The Breaking Point

by James Dale Davidson

  Consequently, I rather expect the devolution to a smaller scale of governance in the current United States to involve mutations of the current system. De facto devolution may come into play in the spirit that Madison expressed in the Virginia Resolution of 1798 in which he decried the federal government’s enlargement of its powers and resulting destruction of the meaning and effect of the Constitution.49 Madison saw the federal government consolidating the states into one sovereignty and feared the consequences: a transformation of the US republican system into an absolute or mixed monarchy system. Jefferson went further in the Kentucky Resolution and explicitly advocated nullification by the states of federal actions deemed beyond proper bounds.50

  No doubt, you could find some chatty law professor who would tell you that the “doctrine of nullification,” along with its sister ship, “the doctrine of interdiction,” was sunk in the Civil War, never to float again. Of course, the law professor would be wrong in the sense that counts. Centralization and decentralization perpetually swing on a pendulum. No legalistic prohibitions can check the swings subject to the powerful megapolitical gravity. Devolve they will: one way or another, layered sovereignty will be realized at the local level.

  As a thought exercise, I can see at least two obvious channels through which that might be achieved:

  1. Through nullification or interdiction of federal laws. Notwithstanding the chatty law professor’s assurance to the contrary, “Nullification is a growing practice.” For example, there are more than two hundred sanctuary cities in thirty-two states where federal immigration law is not enforced. Also, since 1996, twenty-three states plus the District of Columbia have legalized marijuana for medical and/or recreational use. In the wake of the Breaking Point, it is reasonable to suppose that the US government will command much diminished resources (for reasons explored throughout this book). In particular, fiat money is likely to be discredited. Localities may take the lead in reconstituting money on a more sound footing. Texas has already moved in that direction with legislation proposed by State Representative Giovanni Capriglione to create a Texas Bullion Depository where Texas could store its gold. They have some. The University of Texas Investment Management Co. (UTIMCO) heeded the pithy advice of Kyle Bass, a member of UTIMCO’s board. Bass said, “Buying gold is just buying a put against the idiocy of the political cycle.” According to reports in 2011, UTIMCO bought $1 billion in gold bullion.

  One can imagine nullification or interdiction extending to tax laws and other areas allowing states and even metropolitan areas to achieve de facto independence. After all, the United States began as a federation. It could potentially evolve into something akin to a latter-day Hanseatic League, a commercial and defensive confederation of de facto city-states.

  2. Another crevice in the edifice of sovereignty that might be pried open to provide de jure cover for the devolution of power to the local level involves the quasi-independence of American Indian bands from US law. Ironically, perhaps some of those bands would be deft enough to leverage their status for more productive uses than casino gambling. For example, the Muwekma Ohlone Tribe formerly lived around San Francisco Bay, and the Miccosukee Tribe of Indians of Florida have been trying for decades to assert control over land near Miami.

  This is a thought exercise, not a prediction. It seems far from likely that a South Florida version of Singapore will evolve under the leadership of the Miccosukee Tribe of Indians. But considering this unlikely prospect is a useful exercise going into the Breaking Point—something that seems unlikely now will happen. You need to be ready for almost anything.

  For too long, our thinking has been trapped in antique intellectual constructs. It is time we ploughed new furrows. When you view the economy exclusively in terms of twentieth-century business cycles, or even long waves (also a twentieth-century construct), you adopt an unexamined discourse that may lead you astray. It is too easy to assume that slowdowns and downturns automatically lead to upturns and booms as matters of clockwork. They need not. The green shoots are turning brown.

  I suspect that the resurgent phase of capitalist growth requires creative destruction at a scale that can shatter the spatiotemporal fix that imprisons capital within deeply entrenched, immobile infrastructures subject to sharply falling marginal returns. Simply by eliminating the counterproductive antimarket contrivances that are held in place by big government, the world could realize significant efficiency gains that could yield twentieth-century-style growth surges to economies now in the thrall of the twenty-first-century secular stagnation.

  I have already shared with you the astonishing 2013 study from the Journal of Economic Growth that concluded that increased regulation since 1949 had cost the US economy $37 billion in lost annual GDP, as of 2011, implying that the average American would enjoy an additional $125,000 in annual income if not for all the crony capitalist rip-offs. Presumably, eliminating this regulation could lead, after a transition, to something better.

  The potential for realizing a huge one-off surge in income from a shift to efficiency was illustrated in the wake of the collapse of the Soviet Union. Based on World Bank figures, GDP in Russia, and the other former Soviet Republics, took a steep dive after the 1991 collapse of the Soviet Union. Yet also based on World Bank figures, probably subject to large measurement errors, one could nonetheless argue that current per capita GDP in Russia is as much as fourteen times higher than it was on average from 1991 through 2000. And GDP in Kazakhstan is now twenty-three times higher than its 1991–2000 average. Estonia, which had the highest per capita GDP in the former Soviet Union according to the World Development Indicators of the World Bank, has managed a bit less than a tenfold increase in per capita GDP in this century.

  The pertinent point is that after a maximum decline estimated at 39 percent from 1991 levels in 1998, Russia’s GDP per capita subsequently grew by twenty-three times to $25,248 by 2013 according to the World Bank. Equally, Kazakhstan suffered a maximum decline of 28 percent, bottoming in 1995. From that point, GDP per head in Kazakhstan seems to have multiplied thirty-twofold, based on World Bank figures, to $23,214.

  Much like the former Soviet Union, Western economies, lumbered with innumerable counterproductive regulations and crony capitalist big government, have the potential to enjoy a considerable boost to growth by ditching antimarket distortions. The big government nation-state has outlived the megapolitical foundations that gave it existence. Big government was built on high and rising returns to scale in the organization of violence and in the production process.

  There was a time, as Napoleon assured us, when “God was on the side of the big battalions.” No longer. In the majority of asymmetrical conflicts since 1950, the smaller, ostensibly weaker combatant has won. This negates the most pressing reason for big government.

  Another major issue tangled up with the dysfunction of big government is the apparent conflict between democracy and capitalism. Prior to the Industrial Revolution, as evidenced in the United States during the late eighteenth century, there were substantial property restrictions on the vote. In urban areas, only about 40 percent of white males had the franchise, while up to 70 percent voted in rural areas. (Six states also permitted free black males who met property requirements to vote.) Perhaps because there were megapolitical advantages to be realized from government at a larger scale, the franchise was expanded almost everywhere, granting propertyless males and females the vote. This inevitably led to greater income redistribution.

  Indeed, today one of the major functions of big government is income redistribution. It is an obvious route for gaining the affiliation of support populations that otherwise may have little in common. Composing a single policy that commands majority support among persons of wildly different skills, values, incomes, and education levels has proven challenging across the globe.

  If big governments reigning over the advanced economies do collapse in the long run, as seems likely, I would expect the scale of governance to shrink dramatically.
Probably the most viable form of government going forward would be the metropolitan city-state, in which dynamic cities and their hinterlands would achieve independence.

  As Philip Stephens suggested in a bold article in the Financial Times, “London should break free from Little England,” devolution to a smaller scale would remind Britain that “power is best exercised close to the people.” Even better, Europhobes would no longer have an influence on the city, thus ensuring it would stay “open to Polish doctors, Italian designers and French mathematicians.” Stephens laments that conservatives are refusing immigration, as he sees immigrants as the city’s “lifeblood.” He imagines a new London city-state that would attract the best and brightest from around the world, leaving “anti-immigration pressure groups . . . to their anguished debates about identity.”51

  The divergence of interests that divides residents of the home counties in England from their wealthier cousins in London has parallels in the United States. These were highlighted in a 2014 demographic analysis in the Washington Post. It showed that in 210 counties of the United States, income peaked more than forty-five years ago. In another 572 counties, income peaked thirty-five years ago. In only 380 counties, many of them sites of active oil exploration and production, did income peak in the decade of the 2010s.

  I referred earlier to the plans of my friend Peter Thiel, and other high-tech billionaires, to create a workspace for incubating high-tech companies beyond the laws of the United States. As you may recall, their project, Blueseed, will be an artificial island hosting a startup community for entrepreneurs. It will be launched on a cruise ship anchored in international waters, twelve nautical miles from the coast of San Francisco.

  This will allow startup entrepreneurs from anywhere on the globe to launch or grow companies near Silicon Valley without the need for a US work visa. The ship will be converted into a coworking and coliving space, with high-speed Internet access and daily transport to the mainland via ferryboat. To date, over 1,500 entrepreneurs from 500 startups in more than 70 countries have expressed interest in living on Blueseed. This seems a much inferior solution to what could be achieved when San Francisco becomes a city-state.

  Also, in a world in which exogenous energy is destined to be at a premium, cities offer the obvious advantage of hosting and facilitating the greatest density of logistical interlinks and transactions at the lowest cost in energy inputs.

  Still another hint that the age of the microstate draws near is provided by a glance at the CIA’s World Factbook table that ranks the sovereignties of the world on the basis of per capita GDP. Among a dozen or so that rank higher than the United States, every one, except oil-rich Norway (population 5.14 million), is either a city-state or a ministate: Monaco, Macau, Liechtenstein, Qatar, Luxembourg, Hong Kong, Singapore, Jersey, Bermuda, Brunei, Falkland Islands, and Isle of Mann. And if you think about it, Norway’s population is roughly similar to that of Singapore, and Hong Kong’s population is 2.1 million greater than that of Norway.

  It should not be a surprise that the jurisdictions with the highest per capita incomes in the world are city-states and minisovereignties. Governance is more effective at a smaller scale in which many of the policy impasses that stump nation-states can be ignored altogether because it is not necessary to insist upon a one-size-fits-all solution to stretch over a continental economy.

  Microsovereignties are capable of providing a setting for free-market prosperity in the future. After five centuries during which the scale of governance, the scale of warfare, and the organization of business inexorably rose, that long historical trend has been short-circuited by the invention of microprocessing and the advent of the information economy, as reflected in the paradigm example of 3-D printing.

  Just as mass production gave rise to big government, I believe that microproduction will give rise to microsovereignties. Remember, there were 300 city-states in Italy alone in 1250. Their time will come again. The new sovereignties that will emerge from the coming transition crisis will be microsovereignties: small states on the scale of cities and provinces rather than continental economies.

  Philip Stephens has taken a step forward in thinking about what comes next in proposing that London should become a city-state. He did not write overtly about reinventing government in response to crisis, but crisis itself will take care of that in the long run.

  As little as we may wish to confront the long run, someday it will confront us. The arc of history has turned. The status quo has exhausted it potential. Whatever comes next will inevitably confront us as an adventure. As Helen Keller suggested in a wise rumination about the long run, “Security is mostly a superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure, or nothing.”

  Notes

  1 http://www.zerohedge.com/print/478912.

  2 Micklethwait, John, and Adrian Wooldridge, The Fourth Revolution: The Global Race to Reinvent the State (New York: Penguin, 2014).

  3 Tainter, Joseph A., The Collapse of Complex Societies (Cambridge: Cambridge University Press, 1990).

  4 Beaverbrook, Jonathan V., Roland G. Smith, and Peter J. Taylor, “World City Networks: A New Metageography,” Annals of the Association of American Geographers 90, no. 1: 123.

  5 Ibid.

  6 See Castells, Manuel, The Rise of Network Society (Oxford: Blackwell, 1996).

  7 Jacobs, Jane, Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics (New York: Vintage Books, 1994), 29.

  8 Taylor, Peter J., “World Cities and Territorial States: The Rise and Fall of Their Mutuality,” in World Cities in a World System, ed. Paul L. Knox and Peter J. Taylor (Cambridge: Cambridge University Press, 1995), 59.

  9 Turnbull, C. M., A History of Modern Singapore: 1819–2005 (Singapore: NUS Press, 2009), 252.

  10 See Frederic C. Lane, “Economic Consequences of Organized Violence,” in Profits from Power: Readings in Protection Rent and Violence—Controlling Enterprises (Albany: State University of New York Press, 1973), 54.

  11 Podobnik, Bruce, “Global Energy Inequalities,” in Global Social Change: Historical and Comparative Perspectives, ed. Christopher Chase-Dunn and Savatore J. Babones (Baltimore: Johns Hopkins University Press, 2006), table 7.1.

  12 Scott, James, Seeing like a State: How Certain Schemes to Improve the Human Condition Have Failed (New Haven, CT: Yale University Press, 1998), 1.

  13 Albright, William F., Introduction to Herman Gunkel, The Legends of Genesis: The Biblical Saga & History (New York: Schocken Books, 1964), x.

  14 Harvey, David, The Limits to Capital (Chicago: University of Chicago Press, 1982), 428–29.

  15 Ibid.

  16 See http://www.fee.org/the_freeman/detail/marching-to-bismarcks-drummer-the-origins-of-the-modern-welfare-state#ixzz2k5u8pwmj.

  17 Whitrow, G. J., Time in History: Views of Time from Prehistory to the Present Day (Oxford: Oxford University Press, 1988).

  18 Ibid.

  19 Ibid., 84–85.

  20 See Ibid., 92–93.

  21 Ibid., 8.

  22 Ibid., 15.

  23 Quoted in ibid., 84.

  24 Taylor, P. J., “A Metageographical Argument on Modernities and Social Science,” GaWC Research Bulletin 29 (September 4, 2000).

  25 Ibid.

  26 Ibid.

  27 Gibson, William, Neuromancer (New York: Berkley Publishing Group, 1984), 51.

  28 Ingersoll, Alex Monroe, Place in Flows: A Continuum of Virtual Transduction and the Work of Locating the Mobile Mob (University of Colorado, 2008), 74, https://books.google.com/books?id=Erp​gxx​sUCmYC&pg=PA74&lpg=PA74&dq=graphic+represent​ations+of+spaces​+of+flows&source=bl&ots=Gt​XQSj1iYs&sig=KKKAtifhLhUccFEiekrQibj8pwo&hl=en&sa=X&ved=0ahUKE​wjB3ozznJbKAhUGX​B4KHZLZCwEQ6AEIVz​AJ#v=onepage&q=graphic%20represent​ations​%20of%20spaces%20​of%20flows&f=false.

  29 Wegman, Edward J., and Jeffrey L. Sof
ka, “On Some Mathematics for Visualizing High Dimensional Data,” http://binf.gmu.edu/jsolka/PAPERS/MathVisRevision.pdf.

  30 Spengler, Oswald, The Decline of the West, trans. Charles Francis Atkinson (New York: Modern Library, 1962), 74.

  31 Ibid., vol. 2, 456.

  32 Arrighi, The Long Twentieth Century, new ed. (New York: Verso, 2010), 380.

  33 Ibid., 381.

  34 Ibid.

  35 Taylor, Peter J., The Way the Modern World Works: World Hegemony to World Impasse (Chichester: John Wiley & Sons, 1996), 218–19.

  36 Barradas, Nuno Pessoa, Empire without Emperor, 13.

  37 Taylor, Way the Modern World Works, 4.

  38 Nasuti, Matthew J., “Killing Each Taliban Soldier Costs $50 Million,” September 30, 2010, http://kabulpress.org/my/spip.php?article32304.

  39 See http://www.thedailybell.com/editorials/34748/Paul-Craig-Roberts-What-Is-The-Real-Agenda-Of-The-American-Police-State/#sthash.umPApiTG.dpuf.

  40 See “Collateral Damage: Cost of Each US Soldier in Afghanistan Soars to $2.1 Million,” October 25, 2013, http://rt.com/usa/us-afghanistan-pentagon-troops-budget-721/.

  41 Crawford, Neta, and Catherine Lutz, “Economic and Budgetary Costs of the Wars in Afghanistan, Iraq and Pakistan to the United States: A Summary,” Costs of War, Brown University.

  42 Kaldellis, Anthony, The Byzantine Republic: People and Power in New Rome (Cambridge, MA: Harvard University Press), 2015.