The Sovereign Individual takes the stance that the information age will fundamentally shift the world. Their assertion is that as the digital world enables more mobility and independence, states will have less power over individuals. Individuals will become more sovereign. Governments will need to compete for citizens the way companies compete for your business. Being written in 1997, this book is extremely prescient. The Network State by Balaji is modern book building on these ideas, incorporating cryptocurrencies and more practical ideas of how to start a new state. Notes: Power is based on violence. In nomadic tribes, there were not many gains to violence. There wasn't much to be stolen, there wasn't much private property. Once agricultural society emerged, violence became much more beneficial, and therefore much more important. Wealth was now concentrated in a fixed place (a house and farm), which made stealing a more attractive option. Under these conditions, it made sense for a community of owners to agree to give a subset of the community a monopoly on violence in exchange for protection. It can always be hard to see the water we are living in. In the Middle Ages, everything was seen through the eyes of chivalry. We day, we see things through the eyes of democracy and citizenship. This is not necessarily an evolution, it could just be a change. In today's society, it's near heretical to suggest that democracy isn't a noble ideal. That shows the power this idea has in society. This idea could be the effect of nations rising to power, rather than the cause. War used to be between groups such as the nobility, the church, the barbarians, not necessarily states. The wars were actually fought between knights and vassals, not lay people. Oaths were necessary to ensure vassals actually showed up. Breaking an oath was essentially treason, similar to how enlisted or drafted citizens today are bound to not desert. Wars didn't impact the lay people as much then as they do now. "The success and survival of any system depends upon its capacity to marshal military effort in times of conflict and crisis" Systems need to be able to circumvent rational cost-benefit analysis, otherwise no one would go to war that didn't directly benefit them. Myths and stories are created and tailored to the prevailing megapolitical conditions. The move from chivalry to citizenship happened when nation states began to exist and realized it's easier to appeal to the citizens than negotiate with the lords. Individuals or small groups of individuals couldn't exercised military power independently. The authors' hypothesis is that the information age will alter the logic of battle and antiquate citizenship, when an individual can command more power (I wasn't entirely clear on the claim here: through nanobots / microtechnology / biological technology?). Gunpowder weapons were expensive to produce and easy to use with little training. Commoners could now defeat heavily trained knights. This rewarded those with financial resources, those allied with merchants. The printing press then made knowledge less expensive. This subverted the existing power structures that relied on limited knowledge, specifically the Church and feudalism. Again, there is the hypothesis that microtechnology will do the same to the modern nation state. Information is at everyone's fingertips. (There is also Bitcoin replacing fiat money) The Church over-regulated to benefit itself: they made it sinful to use aluminum not sold by the church, they mandated eating fish to prop up fisheries they owned, they sold indulgences and held lotteries, all abusing their position to increase wealth. This is similar to the corrupt, self-serving overregulation that exists today. Protestantism emerged as a lower-cost religion. It removed the constraints that had the most hypocrisy.
The underlying issue with this over-regulation was that productivity was hampered. This was true of the Church in the Middle Ages and of government today.
East Berlin had a wall ot keep its citizens in. People celebrated when it came down. Today the US has an "exit tax" (established in 1995 under Clinton). Putting this effective wall in place shows that the US is a declining state, needing to rely on draconian measures to keep its productive citizens, rather than winning their citizenship on merit.
Effectiveness (total output) is more important than efficiency (ratio of input to output). Democracies and communism both have high effectiveness, given the total resources under their control. That's why they were the major competing philosophies in the Cold War.
Communism says "we own everything" from the start. Democratic welfare states say "you own property" and then after wealth is accumulated in the system they continue to increase taxes.
Governments can be controlled by proprietorship (owner, wants low costs), employees (wants high employment, doesn't care about budget), or customers (merchants, want value for money). In ancient Rome, only those paying for the government could vote. Mass democracies are effectively controlled by employees by putting the majority of the people on welfare, making them dependent on the state.
The book's hypothesis is that the information age will make defense (protection) easier than offense (extortion) for the first time via encryption. Before violence against an employer was easy. You could harm the production line, the physical facility, and this could be done anonymously. When there is no office and work is digital, there are safeguards in place to prevent workers from hurting the code, and nothing done in the system is anonymous.
Commerce, banking, and medicine will move online. Physical locations are nearly irrelevant if you can provide value online.
The skill curve is shaped like a turnip (skill being a mix of mental, physical, economic, willpower/character, etc.). As the required skill goes up even modestly, many people are closed out from productive work. This creates the potential for an unemployable underclass.
The greatest wealth inequality is between jurisdictions, not within them. Poor governments hold back struggling nations. Providing subsidies doesn't help, it just props up the ineffective governments.
Welfare nations tax good outcomes (the rich) to subsidize poor outcomes (the poor). This is a doomed endeavor. Instead, incentives should reward wealth creation and encourage people to pay for the resources they consume.
Regulation can be used when it has a net positive outcome, meaning it attracts more revenue than it costs. For example not allowing the creation of a dirty power plant to retain clean air, causing other benefits.
"Good jobs" (jobs in which you are paid more than you are worth) will be fewer and fewer as there are fewer advantages to large firms. Information availability is increasing and communication and transaction costs are decreasing. This means people will be paid in proportion to their impact, and possibly being paid per tasks ("gig employment") rather than having a traditional "job" (permanent salary). This is a return to how things were before 1800. Jobs made sense in an industrial era where the administration was worth the expense. When it's easier to measure output, and it's easier to distribute work, they may make less sense. The typical job could be more project focused, like a movie studio creating a team for the movie, then closing when it's complete (and building/closing certain teams along the way).
Nationalism doesn't make sense. It creates conflict between people. National lines are arbitrary and reflect the balance of power at one snapshot of time. Could move from international to extranational as nations have less focus and influence.
The same is true for language, "a dialect with an army."
The end of welfare nations could be the end of egalitarianism. With choice of nations, productive people likely won't want to live in welfare nations. Without a strong nation, no one will forcibly try to make people equal, nor provide equal opportunity.
Epigenesis: using language of family to manipulate citizens into thinking nationalism is real and meaningful (what do "we" should with "our" Olympic athletes?).
There may be violence and terrorism by the current beneficiaries of wealth transfers as we move to this new order. Nations and politicians will fight against their loss of wealth and influence, they won't want their productive and wealthy to leave (and implement measures such as the exit tax). A good strategy for current second-tier nations would be to provide low-tax sovereignty to these fleeing elites. This could be an opportunity to gain status in the new order.
Being an American citizen is a liability at the dawn of the Information Age. They will fight the hardest to keep their assets & citizens, and are the more powerful at curtailing citizen freedoms (such as exit, travel, and tax). (This seems to have played out to be partially true, though trumped by China)
Is democracy a good system? It's not used for any meaningful decisions outside of politics.
We're already starting to see free trade zones and pilots of sovereign states. The authors expect this to grow. Technology could be used to create truly representative government. One option could be a "selection by lot," which prevents self-selection, and makes it unlikely anyone would ever serve again. Another could be paying politicians for performance against certain criteria we are about.
Another option is to have commercial sovereignty. Make citizenship and taxation voluntary.
Important for every system to have options for entry, exit, and voice. We have all of these economically, while we only have a small voice politically.
The authors predict growing political corruption and misinformation. The only way through this is using judgment.
The morals of society still matter. Individuals and societies should focus on sovereignty, honesty and trust, competence, keeping the value you generate, and minimizing violence.
Selected quotes:
"There is a strong tendency for societies to render themselves crisis-prone when the existing configuration of institutions has exhausted its potential."
"The success and survival of any system depends upon its capacity to marshal military effort in times of conflict and crisis."
"Citizenship emerged when returns to violence were high and rising, and the state had vastly greater resources than the social entities that waged war in the medieval period."
"Suppose the phone company sent a bill for $50,000 for a call to London, just because you happened to conclude a deal worth $125,000 during a conversation. Neither you nor any other customer in his right mind would pay it. But that is exactly the basis upon which income taxes are assessed in every democratic welfare state."
"To summarize, the democratic nation-state succeeded during the past two centuries for these hidden reasons: There were rising returns to violence that made magnitude of force more important than efficiency as a governing principle. Incomes rose sufficiently above subsistence that it became possible for the state to collect large amounts of total resources without having to negotiate with powerful magnates who were capable of resisting. Democracy proved sufficiently compatible with the operation of free markets to be conducive to the generation of increasing amounts of wealth. Democracy facilitated domination of government by its “employees,” thereby assuring that it would be difficult to curtail expenditures, including military expenditures. Democracy as a decision-rule proved to be an effective antidote to the ability of the wealthy to act in concert to restrict the nation-state’s ability to tax or otherwise protect their assets from invasion."
"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."
"The technology of the Information Age makes it possible to create assets that are outside the reach of many forms of coercion."
"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."
"Information technology divorces income-earning potential from residence in any specific geographic location."
"Governments have become accustomed to imposing “protection services” that are, in Frederic C. Lane’s words, “of poor quality and outrageously overpriced.”"
"“If the world operates as one big market, every employee will compete with every person anywhere in the world who is capable of doing the same job. There are lots of them and many of them are hungry.”8 —ANDREW S. GROVE, PRESIDENT, INTEL CORP."
"The greatest income inequalities have been observed among jurisdictions. Income redistribution has done little to alleviate them. In fact, we believe that foreign aid and international development programs have had the perverse effect of lowering the real incomes of poor people in poor countries by subsidizing incompetent governments."
"“Nationalism, of course, is intrinsically absurd. Why should the accident—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?"
"The impulse to sacrifice is no less active where the taxpayer is concerned. Paying taxes, like bearing arms, is a duty, rather than an exchange in which one forgoes money to obtain some product or service of an equal or greater value. This much is acknowledged in common speech. People speak of a “tax burden” as they do not speak of the “food burden” of shopping for nutriments, or the “car burden” of purchasing an automobile, or a “vacation burden” for traveling, precisely because commercial purchases are generally fair exchanges. Otherwise, the buyers would not make them."
