the rise of network sovereigns and the fall of westphalia
| evergreen series[de-]composable states and sovereignty
If you were born in 1568 in Holland, you would have been born at the outset of a war between Spain and, well, practically everyone else in Europe. You could have lived two full, 16th-century lives 1 and you still would not have seen the end of what was known as the 80 Years War. Now that’s a war.
The treaties signed to bring about the end of the 80 Years War (and other concurrent conflicts) were called the Peace of Westphalia 2 . In popular history, this peace first codified the ideas of the “modern” era of international relations. The tenets of this “modern” framework seem almost not worth mentioning today because they are so ingrained in our thinking:
- sovereignty: states are sovereign within their defined geographic boundaries
- non-intervention: it’s “bad” (and later “illegal”) to interfere within another state’s boundaries
- equality: all states are equally important and valid, no matter their size
These ideas came to be known as Westphalian sovereignty 3 . And the system of states that came to exist under this paradigm is still known today as the Westphalian state system. It could be argued that the Westphalian state system reached its fullest expression in the founding of the United Nations.
For a long time now, the Westphalian state has seemed to reign supreme. Its tenets played a pivotal role in the geopolitics of the 20th century. But over the last ~50 years, that primacy has been increasingly challenged by everything happening in digital space. In earlier days, the challenge came from things like the asymmetric power of strong encryption; then came the relatively free spread of ideas and knowledge across the www; now, decentralized digital currencies, dao’s and the like. Regardless of political viewpoints, few would disagree with the idea that states are coming under increasing pressure in digital space. On the other hand, few would agree on what the future holds for the state in the face of this growing challenge.
It’s easy to take the uncertain future of states to one logical extreme or the other: In one extreme, states gobble up power in digital space and become dystopian, digital leviathans akin to the governments of 1984 or Minority Report. In another, states fail to keep up in the digital arms race and after some calamitous event, dissolve rather rapidly, leaving in their wake a lawless, dystopian landscape as seen in Children of Men or Book of Eli.
I want to present a third possible outcome here. A less bleak, less extreme and less cinematic one. In this third outcome:
States' purview and power decline. They surrender many of the functions they now provide to the market or other collectives. As this happens their power shrinks, in absolute terms. They fail to extend their primacy into digital space. As a result, the percentage of “space” over which they exert dominance shrinks; along with their power in relative terms. They continue to play vital roles in society - albeit more narrowly defined ones - as the monopolists of physical violence and administrators of physical territory.
States cease to be fully sovereign. They gradually cede their sovereignty to a multi-dimensional (across physical and digital dimensions) network composed of states, network states 4 , network unions 5 , DAOs and a curio of other polities and collectives - many of which might be considered quasi-sovereigns. They become nodes - vital, influential nodes - on these networks.
A sovereign shifts from being a monolithic, legal and generally contiguous geographical concept to an emergent, fluid property achieved by some of these multi-dimensional networks some of the time. Our own experience of sovereignty will reflect this shift.
Our world balkanizes into a collection of these networks - network sovereigns. And make no mistake - these sovereigns are not Facebook or Google. They are larger and more amorphous. The borders of this world change fluidly, frequently and relatively peacefully compared to those of the Westphalian state system. Perhaps there is physical violence and even some outright warfare involved in these transitions. But there will not be the complete and utter civilizational collapse that some predict. The torch of sovereignty will not be extinguished. It will be passed. And perhaps bobbled once or twice in the process.
Three dynamics will contribute this outcome:
- the changing costs of external coordination relative to internal coordination
- states' failure to dominate the digital space; and continued importance in physical space
- a less globally assertive US
the changing costs of external relative to internal coordination
It’s useful to consider economist Ronald Coase’s thinking 6 on firms here:
Coase said that the prevalence and size of firms are driven by the relationship and nature of firms' costs and benefits of coordinating internally (e.g employment) and externally (e.g. acquiring goods or services through the market).
What makes coordination more external or internal?
External coordination is generally trustless:
optional, transactional, productized, discrete, more defined, time-boxed, collaboratively directed, artisanal
Internal coordination is generally trustful:
mandatory, relational, continuous, less defined, non-time-boxed, hierarchically directed, multi-purpose
These are generalizations of course; employment can be more external - skunkworks r&d lab given free reign. And external coordination can have internal qualities - the consultant who is treated as an employee.
Electronic communication and more recently software and the internet have made both types of coordination easier. But it is external coordination that is becoming radically easier thanks to blockchains and DAOs. Smart contracts are easily composed - making it possible for smaller units of code to be efficiently capitalized (look at how deFi solutions are composed). Tokens make it possible to capitalize nearly everything. All sorts of complex external agreements can be memorialized and, often, enforced on the blockchain without the aid of external legal systems.
As a result, an increasing amount of leverage can be best achieved by external rather than internal coordination.
A state is also a firm, of sorts. And so it is not exempt from these trends. Therefore, a greater proportion of states' “output” will be sensibly achieved using external coordination than was previously sensible. This is part of what will cause many functions formerly administered by states to be offloaded to other more purpose-built “firms”. Through this process, states will shrink and focus only on tasks uniquely suited to internal coordination. As a result, states' absolute power will decrease.
It is worth emphasizing that there are functions of a state which will remain well suited for internal coordination. Chief among them, the administration of violence. Building aircraft carriers is accomplished with a significant amount of external coordination, but the application of carrier power is very much an internal matter. These sorts of tasks will very likely remain internal tasks. And these remaining internally coordinated state tasks will allow states to maintain a privileged, if not sovereign, position inside of the sovereign networks.
states' failure in digital space; and renewed importance in physical space
States will not come to dominate digital space the way they have come to dominate physical space. They simply do not have the capability to do so. The advantages of size and resources that states have over competitors in physical space simply do not transfer well into the digital. The glacially slow pace of state decision-making is no match for the speed at which digital space evolves or other players can decide. More on this here.
And even if they did have the capacity to establish dominance, they’d have to keep expanding as fast as digital space expands. I don’t think its possible for a single entity to maintain dominance over such a nebulous, dynamic space. And if it were possible, it’s highly unlikely that a state, as we know it, would be the one to do it.
To take it a step further, let’s assume they could, rather magically, establish and maintain dominance. How do you extend the logic of the Westphalian system - a logic rooted in physical geography - into a space which has no physical geography and is constantly expanding? More and more firms are founded with no meaningful geographic locus. Which laws are these firms subject to? And in what court will their alleged crimes be tried? Are we going to sue DAOs in the Hague? Westphalian logic just doesn’t compute.
From almost any angle, it seems unlikely that states win in digital space.
An interesting wrench in this logic is physical hardware. All things digital ultimately resolve to some physical processor, storage and electricity somewhere. This need will be a source of leverage for states. Apple and Google are very much physical companies. They have headquarters. They are on fiat stock exchanges. They have non-anonymous humans running them and US dollars in the bank. They have massive economies of scale and pretty significant barriers to entry. So long as they can continue to coerce these companies into putting in backdoors and sharing data, states will continue to have leverage in digital space. But will it be enough to dominate it? I’m still betting no.
On the other side of this coin, it also seems unlikely that states cede much power in the physical domain. States are built to monopolize physical space and violence. And, in the grand scheme of history, they’ve been more successful than anything else. Physical violence (read: super-carriers, killer drones, hypersonic missiles, nukes) would seem to have extreme barriers to entry and economies of scale. And as silicon valley already knows, “hardware is hard”. Perhaps outfits like Blackwater grow in size or number if and as the US steps back from global affairs but - really - who’s going to compete with US / China / Japan / Russia etc.? It seems most likely to me that states still win in physical violence and space.
Network sovereigns will need relatively peaceful physical space on which to run. So, they will still need states. Going back to the notion that external coordination is going to get easier: why would network sovereigns try to do a job that is already being done relatively well by states? It doesn’t seem to make much sense. Better to partner than to vertically integrate. This is how states will maintain a vital, influential role within network sovereigns.
And so, for these reasons, states will continue to play a critical role in our society; but largely limited to physical space.
the physical space is about to get more distracting
I’m not going to dive into this here. Plenty of folks are discussing this possibility already 7 . Suffice it to say:
If the US steps back, even the slightest bit, in global affairs… If the space race heats up…
The backyards and to-do lists of states are going to get far more complicated. And even if they don’t get more complicated, they’re certainly not going to get less complicated.
This means there will be fewer resources, less decision-making power, etc. to put towards dealing with digital space, making it that much harder for states to keep up.
so what does the world look like when things are said and done?
The state will become a “quasi-sovereign” within a network of quasi-sovereigns. Multiple of these networks will emerge. Some of these network sovereigns will exhibit a fluid, emergent sort of sovereignty. Different from anything that is presently familiar to us. We will be primarily citizens of these network sovereigns, not of states. Perhaps not officially but effectively.
The “proto-geopolitics” we know today will morph into a sort of “multi-geopolitics” - the politics of multiple “geographies”. A politics of both the digital + physical geo-’s.
Since sovereignty will become more modular and composable and perhaps anti-fragile, might sovereignty become more stable? How friendly will the network be to individual humans? Will we be as central to network sovereigns as we have been to Westphalian sovereigns? Who knows. But whatever course the future really does take, let’s hope it’s one where the treatment of sovereignty and the state can be more evolutionary and combinatorial and less adversarial and zero-sum. Who knows a good film producer? Let’s get someone to make a move about this future…