advanced stage will mark the transition to true cybercommerce. Not only will transactions occur over the Net, but they will migrate outside the jurisdiction of nationstates. Payment will be rendered in cybercurrency. Profits will be booked in cyberbanks. Investments will be made in cyberbrokerages. Many transactions will not be subject to taxation. At this stage, cybercommerce will begin to have significant megapolitical consequences of the kind we have already outlined. The powers of governments over traditional areas of the economy will be transformed by the new logic of the Net. Extraterritorial regulatory power will collapse. Jurisdictions will devolve, The structure of firms will change, and so will the nature of work and employment, This outline of the stages of the Information Revolution is only the barest sketch of what could be the most far-reaching economic transformation event.
- Page 231 (location ~ 3532-3538)
THE GLOBALIZATION OF COMMERCE In the Information Age, most current jurisdictional advantages will be eroded rapidly by technology. New types of advantages will emerge. Falling communications costs have already reduced the need for proximity as a necessary condition of doing business. In 1946, it was technically possible for an investor in London to place an order with a broker in New York. But only the largest and most compelling transaction would have justified doing so: a three-minute phone call between New York and London cost $650. Today, it costs $0.91. The price of an intercontinental phone call has plunged by more than 99 percent in half a century. 149 Convergent Communication Soon, the difference between intercontinental chat and a local call may be minimal. So, too, may be the differences among your telephone, your computer, and your television. All will be interactive communications devices, more easily distinguished on ergonomic than functional grounds. You will be able to hold a voice conversation over the Internet using microphones and speakers on your personal computer. Or watch a movie. You will be able to talk back to your television, and communicate vast amounts of data through the network provided by the television entertainment media.
- Page 231 (location ~ 3539-3549)
Continued expansion of computational power will lead to better compression technology, speeding data flow. Widespread adoption of existing public key:private key encryption algorithms will allow providers, such as satellite systems, to incorporate the billing function into the service, lowering costs. Simultaneous with the service, vendors will be able to debit accounts loaded on personal computers in much the way that France Telecom debits the “smart cards” employed in Paris phone boxes.
- Page 232 (location ~ 3557-3560)
Widespread adoption of public-key/private-key encryption technologies will soon allow many economic activities to be completed anywhere you please. As James Bennet, technology editor of Strategic Investment, has written: Enforcement of laws and particularly tax codes has become heavily dependent on surveillance of communications and transactions. Once the next logical steps have been taken, and offshore banking locations offer the services of communication in hard RSA-encrypted electronic mail using account numbers derived from public-key systems, financial transactions will be almost impossible to monitor at the bank or in communications. Even if the tax authorities were to plant a mole in the offshore bank, or burglarize the bank records, they would not be able to identify depositors.'
- Page 243 (location ~ 3725-3730)
While Roman coinage continued to circulate, quantities of money dwindled along with trade in a self-reinforcing downward spiral. (The feudal revolution coincided with a reintroduction of money, coinage, bills of exchange, and other devices for settling commercial transactions. In particular, a surge in European silver production from new mines at Rammelsberg, Germany, facilitated an increase in the circulation of coin that helped lubricate commerce.) The greatest revolution in money prior to the Information Age came with the advent of industrialism. The early-modern state consolidated its power in the Gunpowder Revolution. As its control increased, the state asserted its power over money, and came to rely heavily upon the signature technology of industrialism, the printing press. The first implement of mass production, the printing press, has been widely used by governments in the modern period to mass-produce paper money. Paper money is a distinctly industrial product. It would have been impractical before the printing press to duplicate receipts or certificates that became paper currency. Certainly, monks in the scriptoria would not have spent their time well drawing fifty-pound notes.
- Page 246 (location ~ 3771-3779)
CYBERCASH Now the advent of the Information Age implies another revolution in the character of money. As cybercommerce begins, it will lead inevitably to cybermoney. This new form of money will reset the odds, reducing the capacity of the world’s nationstates to determine who becomes a Sovereign Individual. A crucial part of this change will come about because of the effect of information technology in liberating the holders of wealth from expropriation through inflation. Soon, you will pay for almost any transaction over the Net or World Wide Web at the same time you place it, using cybercash. This new digital form of money is destined to play a pivotal role in cybercommerce. It will consist of encrypted sequences of multihundred-digit prime numbers. Unique, anonymous, and verifiable, this money will accommodate the largest transactions. It will also be divisible into the tiniest fraction of value. It will be tradable at a keystroke in a multitrillion-dollar wholesale market without borders.
- Page 247 (location ~ 3783-3790)
Dialing Without Dollars Inevitably, this new cybermoney will be denationalized. When Sovereign Individuals can deal across borders in a realm with no physical reality, they will no longer need to tolerate the long-rehearsed practice of governments degrading the value of their money through inflation. Why should they? Control over money will migrate from the halls of power to the global marketplace. Any individual or firm with access to 160 cyberspace will be able to easily shift out of any currency that appears in danger of depreciation Unlike today, there will be no necessity to deal in legal tender. Indeed, if transactions spanning the globe it will be likely that at least one party to every transaction will find himself dealing in a currency that is not legal tender to him.
- Page 248 (location ~ 3791-3797)
You will be able to trade in any medium you wish in the cybereconomy. A. the late Nobel Prize-winning economist E A. Hayek argued, there is “no clear distinction between money and non-money.” He wrote, " although we usually assume there is a sharp line of distinction between what is money and what is not-and the law generally tries to make such a distinction-so far as the causal effects of monetary events are concerned, there is no such clear difference. What we find is rather a continuum in which objects of various degrees of liquidity, or with values which can fluctuate independently of each other, shade into each other in the degree to which they function as money.“17
- Page 248 (location ~ 3798-3802)
Even where different pricing measures are used, or certain transactions continue to be denominated in national currencies, cybermoney will serve the consumers far better than nationalized money ever did. Rapidly advancing computational capacity will 161 diminish the difficulties of adjusting prices to various media of exchange to the vanishing point. Each transaction will involve the transfer of encrypted multihundred-digit prime-number sequences. Unlike the paper-money receipts issued by governments during the gold-standard era, which could be duplicated at will, the new digital gold standard or its barter equivalents will be almost impossible to counterfeit for the fundamental mathematical reason that it is all but impossible to unravel the product of multihundred-digit prime numbers. All receipts will be verifiably unique.
- Page 249 (location ~ 3815-3822)
The Transaction Cost of “Free” Currency Use of this new cybermoney will substantially free you from the power of the state. Earlier, we cited the dreary record of the world’s nationstates in maintaining the value of their currencies over the past half century. No currency has suffered a smaller loss from inflation since World War II than the German mark. Yet even so, 71 percent of its value vanished between January 1, 1949, and the end of June 1995. The world reserve currency during this period, the U.S. dollar, lost 84 percent of its value.‘8 This is a measure of the wealth that governments expropriated by exploiting their territorial monopolies on legal tender. Note that there is no intrinsic necessity that currency depreciate or that the nominal cost of living rise every year. To the contrary. The technical challenge of maintaining the purchasing power of savings is trivial. You can see this merely by looking at the long-term purchasing power of gold.
- Page 250 (location ~ 3832-3840)
Michael Prowse of the Financial Times summarized Scotland’s free-banking experience: “There was little fraud. There was no evidence of over-issue of notes. Banks did not typically hold either excessive or inadequate reserves. Bank runs were rare and not contagious. The free banks commanded the respect of citizens and provided a sound foundation for economic growth that outpaced that in England for most of the period.“22 What worked well under the technological conditions of the eighteenth and nineteenth centuries will work even better with twenty-first-century technology. You will soon be able to deal in digital money from a private firm, issued much as American Express issues traveler’s checks as receipts for cash. An institution of greater repute than any government, such as a leading mining company or the Swiss Bank Corporation, could create encrypted receipts for quantities of gold or even for unique bars, identified by molecular signatures and possibly even inscribed with holograms.
- Page 252 (location ~ 3859-3866)
The capacity of digital money to deliver micropayments will facilitate the emergence of new types of businesses that heretofore could not have existed, specializing in organizing the distribution of low-value information. The vendors of this information will now be compensated through direct-debit royalty schemes that overcome previously daunting transaction costs. When the cost of billing exceeds the value of a transaction, it probably will not take place. Use of cybermoney facilitates very-low-cost simultaneous billing, in which accounts are debited with use. We cited such an example above in imagining that you might pay a royalty equivalent to one-third of a penny to Bill Gates, or whoever owns the virtual-reality rights to tour the Louvre.
- Page 253 (location ~ 3873-3878)
Governments facing serious competition to their currency monopolies will probably seek to underprice the for-fee cybercurrencies by tightening credits and offering savers higher real yields on cash balances in national currencies. Some governments may even seek to remonetize gold as another expedient to meet competition from private currencies. They may well reason that they could gain higher seigniorage profits from a loosely controlled nineteenth-century gold standard than would be the case if they allowed their national currency to be displaced entirely by commercial cybermoney. But not all governments will respond in the same way. Those in regions where computer ‘usage and Net participation are low may opt for old-fashioned hyperinflation in the early stages of the cybereconomy. This will not enable these governments to capture the cash balances of the rich, but it will wring resources from those with little wealth or access to the cybereconomy. Governments using such tactics might nonetheless borrow internationally in cybermoney. Still other governments may adapt to the opportunities created by the information economy, and facilitate local transactions in cybermoney. Those jurisdictions that first recognize the validity of digital signatures and provide local court enforcement of repossession for nonpayment of cyberdebts will stand to benefit from a disproportionate surge in long-term capital lending. Obviously, no cybermoney would be available for long-term credits in territories where local courts imposed penalties or permitted debtors to default without recourse. Yield Gap
- Page 256 (location ~ 3916-3927)
The combination of credit crises, competitive adjustments by national monetary authorities, and early transitional obstacles to lending cybercurrency will lead to a yield gap in the early stages of the information economy. Cybermoney will pay lower interest rates than national currencies and will probably also carry explicit transaction costs. Offsetting these apparent drawbacks to holding balances in digital money will be enhanced protection against losses due to predatory taxes and inflation. Because it will probably be gold-linked, cybermoney will also benefit from the appreciation of gold. The price of gold will probably rise significantly relative to other commodities, no matter which of the alternative government policies predominates. Why? The real price of gold almost always rises in deflation. A deflation, after all, reflects a shortage of liquidity. Gold is the ultimate form of liquidity.
- Page 257 (location ~ 3928-3935)
But even more important, freedom from predatory violence will allow the cybereconomy to grow at far higher compound rates of growth than conventional economies dominated by nationstates. That is perhaps the most important point to be made in anticipating the economic impact of the likely collapse of monopoly taxing and inflating capacities of government. Setting aside transition difficulties, which could last for decades, the long-term prospects for the global economy should be highly bullish. Whenever circumstances allow people to reduce protection costs and minimize tribute paid to those who control organized violence, the economy usually grows dramatically. As Lane said, “I would like to suggest that the most weighty single factor in most periods of growth, if any one factor has been most important, has been a reduction in the proportion of resources devoted to war and police.“24
- Page 259 (location ~ 3967-3973)
Those who have employed compulsion and local advantage to redistribute income are destined to lose much of their power. This will alter the command of resources. Privately generated wealth that heretofore has been commandeered by the nationstate will be retained instead by those who earn it. Increasing amounts of wealth will find their way into the hands of the ablest entrepreneurs and venture capitalists worldwide. Globalization, along with other characteristics of the information economy, will tend to increase the income earned by the most talented individuals in each field. Because the marginal value generated by superlative performance will be so huge, the distribution of earnings capacity throughout the entire global economy will take much the shape it does now in the performance professions like athletics and opera.
- Page 261 (location ~ 3992-3998)
AMMON’S TURNIP In the late nineteenth century a number of economists, of whom William Stanley Jevons was the most distinguished in England, started to develop mathematical economics. One of the first to apply probability theory to a major social question was the German economist Otto Ammon, whose work was first translated into English by Carlos C. Closson in an article in the Journal of Political Economy in 1899. The article was entitled “Some Social Applications of the Doctrine of Probability.“4 One might suppose that such an article was now of purely antiquarian interest. In fact, it deals with an economic problem that is again coming to the fore, and deals with it in what is still a stimulating way. Otto Ammon argued that this random distribution of throws of the dice was matched by the distribution of human abilities. He was writing before the development of intelligence testing and IQs, and relied on the earlier work on intelligence of Francis Galton. Ammon did not consider that social utility, or success in life, depended simply on intelligence. He listed “three groups of mental traits which are largely decisive in the place which a man will occupy in life.” These were: 1 . Intellectual traits; among which I included all that belong to the rational side of manpower of quick comprehension, memory, power of judgement, power of invention, and whatever also belongs to this field. 2 . Moral traits; namely, self control, will power, industry, perseverance, moderation, regard for family obligations, honesty and the like. 3 . Economic traits; such as business ability, organizing talent, technical skill, caution, clever calculation, foresight, thrift and so on. To these mental traits he added: 4 . Bodily traits; power to work, endurance, power of undergoing exertions and of resisting excitements of every kind, vigour, good health, etc. In Otto Ammon ’s view, the probable distribution of these qualities of intelligence, character, talent, and body were similar to those of scores on the dice. He went further and argued that there were, in fact, many more than four variables, and that they varied in more than six degrees. If instead of throwing four dice, one throws eight, then there are no less than 1,679,616 possible throws, yet the highest score, forty-eight, can still only be expected to occur once. The man or woman who scores very highly in all the factors that determine the place in life is much rarer than the probability of 171 throwing four sixes would suggest; perhaps as rare as throwing eight sixes. Yet, Ammon notes, a mixture of high and low scores in these human qualities may produce “persons of unbalanced, inharmonious gifts, who, in spite of some brilliant qualities, cannot successfully meet the tests of life.”
- Page 264 (location ~ 4033-4056)
The Shape of the Turnip Modern industrial societies are indeed all turnips, with a small wealthy and upper-professional class at the top, a larger middle class, and a minority poor class at the bottom. Relative to the middle, both the extremes are small. In modern London, if not in Washington, there are certainly more millionaires than homeless. All of this is intriguing, but the immediate interest of Ammon’s work lies in the major long-term shift we are experiencing in the relations, financial and political, between the top and the middle. The skills needed in the Factory Age, which is now passing, are undeniably different from those demanded by the Information Age. Most 172 people could master the skills required for operating the machines of the mid-twentieth century, but those jobs have now been replaced by smart machines which, in effect, control themselves. A whole arena of low-and middle-skill employment has already disappeared. If we are correct, this is a prelude to the disappearance of most employment and the reconfiguration of work in the spot market.
- Page 266 (location ~ 4073-4081)
As the economies of more countries more deeply assimilate information technology, they will see the emergence-so evident already in North America-of a more or less unemployable underclass. This is exactly what is happening. This will lead to a reaction with a nationalist, antitechnology bias, as we detail in the next chapter. The Factory Age may prove to have been a unique period in which semistupid machines left a highly profitable niche for unskilled people. Now that the machines can look after themselves, the Information Age is pouring its gifts onto the top 5 percent of Otto Ammon’s turnip. The Information Age was already looking far better for the top 10 percent, the so-called cognitive elite. Yet it will be the best of all for the top 10 percent of the top 10 percent, the cognitive double top. In the feudal age, it took one hundred semiskilled peasants to support one highly skilled warlord (or knight) on horseback. The Sovereign Individuals of the information economy will not be warlords but masters of specialized skills, including entrepreneurship and investment. Yet the feudal hundred-to-one ratio seems set to return. For better or worse, the societies of the twenty-first century are likely to be more unequal than those we have lived in during the twentieth.
- Page 268 (location ~ 4106-4116)
SHIFTING LOCATIONAL ADVANTAGES Because there will no longer be rising returns to violence, there will be no advantage to living under a government that could capture them. Once-competent governments will no longer be the friends of wealth accumulation, but their enemies. High taxes, burdensome regulatory costs, and ambitious commitments to income redistribution will make territories under their control uninviting settings in which to do business. Those who live in jurisdictions that remained poor or underdeveloped during the industrial period have the most to gain by the liberation of economies from the confines of geography. This is contrary to what you will hear. The main controversy surrounding the advent of the information economy and the rise of the Sovereign Individual will focus on the allegedly adverse effects on “fairness” arising from the death of politics. It is certainly true that the advent of the global information economy will deal a mortal blow to large-scale income redistribution. The main beneficiaries of income redistribution in the Industrial Age have been inhabitants of wealthy jurisdictions whose level of consumption is twenty times higher than the world average. Only within the OECD countries has income redistribution had noticeable effects in raising incomes of unskilled persons.
- Page 270 (location ~ 4132-4142)
Better Government Could Not Be Imported Olson argues, and we agree, that the true obstacle to development in backward countries has been the one factor of production that could not be easily borrowed or imported from abroad, namely government. This is a problem that worsened as the twentieth century unfolded. In 1900, Great Britain and France, along with some other European countries, were in the business of exporting competent government to regions where indigenous powers were incapable of functioning effectively on a large scale. But shifting megapolitical conditions in the twentieth century raised the costs and lowered the returns for this activity. Colonialism, or imperialism, as it was less fondly known, ceased to be a paying proposition. Shifts in technology raised the costs of projecting power from the center to the periphery and lowered the military costs of an effective resistance. Consequently, imperial powers withdrew, or stayed on only in tiny enclaves, like Bermuda or the Cayman Islands.
- Page 273 (location ~ 4184-4191)
Undependable communication and transport reflect the incompetence of backward nationstates at maintaining order. They have kept prices high and minimized opportunities for most of the world’s population. As Olson emphasizes: First, poor transportation and communication tend to force a firm to rely mainly on local factors of production. When a firm’s scale increases, it will have to go further afield to obtain factors of production, and the poorer the transportation and communications systems the faster these factor costs will rise with expanding output. The second and more important reason why poor transportation and communication systems work
- Page 275 (location ~ 4202-4206)
Undependable communication and transport reflect the incompetence of backward nationstates at maintaining order. They have kept prices high and minimized opportunities for most of the world’s population. As Olson emphasizes: First, poor transportation and communication tend to force a firm to rely mainly on local factors of production. When a firm’s scale increases, it will have to go further afield to obtain factors of production, and the poorer the transportation and communications systems the faster these factor costs will rise with expanding output. The second and more important reason why poor transportation and communication systems work against effective large-scale enterprises is that they make it far more difficult to coordinate such enterprises effectively."
- Page 275 (location ~ 4202-4208)
Higher Returns in Poor Areas The obstacles that governments in poorer regions place in the way of functioning free markets will be much diminished as the cybereconomy comes on line. As a consequence, capital and skills in short supply will in fact earn higher returns in many currently poor areas, much as the development theorists of the 1950s postulated they should. And both capital and skills will be far more readily importable. Emerging economies will no longer need to rely as much as during the Industrial Age upon local factors of production. Their enhanced ability to draw upon capital and expertise at a distance will lead to higher rates of growth. This will happen whether or not Incompetent governments become more honest or better able to protect property rights. Lacking power over cyberspace, bad governments will simply be less able to stop people in their jurisdictions from benefiting from economic freedom.
- Page 276 (location ~ 4228-4234)
The New Paradigm The new megapolitical conditions of the twenty-first century will allow market tests to regulate outcomes in areas formerly dominated by politics. The market paradigm presupposes that results can be better regulated by rewarding desirable outcomes and penalizing undesirable ones. To be poor is undesirable, and to become rich is desirable. Therefore, incentives should reward wealth creation and encourage people to pay for the resources they consume. Life is more “fair” when people get to keep more of what they earn. This is a view that will be heard more frequently in the new millennium than it was in the century now ending. Furthermore, it will be compelling as never before because it will be megapolitically founded. Capital in the Information Age is growing more mobile by the moment.
- Page 277 (location ~ 4246-4253)
When Canada breaks apart, this will lead to a marked increase in secessionist activity in the Pacific Northwest of the United States. Residents of Alaska, Washington, Oregon, Idaho, and Montana would find themselves at a distinct disadvantage in competition with Alberta and British Columbia as independent sovereignties.
- Page 282 (location ~ 4317-4319)
“It means that all of the monopolies and hierarchies and pyramids and power grids of industrial society are going to dissolve before this constant pressure of distributing intelligence to the fringes of all networks. Above all, Moore?s Law will overthrow the key concentration, the key physical conglomeration of power in America today: the big city-that big set of industrial cities that now lives on hie -support systems-some 360 billion of direct subsidies from all the rest of us every year Big cities are leftover baggage from the industrial era."‘17 -GEORGE GILDER
- Page 286 (location ~ 4371-4375)
When the nineteenth century opened, cities of more than 100,000 were considered huge, and outside of Asia, where population statistics were doubtful, there were no cities of more than a million persons. The largest city in the United States in 1800 was Philadelphia, with a population of 69,403. New York had just 60,489. Baltimore was the third largest city in America with 26,114 inhabitants. Most of what were to become the great metropolitan cities of Europe had populations that are tiny by twentiethcentury standards. London, with a population of 864,845, was probably the biggest city in the world. Paris, with 547,756, was the only other city in Europe with more than half a million inhabitants in 1801. Lisbon’s population was 350,000. Vienna had a population of 252,000.21 Berlin had barely poked above 200,000 by 1819. Madrid was home to 156,670. The population of Brussels in 1802 was 66,297. Budapest had a population of just 61,000.
- Page 286 (location ~ 4378-4384)
There is an obvious temptation to think that the growth of big cities is a direct function of population growth. But this is not necessarily so. Every human on earth could be packed into Texas, with each family living in its own detached house with a yard, and still have some of Texas left over. As Adna Weber argued in the classic study The Growth of Cities in the Nineteenth Century, population growth alone does not explain why people live in urban settings rather than dispersed in the countryside. In 1890, Bengal had about the same population density as England. Yet Bengal’s urban population was just 4.8 percent, while England’s was 61.7 percent.25
- Page 286 (location ~ 4384-4389)
In the Information Age, only cities that repay their upkeep costs by offering a high quality of life will remain viable. Persons at a distance will no longer be obliged to subsidize them. A good marker for the viability of cities is whether those living at the core of the city are richer than those on its periphery. Buenos Aires, London, and Paris will remain inviting places to live and do business long after the last good restaurant closes in South Bend, Louisville, and Philadelphia.
- Page 287 (location ~ 4399-4403)
Communications technologies that minimize language difficulties will make it ever easier to abide almost anywhere that the environment is attractive. Thinly populated regions with temperate climates, and a large endowment of arable land per head, like New Zealand and Argentina, will also enjoy a comparative advantage because they enjoy high standards of public health and are low-cost producers of foods and renewable products. Such products will benefit from increased demand as the living standards of billions of people in East Asia and Latin America rise.
- Page 288 (location ~ 4407-4410)
For the same reason that producers sort among suppliers in search of the lowest costs, they will be even more strongly motivated to seek alternative suppliers of protection. The benefits of doing so will dwarf the margins to be realized by shifting to a new supplier of plastic tubes. The result to be expected is that Sovereign Individuals and other rational people will flee jurisdictions with large unfunded liabilities. Cheap governments that have few liabilities and impose low costs on customers will be the domiciles of choice for wealth creation in the Information Age. This implies much more attractive prospects for doing business in areas where indebtedness is low and governments have already been restructured, such as New Zealand, Argentina, Chile, Peru, Singapore, and other parts of Asia and Latin America. These areas will also be superior platforms for doing
- Page 289 (location ~ 4417-4423)
For the same reason that producers sort among suppliers in search of the lowest costs, they will be even more strongly motivated to seek alternative suppliers of protection. The benefits of doing so will dwarf the margins to be realized by shifting to a new supplier of plastic tubes. The result to be expected is that Sovereign Individuals and other rational people will flee jurisdictions with large unfunded liabilities. Cheap governments that have few liabilities and impose low costs on customers will be the domiciles of choice for wealth creation in the Information Age. This implies much more attractive prospects for doing business in areas where indebtedness is low and governments have already been restructured, such as New Zealand, Argentina, Chile, Peru, Singapore, and other parts of Asia and Latin America. These areas will also be superior platforms for doing business to unreformed, high-cost economies in North America and Western Europe.
- Page 289 (location ~ 4417-4423)
Why Firms? 187 The classical economists like Adam Smith were almost silent on the question of firm size. They did not address what influences the optimal size of firms, why firms take the form they do, or even why firms exist at all. Why do entrepreneurs hire employees, rather than placing every task that needs doing out to bid among independent contractors in the auction market? Nobel Prize-winning economist Ronald Coase helped launch a new direction in economics by asking some of these important questions. The answers he helped to frame hint at the revolutionary consequences of information technology for the structure of business. Coase argued that firms were an efficient way to overcome information deficits and high transaction costs.26
- Page 290 (location ~ 4437-4443)
Information and Transaction Costs To see why, consider the obstacles you would have faced in trying to operate an industrial-era assembly line without a single firm to coordinate its activities. In principle, an automobile could have been produced without production being centralized under the oversight of a single firm. Economist Oliver Williamson, along with Coase, is another pioneer in developing the theory of the firm. Williamson defined six different methods of operation and control. Among them is the “entrepreneurial mode,” “wherein each workstation is owned and operated by a specialist.“27 Another is what Williamson calls the “federated workstations” in which “an intermediate product is transferred across stages by each worker.“28 There is no physical reason why the thousands of employees could not have been replaced by a gaggle of independent contractors, each renting space on the factory floor, bidding for parts, and offering to assemble the axle or weld the fenders onto the chassis. Yet you would look in vain for an example of an industrial-era automobile factory organized and run by independent contractors.
- Page 290 (location ~ 4443-4451)
To an increasing degree, individuals capable of creating significant economic value will be able to retain most of the value they create for themselves. Support staff that previously absorbed a large part of the revenue generated by the principal income creators in an enterprise will be replaced by low-cost automated agents and information systems. This implies that an organization will be better able to assure itself of the highest quality of service by contracting it out, rather than by keeping the function within the firm, where it will be relatively more difficult to reward individuals for performing a task well. A virtual corporation will eliminate most “organizational slack” by eliminating the organization. “Good jobs” will be a thing of the past. A “good job,” as Princeton economist Orly Ashenfelter put it, “is a job that pays more than you are worth.“3 In the Industrial Age, many “good jobs” existed because of high information and transaction costs. Firms grew bigger and internalized a wider range of functions because doing so allowed them to capture scale economies. Corporate bloat was also subsidized by tax laws. The high taxes that predominated in the late stages of the industrial era artificially magnified the advantages of forming a long-lived firm and hiring permanent employees. In most nations, tax laws and regulations substantially raised the costs of forming and dissolving firms on a project basis. They also have tended to force entrepreneurs to subsume independent contractors as employees. Legal interventions further temporarily inflated the supply of “good jobs” by making it costly and difficult to dismiss an employee, however little he might be contributing to the productivity of the firm.
- Page 296 (location ~ 4537-4549)
The microprocessing revolution is sharply increasing the availability of information and reducing transaction costs. This is devolving the firm. Instead of permanent bureaucracy, activities will be organized around projects, in much the way that movie companies already operate. Most of the formerly “internal” functions of the firm will be outsourced to independent contractors. The industrial-era employees who held “good jobs” but who contributed little and relied upon fellow workers to “cover” for them will soon find themselves bidding for contracts in the spot market. And so will many loyal, diligent employees. “Good jobs” will be an anachronism because jobs in general will be anachronistic. In the extreme case of big Japanese corporations, employees expected to have a job for life. Even where they had no productive task to perform, they would be retained, sometimes merely showing up to sit at “a bare desk in the corner of a factory.” Now even in Japan, the bloated white-collar workforce is being downsized. The headline of a story in the International Herald-Tribune told the tale: “Parting Is Such Sour Sorrow: Japan’s Job-for-Life Culture Painfully Expires.”
- Page 297 (location ~ 4552-4560)
Already, major corporations such as AT&T have eliminated all permanent job categories. Positions in that large firm are now contingent. In Bridges’s words, “Employment is becoming temporary and situational again, and categories are losing their boundaries.“35 In the new cybereconomy, “independent contractors” will telecommute across continents to nest together on the Information Age equivalent of the assembly line.
- Page 298 (location ~ 4567-4570)
There will be intensified competition among jurisdictions to domicile high value-added activities that in principle could be located anywhere. No stopping place is necessarily more compelling than the next. ? Business relations will gravitate toward reliance upon “circles of trust.” Due to encryption, which gives individuals an ability to steal undetected, honesty will be a more highly valued characteristic of business associates. ? Patent and copyright regimes will change, due to ease of access to certain information. ? Protection will become increasingly technological rather than juridical. The lower classes will be walled out. The move to gated communities is all but inevitable. Walling out troublemakers is an effective as well as traditional way of minimizing criminal violence in times of weak central authority. ? Bulk goods will be heavily taxed and shipped locally, as in the Middle Ages, while luxury goods will be lightly taxed and shipped a great distance.36 ? Police functions will increasingly be taken up by private guards linked to merchant associations. 194 ? There may be a transitional advantage to private over publicly traded firms because private firms will enjoy greater leeway in escaping costs imposed by governments.
- Page 300 (location ~ 4591-4602)
LUDDITES “Nationalism, of course, is intrinsically absurd. Why should the accident of fortune or misfortune of birth as an American, Albanian, Scot, or Fiji islander impose loyalties that dominate an individual life and structure a society so as to place it in formal conflict with others? In the past there were local loyalties to place and clan and tribe, obligations to lord or landlord, dynastic or territorial wars, hut primary loyalties were to religion, God or god-king, possibly to emperor to a civilization as such. There was no nation. There was attachment to patria, land of one’s fathers, or patriotism, but to speak of nationalism before modern times is anachronistic.”
- Page 302 (location ~ 4623-4628)
4. An intense and even violent nationalist reaction centered among those who lose status, income, and power when what they consider to be their “ordinary life” is disrupted by political devolution and new market arrangements. Among the features of this reaction: a. suspicion of and opposition to globalization, free trade, “foreign” ownership and penetration of local economies; b. hostility to immigration, especially of groups that are visibly different from the former national group; c. popular hatred of the information elite, rich people, the well-educated, and complaints about capital flight and disappearing jobs; d. extreme measures by nationalists intent upon halting the secession of individuals and regions from faltering nationstates, including resort to wars and acts of “ethnic cleansing” that reinforce nationalist identification with the state and rationalize the state’s claims on people and their resources.
- Page 304 (location ~ 4657-4666)
Reactionary sentiments will be most intensely felt within the currently rich countries, and especially in communities with high percentages of the value-poor and skill-poor who previously enjoyed high incomes. c. The Unabomber notwithstanding, the neo-Luddites will attract most of their adherents among those in the bottom two-thirds of earnings capacity within the populations of leading nationstates. d. The nationalist and Luddite reaction will be strongest, however, not among the very poor but among persons of middling skills, underachievers with credentials, who came of age during the industrial era and face downward mobility.*
- Page 305 (location ~ 4672-4678)
Simply put, contemporary religious leaders focus much of their declining moral authority on secular redemption and agitation to influence the state rather than on spiritual salvation. Given this record, they can be expected to participate as accomplices in the reaction against the coming secular reformation. As the nationstate is challenged and begins to wobble, it will no longer be able to fulfill the promises of material benefits that are central to popular support. The de facto bargain struck at the time of the French Revolution will lapse. The state will no longer be capable of guaranteeing its citizens low-cost or free schooling, much less medical care, unemployment insurance, and pensions in exchange for otherwise poorly paid military service. While the changing requirements of warfare will enable governments to defend themselves and territories under their dominion without fielding mass armies, this will hardly relieve governments of the criticism for breaking what has become an anachronistic bargain. Indeed, as the new megapolitical logic takes hold, its consequences will prove wildly unpopular with the losers in the new information economy. It is therefore all but certain that many religious leaders, along with the primary beneficiaries of government spending, will be at the forefront of a nostalgic reaction seeking to reassert the claims of nationalism.
- Page 310 (location ~ 4751-4760)
20/20 Vision By 2020, or roughly five centuries after Martin Luther nailed his 95 subversive theses on the church door at Wittenberg, the perception of the cost/benefit ratios of citizenship will have undergone a similar subversive clarification. The vision of the nationstate among persons of ability and wealth, the Sovereign Individuals of the future, will have undergone the political equivalent of laser surgery. They will be seeing 20/20. In the twentieth century, as throughout the modern era, persistently high returns to violence made big government a paying proposition. The decisiveness of massed power mobilized the allegiance of the wealthy and ambitious to OECD nationstates, notwithstanding predatory taxes imposed on income and capital. Politicians were able to impose marginal tax rates approaching or exceeding 90 percent in every OECD country in the decade immediately following World War
- Page 311 (location ~ 4768-4775)
20/20 Vision By 2020, or roughly five centuries after Martin Luther nailed his 95 subversive theses on the church door at Wittenberg, the perception of the cost/benefit ratios of citizenship will have undergone a similar subversive clarification. The vision of the nationstate among persons of ability and wealth, the Sovereign Individuals of the future, will have undergone the political equivalent of laser surgery. They will be seeing 20/20. In the twentieth century, as throughout the modern era, persistently high returns to violence made big government a paying proposition. The decisiveness of massed power mobilized the allegiance of the wealthy and ambitious to OECD nationstates, notwithstanding predatory taxes imposed on income and capital. Politicians were able to impose marginal tax rates approaching or exceeding 90 percent in every OECD country in the decade immediately following World War II.
- Page 311 (location ~ 4768-4775)
Nineteenth-century American Vice President John J. Calhoun shrewdly sketched the arithmetic of modern politics. Calhoun’s formula divides the entire population of the nationstate into two classes: taxpayers, who contribute more to the cost of government services than they consume; and tax consumers, who receive benefits from government in excess of their contribution to the cost. With a few conspicuous exceptions, most OECD entrepreneurs were net taxpayers to an exaggerated extent as the twentieth century wound down. For example, in 1996, the top 1 percent of British taxpayers shouldered 17 percent of the total income tax burden. They paid 30 percent more than the bottom 50 percent of earners, who contributed just 13 percent of income tax payments. In the United States, the rich shouldered an even more exaggerated burden, with the top 1 percent paying 28 percent of the total income tax receipts in 1994.12 Not only were the rich obliged to pay for service that, as Frederic C. Lane reminds us, “was of poor quality and outrageously overpriced,” but their payments were often not proportionate to any service whatever.‘3
- Page 312 (location ~ 4780-4789)
Under the old regime, consumer choices were so limited that even Castro himself would have been hard-pressed to secure a packet of decent dental floss had he wanted to clean cohiba fragments from his teeth. Until recently, not even the rich in many parts of the globe could enjoy the quality of life that was common among the middle classes in Western Europe or North America. Faced with this doleful situation, most persons of outstanding talent were moved to accept the nationalist bargain during the Industrial Age. They stayed put and paid outrageously high taxes for the doubtful protection offered by the particular nationstate that monopolized violence in the territory in which they were born. 203 “Paradise is now shut and locked, barred by angels, so now we must go forward, around the world and see if somehow somewhere, there is a back-way in.” HEINRICH VON KLEIST Cuba only imposed an income tax in 1996 as an emergency measure in response to economic depression following the end of subsidies occasioned by the collapse of Communism in Europe.
- Page 314 (location ~ 4814-4822)
?A language is a dialect with an army and a navy? MARIO PEI
- Page 321 (location ~ 4913-4913)
This points to another important military advantage of a common language. It reduces the motivational hurdles to fighting a war. Propaganda is useless if incomprehensible. In this respect as well, the French revolutionaries were also well attuned to the possibilities. Their “dominant idea,” according to Langins, was “the will of the people They therefore had to identify themselves with the popular will by expressing it in its own particular language.” 30 Prior to 1789, mutual incomprehensibility among “citizens” was a drawback in expressing the “will of the people” and thus a check on the exercise of power at the national level. In more ways than one, multilingual states and empires faced higher obstacles in mobilizing for war during the industrial period. At the margin, therefore, they tended to be supplanted by nationstates that were better able to motivate their citizens to fight and mobilize resources for war.
- Page 325 (location ~ 4980-4987)
Now that the military imperatives favoring language uniformity have largely been outstripped, we expect the national languages to fade, but not without a fight. It is to be expected that the well-rehearsed adage that “war is the health of the state” will be tested as a recuperative. As the nationstate slides into irrelevancy, demagogues and reactionaries will foment wars and conflicts, along the lines of ethnic and tribal fighting that has racked the former Yugoslavia and numerous jurisdictions in Africa, from Burundi to Somalia. Conflicts will prove convenient for the pretexts they provide for those seeking to arrest the trend toward commercialization of sovereignty. Wars will facilitate efforts to sustain more exacting regimes of taxation and impose more severe 211 penalties for escaping the duties and burdens of citizenship. Wars will help undergird the “them and us” dimension of nationalism. To the proponents of systematic coercion, commercialized sovereignty, which gives individuals a choice of sovereignty services based upon price and quality, will seem no less a sin than the assertion by individuals of the right to veto the judgments of the pope and choose their own path to salvation during the Reformation.
- Page 327 (location ~ 5011-5020)
systematic coercion, commercialized sovereignty, which gives individuals a choice of sovereignty services based upon price and quality, will seem no less a sin than the assertion by individuals of the right to veto the judgments of the pope and choose their own path to salvation during the Reformation.
- Page 328 (location ~ 5017-5020)
In many respects, the new technology of the Information Age will counter part of the megapolitical impact of fifteenth-century technology, the printing press, in stimulating and underpinning the rise of nationstates. The World Wide Web creates a commercial venue with a global language, English. It will eventually be reinforced with simultaneous-translation software, making almost everyone effectively multilingual, and helping to denationalize language and imagination. Just as the technology of the printing press undermined allegiance to the dominant institution of the Middle Ages, the Holy Mother Church, so we expect the new communications technology of the Information Age to undermine the authority of the nanny state. In due course, almost every area will become multilingual. Local dialects will rise in importance. Propaganda from the center will lose much of its coherence as immigrants and speakers of minority tongues are emboldened to resist assimilation into the nation.
- Page 330 (location ~ 5058-5065)
The imaginative link between the nation and home continues to be highlighted by nationalists at every opportunity. As Billig suggests, the nation is ‘‘imagined as homely space, cozy within its borders, secure against the dangerous outside world. And ‘we’ the nation within the homeland can so easily imagine ‘ourselves’ as some sort of family." 41 The cliches of nationalism, tirelessly and routinely repeated, include many commonplace metaphors of kinship and identity. They associate the nation with an individual’s sense of “inclusive fitness,” a powerful motive for altruism and sacrifice.
- Page 331 (location ~ 5075-5079)
We introduce sociobiology into our analysis of nationalism because it provides perspective on aspects of human nature that help facilitate systematic coercion. We agree with natural scientist Cohn Tudge, author of The Time Before History, that before we can understand the current world, much less gain a perspective on that to come, we need to understand the preface to history. That means we must “look at ourselves on the grand scale of time.“47 Tudge reminds us “that beneath the surface tremors of our lives there are much deeper and more powerful forces at work that in the end affect us all and all our fellow creatures… 48 We suspect that among “these deeper and more powerful forces” is a genetically influenced motivational component undergirding nationalism. As Hirshleifer points out, paraphrasing Adam Smith and R. H. Coase, “human desires are ultimately adaptive responses shaped by man’s biological nature and situation on earth,” 4’) This comes to the fore with the obviously biological allusions in most discussions of nationalism. Even in the United States, a conspicuously multiethnic nation, the government is personified in familial terms as ’ Uncle Sam.”
- Page 333 (location ~ 5105-5113)
“The great theoretical contribution of sociobiology has been to extend the concept of fitness to that of ‘inclusive fitness.’ Indeed, an animal can duplicate its genes directly through its own reproduction, or indirectly through the reproduction of relatives with which it shares specific proportions of genes. Animals, therefore, can be expected to behave cooperatively and thereby enhance each other’s fitness to the extent that they are genetically related. This is what is meant by kin selection. Animals, in short, are nepotistic, i.e., they prefer kin over non-kin, and close kin over distant kin. This may happen consciously as in humans, or more commonly unconsciously.“5 PIERRE VAN DEN BERGHE
- Page 336 (location ~ 5138-5143)
GENETICALLY INFLUENCED MOTIVATIONAL FACTORS The biological perspective on human behavior was enhanced by the introduction of the concept of “inclusive fitness” in 1963 by W D. Hamilton in “The Evolution of Altruistic Behavior.” Hamilton recognized that while humans are fundamentally given to self-oriented behavior, they also undertake occasional acts of altruism or self-sacrifice that offer no apparent benefits in terms of the life of the individual. Hamilton sought to reconcile these apparent contradictions by positing that the fundamental maximizing unit is not the individual organism but the gene. Individuals in any species will seek to maximize not simply their own personal wellbeing but what Hamilton called their “inclusive fitness.” He argued that “inclusive fitness” involves not only personal survival in the Darwinian sense, but also the enhanced reproduction and survival of close relatives who share the same genes.52 Hamilton’s “inclusive fitness” thesis helps illuminate many otherwise curious features of human societies, including aspects of politics in nationstates.
- Page 336 (location ~ 5144-5151)
Altruism: Misnomer or Fossil Kin Selection? According to Van Den Berghe, “Altruism, then, is directed mostly at kin, especially at close kin, and is, in fact, a misnomer. It represents the ultimate genetic selfishness. It is but the blind expression of inclusive fitness maximization.” This is not to say, however, that there is no altruism absent the close genetic relationship referred to by Hamilton and Van Den Berghe. The uncertainties introduced by the fact that humans reproduce sexually rather than through asexual cloning all but guarantee that an inclination to “inclusive fitness maximization” would stimulate a good deal of “altruism”
- Page 336 (location ~ 5152-5156)
Seen in their proper light, however, as Hirshleifer points out, many of the paradoxes of “altruism” are semantic muddles that frequently confuse or mislead people 217 into losing sight of the context of competition in which “helping” could convey a survival advantage: " ‘If an altruism choice of strategy is to be viable in competition with non-altruism, altruism must contribute to self-survival more than non-altruism does, and therefore it can’t really be altruism.’ All such muddles could be avoided if we drop the term ‘altruism’ and ask instead: What are the determinants of the entirely objective phenomenon that can be called helping? " 54 This question is perhaps most interesting in the case of “kinship helping.” Hamilton’s basic formulation of inclusive fitness involved a biological cost-benefit analysis in which an individual, or “the gene controlling helping behaviour,” values the survival of an identical copy of itself equally to its own survival. Therefore, the willingness to undertake helping, let alone sacrifice, varies with the chance that another individual has an identical gene. “Specifically, a gene for kinship helping instructs a man (other things equal) to give his life if he can thereby save two siblings, four half-siblings, eight cousins, etc.“55
- Page 337 (location ~ 5161-5170)
Members of the tribe, though subdivided into smaller kin groups, saw themselves as a single people, solitary against the outside world, and interlinked by a web of kinship and marriage making the tribe in fact a superfamily. A high rate of inbreeding assured that most spouses were also kinsmen." 57 In short, for all of human existence prior to the advent of agriculture, ethnic groups were “inbreeding superfamilies.” Given this past identity between the family and the in-group, there could well be a genetically influenced tendency to treat the in-group as kin. It is easy to imagine that such behavior could have had survival value in the past when every member of the “inbreeding superfamily” was kin. As Margolis suggests, it is easy to imagine that for “such small bands of hunter-gatherers, closely related, that inclusive selfishness (aside from any prospect of reciprocity or vengeance) would alone support a measure of commitment to group-interest. One can then argue that some tendency to group-interested motivation survives as a kind of fossil kin-altruism.
- Page 341 (location ~ 5217-5225)
This epigenetic tendency to behave with an in-group as if it comprised close relatives creates a vulnerability to manipulation that has commonly been exploited by nationalists to engender sacrificial support for the state. In that sense, it is not a 220 coincidence that nationalist propaganda everywhere is dressed up in the vocabulary of kinship. “By the voice of her cannon alarming, fair France bids her children arise. Soldiers around us are arming. On, on, ’tis our mother who cries. CHANT OF FRENCH SOLDIERS
- Page 342 (location ~ 5233-5238)
Bogus Kinship Consider the strong tendency of politicians everywhere to describe the state in terms borrowed from kinship The nation is “our fatherland” or “our motherland.” Its citizens are “we,” “members of the family,” our “brothers and sisters.” 62 The fact that states as culturally different as France, China, and Egypt employ such similes is not a rhetorical coincidence, as we see it, but a prime example of “epigenesis” or the tendency of genetically influenced motivational factors to innately bias humans to favor certain choices. How does this epigenesis work? The identification mechanism employed to harness emotional loyalty to the nationstate makes use of various devices that would have been markers of kinship in the primitive past “to link the individual’s inclusive fitness concerns” with the interests of the state.63 For example, Shaw and Wong focus on five identification devices used by modern nationstates to mobilize their populations against out-groups.
- Page 342 (location ~ 5238-5245)
Parents and siblings are the closest relations, grandparents and cousins are less close, with distant, kissing cousins so remote that they are barely more likely than complete strangers to share any given gene in common. Husbands and 221 wives generally are no longer closely related, as they tended to be in the Stone Age. In any event, all actual kinship is definable in mathematical terms as the “coefficient of relatedness,” which Hamilton calculated as a measure of genetic overlap.65
- Page 343 (location ~ 5256-5259)
By contrast, the national “family” is imagined to be totally and elastically coincident with the state’s territorial dimensions. Nationality extends uniformly, like a liquid, into every crevice within the strictly defined boundaries. Benedict Anderson writes, “In the modern conception, state sovereignty is fully, flatly and evenly operative over each square centimeter of a legally demarcated territory.” 66 And, of course, when it comes to sacrifice for the state, the coefficient of imaginary relatedness is always one. This identification of inclusive fitness with the nationstate is interesting because it could help inform the disposition of humans to welcome or resist the changes of the new millennium. As we have explored earlier, prior to the Information Age all types of society were territorially based. They either formed around the home territory of the nucleus ethnic group, or, as with the nationstate, played upon the same motives of group solidarity to mobilize force for defense of a local territory against outsiders. In every case, it was the stranger outside of one’s immediate territory who was feared as the enemy. Given the assumptions of kin selection in the primordial past, this made sense. When humanity emerged in its current genetic form, members of the tribe were close kin. They were members of a nucleus ethnic group, “the inbreeding superfamily.”
- Page 343 (location ~ 5260-5270)
A member of a hunter-gatherer tribe really did depend for his prosperity upon the success of the whole tribe. There was no independent property, nor any way that an individual or family could plausibly have hoped to survive and prosper if detached from the tribe. This strongly linked the individual’s self-interest to that of the group. In Hirshleifer’s words, “To the extent that members of a group share a common fate or outcome, helping one another becomes self-help.” 67
- Page 344 (location ~ 5272-5275)
Now microtechnology is facilitating the creation of very different conditions from those to which we were genetically disposed by the conditions of the Stone Age. Information technology is creating economic inequality magnitudes outside the range of anything experienced by our ancestors in the pristinely egalitarian Stone Age. Information technology is also creating supraterritorial assets, which will help to subvert the embodiment of the in-group, the nationstate. Ironically, these new cyberassets will probably be of higher value precisely because they are established at a distance from home. All the more so if there is an invidious backlash of the kind we expect against the economic inequality arising from increasing penetration of information technology in the rich industrial countries. That very fact would tend to make assets held at long distance 222 more valuable. They would not only be less exposed to envy, they would be more likely to be put beyond the reach of the most predatory group with which an individual must cope-his own nationstate.
- Page 345 (location ~ 5278-5286)
“Ambitious people understand, then, that a migratory way of life is the price of getting ahead.” 73 –CHRISTOPHER LASCH
- Page 350 (location ~ 5357-5358)
Although Lasch was far from a dispassionate observer, and he obviously meant his portrait of the information elite to be unflattering, his contempt for those who are liberated from the tyranny of place rests on a perception of some of the same developments that are the focus of this book. When we read Lasch’s critiques or those of Mickey Kaus ( The End of Equality), Michael Walzer ( Spheres of Justice), or Robert Reich ( The Work of Nations), we see parts of our analysis confirmed, often unhappily, by authors who are deeply unsympathetic to many of the consequences of the deepening of markets, much less the denationalization of Sovereign Individuals. Lasch lambastes those with extranational ambitions “who covet membership in the new aristocracy of brains” for “cultivating ties with the international market in fast-moving money, glamour, fashion and popular culture.” He continues: It is a question whether they think of themselves as Americans at all. Patriotism, certainly, does not rank very high in their hierarchy of virtues. “Multiculturalism,” on the other hand, Suits them to perfection, conjuring up the agreeable image of a global bazaar in which exotic cuisines, exotic styles of dress, exotic music, exotic tribal customs can be savored indiscriminately, with no questions asked and no commitments required. The new elites are at home only in transit, en route to a high-level conference, to the grand opening of a new franchise, to an international film festival or an undiscovered resort. Theirs is essentially a tourist’s view of the world-not a perspective likely to encourage a passionate devotion to democracy.76
- Page 351 (location ~ 5369-5380)
MOST POLITICAL AGENDAS WILL BE REACTIONARY Most of those who harbor an ardent political agenda, whether nationalist, environmentalist, or socialist, will rally to defend the wobbling nationstate as the twenty-first century opens. Over time, it will become ever more obvious that survival of the nationstate and the nationalist sensibility are preconditions for preserving a realm for political compulsion. As Billig points out, nationalism “is the condition for conventional (political) strategies, whatever the particular politics.” 81 Therefore, the nationalist 227
- Page 353 (location ~ 5404-5409)
MOST POLITICAL AGENDAS WILL BE REACTIONARY Most of those who harbor an ardent political agenda, whether nationalist, environmentalist, or socialist, will rally to defend the wobbling nationstate as the twenty-first century opens. Over time, it will become ever more obvious that survival of the nationstate and the nationalist sensibility are preconditions for preserving a realm for political compulsion. As Billig points out, nationalism “is the condition for conventional (political) strategies, whatever the particular politics.” 81 Therefore, the nationalist 227 content in all political programs will swell like a glutton’s paunch in the years ahead.
- Page 353 (location ~ 5404-5410)
Environmentalists, for example, will focus less on protecting “Mother Earth” and more on protecting the “motherland.” For reasons we explore later, the nation and citizenship will be especially sacred to those who value equality highly. More than they may now understand, they will come to agree with Christopher Lasch, who followed Hannah Arendt in proclaiming, “It is citizenship that confers equality, not equality that creates a right to citizenship.” 82 The privatization of sovereignty will deflate the industrial-era premium on equality by severing ties of the creators of wealth to nation and place. Citizenship will no longer serve as a mechanism for enforcing income redistribution based upon the equality of the vote within a confined territory. The consequences will include another bruising for the progressive view of history. Contrary to the expectations of supposedly forward-thinking people when the twentieth century opened, the free market was not destroyed by the decades but left triumphant. The Marxists anticipated the eclipse of capitalism, which never happened, to lead to the transcendence of nationstates and the emergence of a universal class consciousness among workers. In fact, the state will be eclipsed, but in a very different way. Something nearly the opposite to their expectation is happening. The triumph of capitalism will lead to the emergence of a new global, or extranational, consciousness among the capitalists, many of whom will become Sovereign Individuals.
- Page 353 (location ~ 5410-5420)
Opportunity Costs Far from suffering from the loss or curtailment of government services currently financed by high taxes, the information elite will flourish in an unparalleled fashion. Simply by escaping the excess tax burden they now pay, they will gain a tremendous margin for improving the material wellbeing of their families. As previously indicated, each $5,000 in tax paid annually reduces your lifetime net worth by $2.4 million if you can earn 10 percent annually from your investments. But if you could earn 20 percent, each $5,000 in annual tax payments would leave you $44 million poorer over a period of forty years. Cumulatively, paying $5,000 per year would therefore cost you more than a 228 million dollars per year. At that rate, $250,000 per year in tax would soon translate to an annual loss of more than $50 million, or $2.2 billion in a lifetime. And, of course, sporadically higher earnings, for even a few years, especially early in life, imply a still more startling loss of wealth to predatory taxation. Your
- Page 354 (location ~ 5428-5436)
Opportunity Costs Far from suffering from the loss or curtailment of government services currently financed by high taxes, the information elite will flourish in an unparalleled fashion. Simply by escaping the excess tax burden they now pay, they will gain a tremendous margin for improving the material wellbeing of their families. As previously indicated, each $5,000 in tax paid annually reduces your lifetime net worth by $2.4 million if you can earn 10 percent annually from your investments. But if you could earn 20 percent, each $5,000 in annual tax payments would leave you $44 million poorer over a period of forty years. Cumulatively, paying $5,000 per year would therefore cost you more than a 228 million dollars per year. At that rate, $250,000 per year in tax would soon translate to an annual loss of more than $50 million, or $2.2 billion in a lifetime. And, of course, sporadically higher earnings, for even a few years, especially early in life, imply a still more startling loss of wealth to predatory taxation. Your authors have seen to our own satisfaction that higher than 20 percent returns are possible.
- Page 354 (location ~ 5428-5437)
An individual with high earnings capacity paying taxes at Hong Kong rates could end up with a thousand times more wealth than someone with the same pretax performance paying taxes at North American or European rates. To subject your capital to recurring invasion by a high-tax jurisdiction is like running in a race and having someone shoot you every time you take a stride. If you could enter the same race with proper protection and run unhobbled, you would obviously go much farther, more quickly. The Sovereign Individuals of the future will take advantage of the “transient” inclinations that so offend Christopher Lasch and other critics of the information elite, and they will shop for the most profitable jurisdictions in which to domicile. While this is contrary to the logic of nationalism, it accords with a compelling economic logic.
- Page 355 (location ~ 5439-5446)
The “losers and leftbehinds” in the Information Society will surely envy and resent the success of winners, especially as the deepening of markets implies that this will be increasingly a “winners take all” world. Increasingly, rewards are already coming to be based upon relative performance, rather than absolute performance as was the case in industrial production. A factory worker was paid either on the basis of hours in attendance as measured by the time clock, or according to some criterion of output, such as pieces made, units assembled, or some similar measure. 86 Standardized pay was made possible by the fact that output was similar for everyone using the same tools.
- Page 357 (location ~ 5474-5479)
Middle talents will be in vast supply, some originating with persons who can rent their time for a fraction of the rates that prevail in the leading industrial countries. The losers will be the minor-league outfielders with “slider speed bats” whose 230 reflexes are half a second shy of hitting a major league fastball. Instead of making a million dollars a year banging out home runs, they will make $25,000, with no supplementary income from celebrity endorsements. Others will strike out altogether.
- Page 358 (location ~ 5482-5485)
“Once a country opens itself up to the global market those of its citizens with the skills to take advantage of it become the winners, and those without become losers or leftbehinds. Usually one party. . . claims to be able to defy globalization or ease its pain. That is Pat Buchanan in America, the Communists in Russia and now the Islamic Welfare Party here in Turkey. So what is happening in Turkey is much more complicated than just a fundamentalist takeover. It is what happens when widening globalization spins off more and more losers, when widening democratization gives them all a vote, while religious parties effectively exploit this coincidence to take power"87 THOMAS L. FRIEDMAN
- Page 358 (location ~ 5486-5491)
Who will the losers be in the Information Age? In general terms, the tax consumers will be losers. It is usually they who could not increase their wealth by moving to another jurisdiction. Much of their income is lodged in the rules of a national political jurisdiction rather than conveyed by market valuations. Therefore, eliminating or sharply reducing the taxes that are negatively compounding against their net worths may not appear to make them much better off-the price of lower taxation is a diminished stream of transfer payments. They will lose income because they will no longer be able to depend upon political compulsion to pick the pockets of persons more productive than themselves. Those without savings who rely upon government to pay their retirement benefits and medical care will in all probability suffer a fall in living standards. This loss of income translates into a depreciation of what financial writer Scott Burns has dubbed “transcendental” or political capital. 88 This “transcendental” or imaginary capital is based not upon the economic ownership of assets but upon the de facto claim to the income stream established by political rules and regulations. For example, the expected income from government transfer programs could be converted into a bond capitalized at prevailing interest rates. This imaginary bond funded by the imagined community is transcendental capital. It will be suddenly depreciated by the “great transformation” that is destined to reduce the grip of political authorities upon the cash flow required to redeem their promises.
- Page 359 (location ~ 5491-5502)
It does not take a giant stretch of the imagination to see that the information elite are likely to take advantage of the opportunities for liberation and personal sovereignty offered by the new cybereconomy. Equally, it is to be expected that the “leftbehinds” will become increasingly jingoistic and unpleasant as the impact of information technology grows in the new millennium. It is difficult to guess at precisely what point the reaction will turn ugly. Our guess is that the recriminations will intensify when Western nations begin to unambiguously crack apart in the manner of the former Soviet Union.
- Page 359 (location ~ 5504-5508)
As information technology comes to the fore, it will help facilitate a global perspective, as well as create ways by which Sovereign Individuals can harness the latent possibilities of information technology to escape from the nationalist burden of taxation. Within the next few decades, for example, narrow-casting will replace broadcasting as 232 the method by which individuals obtain their news. This has significant implications. It amounts to a change in the imaginations of millions from first personal plural to singular.
- Page 361 (location ~ 5531-5535)
The move to the Internet and the World Wide Web will also reduce the importance of location in commerce. It will create individual addresses that are not bounded territorially. Satellite-based digital telephone services will evolve beyond location-based land-line systems sharing a common international dialing code. The individual will have his own, unique global telephone address, like an Internet address, that will reach him wherever he happens to be. In due course, national postal monopolies will collapse, allowing privatized mail delivery by worldwide services with no particular ties to any existing nationstate. These and other apparently small steps will help free the ordinary consumer, as well as the cognitive elite, from rote identification with the nationstate. The demystification of citizenship will be most dramatically accelerated by the emergence of practical alternatives to dealing within bounded territories monopolized by states. The building blocks of the cybereconomy-cybermoney, cyberbanking, and an unregulated global cybermarket in securities-are almost bound to come into existence on a large scale.
- Page 362 (location ~ 5541-5549)
For the first time since the medieval period of fragmented sovereignty, borders will not be clearly demarcated. As we explored earlier, there will be no distinct territory in which many future financial transactions will occur. Instead of accepting an inheritance of liabilities on the basis of an accident of birth, increasing numbers of Sovereign Individuals will take advantage of this ambiguity to desert their tax liabilities, moving beyond citizenship to become customers. They will negotiate private tax treaties 233 as customers, along the lines now available in Switzerland, as analyzed in Chapter 8. A typical private tax treaty negotiated with the French-speaking Swiss cantons allows an individual or family to reside in exchange for a fixed annual tax payment of 50,000 Swiss francs (currently about $45,000). Note that this is not a flat-rate tax, but a fiat amount of tax fixed without respect to income. If your annual income is 50,000 Swiss francs, ($45,000) you should not enter into such a private tax treaty because your tax rate would be 100 percent. At an income of 500,000 Swiss francs, your rate is 10 percent. At SF5,000,000, the rate is just 1 percent. At SF50 million, your tax rate is just 1/10th of percent. If this seems an incredibly good deal compared to a marginal rate of 58 percent in New York City, that is merely a measure of how predatory and monopolistic the pricing of government services generally became during the industrial period.
- Page 363 (location ~ 5556-5566)
While reactionaries will respond by attempting to vilify innovators and revive nationalist sentiment, we doubt that the megapolitically defunct nationstate can exert a sufficiently strong tug of loyalties to withstand the Competitive pressures unleashed by information technology. Most thinking individuals in a world of bankrupt governments will prefer to be well treated as customers of protection services, rather than be plundered as citizens of nationstates. The wealthy OECD countries impose heavy tax and regulatory burdens upon individuals doing business within their borders. These costs may have been tolerable when the OECD nationstates were the only jurisdictions in which one could do business and reside at a reasonable level of comfort. That day has passed. The premium paid to be taxed and regulated as a resident of the richest nationstates no longer repays its cost. It will be ever less tolerable as competition between jurisdictions intensifies. Those with the earnings ability and capital to meet the competitive challenges of the Information Age will be able to locate anywhere and do business anywhere. With a choice of domiciles, only the most patriotic or stupid will continue to reside in high-tax countries.
- Page 365 (location ~ 5586-5595)
Unless there is an astonishing and almost miraculous change in policies, the successful investor or entrepreneur in the Information Age will pay a lifetime penalty of tens of millions, hundreds of millions, or even billions of dollars to reside in the countries with fiscal policies like those that have enjoyed the highest living standards during the twentieth century. Absent a radical change, the penalty will be highest for Americans. The United States is one of just three jurisdictions on the planet that impose taxes based upon nationality rather than residence. The other two are the Philippines, a former U.S. colony, and Eritrea, one of whose exiled leaders fell under the spell of the IRS during its long rebellion against Ethiopian rule. Eritrea now imposes a nationality tax of 3 percent. While that is a pale imitation of the U.S. rates, even that burden makes Eritrean citizenship a liability in the Information Age. Current law makes U.S. citizenship even a larger liability. The IRS has become one of America’s leading exports. More than any other country, the United States reaches to the corners of the earth to extract income from its nationals. If a 747 jetliner filled with one investor from each jurisdiction on earth touched down in a newly independent country, and each investor risked $1,000 in a start-up 235 venture in the new economy, the American would face a far higher tax than anyone else on any gains. Special, penal taxation of foreign investment, exemplified by the so-called PFIC taxation, plus the U.S. nationality tax, can result in tax liabilities of 200 percent or more on long-term assets held outside the United States. A successful American could reduce his total lifetime tax burden as a citizen of any of more than 280 other jurisdictions on the globe.
- Page 366 (location ~ 5599-5613)
Americans living in the United States or abroad are treated more like assets and less like customers than citizens of any other country. The American tax regime is therefore more anachronistic and less compatible with success in the Information Age than those of even the notoriously high-tax welfare states of Scandinavia. Citizens of Denmark or Sweden face few legal obstacles in realizing their growing technological autonomy as individuals. Should they wish to negotiate their own tax rates, they are free to elect to pay taxes in Switzerland by private treaty, or move to Bermuda and pay no income taxes at all. A Swede or a Dane who wishes to pay high taxes because he believes the Scandinavian welfare state is worth what it costs is actually making a choice. He can elect to be taxed at any rate that prevails in any other jurisdiction in the civilized or uncivilized world. To change his tax rate, he need only move. Technology makes such a choice easier by the moment. Yet that option is denied to Americans. Holding a U.S. passport is destined to become a major drawback to realizing the opportunities for individual autonomy made possible by the Information Revolution. Being born an American during the industrial period was a lucky accident. Even in the early stages of the Information Age, it has become a multimillion-dollar liability.
- Page 367 (location ~ 5614-5624)
Unless U.S. taxes are reformed to become more competitive with those of other jurisdictions, and are no longer levied on the basis of nationality, thinking persons will renounce U.S. citizenship, notwithstanding the obstacles imposed by Clinton’s exit tax. The competitive conditions of the Information Age will render it possible to earn high incomes almost anywhere. In effect, the locational monopolies that nationstates exploited to impose extremely high taxes will be broken by technology. They are already breaking down, As they erode further, competitive pressures are almost bound to drive the most enterprising and able to flee countries that tax too much. As former Economist editor Norman Macrae put it, such countries “will be inhabited residually, mainly by dummies.” 236 “[B]y the year 2012, projected outlays for entitlements and interest on the national debt will consume all tax revenues collected by the federal government. … There will not be one cent left over for education, children?s programs, highways, national defense, or any other discretionary program. BIPARTISAN U.S. COMMISSION ON ENTITLEMENT AND TAX REFORM
- Page 368 (location ~ 5630-5639)
Most of the assets of the typical retiree are not real wealth but “transcendental capital,” the expected value of transfer payments. Most people have been conditioned to rely upon these transfer payments to make up the gap in their private resources. The catch is that they are unlikely to be forthcoming. Pay-as-you-go systems will lack the cash flow or resources to make good on them. A study conducted by Neil Howe showed that even if pretax incomes in the United States were to rise faster than they have over the past twenty years, average after-tax incomes in America would have to be pushed down by 59 percent by 2040 in order to finance Social Security and government medical programs at current levels. This is not a problem that can be manipulated around the margins. The welfare state faces insolvency. Its financing predicament is even more acute in Europe than in North America. Italy is perhaps the worst case, followed closely by Sweden and the other Nordic welfare states that set the standard for generous terms in income-support programs. The Financial Times estimates that if “the present value of Italian state pensions is included, the country’s public sector debt would rise to more than 200 percent of GDP” 91 Indebtedness at such levels is all but mathematically hopeless. A comprehensive study of commercial indebtedness of Toronto Stock Exchange companies undertaken a few years ago showed that few survive debt ratios one-quarter as extreme as those facing the leading welfare states today. 92 Put simply, they are broke. As this reality is faced, grudgingly but inevitably, literally trillions in unfunded entitlement obligations will be written off.
- Page 369 (location ~ 5644-5656)
VIOLENCE IN PERSPECTIVE There are at least two contending theories about what precipitates violence in conditions of change. Historian Charles Tilly summarizes one theory: “[T]he stimulus to collective violence comes largely from the anxieties people experience when established institutions fall apart. If misery or danger compounds the anxiety, runs the theory, the reaction becomes all the more violent.” In Tilly’s view, however, violence is not so much a product of anxiety as it is a far more rational attempt to bully authorities into meeting their responsibilities" motivated by a “sense of justice denied.” According to Tilly’s interpretation, “large structural changes” tend to stimulate collective violence of a “political” nature. ?Instead of constituting a sharp break from ’normal’ political life, furthermore, violent struggles tend to accompany, complement, and extend organized, peaceful attempts by the same people to accomplish their objectives. They belong to the same world as nonviolent contention."
- Page 370 (location ~ 5668-5676)
The collapse of coerced income redistribution is bound to upset those who expect to be on the receiving end of the trillions in transfer programs. Mostly, these will be “the losers or leftbehinds,” persons without the skills to compete in global markets. Like the pensioners of the former Soviet Union who formed the core of Zuganov’s Communist support, the disappointed pensioners of the dying welfare states will form a reactionary constituency keen to prevent the sovereignty of the nationstates from being privatized, thereby depriving the state of its license to steal. As they realize that governments they formerly controlled are losing their sovereignty over resources and the ability to compel large-scale income transfers, they will become as adamant as French civil servants in fighting arithmetic.
- Page 371 (location ~ 5686-5691)
This is a tradition that began with the nineteenth-century “White Caps” and Ku Klux Klan. Yet blacks, as a group, are major beneficiaries of income transfers, affirmative action, and other fruits of political compulsion. They are also disproportionately represented in the U.S. military. Therefore, they are likely to emerge, along with blue-collar whites, as among the most fervent partisans of American nationalism. Politicians willing to cater to the insecurities of those whose relative talents fall well down on Ammon’s turnip will come noisily to the fore in almost every country. From Slobodan Milosevic in Serbia to Pat Buchanan in the United States to Winston Peters in New Zealand, to Necmettin Erbakan of Turkey’s fundamentalist Islamic Welfare Party, demagogues will rail against the globalization of markets, immigration, and freedom of investment.
- Page 372 (location ~ 5699-5705)
The argument is not dissimilar to the psychological explanation for the appeal of fascism developed by Erich Fromm in his famous work Fear of Freedom, first published in 1942. According to Fromm, social mobility introduced by capitalism had destroyed the fixed identities of traditional village life. The son of a farmer no longer knew that he would inevitably be a farmer, or even that he would be bound to live scrabbling to harvest a crop on the same poor ground that his father tilled. He now had a broad choice of occupation. He could become a schoolteacher, a merchant, a soldier; study medicine or take to the sea. Even as a farmer, he could emigrate to the United States, Canada, or Argentina and make a life far from the home of his forebears. This freedom that capitalism provided to people “to create their own identities” proved scary to those who were not prepared to make creative use of it. As Billig said, they yearned “for the security of a solid identity,” and were “drawn towards the simplicities of nationalist and fascist propaganda.“99 Equally as Billig writes of the twilight of the industrial era, “There is a global psychology, which strikes the nation from above, withering loyalties with a free play of identities. And then, there is the hot psychology of caste or tribe, which hits at the soft underbelly of the state with a powerfully intolerant commitment and emotional ferocity.” 100 Andrew Heal views the same phenomenon from another perspective. He sees two great “global political and economic trends. . . . Trend one is the growth of the global economy. . . The second is the rise of nationalist, ethnic and regionalist sentiment, whether it be Maori, Scottish, Welsh or from anti-immigrant factions, who even as their 240 governments push them towards new, borderless horizons, pull themselves ever so hard the opposite way.” 101 However you choose to look at them, whether as major “trends” or “psychological themes,” it is clear that a strong reactionary sentiment in favor of nationalism and against the fall of borders and the deepening of markets is gathering its voice worldwide.
- Page 374 (location ~ 5724-5739)
The argument is not dissimilar to the psychological explanation for the appeal of fascism developed by Erich Fromm in his famous work Fear of Freedom, first published in 1942. According to Fromm, social mobility introduced by capitalism had destroyed the fixed identities of traditional village life. The son of a farmer no longer knew that he would inevitably be a farmer, or even that he would be bound to live scrabbling to harvest a crop on the same poor ground that his father tilled. He now had a broad choice of occupation. He could become a schoolteacher, a merchant, a soldier; study medicine or take to the sea. Even as a farmer, he could emigrate to the United States, Canada, or Argentina and make a life far from the home of his forebears. This freedom that capitalism provided to people “to create their own identities” proved scary to those who were not prepared to make creative use of it. As Billig said, they yearned “for the security of a solid identity,” and were “drawn towards the simplicities of nationalist and fascist propaganda.“99 Equally as Billig writes of the twilight of the industrial era, “There is a global psychology, which strikes the nation from above, withering loyalties with a free play of identities. And then, there is the hot psychology of caste or tribe, which hits at the soft underbelly of the state with a powerfully intolerant commitment and emotional ferocity.” 100
- Page 374 (location ~ 5724-5733)
In its twilight, with a faltering capacity to redeem promises of something for nothing from an empty pocket, the welfare state found it expedient to foster new myths of discrimination. Many categories of officially “oppressed” people were designated, especially in North America. Individuals in groups with designated status as “victims” were informed that they were not responsible for shortcomings in their own lives. Rather, the fault was said to lie with “dead white males” of European descent, and the oppressive power structure allegedly rigged to the disadvantage of the excluded groups. To be black, female, homosexual, Latino, francophone, disabled, etc. was to be entitled to recompense for past repression and discrimination. If Lasch’s argument is to be believed, the purpose of heightening a sense of victimization was to undermine nations, making it easier for the new, footloose information elite to escape the commitments and duties of citizenship. We are not entirely convinced that the new elite, especially most of those in the mass media, are cunning enough to reason to such a posture.
- Page 375 (location ~ 5740-5749)
Industrial innovation tended to open job opportunities for the unskilled and increase the scale economies of enterprise. This not only raised the earnings of the poor without any effort on their part, it also tended to increase the power of political systems, making them more capable of withstanding unrest. Those who were displaced by mechanization and automation in the early phases of the Industrial Revolution tended to be skilled artisans, craftsmen and journeymen, rather than unskilled labor. This was certainly true in the textile industry, the first to employ mechanization and power equipment on a large scale, which led to a violent reaction by Luddites, who destroyed textile machinery and murdered factory owners during a rampage in the early nineteenth century. On the other hand, the followers of Captain Swing, the mythical leader of an 1830 rebellion in southeastern England, were day laborers.
- Page 377 (location ~ 5768-5774)
Contrary to the romantic jabberings of Marxists and others who have transformed the violent opponents of labor-saving technology into heroes, they were an unpleasant and violent lot who opposed the introduction of technology that raised living standards worldwide for purely selfish reasons. While the violent followers of Ned Ludd and Captain Swing jeopardized public order for many months in England, once suppressed by central authority their movements were bound to miscarry. The poor, unskilled majority were unlikely to be long attracted to a cause that promised to destroy machinery that offered them jobs and also raised their living standards by lowering the cost of items they needed, such as warm clothing and bread.
- Page 377 (location ~ 5777-5782)
Over the past two centuries, industrial automation dramatically raised wages for unskilled work, especially in the small part of the world where conditions first allowed capitalism to flourish. The large scale of advanced industrial enterprise not only rewarded unskilled labor with unprecedented wages, it also facilitated income redistribution. The welfare state arose as a logical consequence of the technology of industrialism. Because of their large scale and high capital costs, the leading industrial employers were the easiest targets to tax. And they could be relied upon to keep records and enforce the garnishment of wages that made the income tax technologically feasible as it had not been in previous centuries when economies were more decentralized. The net effect was that the growth of scale economies promoted by industrial innovation made governments richer, and presumably better able to maintain order.
- Page 378 (location ~ 5786-5793)
The one coherent thread that runs through these complaints is a steadfast resistance to technological innovation and market change. In the early stages of the factory system, this resistance led to violence. It may again. And not because capitalists are “exploiting the workers.” The advent of the computer as a paradigm technology revealed the absurdity of that claim. It might have been half-credible for the inattentive to suppose that a barely literate auto worker had somehow been “exploited” in the production of an automobile by owners who conceived and financed the businesses that employed workers. The crucial role of conceptual 243 capital in the production and marketing of tangible products was less obvious than it is in the output of the Information Age, which clearly involves mental work. Therefore, the plausibility of the assumption that entrepreneurs had somehow seized the value of information products actually created by workers was much diminished. Where the value was clearly created through mental work, as in the production of consumer software, it was little short of preposterous to suppose that it was actually the product of anyone other than the skilled persons who conceived it. In fact, far from assuming that the workers created all value, as Marxists and socialists did through most of the nineteenth and twentieth centuries, the obvious and growing trend away from unskilled employment gave rise to a spreading worry about quite the opposite problem -whether unskilled laborers still had any economic contribution to make.‘04
- Page 379 (location ~ 5801-5812)
The point of designating victims was not to incubate paranoid delusions of persecution among important subgroups of industrial society, or to subsidize the spread of counterproductive values. It was to relieve the bankrupt state of the fiscal pressures of redistributing income. Inculcating delusions of persecution was merely an unfortunate side effect. Ironically, the surge in concern about “discrimination” coincided with the early stages of a technological revolution that is bound to make actual arbitrary discrimination far less of a problem than it has ever been before. No one on the Internet knows or cares whether the author of a new software program is black, white, male, female, homosexual, or a vegetarian dwarf. While the reality of discrimination is bound to be less oppressive in the future, that will not necessarily relieve the pressure for “reparations” to compensate various real or imagined wrongs. Every society, whatever its objective circumstances, gives rise to one or more rationalizations for income redistribution. They range from the subtle to the absurd, from the biblical injunction to love your neighbor as yourself, to the invocations of black magic. Sorcery, witchcraft, and the evil eye are the flip side of religious feeling, the spiritual equivalent of the Inland Revenue or the IRS.
- Page 380 (location ~ 5819-5828)
We expect a return of extortion motivated by a desire to share in the rewards of achievement as the Information Age unfolds. Groups that feel aggrieved over past discrimination are unlikely to quickly relinquish their apparently valuable status as victims simply because their claims on society become less justified or harder to enforce. They will continue to press their claims until evidence in the local environment leaves no doubt that they will no longer be rewarded. The growth of sociopathic behavior among Afro-Americans and Afro-Canadians tells you that. It says that there is little balance between black anger and a realistic appraisal of the extent to which black problems are self-inflicted consequences of antisocial behavior. Black anger has risen, even as black lifestyles have grown more dysfunctional. Out-of-wedlock births have soared. Educational attainment has fallen. Growing percentages of young blacks are implicated in criminal activities, to the point where there are now more black men in penitentiaries than in colleges.
- Page 381 (location ~ 5836-5844)
These perverse results may have had the temporary effect of increasing the flow of resources to underclass communities during the twilight of industrialism by raising the shakedown threat against society as a whole. But the effect could be only temporary. By eliminating the beneficial impact of competition in challenging underachievers to conform to productive norms, the welfare state has helped to create legions of dysfunctional, paranoid, and poorly acculturated people, the social equivalent of a powder keg. The death of the nationstate and the disappearance of income redistribution on a large scale will no doubt lead some among the more pyschopathic of these unhappy souls to strike out against anyone who appears more prosperous than they. Therefore, it is reasonable to suppose that social peace will be in jeopardy as the Information Age unfolds, especially in North America and in multiethnic enclaves in Western Europe. “We will never lay down Arms [till] The House of Commons passes an Act to put down all Machinery hurtful to Commonality, and repeal that to hang Frame Breakers. But We. We petition no more-that won’t do-fighting must. “Signed by the General of the Army of Redressers Ned Ludd Clerk “Redresser-forever Amen”
- Page 382 (location ~ 5845-5853)
The world’s nationstates will seek to counteract the cybereconomy and Sovereign Individuals who are able to take advantage of it to accumulate wealth. A furious nationalist reaction will sweep the world. Part and parcel of it will be an antitechonological reaction equivalent to the Luddite and other antitechnology rebellions in Britain during the Industrial Revolution. This should be considered closely, because it 246 could be a key to the evolution of governance in the new millennium. One of the crucial challenges of the great transformation ahead will be maintaining order in the face of escalating violence, or alternatively escaping its brunt. Individuals and firms that are particularly associated with the advent of the Information Age, including those in Silicon Valley, and even the suppliers of electricity required to power the new technology, will have to maintain a special diligence against freelance, neo-Luddite terrorism. A lunatic like the Unabomber is unfortunately likely to stimulate brigades of imitators as frustration with falling incomes and resentment against achievement mount. We suspect much of the violence to come will involve bombings. As reported in the New York Times, domestic terrorism across the United States soared during the 1990s.
- Page 384 (location ~ 5881-5890)
Defense Becomes a Private Good Notwithstanding the penal taxes imposed by nationstates as a price of protection, they are unlikely to provide it effectively in the years to come. The falling scale of violence implied by the new information technology makes the provision of a massive military establishment far less useful. This implies not only a declining decisiveness in warfare, meaning that states will be less able to actually protect citizens, it also implies that the apparent extraterritorial hegemony of the United States as the world’s superpower will be less effective in the next century than the hegemony of Great Britain was in the nineteenth century. Until the onset of World War I, power could be effectively and decisively projected from the core to the periphery at relatively low cost. In the twenty-first century, the threats that major powers pose to the safety of life and property will necessarily diminish with the return to violence. Falling returns to violence suggest that nationstates or empires capable of exercising military power on a large scale are unlikely to survive or come into being in the Information Age. As the fiscal requirement for provision of an adequate defense falls, it will become ever more credible to treat protection services as if they were private goods.
- Page 385 (location ~ 5894-5903)
In the long run, of course, Sovereign Individuals will probably be able to travel on nongovernmental documents, issued like letters of credit by private agencies and affinity 247 groups. It is not farfetched to suppose that a group will emerge as a kind of merchant republic of cyberspace, organized like the medieval Hanseatic League, to facilitate negotiation of private treaties and contracts among jurisdictions as well as to provide protection for its members. Imagine a special passport issued by the League of Sovereign Individuals, identifying the holder as a person under the protection of the league. Such a document, if it comes into existence, will be only a temporary artifact of the transition away from the nationstate and the bureaucratic age it fostered. Before the modern period, passports were generally unnecessary to pass frontiers, which were loosely defined in most cases. While letters of safe conduct were sometimes employed in medieval frontier societies, they were normally issued by the authorities whose realm was to be visited, rather than the jurisdiction from which the traveler originated. More important than a passport were letters of introduction and credit, which allowed a traveler to find lodging and negotiate business. That day will come again. Ultimately, persons of substance will be able to travel without documents at all. They will be able to identify themselves on a foolproof biometric basis through voice-recognition systems or retinal scanning that recognizes them uniquely.
- Page 386 (location ~ 5909-5920)
We argue in this book that it will no longer take a nationstate to fight an Information War. Such wars could be undertaken by computer programmers deploying large numbers of “bots” or digital servants. Bill Gates already possesses a greater capacity to detonate logic bombs in vulnerable systems globally than most of the world’s nationstates. In the age of the Information War, any software company, or even the Church of Scientology, would be a more formidable antagonist than the accumulated threat posed by the majority of the states with seats in the United Nations. This loss of power by nationstates is a logical consequence of the advent of low-cost, advanced computational capacity. Microprocessing both reduces returns to violence and creates for the first time a competitive market for the protection services for which governments charged monopoly prices in the industrial period. In the new world of commercialized sovereignty, people will choose their jurisdictions, much as many now choose their insurance carriers or their religions.*
- Page 387 (location ~ 5924-5932)
COMPETITION AND ANARCHY It is important to bear in mind that the competition between jurisdictions that we anticipate is not mainly competition among organizations employing violence in the same territory. As indicated earlier, competitive organizations using violence tend to increase the penetration of violence in life, reducing economic opportunity. As Lane put it, In the use of violence there were obviously great advantages of scale when competing with rival violence-using enterprises or establishing a territorial monopoly. This fact is basic for the economic analysis of one aspect of government: the violence-using, violence-controlling industry was a natural monopoly, at least on land. Within territorial limits the service it rendered could be produced much more cheaply by a monopoly. To be sure, there have been times when violence-using enterprises competed in demanding payments for protection in almost the same territory, for example, during the Thirty Years’ War in Germany. But such a situation was even more uneconomic than would be competition in the same territories between rival telephone systems.
- Page 388 (location ~ 5937-5945)
Hirshleifer analyzes a number of anarchic settings. These include, in addition to relations among sovereignties, gang warfare in Prohibition-era Chicago and “miners versus claim jumpers in the California gold rush.” Note that even though California was part of the United States by the onset of the gold rush in 1849, conditions in the goldfields were properly described as anarchy. As Hirshleifer notes, “[T]he official organs of law were impotent.” “’ He argues that topographical conditions in the mountainous camps, plus effective vigilante organization by miners to combat claim jumpers, made it difficult for gangs of outsiders to seize gold mines, in spite of the lack of effective law enforcement. In other words, under certain conditions, valuable property can be effectively protected even under anarchy. The question is whether Hirshleifer’s theoretical analysis of the dynamics of the spontaneous order of the Darwinian “natural economy” is of any relevance to the economy of the Information Age. We suspect it is. While we do not anticipate generalized anarchy, or goldfield conditions everywhere, we do anticipate an increase in the number of anarchic relations in the world system. In light of this expectation, Hirshleifer’s argument about conditions under which “two or more anarchic contestants” can “retain viable shares of the socially available resources in equilibrium” is suggestive.! 16 In particular, he explores when anarchy is prone to “break down” into tyranny or dominance hierarchies, which happens when the anarchic parties can be subdued by an overwhelming authority.
- Page 390 (location ~ 5968-5979)
Decisive warfare, almost by definition, subdues anarchy by placing contestants for the control of resources under the domination of a more powerful authority. On the other hand, declining decisiveness in battle, which corresponds to the superiority of the defense in military technology, contributes to the dynamic stability of anarchy. Therefore, the apparent impact of information technology in reducing the decisiveness of military action should make the anarchy between minisovereignties more stable and less prone to be replaced through conquest by a large government. Less decisiveness in battle also implies less fighting, which is an encouraging deduction for the world in the Information Age.
- Page 391 (location ~ 5983-5988)
In the Information Age, digital resources may prove to be predictable, but they will not be ‘-durable resources" of the kind that Hirshleifer identifies with territoriality and anarchy. Indeed, if digital money can be transferred anywhere on the planet at the speed of light, conquest of the territory in which a cyberbank is incorporated may be a waste of time. Nationstates wishing to suppress Sovereign Individuals would have to seize simultaneously both the world’s banking havens and its data havens. Even then, if encrypted systems are designed properly, nationstates would merely be able to sabotage or destroy certain sums of digital money, not seize
- Page 392 (location ~ 5999-6003)
In the Information Age, digital resources may prove to be predictable, but they will not be ‘-durable resources" of the kind that Hirshleifer identifies with territoriality and anarchy. Indeed, if digital money can be transferred anywhere on the planet at the speed of light, conquest of the territory in which a cyberbank is incorporated may be a waste of time. Nationstates wishing to suppress Sovereign Individuals would have to seize simultaneously both the world’s banking havens and its data havens. Even then, if encrypted systems are designed properly, nationstates would merely be able to sabotage or destroy certain sums of digital money, not seize it.
- Page 392 (location ~ 5999-6003)
In the Information Age, digital resources may prove to be predictable, but they will not be ‘-durable resources" of the kind that Hirshleifer identifies with territoriality and anarchy. Indeed, if digital money can be transferred anywhere on the planet at the speed of light, conquest of the territory in which a cyberbank is incorporated may be a waste of time. Nationstates wishing to suppress Sovereign Individuals would have to seize simultaneously both the world’s banking havens and its data havens. Even then, if encrypted systems are designed properly, nationstates would merely be able to sabotage or destroy certain sums of digital money, not seize it. The conclusion is that the most predictable and vulnerable assets of the rich in the coming Information Age may be their physical persons-in other words, their lives. Which is why we fear Luddite-style terrorism in the coming decades, some of it perhaps covertly encouraged by agents provocateurs in the employ of nationstates.
- Page 392 (location ~ 5999-6006)
Over the long term, however, we doubt that the leading nationstates will succeed in suppressing Sovereign Individuals. For one thing, existing states, especially in capital-poor regions, will find that they have more to gain by harboring Sovereign Individuals than by maintaining solidarity with the North Atlantic nationstates and upholding the sanctity of the “international” system. The fact that bankrupt, high-tax welfare states want to keep “their citizens” and “their capital” in “their country” will not be a compelling motive to be observed by hundreds of fragmenting sovereignties elsewhere.
- Page 392 (location ~ 6006-6010)
Demand Creates Supply Those pressures will be felt more vigorously early on in nationstates with the weakest balance sheets. Among the new “offshore” centers will be fragments and enclaves of current nationstates, like Canada and Italy, which will almost surely disintegrate well before the end of the first quarter of the twenty-first century. The birth of a global market for high-quality, cost-efficient jurisdictions will help bring such jurisdictions into being. As in ordinary commerce, small-scale competitors will be more nimble and better able to compete. The thinly populated jurisdiction can more easily structure itself to operate efficiently. The information elite will seek high-quality protection on contract for a reasonable fee. While this fee will fall well short of what would be required to redistribute a noticeable benefit to the whole populations of nationstates as they are now structured, with tens of millions to hundreds of millions of citizens, it would not be trivial in a jurisdiction with a population in the tens of thousands or hundreds of thousands.
- Page 393 (location ~ 6018-6026)
We believe that the age of the nationstate is over, but this is not to say that the attraction of nationalism as a tug on human emotions will be immediately quieted. As an ideology, nationalism is well placed to draw upon universal emotional needs. We have all had the experience of awe, such as one might feel on first seeing a giant waterfall, or first standing at the entrance to a great cathedral. We have all had the experience of belonging, such as we might feel at a family Christmas party, or as a member of a successful team in some sport. Human culture calls for a response to both of these powerful emotions. We are illuminated by the historic culture of our own country, which is itself part of the larger culture of humanity. We are comforted by the knowledge that we belong to a cultural group, which gives us both a sense of participation and of identity.
- Page 394 (location ~ 6031-6037)
“Democratic political Systems are a recent affair in historical terms. They had a brief existence in Greece and Rome, afterward reemerging in the 18th century, fewer than 200 years ago. . . . A cycle of repudiation may now have begun again.”’ WILLIAM PFAFF It is no secret that democracy has been relatively rare and fleeting in the history of governments. In those times, ancient and modern, where democracy has prevailed, it has depended for its success upon megapolitical conditions that reinforced the military power and importance of the masses. Historian Carroll Quigley explored these characteristics in Weapons Systems and Political Stability.2
- Page 395 (location ~ 6047-6052)
DEMOCRACY, THE FRATERNAL TWIN OF COMMUNISM? 254 We offered a paradoxical explanation in Chapter 5, namely that democracy flourished as a fraternal twin of Communism precisely because it facilitated unimpeded control of resources by the state. This conclusion may seem silly to the ‘common sense" of the industrial era. We do not deny that within the terms of industrial society, democratic systems and Communism were stark opposites. But seen from a megapolitical perspective, as they may more likely be seen from the vantage of the Information Age, the two systems had more in common than you would have been led to suspect.
- Page 396 (location ~ 6063-6068)
The state socialist system was predicated upon the doctrine that the state owned everything. The democratic welfare state, by contrast, made more limited initial claims. It pretended to allow private ownership, although of a contingent kind, and thereby harnessed superior incentives to mobilize output. Instead of mismanaging everything from the start, democratic governments in the West allowed individuals to own property and accumulate wealth. Only after the wealth had been created did the democratic nationstates step in to tax a large fraction of it away. The word “large” should be capitalized. For example, in 1996 the lifetime federal tax rate in the United States stood at seventy-three cents on the dollar. For owners of corporations, who received their income through dividends, the rate was eighty-three cents on the dollar. And for anyone who sought to leave or give money to grandchildren, the federal tax rate was ninety-three cents on the dollar. When state and local taxes are considered as well, democratic government at all levels confiscates the lion’s share of each dollar earned in the United States. Predatory tax rates made the democratic state a de facto partner with a three-quarters to nine-tenths share in all earnings. This was not the same thing as state socialism, to be sure. But it was a close relation. The democratic state survived longer because
- Page 397 (location ~ 6075-6085)
The state socialist system was predicated upon the doctrine that the state owned everything. The democratic welfare state, by contrast, made more limited initial claims. It pretended to allow private ownership, although of a contingent kind, and thereby harnessed superior incentives to mobilize output. Instead of mismanaging everything from the start, democratic governments in the West allowed individuals to own property and accumulate wealth. Only after the wealth had been created did the democratic nationstates step in to tax a large fraction of it away. The word “large” should be capitalized. For example, in 1996 the lifetime federal tax rate in the United States stood at seventy-three cents on the dollar. For owners of corporations, who received their income through dividends, the rate was eighty-three cents on the dollar. And for anyone who sought to leave or give money to grandchildren, the federal tax rate was ninety-three cents on the dollar. When state and local taxes are considered as well, democratic government at all levels confiscates the lion’s share of each dollar earned in the United States. Predatory tax rates made the democratic state a de facto partner with a three-quarters to nine-tenths share in all earnings. This was not the same thing as state socialism, to be sure. But it was a close relation.
- Page 397 (location ~ 6075-6084)
The state socialist system was predicated upon the doctrine that the state owned everything. The democratic welfare state, by contrast, made more limited initial claims. It pretended to allow private ownership, although of a contingent kind, and thereby harnessed superior incentives to mobilize output. Instead of mismanaging everything from the start, democratic governments in the West allowed individuals to own property and accumulate wealth. Only after the wealth had been created did the democratic nationstates step in to tax a large fraction of it away. The word “large” should be capitalized. For example, in 1996 the lifetime federal tax rate in the United States stood at seventy-three cents on the dollar. For owners of corporations, who received their income through dividends, the rate was eighty-three cents on the dollar. And for anyone who sought to leave or give money to grandchildren, the federal tax rate was ninety-three cents on the dollar. When state and local taxes are considered as well, democratic government at all levels confiscates the lion’s share of each dollar earned in the United States. Predatory tax rates made the democratic state a de facto partner with a three-quarters to nine-tenths share in all earnings. This was not the same thing as state socialism, to be sure. But it was a close relation. The democratic state survived longer because it was more flexible and collected more prodigious quantities of resources compared to those available in Moscow or East Berlin.
- Page 397 (location ~ 6075-6086)
Mass Democracy Incompatible with the Information Age A moment’s reflection shows that the technology of the Information Age is not inherently a mass technology. In military terms, as we have indicated, it opens the potential for “smart weapons” and “Information War,” in which “logic bombs” could sabotage centralized command and control systems. Not only does information technology clearly point toward the perfection of weapons operated by specialists; it also reduces the decisiveness of warfare, improving the relative position of the defense. Microtechnology makes possible dramatic gains in the military power of individuals, while reducing the importance of massed infantry formations.
- Page 398 (location ~ 6100-6104)
Think about it. In principle, a legislature would be just as democratic if its members were chosen according to any arbitrary division of the population. Parliamentary ridings or congressional districts could be based on birthdays, or even alphabetical constituencies. Everyone born on January 1 could vote from one list of 256 candidates. Those born on January 2 from another. Or every person whose name began with “Aa” to “Af” could choose among one list of candidates. Those whose names began with “Ag” would chose among another. And so on. No such system exists now for several reasons. A first and sufficient reason is that it was technologically impractical in the eighteenth century. But even more important is the fact that birthday or alphabetical constituencies would not have reflected or even approximated the distribution of raw power that the vote had to manifest at that time. Persons who shared no more than birthdays or the first few letters of their names in common would have been and still would be extremely hard to organize into any coherent power base.
- Page 399 (location ~ 6110-6118)
To an increasing extent, the economy is transcending geographic limitations. Society is far more mobile. And so is wealth in the Information Age. Unlike a steel mill, a computer program cannot easily be held hostage to the local political process. A steel mill can scarcely be moved when legislators determine to tax it or regulate its owners. A computer program can be transmitted by modem at the speed of light anywhere in the world. The owner can pack his laptop computer and fly away. This, too, undermines the megapolitical foundations of geographic constituencies. A major difficulty that all representative democratic systems share in light of our analysis is that their geographic constituencies are bound to overrepresent the vested interests of industrial-era enterprises. The “losers” or “leftbehinds” are perfect constituents, geographically concentrated and politically needy. The history of industrial democracy confirms this. “Winners” from new industries were chronically underrepresented in legislative deliberations even in the high tide of the Industrial Age in the 1930s. 6 The tendency of politicians to represent the existing, established competitors, not the new enterprises that might come into being or the potential customers of new enterprises, is probably an inherent feature of representative government.
- Page 401 (location ~ 6136-6146)
New Institutions Happily, however, dictatorship is not the sole alternative to mass democracy. We believe that the technology of the Information Age will give rise to new forms of governance-just as the Agricultural Revolution and, later, the industrial era brought forth their own distinctive forms of social organization. What might such new institutions be? Somewhere, in some jurisdiction, sometime before the crack of doom, someone will realize the potential that computer technology offers to make possible truly representative government. The supposed problem of excessive campaign expenditures and the undoubted annoyance of chronic political campaigning could be resolved in an instant. Rather than being elected, representatives could be selected by sortition entirely at random, with a high statistical probability that their talents and views would match those of the population at large.
- Page 403 (location ~ 6171-6177)
Straight Commission Today, politicians bent on optimizing votes have little incentive to analyze problems coherently. It is hardly surprising, therefore, that their records in actually solving problems are so pathetic as compared to entrepreneurs, business executives, and coaches of sports teams, who are rewarded according to performance. Performance-based compensation for legislators would not make everyone chosen at random as effective as Lee Kuan Yew. But there is every reason to believe that performance would be greatly enhanced if the pay of legislators were keyed to some objective measure of performance, such as the growth of after-tax per capita income. Pay them on the basis of performance, and the chance that they would perform would increase a thousandfold. The gain to society from policies that improve real income net of taxes could be huge.
- Page 404 (location ~ 6188-6194)
Pay Leaders to Do a Good Job A rational selection process, combined with a constructive incentive structure to reward positive leadership, would bring able people to the helm of government. It would also mobilize new types of talent who otherwise would not normally take an interest in the problems of governance. The most talented executives in the world could be attracted to run faltering governments if they could be paid on the basis of results they actually achieve for society. A leader who could significantly boost real income in any leading Western nation could justly be paid far more than Michael Eisner. In a better world, every successful head of government would be a multimillionaire.
- Page 407 (location ~ 6239-6245)
COMMERCIALIZED SOVEREIGNTY We expect to see something new emerge to replace politics. While any of the possibilities we canvass above might be tried with some advantage, our expectation is not that politics will be reformed or improved, but that it will be antiquated and, in most 262 respects, abandoned. By this we do not mean to say that we expect to see dictatorship, but rather entrepreneurial government - the commercialization of sovereignty. Unlike dictatorship, or even democracy, commercialized sovereignty will not foreclose choice. It will afford every individual greater scope for expressing his views.
- Page 408 (location ~ 6253-6258)
Avoiding “Cumbrous Political Channels” In effect, if information technology evolves as it may, it will assure that governments are actually controlled by their customers. As a customer, you will first have hundreds, then thousands of options to reduce your protection costs directly by contracting a private tax treaty with a nationstate or by defecting from nationstates altogether to emerging minisovereignties. These contract “entry” and defection or “exit” options are economic expressions of your desires as a customer. Voting with your feet and your money has the great advantage that it leads to results that you desire.
- Page 410 (location ~ 6278-6283)
For the rest, they can express their views only though cumbrous political channels.5 Albert 0. Hirschman, speaking as a partisan of politics, took exception to Friedman’s preference for “exit as the ‘direct’ way of expressing one’s unfavorable views of an organization. A person less well trained in economics might naively suggest that the direct way of expressing one’s views is to express them!” 16 Whether it is more direct or effective to express your opinions through market mechanisms, such as providing or withdrawing your support as a customer, or through “cumbrous political channels” is a 264 complex and contentious question. Different persons will answer it in different ways.
- Page 411 (location ~ 6298-6303)
Exit First, Contract Later The early stimulus to commercialization of sovereignty will have to come from persons expressing themselves economically by exit. This option will be most difficult in the United States, where it will also be most valuable. The “Berlin Wall” for capitalists imposed by President Bill Clinton and the Republican Congress contradicts the slogan so confidently expressed by American nationalists in the 1960s, “Love it or leave it.” By imposing penal taxes on those who leave, the exit tax is meant to compel loyalty. Yet this vindictive legislation, reminiscent of the penalties imposed on fleeing property owners in the last days of the Roman Empire, may inadvertently set the framework for a more rational policy later in the Information Age. At some point, when enough able persons have left and compounded sufficiently large fortunes offshore, it will become appealing to U.S. authorities to allow citizens or green card holders to buy their way out of future tax liabilities by paying an exit tax but not exiting.
- Page 415 (location ~ 6362-6370)
E. J. Dionne, Jr., is a political reporter for the Washington Post. Like Lasch, he harks back, nostalgically, to politics. He also speaks for a social democratic leveling impulse that is bound to find louder voice in the decades to come as the new megapolitical realities of the Information Age more decisively undermine institutions left over from the modern world. Dionne sees the material improvements in living standards that were widely shared within rich jurisdictions in the twentieth century as owing mainly to democratic politics rather than to technological or economic development. His message is that hope for the future requires extending the dominion of politics over the technologies of the Information Age: The overriding need in the United States and throughout the democratic world is for a new engagement with democratic reform, the political engine that made the industrial era as successful as it was. The technologies of the information age will not on their own construct a successful society, any more than industrialism left to itself would have made the world better. … Even the most extraordinary breakthroughs in technology and the most ingenious applications of the Internet will not save us from social breakdown, crime or injustice. Only politics, which is the art of how we organize ourselves, can even begin to take on such tasks."
- Page 417 (location ~ 6382-6391)
As we have attempted to convey in explaining our theory of megapolitics, technological imperatives, not popular opinion, are the most important sources of change. If our theory of megapolitics is valid, the reason the modern age, with its concept of 269 citizenship and politics organized around the state, supplanted the feudal system and chivalry organized around personal oaths and relationships was not a matter of ideas, but shifts in costs and benefits arising from new technology. Chivalry did not die because Castiglione or others failed to convince a disinterested populace who had any control over the matter that there was no need for honor or morality in the affairs of state. To the contrary, Castiglione’s Courtier is critical of princes and the kind of behavior his contemporary, Niccolo Machiavelli, commended in his Il Principe, or The Prince. But so what? Machiavelli ultimately reached a larger audience with his book, not because his argument in The Prince was more eloquent but because his advice better suited the megapolitical conditions of the modern age.
- Page 419 (location ~ 6422-6430)
As the distinguished twentiethcentury philosopher Ernst Cassirer said in discussing “The Moral Problem in Machiavelli,” The book describes, with complete indifference, the ways and means by which political power is to be acquired and maintained. About the right use of this power it does not say a word. … No one had ever doubted that political life, as matters stand, is full of crimes, treacheries and felonies. But no thinker before Machiavelli had undertaken to teach the art of these crimes. These things were done, but they were not taught. That Machiavelli promised to become a teacher in the art of craft, perfidy, and cruelty was a thing unheard of.
- Page 420 (location ~ 6430-6435)
As we explored earlier, the virtues of chivalry included an emphasis on extreme fidelity to oaths. This was a necessity in a society where protection was organized in exchange for personal services. The bargains upon which feudal society rested were not such that they would have reemerged spontaneously among people free to determine where their best interests lay under conditions of duress. Therefore, feudal commitments that were the basis of chivalry had to be shorn up with a strong sense of honor. In that context, little could have been more subversive than Machiavelli’s suggestion that the Prince should not hesitate to lie, cheat, and steal when so doing served his interests. As the twentieth century drew to a close, Machiavelli’s arguments were still being examined for their importance in understanding modern politics and various twentiethcentury crimes and tyrannies. Castiglione’s work, by contrast, is all but forgotten. In a year’s time, Il Lihro del Cortegiano may be read from cover to cover by a handful of literature students at the graduate level and a few connoisseurs of the history of manners. Sometime within the next few decades, the new megapolitics of the Information Age will antiquate The Prince. The Sovereign Individual will require a new recipe for success, one which will highly emphasize honor and rectittude in deploying resources 270 outside the grip of the state. We can predict that such advice will not be read with pleasure by E. J. Dionne, Jr., and the other living social democrats.
- Page 420 (location ~ 6439-6450)
What we now think of as “political” leadership, which is always conceived in terms of a nationstate, will become increasingly entrepreneurial rather than political in nature. In these conditions, the viable range of choice in putting together a “policy” regime for a jurisdiction will be effectively narrowed in the same way that the range of options open to entrepreneurs in designing a first-class resort hotel or any similar product or service is defined by what people will pay for. A resort hotel, for example, would seldom attempt to operate on terms that required guests to perform hard labor to repair and extend its facilities. Even a resort hotel owned or controlled by its employees, like the typical modern democracy, would try in vain to force customers to comply with such demands, especially after better accommodations became available. If the customers would rather play golf than do heavy labor in the hot sun, then on that question, at least, the market offers little scope for imposing arbitrary alternatives. In such conditions, presently “political” issues will recede into entrepreneurial judgments, as jurisdictions seek to discover what policy bundles will attract customers.
- Page 421 (location ~ 6454-6463)
In short, the commercialization of sovereignty will facilitate the control of governments by their customers. This will tend to make the opinions of noncustomers irrelevant, or less relevant, just as the opinions of Big Mac eaters about foie gras are irrelevant to the success of three-star French restaurants, like L’Arpege in Paris.
- Page 422 (location ~ 6469-6471)
Harvard University political theorist Michael Sandel argues in Democracy in Discontent that “Democracy today is not possible without a politics that can control global economic forces, because without such control it won’t matter who people vote for, the corporations will rule.“24 In other words, the state must retain its parasitic power over individuals, in order to assure that political outcomes can diverge from market outcomes. Otherwise collective decisions to compel diseconomic outcomes would be meaningless.
- Page 423 (location ~ 6483-6486)
We suspect that the deepening of markets will not only diminish the taxing capacity of the nationstate, it will also erode the capacity of politicians to impose their will arbitrarily upon the owners of resources by regulation. In a world where jurisdictional advantages will be subject to market tests, and many local markets will be opened to competition from anywhere, it is hardly to be expected that local “communities” will have many effective ways of isolating favored firms from global competitive pressures.
- Page 426 (location ~ 6523-6527)
The Eclipse of Public Goods Of course, the apologists for coercion will argue that the waning of state power will lead to an inability to procure or enjoy public goods. This is unlikely, both for competitive and other reasons. For one thing, with locational advantages mostly dissipated by technology, jurisdictions that fail to provide essential public goods, such as maintenance of law and order, will rapidly lose customers. In the most extreme failures, such as those already evidenced in Somalia, Liberia, Rwanda, and the former Yugoslavia, hordes of penniless refugees are likely to spill over borders seeking more satisfactory provision of law and order. But these extreme examples of desertion, or voting with one’s feet, will differ only by their urgency from straightforward jurisdictional shopping. In any event, corporations will force local jurisdictions to meet the needs of their customers.
- Page 427 (location ~ 6535-6541)
In the Information Age, it will be technologically feasible to impose tolls, including congestion fees, that accurately price access to highways, runways, and other infrastructure without interrupting traffic flow. Thus the provision transportation infrastructure could be discretely privatized and financed directly by those who use the service. Economist Paul Krugman estimates that market pricing of U.S. transportation infrastructure would add from $60 billion to $100 billion annually to CIDP in the United States, while improving the efficiency of resource use and reducing pollution.33
- Page 428 (location ~ 6554-6558)
Microprocessing reduces the size that groups must attain in order to be effective in the use and control of violence. As this technological revolution unfolds, predatory violence will be organized more and more outside of central control. Efforts to contain violence will also devolve in ways that depend more upon efficiency than magnitude of power.
- Page 430 (location ~ 6584-6586)
“Persistent make-believe” of the kind that disguised the fall of the Roman Empire is probably a typical feature of the decomposition of large political entities. It now disguises and masks the collapse of the nationstate. For a variety of reasons, the news media cannot always be depended upon to tell you the truth. Many are conservative in the sense that they represent the party of the past. Some are blinded by anachronistic ideological commitments to socialism and the nationstate. Some will be afraid for more tangible reasons to reveal the corruption that is likely to loom ever larger in a decaying system. Some will lack physical courage that might be required for such a task. Others will fear for their jobs or be shy of other retribution for speaking up. And, of course, there is no reason to suspect that reporters and editors are any less prone to corrupt consideration than building inspectors or Italian paving contractors.
- Page 431 (location ~ 6595-6601)
BEYOND REALITY As artificial reality and computer game technologies continue to improve, you’ll even be able to order a nightly news report that simulates the news you would like to hear. Want to watch a report showing yourself as the winner of the decathlon at the Olympics? No problem. It could be tomorrow’s lead story. You’ll see any story you wish, true or false, unfold on your television/computer with greater verisimilitude than anything that NBC or the BBC can now muster. We are rapidly moving to a world where information will be as completely liberated from the bounds of reality as human ingenuity can make it. Certainly, this will have tremendous implications for the quality and character of the information you receive. In a world of artificial reality and instantaneous transmission of everything everywhere, integrity of judgment and the ability to distinguish the true from the false will be even more important.
- Page 431 (location ~ 6604-6612)
More Information, Less Understanding As the barriers to transmission of information have fallen, there has been more of it, which is good. But there has also been more confusion about what it means. The modern technology that helps liberate information from political controls and impediments of time and place also tends to raise the value of old-fashioned judgment. The kind of insight that helps discern what is important and true from the mountain of facts and fantasies is growing in value almost daily. This is true for at least three reasons: 1. The very glut of information now available puts a premium on brevity. Brevity leads to abbreviation. Abbreviation leaves out what is unfamiliar. When you have many facts to digest and lots of phone calls to return, the natural desire is to make each information-processing event as concise as possible.
- Page 432 (location ~ 6618-6625)
A recent psychological study disguised as a public opinion poll showed that members of individual occupational groups were almost uniformly unwilling to accept any conclusion that implied a loss of income for them, no matter how airtight the logic supporting it. Given increased specialization, most of the interpretive information about most specialized occupational groups is designed to cater to the interests of the groups themselves. They have little interest in views that might be impolite, unprofitable, or politically incorrect. There is no better example of this general tendency than the broad drumbeat of views implying bright prospects for investing in the stock market. Most of that information is generated by brokerage firms, few of which will tell you that stocks are overvalued. Their income is derived from transaction business that depends on the majority of customers being ready to buy. Independent, contrary voices are seldom heard.
- Page 433 (location ~ 6634-6641)
Information War Ahead Looming ahead is the widely discussed but little-understood possibility of “Information War.” It also points to diminishing returns to violence. “Logic bombs” could disable or sabotage air-traffic control systems, rail-switching mechanisms, power generators and distribution networks, water and sewage systems, telephone relays, even the military’s own communications. As societies become more dependent upon computerized controls, “logic bombs” could do almost as much damage as physical explosions. Unlike conventional bombs, “logic bombs” could be detonated remotely, not just by hostile governments but by groups of freelance computer programmers, and even talented individual hackers. Note that an Argentine teenager was arrested in 1996 for repeatedly hacking into Pentagon computers. While to date hackers have not tended to tamper with computer-controlled systems in destructive ways, this is not because there are truly effective ways of stopping them.
- Page 436 (location ~ 6680-6687)
The Age of the Sovereign Individual This is part of the reason why we have entitled this book The Sovereign Individual. As the scale of warfare falls, defense and protection will be mounted at a smaller scale. Therefore, they will increasingly be private rather than public goods, provided on a for-profit basis by private contractors. This is already evident in the privatization of policing in North America. One of the more rapidly growing occupations in the United States is the “security guard.” Projections indicate that the number of private security guards will increase 24 percent to 40 percent above 1990 levels by the year 2005.6 The privatization of policing is already a well-defined trend. Yet as Anglo-Irish guru Hamish McRae points out, this is hardly the result of any deliberate decision of government. He writes in The World in 2020: No government has made a specific decision to move out of some policing tasks, nor indeed, have any moved out; the private sector has moved in. Partly as a result of the perceived failures of the police, partly as a result of other changes in society, private security firms have gradually been taking over much of the job of protecting ordinary civilians in their offices or shopping centres. As the gated communities of Los Angeles show, people are even moving some way back towards the medieval concept of a city, where the citizens live behind town walls patrolled by guards, and where access is possible only at controlled gates.9
- Page 437 (location ~ 6690-6700)
To respond to this technological change will entail a massive investment requirement (read opportunity) to redesign vulnerable systems with distributed rather than concentrated capabilities. If vulnerabilities of large scale are not removed, the systems that retain them will be subject to catastrophic failure. Sooner or later, by default if not by design, services and products provided by large bureaucratic agencies and corporations will devolve into highly competitive markets, managed not from a ‘headquarters" but through a distributed, decentralized network. The corporation with a headquarters that can be surrounded by pickets or sabotaged by terrorists will be vulnerable until it ultimately becomes a “virtual corporation” without a location, “dwelling in many places concurrently,” as Kevin Kelly, executive editor of Wired magazine writes in Out Of Control"’ Kelly understands that 282 technology has changed the imperative to bring production processes under centralized control. “For most of the industrial revolution, serious wealth was made by bringing processes under one roof. Bigger was more efficient.” Now it isn’t.
- Page 438 (location ~ 6704-6712)
Narco Republics As we warned in The Great Reckoning, many governments in the world are thoroughly corrupted by drug lords. Mexico is an indisputable example. Former Mexican federal deputy attorney general Eduardo Valle Espinosa put the Mexican system in perspective in his resignation statement: “Nobody can outline a political project in which the heads of drug trafficking and their financiers are not included. Because if you do, you die.” Valle indicated that bribes make serving as a Mexican police chief so lucrative that candidates pay up to $2 million just to get hired. In a strict profit-and-loss accounting, buying a local police office can be a lucrative investment. Drug cartels are willing to pay fortunes to even low-ranking Mexican officials because the money buys them immunity from prosecution for their crimes. Colombia is another country where the top rungs of government are dominated by drug lords. The U.S. authorities have recently revoked the U.S. visa of Colombian 285 president Ernesto Samper on grounds that he knowingly received political contributions from drug dealers in exchange for favors.
- Page 442 (location ~ 6769-6778)
One Chance in 250,000,000 Nonetheless, Partners in Power contains details that would interest any student of the corruption of modern American politics. And by no means, however, are all of Morris’s fingers pointed at Bill Clinton. His wife comes in for some critical attention as well. For example, consider this excerpt from Morris’s account of Hillary Clinton’s miraculous commodity trading: “In 1995 economists at Auburn and North Florida Universities ran a sophisticated computer statistical model of the First Lady’s trades for publication in the Journal of Economics and Statistics, using all the available records as well as market data from the Wall Street Journal. The probability of Hillary Rodham’s having made her trades legitimately, they calculated, was less than one in 250,000,000.” 22 Morris musters many incriminating 286 details about the drug-running and money-laundering operation that prospered in Arkansas under Clinton.
- Page 444 (location ~ 6794-6801)
Apparently, others of like mind have continued to notice the possibilities with Clinton. New York magazine, following an earlier piece in Readers’ Digest, reports that “the president’s key allies in the trade-union movement are also men affiliated with what to all appearances are some of the dirtiest, most mobbed-up unions in America.“29 Of particular interest is Clinton’s close relationship with Arthur Coia. Coia, who is one of Clinton’s “prime fund raisers,” is president of the Laborers International Union of North America, “one of the most flamboyantly corrupt unions in labor history.“30 Apparently, the Justice Department under Mr. Clinton struck what New York describes as a “weirdly generous deal” with Coia “to keep his job in the face of compelling charges from that very same Justice Department that he is a long-time associate of organized-crime figures.” 31 Whether or not Terry Reed’s thesis is correct that “the CIA has co-opted the presidency,” there is obviously a strong temptation for individuals within a covert organization authorized to undertake “black operations” to indulge in Professor Hirshleifer’s rational choice of employing “unlawful means of acquiring resources.” Given thc technological change that is reducing the decisiveness of massed military power in the world, one should perhaps expect to see increasing corruption, if not outright takeover of governments by organized criminal enterprises. Hirshleifer argues, and we agree, that “the institutions of political economy can never be so perfect as to entirely displace … the underlying realities of natural economy.” 32 Power is devolving in the “natural economy.” This implies far-reaching shifts in the internal margins of power in society.
- Page 446 (location ~ 6834-6847)
In the long run, political corruption at the highest levels makes nonsense of conventional celebration of the possibilities of democracy for the deliberate mastery of public problems. In the Information Age it will be much less important that government be large and powerful than that it be honest. Most of the services that governments historically provided are destined to devolve into the private market in the next millennium. But it is doubtful on the evidence from around the world whether you can long depend upon a corrupted system with corrupt leaders for the security of your family and investments. As Morris says, “[T]he Clintons are not merely symptomatic, but emblematic of the larger bipartisan system at its end-of-century dead end.” Vito Tanzi, in his essay on corruption, shows that “the only way to deter corruption is to reduce significantly the scale of public intervention.” 38 The Information Revolution will significantly reduce “the scale of public intervention” and on that basis holds out hope for a rebirth of morality and honesty. The other obvious implication of the Information Revolution for morality is an increased vulnerability that comes with the possibility of cybercommerce and virtual corporations communicating with unbreakable encryption.
- Page 448 (location ~ 6864-6873)
One can take the Quakers as an example. The Quakers became successful businesswise, and were particularly successful as bankers, for a number of reasons. They set themselves the highest possible standard of trustworthiness. They would not swear oaths, but regarded every business commitment as being as binding as an oath. “My word is my bond” was for them an absolute principle. They believed in a quiet style of living, decent but frugal. As a religious duty, they avoided spending money on the vanities of this world. They avoided quarrels, and thought war was always sinful. They thought that the businessman had a moral obligation to give fair value, and as merchants they developed a reputation for maintaining high quality with moderate prices. “Caveat emptor”-let the buyer beware-was not good enough for them. In an age when most merchants followed a high-price, high-margin theory of trade, the Quaker morality led them naturally to a low-margin, high-turnover policy.
- Page 449 (location ~ 6885-6891)
Unfortunately such business advantages can be eroded by the very success they produce. Countries go through a cycle, which formed the basis of Adam Ferguson’s sociological theory in the eighteenth century, from poverty and hard work, to riches, to luxury, to decadence, and on to decline. The ancient Romans themselves looked back to the virtues of the Republican period, when the Empire was being built, and deplored the luxury and laziness that they regarded as the cause of their decline. This erosion of the 290 industrious virtues by prosperity can happen surprisingly quickly. The Germans are still a capable and efficient people, but they are not working anything like as hard as they did when they were rebuilding their country after the ruin of defeat in 1945. In two generations, they have gone from working long hours, almost with their bare hands, in conditions of acute poverty, to working short hours for the highest pay and the most expensive welfare on earth. In October 1995, the Petersburg Declaration was signed by sixteen German associations of employers. It is a catalogue of well-justified complaints, which reflect the decline in Germany’s industrial morale.
- Page 450 (location ~ 6895-6904)
The existing Volkswagen labor contract gives the highest pay for any car workers on earth, to which welfare taxes have to be added, in return for a 28-hour week-four days of seven hours each. Postwar Germany is now a massive exporter of jobs. The British were regarded in the middle of the nineteenth century as the most efficient industrial nation, a reputation they had certainly lost a hundred years later. The cycle of prosperity undoubtedly undermines virtues of hard work and modest expectations, which exist at the early stages of successful industrial development. Nations are not able to retain their early virtues, just as individuals can become greedy and lazy with too easy a success. Global investment undoubtedly rewards these industrious virtues and penalizes those who become greedy and lazy, as it should. Indeed, one could say that sound investment has to be based on a moral as well as a purely financial assessment. The Englishman in the eighteenth century who subscribed to the capital of a Quaker bank was likely to do very well.
- Page 451 (location ~ 6913-6920)
There has always been a human recognition that hard times may develop, and normally do develop, healthier responses than those of periods of prosperity. In our individual lives, we all try to make ourselves comfortable, we hope to live in a house that we enjoy, have a job that we like, have enough money in the bank, and so on. The struggle to achieve these objectives is a rewarding one. We study at school, we train ourselves, we work hard at our wage policies have to contribute to the reduction of unemployment by alleviating the costs for enterprises. - .. Wage increases should be measured according to competitiveness and productivity. … The behaviour of the unions has to change. The yearly ritual of campaigns, demands, workers’ mobilization, threats, and warning strikes is damaging. In far too many people the achievement of these objectives creates something of a trap. The struggle is better than the achievement. The great Swiss psychologist Carl Jung had an American businessman as his patient early in this century. The businessman had these very ambitions as a young man. He had worked to establish his own business, and to make enough money to retire by the age of forty. He married a young and attractive woman, he bought a beautiful home, he had a young family, his business was highly successful, and by the age of forty he had indeed been able to sell out and retire, a rich and independent man with nothing apparently to worry about. At first he enjoyed his freedom, was able to do things he had long promised himself. He took his family to Europe. They visited art galleries and so on. Gradually these interests, and his sense of freedom itself, began to pale. He started to look back at the time when he was not free, when he was working all hours at his business and had all the usual business worries, as the happy period of his life. He fell into a depression, which led his wife to bring him to Jung as a patient. Jung diagnosed him, in effect, as having no outlet for his creative energy, which had turned in on him, and was destroying him. The diagnosis may well have been correct, but it did not lead to a cure. The businessman never recovered from his nervous breakdown.
- Page 452 (location ~ 6927-6942)
This sense that virtue is dynamic, that it consists in the effort rather than the result, developed strongly in the nineteenth century, and in different ways. There is a well-known poem by Arthur Hugh Clough that brought comfort to many people in the life-and-death struggle of the Second World War. It is worth noting that suicide rates in 292 the warring countries fell in the Second World War; even the struggle of war can be better than the depression of inactivity.
- Page 453 (location ~ 6946-6949)
Say not, the struggle nought availeth, The labour and the wounds are vain, The enemy faints not, nor faileth, And as things have been they remain. If hopes were dupes, fears may be liars; It may be, in yon smoke concealed, Your comrades chase e ’en now the fliers, And, but for you, possess the field. For while the tired waves, vainly breaking, Seem here no painful inch to gain, Far back, through creeks and inlets making, Comes silent, flooding in, the main. And not by eastern windows only, When daylight comes, comes in the light, In front, the sun climbs slow, how slowly, But westward, look, the land is bright.
- Page 454 (location ~ 6949-6956)
Strong relief is a necessity of its vision; and a world where all the mountains are brought down and all the valleys are exalted is no congenial place for its habitation. This is why in a solitary 293 thinker this mood might slumber on forever without waking. His various ideals, known to him to be mere preferences of his own, are too nearly of the same denominational value: he can play fast or loose with them at will. This too is why, in a merely human world without a God, the appeal to our moral energy falls short of its maximal stimulating power. Life, to be sure, is even in such a world a genuine ethical symphony; but it is played in the compass of a couple of poor octaves, and the infinite scale of values fails to open up.
- Page 455 (location ~ 6965-6971)
Strong relief is a necessity of its vision; and a world where all the mountains are brought down and all the valleys are exalted is no congenial place for its habitation. This is why in a solitary 293 thinker this mood might slumber on forever without waking. His various ideals, known to him to be mere preferences of his own, are too nearly of the same denominational value: he can play fast or loose with them at will. This too is why, in a merely human world without a God, the appeal to our moral energy falls short of its maximal stimulating power. Life, to be sure, is even in such a world a genuine ethical symphony; but it is played in the compass of a couple of poor octaves, and the infinite scale of values fails to open up. William James believed that the dynamic morality, which consists in doing rather than being, in acting rather than refraining from action, can be extended into the religious sphere. There is also a powerful development of the morality of competition and survival in the work of Adam Smith (1776), moral doctrine of the present world economic order, its central theme needs careful consideration.
- Page 455 (location ~ 6965-6974)
Adam Smith may not have been the first writer on economic matters to reduce the welfare of nations to the action of individuals, but he put it most succinctly and with the greatest authority: Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.
- Page 456 (location ~ 6981-6985)
The human species, itself one among many, is forced to compete by the mismatch between its unlimited capacity for generation and its limited ability to grow food. The survival of human societies, as of animal species, depends on successlul adaptation to the environment. A dynamic morality is therefore concerned with overcoming the problems of adaptation. This is best achieved by individuals who adapt their own actions to the opportunities of the environment, and therefore employ resources available in the society to the greatest advantage. Malthus already saw that Adam Smith’s ideas had changed the world, and he wrote that his new argument about population was not new: “The principles on which it depends have been explained in part by Hume and in part by Dr. Adam Smith.” He also saw that this constant competition for survival was a moral, not merely a practical, matter. The last paragraph of the 1798 “Essay” reads: Evil exists in the world, not to create despair, but activities. We are not patiently to submit to it, but to exert ourselves to avoid it. It is not only the interest, but the duty of every individual, to use his utmost efforts to remove evil from himself, and from as large a circle as he can influence; and the more he exercises himself in this duty, the more wisely he directs his efforts, and the more successful these efforts are; the more he will probably improve and exalt his own mind, and the more completely does he appear to fulfil the will of his Creator.
- Page 457 (location ~ 6995-7006)
Perhaps one can illustrate Darwin’s sense of the importance of this argument from his summary of the contents of Chapter 3 of his epoch-making book, On the Origin of Species, first published in 1859. He called this crucial chapter “Struggle for Existence.” The subject readlines are: “Bears on Natural Selection-The term used in a wide sense-Geometrical powers of increase-Rapid increase of naturalized animals and plants-Nature of the checks to increase-Competition universal-Effects of climate-Protection from the number of individuals-Complex relations of all animals and plants throughout nature-Struggle for life most severe between individuals and varieties of the same species; oflen severe 295 between species of the same genus-The relation of organism to organism the most important of all relations.” Since 1776, it has been evident that the best way to optimize the wealth of nations is to allow individuals to optimize their own return on capital in conditions of free competition. Since 1798, it has been evident that the relative survival of populations depended on societies having sufficient economic and political success to be able to feed themselves, protect themselves from infectious diseases, and protect their populations in war.
- Page 457 (location ~ 7006-7015)
These ideas have been so powerful that it has been impossible for anyone to think about the nature of humanity, or the problems of morality, since the time in which they were developed, without responding to them. Karl Marx believed in the struggle for survival just as much as Charles Darwin, but he believed it was a war between social classes, themselves formed by economic forces. Adolf Hitler believed in the struggle for survival, and saw his own political career almost exclusively in those terms. But he believed that the struggle was one between different races. Marx, Lenin, Stalin, Mao, and Hitler can all be called social Darwinists, in that they saw the struggle for survival, “Mein Kampf” as Hitler called it, as the central political issue. The Marxists saw social classes as though they were separate species; the Nazis saw races in the same light. This, however, makes not a dynamic morality, such as Malthus envisaged, but a dynamic immorality. Both Marxism and Nazism wished to solve the same problem, the problem of the struggle for survival, but by destroying competition. They invaded foreign territories, they promoted conflict between different classes who competed for social power, or different races who were seen either as economic exploiters (the normal charge made against Jews by anti-Semites) or as a dangerous underclass (the fear held of blacks by their white enemies). The Second World War was an attempt by Adolf Hitler, which failed, to secure an advantage in survival terms of the German people, by destroying potential competition, particularly Slavs and Jews. By an interesting paradox, defeat in war proved more advantageous to Germany than the victory of the Nazis could ever have been.
- Page 458 (location ~ 7018-7030)
It is in the interest of the merchant that the customer should be satisfied with the transaction, because onlv a satisfied customer comes back for more trade. It is also in the interest of the merchant that the customer should be prosperous, because a prosperous customer has the money to go on buying. Conquest implies the destruction of the other party; commerce implies the satisfaction of the other party. As modern technology has 296 made conquest an extraordinarily dangerous policy, commerce has become the only rational approach to the problems of survival.
- Page 459 (location ~ 7034-7038)
A successful social morality must therefore have certain characteristics. It must be strong-a weak morality will be vulnerable and ineffective. It must contribute to the struggle for survival, but in ways that are collaborative rather than murderous. Hitler had a strong morality of survival, but its destructive quality nearly destroyed his own society. It must be dynamic, to match the dynamic changes of modern technology, and indeed of all modern social systems. It must be economically efficient. The mixture of egalitarian and authoritarian ideas in the Leninist system simply did not work. Yet these are not all the characteristics that such a social morality might be expected to possess. It has a broader purpose of making the society a good one to live in, and of binding people together. Also, moralities have to adapt and survive; a brittle morality may be acceptable in our generation only to be rejected in the next.
- Page 460 (location ~ 7045-7052)
In such a moral society, the individual citizen is able to work toward personal objectives inside a framework of social support. Admittedly the moral laws may be somewhat arbitrary, or at least may appear arbitrary to outsiders. The Orthodox Jew loses the freedom to eat pork or shellfish, or to work on the Sabbath. The loyal Catholic may lose the freedom to use artificial contraceptives, let alone to have an abortion. The Moslem may lose the freedom to drink alcohol. The pious Confucian may have the inconveniently long period of mourning for his reverend father-even Confucius himself 297 warned that mourning rituals could be exaggerated. Yet the adherent to each of these systems of belief regards these observations as a small price to pay for a shared and coherent sense of world order, in which the individual has a settled place. An Orthodox Jew could well argue that the observance of the Sabbath is a small price to pay for the benefits of the Law or the strength of the Jewish family. A shared morality in a tolerant society was the ideal of John Locke and of early philosophers of liberty. They did not at all believe that a society, of any kind, can be maintained without rules, but they thought that the rules ought to be subject to the best of reason, and that people should be coerced to accept only the essential rules. They did recognize that coercion was inevitable in social morality, particularly in the protection of life or of property, because they considered that no society can survive if there is no security. They applied an almost absolute tolerance to variations in personal choices that did not affect the welfare of others. The Confucian, mourning his father for forty days, could live next door to the Jew, honoring the Sabbath, without either disturbing the other, or wanting to coerce him into following his own religious practices.
- Page 461 (location ~ 7060-7072)
When one looks at the forces that are hostile to the morality of society, one needs to consider this core morality, which is broadly similar in most modern religious belief systems. Two, at least, of the Ten Commandments of the Old Testament, for Christians, or the Torah, for Jews, can be regarded as universal for anything one could recognize as a religion: “Thou shalt not kill” and “Thou shalt not steal.” One can even go beyond that. Almost all serious agnostics would regard both murder and theft - the ultimate threat to life and the ultimate threat to property - as forbidden, and would accept that society has the right to punish people who kill or rob. They might disagree about the appropriate punishment for a particular crime, but not about the right of society to punish as such. The original phrase of John Locke has it precisely. Everyone has a right to “life, liberty and estate.” In 1776 Thomas Jefferson added another of John Locke’s phrases, “the pursuit of happiness.” That makes a very fine phrase, and a very fine aspiration, but “life, liberty and estate” is more down to earth than “life, liberty, and the pursuit of 298 happiness.” Society depends absolutely on the right to life and the right to property. In practice history shows that these rights can be protected only when there is liberty. If the state is all-powerful, then the state becomes the great enemy of life, as in wars of aggression, and of individual property, by taking an inordinate share of the national wealth for its own often undesirable and always wasteful purposes.
- Page 462 (location ~ 7082-7093)
Americans would point to the decay of the big cities, which have become breeding grounds for crime, especially the narco-business, as the worst symptom of the decline of a communal sense of morality. Most Americans also recognize that there is a clash of several different moral cultures, all competing in their claims and their authority. The ‘politically correct" culture rejects many, but not all, of the moral principles that upheld the old culture. It aggressively emphasizes the role and the rights of groups who are seen as having been historically exploited by a dominant white male culture, and rejects that culture, despite its being the founding culture of the United States. The dominant male culture of the first half of the twentieth century centered on the survival of the nuclear family. This historically gave the husband-father at least a nominal dominance in the home, though in practice the home was often run by the wife-mother with the often meek acceptance of the nominal master. It gave the male boss a real dominance in the workplace, a dominance that the feminist movement has so far challenged but not reversed. The interest of the family, and historic Christian teaching, outlawed abortion. The old morality thought abortion was unlawful killing, was never allowable, and the adherents of the traditional morality still think that. Adherents of the new morality think the opposite. In Roe v. Wade the Supreme Court based the constitutional right to abortion, which had hitherto been regarded as a question for the individual states, on the doctrine of a right to privacy, itself remote from any language actually to be found in the Constitution or its amendments.
- Page 465 (location ~ 7116-7128)
The abortion debate is the extreme example of the conflict between the old and new morality, though there are equally remarkable conflicts in other areas where the old social organization with its morality has been challenged by the new. Traditional Christian morality, in Protestant and Catholic churches alike, laid great emphasis on sexual roles: No heterosexual intercourse outside or before marriage. No genital homosexual relationships. Lesbianism was less emphasized, because society hardly recognized its existence. When Queen Victoria was first told of it, she stoutly refused to believe that such things happened between women. Political correctness is the morality of supposedly oppressed groups. The homosexuals claimed an equal validity for their lifestyle, and challenged the traditional opposition to their sexual conduct.
- Page 466 (location ~ 7132-7138)
At the same time other sexual taboos were being eroded or abolished. In the 1960s there was a new wave of free love, partly based on the apparent security of the female contraceptive pill, but also promoted by mood-changing drugs and pop music. It led to an increasing amount of nonmarital cohabitation. By the 1990s it was thought 300 absolutely normal in Bntain, a rather more old-fashioned society than most of the United States, for Prince Edward to sleep with his girlfriend at Buckingham Palace, in the same stable but unmarried intimacy that students were sleeping with each other in their 1960s lodgings. Few people thought it odd that Queen Elizabeth II, the head of the Church of England, condoned her youngest son’s conduct, her three elder children’s marriages having already broken down. Those few who complained were regarded as hopelessly out of date and priggish. Yet there were still many people who regarded the old morality as preferable, even if they did not practice it themselves, or seriously expect their children to do so, beyond a fairly early age. The politically correct movement has had its own puritanical side. Because it sprang from the perceived interests of women, seen as the largest of the oppressed groups, it had a certain hostility to male sexuality, both in aggressive and in what would previously have been regarded as harmless forms. Some women took the view that all men were by nature rapists, and the natural horror at rape was exaggerated into a general denunciation of the male gender. Others concentrated on sexual harassment, a real grievance-many men have very crude sexual manners-which became ludicrous in some trivial cases. Sexual harassment was even alleged in mere looks, without any word being uttered, let alone physical contact. As a result the new morality could be very censorious.
- Page 466 (location ~ 7140-7153)
The politically correct and the fundamentalist Christian groups are bitterly critical of each other, yet in the modern world they look rather alike. They both assume the authority of a particular moral doctrine as though it were universal, even though their moral doctrines are different. Both indeed can be criticized for the same defect, for an exaggerated and overconfident moralism, lacking in depth, in historic sense, or in tolerance. Both are attacked for their supposed resemblance to seventeenth~century Puritanism, to the self-confident moralists like Oliver Cromwell in England-he nearly emigrated to New England-or the Salem witch hunters. Neither the women?s movement, in its more dogmatic form, nor the conservative preachers of the Bible belt can be accused of any lack of morality, but of its overdevelopment and rigidity. The heart of these moralities sometimes seems to have turned to stone. This sort of hardening of the moral arteries is as damaging to the consensual morality of society as the “anything goes”
- Page 467 (location ~ 7156-7163)
The politically correct and the fundamentalist Christian groups are bitterly critical of each other, yet in the modern world they look rather alike. They both assume the authority of a particular moral doctrine as though it were universal, even though their moral doctrines are different. Both indeed can be criticized for the same defect, for an exaggerated and overconfident moralism, lacking in depth, in historic sense, or in tolerance. Both are attacked for their supposed resemblance to seventeenth~century Puritanism, to the self-confident moralists like Oliver Cromwell in England-he nearly emigrated to New England-or the Salem witch hunters. Neither the women?s movement, in its more dogmatic form, nor the conservative preachers of the Bible belt can be accused of any lack of morality, but of its overdevelopment and rigidity. The heart of these moralities sometimes seems to have turned to stone. This sort of hardening of the moral arteries is as damaging to the consensual morality of society as the “anything goes” anarchy against which it protests.
- Page 467 (location ~ 7156-7163)
It is a distortion of moral forces, a coarsening into self-righteousness. Pharisaism, the conviction that one is uniquely virtuous, is as old as humankind, and was particularly offensive to Jesus Christ. The erosion of morality, the belief that ethical choices are purely a matter of private preference, as much a matter for the individual as the choice of clothes, is a more recent phenomenon. This belief reflects the absence of any shared morality at all. It takes to a quite new stage the classical doctrine of liberty, and turns “the pursuit of happiness” from what John Locke originally meant by the phrase, and Jefferson understood by it in 1776, into a hedonism that is reckless of consequences.
- Page 468 (location ~ 7164-7168)
We have already described some of the attributes of the new world of the next century. It will be shaped by two main forces, the shift of technology that is opening up the economies of Asia and the new global electronic communications that are making the citizen progressively less dependent on his or her local government. The new technology will replace, or has already replaced, many of the middle human skills-the production line worker, the office clerk, now increasingly the middle manager. But it has rewarded the rarer skills, creating an international cognitive elite of highly skilled people for whom the new communications open up the widest possible market for their skills.
- Page 469 (location ~ 7182-7186)
We have already described some of the attributes of the new world of the next century. It will be shaped by two main forces, the shift of technology that is opening up the economies of Asia and the new global electronic communications that are making the citizen progressively less dependent on his or her local government. The new technology will replace, or has already replaced, many of the middle human skills-the production line worker, the office clerk, now increasingly the middle manager. But it has rewarded the rarer skills, creating an international cognitive elite of highly skilled people for whom the new communications open up the widest possible market for their skills. Like most elites, the cognitive elite tend to be a bit above themselves, are rather arrogant, and think they can set their own standards. They are alienated from society as a result.
- Page 469 (location ~ 7182-7188)
A godless, rootless, and rich elite is unlikely to be happy, or to be loved. This inadequacy in the initial moral education of what will be the dominant economic group of the next century is likely to be reinforced by their life experience. These people will have the discipline of an advanced technical education, of one sort or another, to fit themselves for their new role as the leaders of the new electronic universe. But they will learn from that only some of the moral lessons that have historically been the framework for human social conduct. By the standards of Confucius, Buddha, or Plato (500 B.C.), St. Paul (A.D. 50), or Mahomet (A.D. 600), they may be moral illiterates. They will have been taught the lessons of economic efficiency, the use of resources, the pursuit of money, but not the virtues of humility or self-sacrifice, let alone chastity. Essentially most of them will have been brought up as pagans with a set of values closer to those of the late Roman Republic than to Christianity. Even these values will be highly individualistic, rather than shared. Societies, as we have argued, can only be strong if real moral values are widely shared.
- Page 472 (location ~ 7224-7233)
Neither ofthese conditions exists now, and both community feeling and tradition are being weakened by the economic and technological revolution that is taking place. The lives of the many and the few are becoming more and more distant from each other. The technological revolution has been achieved by breaking away from the old ways of doing things. In every field it has been the radical who has won, and the conventional thinker who has fallen behind, who has literally fallen out of the race. Our politics may be led by conventional thinkers-Bill Clinton, Helmut Kohl, John Major-but our most successful businesses are led by radicals with a keen understanding of the new technological world; the archetype is Bill Gates. Conventional thinking has been discredited by its inability to deal with the rapidity and the sheer force of change. Yet morality is not like that. If we take the science of Moses, formed about 1000 B.C., it has very little to tell us. The account of the creation in the Book of Genesis may well contain a theological truth-God made the universe and humankind but it does not give a scientific account of the actual development of physical structures.
- Page 473 (location ~ 7239-7248)
In science, three thousand years completely changed what human knowledge is; in morality, we may actually have fallen back. The average psychotherapist probably gives the patient less good moral advice on how to lead his life than the average Jew would have received from his teacher in the period of Moses. Of course, Christianity itself is still available, but it is for most of the world a pale ghost of its former self. Few people have the faith of the earlier ages, or even of the less sophisticated communities; one does not look for saints on Park Avenue. The destruction of tradition has been a necessary condition of scientific progress. If we all still believed that the sun revolved around the earth, then we could not have developed satellite communications. Indeed what we believe to be science itself is only a series of hypotheses, imperfect explanations due to be replaced by other explanations, stronger but still imperfect. Yet the destruction of tradition has been a disaster to the moral order of the world.
- Page 473 (location ~ 7252-7259)
Several features of the new morality can be foreseen. For one thing, it will emphasize the importance of productivity and the correctness of earnings being retained by those who generate them. Another corollary point will be the importance of efficiency in investment. The morality of the Information Age applauds efficiency, and recognizes the advantage of resources being dedicated to their highest-value uses. In other words, the morality of the Information Age will be the morality of the market. As James Bennett has argued, the morality of the Information Age will also be a morality of trust. The cybereconomy will be a high-trust community. In a setting where unbreakable encryption will allow an embezzler or thief to securely place the proceeds of his crimes outside the range of recovery, there will be a very strong incentive to avoid losses by not doing business with thieves and embezzlers in the first place. Just as in the example of the Quakers cited earlier, a reputation for honesty will be an important asset in the cybereconomy.
- Page 476 (location ~ 7285-7293)
They eagerly adopted the optimistic message carried by international aid workers, Peace Corps volunteers, local revolutionaries, and the competing ideologues of the Cold War, who told one and all that a better day lay ahead. This was precisely the wrong message. An important consequence of redistribution among cultures has been to make those who lived in nonindustrial civilizations and adhered to nonindustrial values artificially competitive. International aid, rescue missions to counter famine and disease, and technical intervention fooled many into believing that their life prospects had sharply improved-without the necessity on their part of updating their values or significantly altering their behavior.
- Page 479 (location ~ 7330-7335)
The shift from an Industrial to an Information Society is bound to be breathtaking. The transition from one stage of economic life to another has always involved a revolution. We think that the Information Revolution is likely to be the most far-reaching of all. It will reorganize life more thoroughly than either the Agricultural Revolution or the Industrial Revolution. And its impact will be felt in a fraction of the time. Fasten your seat belts.
- Page 479 (location ~ 7344-7347)