Countries

The speech of the year was given by the UN Kenyan ambassador, Martin Kimani, warning about the obsession about changing borders to ethnically purify nations. African borders were drawn in distant metropolis. “Today across any border live people who share bonds. We didn’t choose to pursue states under ethnic lines. We pursue continental integration. Rather than form nations that look back in history with a dangerous nostalgia, we chose to look forward, to follow the rules of the UN, not because we liked our borders, but because we wanted to build something greater, forged in peace.”

If it was functional to the expansion of markets and capitalism a few centuries ago, today the economic functionality of the nation-state is over. Rodrik’s trilemma cannot be solved by eliminating globalization (think of the Internet and climate change, but also of moral universalism), and we must choose between combining it with jurisdictional (in taxes, regulations, etc.) competition or combining it with a progressive (both in the sense of evolving, and in the sense of social progress) democratic global federalism. The European Union should be only the beginning of this.

The federalist alternative to post-colonialism has been much more successful than the replacement of colonies by small countries. Africa and Latin America could have chosen to go the way of North America or India, but they chose (or others chose for them) to go the way of the small country with its flag, its currency and its army. There is no need for more of them.

The war that started in 1914 has not completely finished and we still see nationalism as one of the big political forces of our time. Yugoslavia shows the logical conclusion of the domino effect: from an integrated federation, nationalism threatens to push ourselves through a slippery slope where at the end each individual will remain on top of their roofs waving a different flag.

The times of Wilson and his opportunistic push for self-determination (of the territories in the losing empires) are gone. Perhaps state competition had some benefits until the nineteenth century, but after the catastrophes of the twentieth, they are over. The nation-state locks us in an inefficient evolutionary equilibrium. Many potentially better institutional innovations remain unexplored.

Happy new year.

Democracy according to Elon Musk

The era of the petulant olygarch, in the words of Paul Krugman, has brought us an illustration of the dangers of fake democracy.

Some days ago, the new owner of Twitter, a platform that should be a global public utility and that he recently purchased, Elon Musk, disguised himself as a democrat and asked this to the Twitter community:

“Should I step down as head of Twitter? I will abide by the results of this poll”

He did not specify whether "head" meant owner or chief executive, or both. Currently, he is both.

The possible answers were yes or no and the yes vote won by 57% to 43% (meaning that Musk had lost the vote). Many of us voted and others took him even seriously.

Hours after the poll being closed, Musk announced that he would continue ruling Twitter until he found someone “foolish enough” to take the job.

He will still be the owner, though, even if he delegates into someone who cannot be now someone of high calibre, since we already know that it must be someone foolish enough. And if he finds someone, Musk will retain the power to fire him at any time.

Capitalism and Democracy have different rules. In a true democracy, people vote under the rule of law, and it is in that context that one person has one vote, and the votes are aggregated with one of a variety of possible (none of them perfect) voting rules. When people vote, the consequences of the referendum should be clear to everybody (a criterion that the Brexit referendum did not satisfy). In a capitalist firm, there are also rules, but these give the residual control rights to the owners of capital, who are usually a tiny minority of the people involved in a corporation. That is why there are limits to unrestricted private ownership, as there are limits to markets, to protect the rest of us from owners who impose unwanted costs on the rest of society.

The Venice Commission guidelines on the holding of referendums, which sets the standards for this type of votes, establish that plebiscites must take place under clear rules and under neutral authorities, among other rules. Of course, none of these guidelines were observed by Mr. Musk, who most probably doesn’t even know about them.

But referendums are one of the preferred tools of national populists and autocrats. They obviously prefer to win them, but they will play with the result if they lose. Even when they are called under good intentions, like the referendum on the peace agreement in Colombia in 2016 (the same year as Brexit), they are used by demagogs and opportunists to erode democratic institutions.

The blurring of borders: moral universalism, nation-states and the World Cup

The appeal of nation-states today lies more in the emotional services they provide than in their functionality in the world of the twenty-first century. The demand for secession, for example, is more influenced by identity issues than by economic issues, although secession movements have clear economic implications. As the UN Kenyan ambassador recently said, more than fighting the battles of the past about borders, most countries today try to cooperate over them. In Europe, the mechanism to make borders irrelevant is called European Union.

The 14 players (out of 26) of the Moroccan national team in the soccer world cup that were born in European countries, are not fighting for a nation-state they barely know, they probably just want to be treated with dignity in Europe. And still, because there are residuals of old times where borders mattered more, they have been caught singing against the independence of Western Sahara (the intricacies of which may elude them).

National anthems (better not to understand what they say, usually related to arms and enemies) are still part of the ritual of world cups, but some players of the contending national teams may be team mates during the ordinary season and have difficulties to understand the animosities in the stands. Some of them have been criticised for not being able to sing anthems correctly.

Many of the world cup players are probably moral universalists, they are willing to cooperate and show trust with strangers as much as with co-nationals. Actually, that’s what they do all year long in their club teams. Hopefully, national rivalries will be more and more relegated to the soccer pitch, where we may accept to play our ritual warrior dances, in a similar way that there are folkloric festivals in many developed and multicultural cities.

The degree of moral universalism has an impact on many decisions that matter for our standards of living and for the kind of society that we are building. It may affect our decisions on education, investment, consumption and the policies that we support.

The semi-final between Morocco and France will show two national teams that are expressions of the same phenomenon: a multi-racial and multi-cultural Europe that should treat all its citizens equally, as an example of what can be done when nation-states lose their significance. The Moroccan national team is the result of a deliberate policy to recruit players in the diaspora, where they are part of the millions of descendants of Europeans from African origin. The French national team integrates in itself other children of these immigrant communities. One could think that the semifinal between Croatia and Argentina will be very different, between two proud nationalisms, but most if not almost all of their players also play in European teams (including just a few in Croatia), and have been living out of their countries since they were kids. The Argentinian superstar Leo Messi has lived more time in Barcelona than in Argentina. He has no plans to go back to live in his native country, but probably the national team provides him some valuable emotional services.

Gordon Brown's federalist proposal

In his article “Think our plan to fix British politics is a pipe dream? Think again”in The Guardian, former British Prime Minister Gordon Brown links very well two lines of reform that are usually presented as separate: economic policy reform and institutional governance reform. Instead, he rightly argues that the two must go together. Policy reforms to have a more inclusive society will not be successful unless government is adapted to a multi-level interconnected democracy where tax and regulatory competition is stopped. And abstract institutional reforms will not be supported by the voting public, unless they translate into improvements in the standards of living.

Here are some paragraphs from his article: “we need to change who governs but we also need to change the way we are governed. And to bridge the gap between the Britain we are and the Britain that we can become, the Commission on the UK’s Future, which reported to Keir Starmer this week, is demanding a new economic and political settlement to ditch a century of centralisation, end the over-concentration of power in Westminster and call time on the long era of “the man in Whitehall knows best”.

“... a tale as old as time that constitutional commissions take minutes and waste years, only to see their reports written off within seconds of publication. With good reason. They usually fixate on abstract, out-of-touch, legalistic remedies, at the expense of addressing the everyday lives and challenges faced by ordinary citizens fed up with poor government.”

“... in order to build economic prosperity across the United Kingdom and alleviate fast-rising poverty, political reform is a necessity. Any economic plan will fail unless the right powers are in the right places in the hands of the right people. The goal of an irreversible transfer of wealth, income and opportunity to working families across the United Kingdom is dependent upon the irreversible transfer of political power closer to the people. The two go together.”

“... doubling growth, increasing productivity and creating the new well-paid jobs of the future will not come from trying to win a race to the bottom to attract low-paying jobs from abroad”

“The mayors and local authority economic partnerships will oversee local bus and train services, as well as planning and housing. We will revamp the British Business Bank with a mandate to end the long-term equity shortage faced by growing firms in the regions, and we propose to seek joint ventures with the European Investment Bank, among a series of measures, to invest in local infrastructure.”

“... we must also prevent the wrong powers from being hoarded in the wrong places. Because past devolution programmes have left the centre unreformed, a new Britain needs a new Westminster and a new Whitehall.” The federalist plans are therefore complemented with proposals to clean up politics, to make government more transparent and less corrupt.

Although Gordon Brown proposals have the UK in mind, his arguments are of more general interest. The nation state and the emergence of market capitalism were not two orthogonal developments. The Westfalian nation-state as we know it today was one of the institutional innovations that emerged to consolidate markets and provide the large scale law and order aparatus that could sustain the Industrial Revolution.

Similarly, today we need an organization of democratic sovereignty that is adapted to and inter-dependent economy in a globalized world in the twenty-first century.