Emerging Technologies Law is a blog by William Ting which examines 21st century legal, business & Social tech issues.

Nation States Sinking?

Nation States Sinking?

 Nation States sinking? (Getty Images license)

Nation States sinking? (Getty Images license)

      This is the first part of my series on blockchain technology which will explore blockchain's application to a variety of our online & real world activities as well as legal and business issues raised. So stay tuned!  Part One will take a look at the political implications of blockchain and its often misunderstood impact on politics.

     Many believe that the decentralizing effects of key emerging technologies like blockchain mean that the centralized nation state will be rendered obsolete.  Then I came upon this article arguing that nation states may eventually become outdated and that "city-states" will rise again. These ideas are interesting in an academic environment but completely unworkable in reality for a variety of reasons, the major ones discussed below.

 big income inequality in city-states (CC0 Creative Commons)

big income inequality in city-states (CC0 Creative Commons)

     First, city-states suffer from the problem of social inequality. For example, Hong Kong (a city-state mentioned in the article) leads the global inequality index with an all-time historic high. Why? In a small city-state, usually political and economic power usually are concentrated in the hands of a few elite houses. (See the sad story about an elderly husband having to end his disabled wife's suffering because he could not afford to pay her medical bills, which set off a wave of public outrage at the poor state of social services). This has always been the problem with the city-state.  Florence which was a leading city-state back in the Renaissance also suffered from income inequality as economic power was also concentrated in a few merchant and banking families. The Medici family was the de facto ruler of the city. Social inequality eventually lead to great social upheaval with a revolt led by a monk called Girolamo Savonarola who tried to reform city politics in favor of the average person on the street. That experiment also did not end well.

 can city-states take over the burdens of the welfare state? (CC0 Creative Commons)

can city-states take over the burdens of the welfare state? (CC0 Creative Commons)

     Second, city-states simply do not have the resources to fund the modern welfare state. For example, most Western European countries like France, Norway and Germany subsidize many expensive social welfare programs that take up a sizeable amount of their respective annual budget. It is inconceivable for a city say like New York or Paris to fund such welfare programs for its millions of residents. Can you imagine individual "city-states" trying to feed the multitude of refugees escaping from the turbulent Middle East and Africa who pour into the cities of Europe everyday. Individual cities will be overwhelmed by refugees because they suffer from limited administrative infrastructure, budget, resources and experience. 

 cyberattack defense? (Getty Images license)

cyberattack defense? (Getty Images license)

     Third, city-states simply do not have the resources to defend against cyberattacks from dominant nation states. Imagine the city of Berlin trying to hold off a cyber attack coordinated by some unscrupulous rogue nation state. The odds are that Berlin (without help from some centralized authority) will be thrown into chaos if it fails to defend itself. When faced with cyberattacks, individual city-states will wish they had the support of an experienced and well-funded central authority helping them fight the good fight (like the US. Cyber Command which acts as a unified combatant command to improve US cyber defense).

 how well will city-states defend itself? (CC0 Creative Commons)

how well will city-states defend itself? (CC0 Creative Commons)

     Fourth, the rise of city-states will mean the fall of personal safety for their residents. One of the key reasons why the city-states of the Renaissance collapsed was invasion by larger centralized powers like the nation state. Spain took over Florence (as well as the southern half of Italy) and built a fort (which you can still visit today) with cannons pointing toward the city (usually cannons point outwards). France and the Holy Roman Empire (who ironically sacked Rome) meddled and undermined the domestic affairs of the remaining city-states. This is why Machiavelli argued for city-states to raise professional standing armies like the ones used by nations that continually beat them in battle. Modern city-states will suffer the same vulnerability. In a modern firefight between Berlin and a large encroaching nation state, we all know which side will be rolled over. 

 in jeopardy: free trade and rule of law, pillars of modern economic development (CC0 Creative Commons)

in jeopardy: free trade and rule of law, pillars of modern economic development (CC0 Creative Commons)

     Fifth, having multiple city-states will defeat free trade principles (which have been the pillar of economic progress ever since the end of WWII) and the free movement of goods and persons. This is because each city-state will have their own courts, judges, police, and laws & regulation. Will judgments or court orders be enforceable in other cities? Who will enforce anti-trust laws? What about passports and visas? Try to do business with 5,000 individual cities spread throughout the world each with their own currencies and regulations. Yes, good luck.  

 lights out for innovation (CC0 Creative Commons)

lights out for innovation (CC0 Creative Commons)

 IP = value (Getty Images license)

IP = value (Getty Images license)

     Sixth, city-states will kill innovation because there will be thousands of patent issuing authorities each with their own rules and protocols. How will patents be granted? Will an inventor have to apply to hundreds of cities for an original grant patent so as to protect his/her invention? Currently to get a patent in the US, an inventor just needs to send an application to the US Patent & Trademark Office. If its granted, the patent will be enforceable in the federal courts throughout the US and also throughout the world per international patent treaties. If there are hundreds of city-states, imagine how confusing a patent litigation will become. Where will an inventor even file suit? Will the inventor need to sue in every city in which his/her patent is being infringed? How will the injunctive order of one city be recognized in another city? If IP rights cannot be enforced then they are useless. There will be no economic incentive to innovate and progress driven by technology will be brought to a stand-still. 

 emerging tech: technology-enabled decentralization (Getty Images license)

emerging tech: technology-enabled decentralization (Getty Images license)

 blockchain: enabler of decentralization (Getty Images license)

blockchain: enabler of decentralization (Getty Images license)

     Lastly, technology already exists that can decentralize many social economic activities (like using blockchain to pay music artists or to fund a start up directly).  But this does not mean that technologically enabled decentralization will cause the centralized nature of nation states to disappear. For example, we all use emails. But how many of us actually own our very own servers, networks, communication systems, or internet connectivity hardware (T1 line) to set up our own email infrastructure? Sure, the technology exists to help us make using emails more "decentralized" (reduce our reliance from Yahoo, Google or Facebook). Just call Cisco or Dell and they can make this happen if you have the budget. But I suspect that many of us would prefer to accept a "centralized" authority (like Google mail) to enable us to write and read emails. In other words, technology-enabled decentralization can co-exist with the centralized nature of the modern nation state.  

 Political power decentralized (CC0 Creative Commons)

Political power decentralized (CC0 Creative Commons)

 1 person 1 vote (CC0 Creative Commons)

1 person 1 vote (CC0 Creative Commons)

     The correct analysis is that political power (and not the nation state) has over the course of history become more decentralized. For example, ancient Egyptian pharaohs, Chinese emperors and European queens and kings (like Louis the 14th "Mr. l'√Čtat c'est moi") held absolute power and were treated like gods on earth. Most economies now are liberal democracies where political power is constitutionally mandated to vest in the legislative delegates elected by the voting public.

     Wars and revolutions have brought about political democratization for some countries and helped established the foundations of civil rights, rule of law and respect for property. But for the people to truly realize the potential of these fundamental rights, we need to fully utilize blockchain technologies to empower the people to conduct their lives online and in the physical world via transactions that are more direct, cheap, efficient and free, Over time, blockchain technologies will help further decentralize political power more into the hands of the people away from large traditional institutions like financial institutions and credit information databases. Just as the internet has provided a platform for millions of online users and artists to showcase their varied talents, so too will blockchain tech enable financial empowerment of the people. 

     Some economies have developed the other way towards becoming more centralized. But they have done so at the cost of curtailing their citizens from fully enjoying the benefits of a free and global internet. Time will tell if the socially liberating effects of blockchain tech may translate into further political changes. Dr. Gavin Wood co-inventor of Ethereum stated that political power has become more decentralized over history, just like computing and software development. Since history repeats itself, there is every likelihood that blockchain tech will create implications for more political freedom and decentralization. 

     Political power but not the nation state, has become decentralized. Technology-enabled decentralization will disrupt many industries and change how we interact with each other, but it will never disrupt the nation state. 

 (CC0 Creative Commons)

(CC0 Creative Commons)

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