The 'Market State' Prediction Went Terribly Wrong

Submitted by Richard Fernandez via,

Immediately after legal scholar Philip Bobbitt tried to explain the history and future of the State in his book The Shield of Achilles, a brief intellectual storm swept the non-American Anglosphere as intellectuals pored over it as a guide to a world made murky by September 11, 2001. “The Shield of Achilles generated much interest in the diplomatic and political community. Public officials who follow Bobbitt’s works include the former Prime Minister of the United Kingdom, Tony Blair; the Archbishop of Canterbury, Rowan Williams, who built his Dimbleby Lecture around Bobbitt’s thesis; and the former Prime Minister of Australia, John Howard, who referred to Bobbit’s book in a 2004 address to the Australian Strategic Policy Institute.”

September 11, 2001 was a memento mori moment for a civilization which had almost come to believe it was chosen to be the End of History.  In that uncertain time much store was laid on Bobbitt’s concept of the “Market State” which he predicted would succeed the Nation State.   For an Anglosphere bewildered by a storm, the idea of a chart proved irresistibly attractive.  Bobbit explained the future evolution of the State as follows:

“The simple difference between the two is that the nation state derives its power through its promise to improve its citizens’ material wellbeing, while the market state is legitimised through its promise to maximise its citizens’ opportunities.” Or to put it another way, where the nation state – be it fascist, communist or democratic – is highly centralized, the market state is fragmented and is run by outsourcing its powers to transnational, privatized organisations.

While the Nation State was focused on defending territory and nationality the Market State would be concerned with preserving a portable bundle of opportunities and rights its ‘citizens’ could use anywhere in a transnational world. In Bobbitt’s elegant prose, “the threat to the state lay primarily in the unrealized domain of its ideals … the security of the state depended on the security of the larger system and if the latter were infused with the ideals of the triumphant liberal democracies, the security of the democracies and of the system as a whole was assured.”

The State had to transcend itself to survive.  Australian intelligence analyst Paul Monk correctly characterized the shift as enlarging and at the same time diminishing the role of the traditional state:

A nation state is a state defined by sovereignty within territorial borders, the defense of those borders by means of deterrence or retaliation for violation of them, and a public policy of large-scale social security for the population within those borders.

A market state, by comparison, is defined by constitutional, economic and strategic adaptation to a world in which the claims of human rights, the reach of weapons of mass destruction, the proliferation of transnational threats to security and well-being, and the emergence of global capital markets that ignore borders, curtailing the power of states to control their own economies; while the development of telecommunications networks that likewise ignore borders, serves to undermine national languages, customs, cultures and regimes.

The problem was that in the intervening years the Market State prediction went — or has seemed to go — terribly wrong.  As recent events painfully illustrate, we’re not getting warmer.  The search is getting colder. In a recent article in the New Statesman Bobbitt  admitted:

It wasn’t supposed to be like this. … It was generally expected that [the triumph of liberal democracy] would, in Henry Kissinger’s words, “automatically create a just, peaceful and inclusive world” …

How far we have come since those words were written. The international order that so confidently expanded the G8 to the G20, that continued the enlargement of the European Union to 28 member states, that brought about the first democratic elections in Iraq and Afghanistan despite harrowing terrorist intimidation, that increased the membership of Nato to include not only former members of the Warsaw Pact but even the Baltic states that had been part of the Soviet Union, and that created the Association of South-East Asian Nations and brought China into the World Trade Organisation is now shuddering and fragmenting. …

Now, Henry Kissinger has concluded, “The state itself is under threat.”

What happened to the progression to the Market State?  Most alarmingly the greatest threats appeared to come from obsolete forms given unnatural vitality by modern technology.  The international order is being challenged by “national, ethnocultural groups”, even by entities categorized not by “nationality but by religion”.   It is as if we had gone backward in time.  An Internet-powered ISIS, a WMD enhanced North Korea, an unpredictably hybridized Russia arose as Frankenstein forces that international system could neither explain nor contain.

This suggested something was seriously wrong with the paradigm.   A resurgent nationalism rose from the graveyard of history where it had been interred by the globalized, multicultural world. Vladimir Putin reinvented himself as a Russian nationalist, not a born-again Communist in a world where socialism was in vogue only on Western campuses. Like Wrong Way Corrigan Europe was building a borderless Schengen regime all the way until the moment it was collapsed by a tide of refugees.

With the UK on the verge of leaving the European Union in order to return governance of Britain to Britons, it is the political elites who seem seriously out of touch. In America the surprising ascendancy of Trump so traumatized the political establishment that Anne Applebaum gloomily asked in the Washington Post: “is this the end of the West as we know it?”

Right now, we are two or three bad elections away from the end of NATO, the end of the European Union and maybe the end of the liberal world order as we know it. …

In the United States, we are faced with the real possibility of Republican Party presidential nominee Donald Trump … A year from now, France also holds a presidential election. One of the front-runners, Marine Le Pen of the National Front, has promised to leave both NATO and the E.U. , to nationalize French companies and to restrict foreign investors. ….

Britain may also be halfway out the door. In June, the British vote in a referendum to leave the E.U. Right now, the vote is too close to call — and if the “leave” vote prevails, then, as I’ve written, all bets are off. Copycat referendums may follow in other E.U. countries too. Viktor Orban, the Hungarian prime minister, sometimes speaks of leaving the West in favor of a strategic alliance with Istanbul or Moscow.

“It wasn’t supposed to be like this,” Bobbitt wrote.  But if so, why did the State fail to transition into the Market State?  The key fallacy may lie in his belief that the market state would work to “maximize its citizens’ opportunities.”  This belief rests on the unsupported assumption that such State would continue to act as the faithful agent of its citizens.  Yet once a State has been relieved of what Paul Monk called the duty to maintain “sovereignty within territorial borders … and a public policy of large-scale social security for the population within those borders” it acquires a rival claim to its services: the World.

“World leaders” no longer work only for their own countries, but for the World.  Politicians like the Prime Minister of Greece suddenly find themselves working for “global capital markets that ignore borders”, faceless bureaucrats in Brussels and accountable to a bewildering plethora of G’s — G8, G20, etc — not to mention a United Nations and a United Europe.

In retrospect the idea that an increasingly internationalized political elite would automatically remain faithful agents of their own populations should have rung alarm bells.  Although much has been made of the security violations of Hillary Clinton’s private email system, its true value is as a record of how the Clinton’s constituency grew beyond the borders of America.  It is not for nothing that the Clinton Foundation is also known as the Clinton Global Initiative.  It has received money from 20 foreign governments.

A world where Angela Merkel feels compelled to accept millions of migrants for Europe even to the detriment of Germany and where president Obama feels he can sign major international treaties with Iran without reference to Congress is an unstable world locked in a game that is no longer transparent.  Who do politicians work for?  It creates a world of dubious loyalties and unpredictable coalitions.

If the obvious conflict of interest has been ignored by the politicians, it has not been lost on the voters.  Many plainly sense what economists call an principal-agent problem, which may be the source of the current voter revolt.  Bobbitt comes near to identifying one of the causes of Market State failure when he observes that President Obama saw the ISIS problem from the standpoint of the international system rather than as president of the United States.

In an interview in 2014, he described his vision of a new geopolitical balance of power in the region. “It would be profoundly in the interest of citizens throughout the region if . . . you could see an equilibrium developing between Sunni, or predominantly Sunni, Gulf states and Iran . . . If you can start unwinding some of [the distrust among the states of the region], that creates a new equilibrium. And so I think each individual piece of the puzzle is meant to paint a picture in which conflicts and competition still exist in the region but that it is contained.”

What Obama did by putting “the interest of citizens throughout the region” in the forefront was unconsciously subordinate the claims of principal, the American people. Bobbitt notes, “it was only after “the San Bernardino killings in December 2015, [that] Obama acknowledged in a televised address to the nation that the US was at war, a concession he must have made with some reluctance.”

But Bobbitt has not taken his insight to its logical conclusion.  Obama’s reluctance to recognize a threat to his country represents an unnatural state of affairs. The efficient cause of the current crisis lay in breaking the former chain of political accountability without replacing it with another.  If there is any truth to Anne Applebaum’s belief that “we are two or three bad elections away from the end of NATO, the end of the European Union and maybe the end of the liberal world order as we know it,” it must be that the fuse was lit before Trump; perhaps in 2008 or earlier.

The fate of the State depends as much on principal/agent considerations as much as on Bobbit’s duality of strategy and law.

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