The nation-state’s intervention into the affairs of its citizens merely began with the establishment of a common language and a universal educational system. The modern state’s mission is to create a totally rationalized environment that can optimize the free play of property exchange in a market economy. Records have to be kept on every citizen. Birth certificates, school registrations, marriage licenses, death certificates, and passports all have to be issued. Taxes have to be collected, and government revenues need to be distributed. Full-time armies need to be trained, equipped, quartered, and sent into battle. Standards have to be set to regulate everything from the quality of food and medicine to the quality of the environment. Even reproducing the culture itself is no longer just left to chance or to the whims of local communities. Museums have to be built, memorials financed, historic dates recognized and celebrated, and parks set aside for recreation and entertainment. The list is nearly endless.
Medieval political institutions were far more lax and less involved in the day-to-day affairs of their own subjects. Creating a “productive” society requires the kind of total mobilization of human life that would have been unthinkable in any previous period of history. The irony here is that the Enlightenment philosophers favored a world populated by autonomous agents, seeking only to optimize their own self-interests in the marketplace. To make that possible, however, nation-states had to create giant bureaucracies to oversee the game, and make sure that all of that “self-interest” didn’t disintegrate into a nightmarish Hobbesian “war of all against all.” In the end, the price of securing individual freedom in the marketplace was more government intervention and involvement in the most intimate aspects of people’s personal lives. By the first decade of the twentieth century, more than 700,000 Austrians were employed by their national government and more than 500,000 people in France worked in government bureaucracies, as did 1.5 million in Germany and 700,000 in Italy.17
Consolidating Power
Nations and states both existed before the modern era. A nation is a community of people who share a particular lived experience, while a state is a political institution that controls or possesses a geographic region for the purpose of exploitation and does so by manipulating the means of violence to maintain obedience to its rule. What is unique in the modern era is the coming together of the nation and the state in a single schema.
In medieval Europe, there were literally thousands of small, isolated communities whose shared lived experience was local and barely extended beyond the nearest mountain range or river basin. These communities were loosely bound to larger institutional authorities that included kingdoms, dynasties, and the papacy in Rome. Rule, in medieval Europe, however, was experienced more over peoples than territories. In fact, territories were vague and fluid, rather than precise and fixed. Even local rule was rather spotty and more arbitrary. Government in medieval Europe was personalized, even to the extent that it was often portable. That is, the royal families would often establish residence in an area and make visits to the various estates, taking their entire government entourage along with them. Representatives would be dispatched to collect rent and taxes from the villagers of the district, creating a more personal relationship between ruler and ruled. In the fourteenth century, this kind of makeshift arrangement began to slowly give way to more rationalized forms of rule exercised from a distance. 18 But the point, says historian David Held, is that in the medieval era, “empires were ruled but they were not governed.”19 They simply lacked the means to administer an entire kingdom from a centralized location.
The introduction of the cannon in the mid-fifteenth century fundamentally changed the nature of political rule. More powerful lords, with sufficient funds to finance the new military technology, were able to, literally as well as figuratively, destroy the walls and fortresses of local rulers and consolidate their holdings over a larger territory. Between 1450 and 1550, many of the thousands of independent principalities and duchies were weakened or eliminated altogether as central governments became more powerful.20 Eventually, the monarchies succeeded in disarming the old medieval warrior-dynasties and replacing them with a single sovereign rule. By the middle of the seventeenth century, Europe was no longer ruled by feuding local families but rather by centralized monarchical states.21
The amassing of economic power in the hands of the monarch was often welcomed by a peasant class tired of being caught up in the ceaseless warfare between feuding local nobles. The people, at least for a time, were willing to subject themselves to strong rule from above if it meant making day-to-day life in their locality a little less precarious and slightly more bearable.
Rousseau, however, caught the deeper political significance of the shift from ruling people to governing territory. In The Social Contract, he wrote,
It is understandable how the combined lands of private individuals become public territory, and how the right of sovereignty, extending from the subjects to the ground they occupy, comes to include both property and person. . . . This advantage does not appear to have been well understood by ancient kings who, only calling themselves kings of the Persians, the Scythians, the Macedonians, seem to have considered themselves leaders of men rather than masters of the country. Today’s kings more cleverly call themselves Kings of France, Spain, England, etc. By thus holding the land, they are quite sure to hold its inhabitants.22
By claiming sovereignty over territory, the monarchies were able to broaden their claim to power to include power over all the property within their jurisdictional boundaries, including the property people held over their own labor, as well as their other worldly holdings. Henceforth, loyalty to the king became a critical litmus test for securing one’s property and, by extension, one’s freedom. The centralized authority was now the only force that could both assure one’s property and take it away.
The first formal recognition in international law of the sovereign rights of territorial states came in the form of a peace agreement in 1648 that ended the thirty-year war between Lutherans, Calvinists, and Catholics. The Peace of Westphalia recognized the irreconcilable differences between the various branches of Christianity and granted territorial rulers sovereign authority within their own domains to establish matters of religion, while restricting the rights of other countries to intervene in what was hereafter to be considered an internal matter within each respective country. The essential points laid out in the Peace of Westphalia, although modified over the course of the next three centuries, remained pretty much the same until the end of World War II.23
The treaty recognized that the world is made up of autonomous and independent states and that each state is sovereign over the internal affairs within its fixed territory. Moreover, each state is equal to every other state, and no superior authority exists over them. Finally, territorial states are each expected to preserve their own self-interests, and while free to enter into diplomatic relationships and bilateral or multilateral agreements with one another, they also have the right to use force to settle disputes, if necessary. 24
For a time, the interests of the new territory-based monarchical rulers and the emerging capitalist class and bourgeoisie coincided. The new state powers, anxious to consolidate their rule, needed to generate revenue. Armies had to be raised, ships had to be built, weapons had to be manufactured, and administrative bureaucracies had to be set up both to control their own territory and to colonize new territories abroad. It was, therefore, in the interest of the monarchies to stimulate domestic economic activity.
For their part, the merchants and manufacturers were desirous of reforms that would help speed the transition to free trade in national markets. They sought the elimination of legal and customary restrictions that hampered labor mobility, pushed for legal enforcement of commercial contracts backed by the police power of the monarchy, and pressed for improvements in roads, waterways, and communication to speed commerce and expand the geographic range of trade. They also wanted the centralized political au
thority to standardize weights and measures and create a single coinage to reduce transaction costs and expedite commercial activity. The monarchical authority was more than willing to facilitate the changes and back up the reforms with the full coercive force of the state because the state, too, had an interest in creating favorable conditions for the flourishing of a national market.
Eventually, however, the mercantilist policies pursued by the new regimes threw an irreconcilable wedge between the nascent capitalist class and the government. The states were intent on accumulating precious metals—gold and silver—to finance their domestic spending and foreign adventures. They reasoned that the best way to increase their money holdings was to favor foreign over domestic trade. The strategy was to heavily regulate domestic production so they could secure high-quality goods at low prices and then sell the goods abroad for higher prices and be paid in precious metals.
Under the scheme, their overseas colonies would be restricted to producing only cheap raw materials for export back to the parent country and be forced to buy their finished manufactured goods from the home country at inflated prices. Any effort in the colonies to manufacture their own goods for domestic use or for trade abroad was forbidden, and any infractions were harshly punished.
Many states established their own foreign trading companies to conduct business on their behalf in their colonies. The most powerful and notorious of these were the Dutch and British East India companies. The latter boasted its own private army and, at one point, administered most of India as a surrogate for the British government.
The emphasis on foreign trade greatly benefited the export merchants, but at the expense of the domestic manufacturers. While, at first, the increase in foreign trade helped expand the home market for manufactured goods, the restrictions that governments like Britain’s eventually placed on the volume of domestic production that could be produced in order to keep export prices artificially high worked to the disadvantage of the manufacturers.25
The young capitalist class preferred open markets and free trade, believing that it was the best way to increase output, optimize their margins, and improve their profits. The peasantry, the urban working poor, and the rising middle class all felt the sting of higher prices on domestic products. They also suffered under the burden of increased taxes to finance government spending on armies, weaponry, and wars.
By the late eighteenth century, the breach between the emerging capitalist class and the monarchies was irreversible. On June 17, 1789, deputies of the third estate defied King Louis XVI by establishing their own National Assembly and demanding a French constitution. A few months later, the radicals issued the Declaration of the Rights of Man and the Citizen, which stated, among other things, that “the source of all sovereignty resides essentially in the nation: no body of man, no individual can exercise authority that does not emanate expressly from it.”26
In a stroke of the pen, government ruled by divine authority, and passed on by royal inheritance, was dethroned. Henceforth, sovereignty was to lie with “the nation.” Who comprised “the nation”? The citizens. And who were the citizens? Those who shared a common lived experience and were bound together by a collective past and future destiny. The citizen, the nation, and the state were conjoined as a single governing entity for the first time in history. From now on, government was to be of, by, and for the people.
The French Revolution was heavily influenced by the United States of America, which had already fought and won its own revolution to secure the rights of the people. The Americans and French were engaged in a radical new kind of political experiment, for which there was little precedent. Historian Anthony Smith writes,
There was no question in earlier epochs of mobilizing the people to participate in politics at the center, nor of the need for men, let alone women, to become politically aware and active “citizens.” Nor, as a result, was there any interest in providing an infrastructure and institutions, which would cater to all the needs and interests of the citizens.27
After the euphoria of declaring themselves sovereign died down, the French settled on a more restrictive definition of the citizen, “limiting political rights to men of property and education.”28 The Americans, the British, and most other new nation-states in the eighteenth and nineteenth centuries did so as well. Since it was assumed that the nation-state’s raison d’être was to protect the property rights of its citizens, it made sense to extend the vote to only those “men” in society who owned property.
The great shift to modern nation-states, which began with England, the United States, and France, spread rapidly to other parts of Europe in the nineteenth and early twentieth centuries. Two developments were particularly important in hastening the transition: the confiscation of Church land by the emerging bourgeois class, and the coming of the railroad and the telegraph.
France and Spain had begun seizing Jesuit properties as early as the 1760s. The forced sale of Church properties continued in Italy, Germany, and elsewhere. Much of the land was purchased at the auction block for rock-bottom prices by wealthy bourgeois lawyers. The new landowners joined forces with the older aristocratic class in the 1850s and 1860s in support of a private property regime, free trade, national markets, and centralized nation-state governance.29
Of all the developments that facilitated the transformation to the modern nation-state, none proved more important than the introduction of the railroad and the telegraph. These two technologies alone broke through the ancient spatial and temporal barriers that had kept Europeans relatively isolated from one another since the fall of the Roman Empire. In 1780, a stagecoach made the trip from London to Manchester in four to five days. By 1880, the train could travel the same route in under five hours.30 The railroad allowed for the quick dispatch of troops across vast distances, the fast and efficient shipment of raw materials and finished products to distant markets, and the dramatic increase in the mobility and range of travelers. The telegraph created instantaneous communication between people over great distances and enabled railroads to coordinate freight and passengers and make tracks safe.
Britain in 1840 had laid down only 2,390 kilometers of track. By 1900, it had laid out more than 30,079 kilometers of track, connecting every hamlet, village, town, and city into a national grid. Similarly, France went from 496 kilometers of track in 1840 to 38,109 kilometers by 1900.31
Principalities and city-states were just too small to handle the potential “economies of scale” made possible by these revolutionary new transportation and communication technologies. Only expanded national markets operating across a wide terrain and secured by territorial nation-state governments could reap the full potential of technologies that were beginning to annihilate space and time. In the sixteenth century, Europe was governed by more than five hundred separate entities. By 1900, twenty-five nation-states governed over most of Europe.32 None of the political leaders of the time could have imagined the possibility that just a half century later, the nation-states of Europe, pressed by new spatial and temporal realities, would begin a new journey, fusing their commercial and political interests in a union that would eventually subsume much of the sovereignty of nation-state regimes.
The Last True Believers
What becomes clear in even a cursory examination of the evolution of capitalist markets and nation-state governments in Europe is that their development has been anything but smooth. The history of these two pillars of European modernity is checkered with struggle and compromise all along the way, as competing interests have sought to impose their own beliefs and agendas onto the process.
Europeans often wonder why we Americans, by contrast, have been so unquestioning of capitalist theory and so patriotic and loyal to our country. The difference is that America wasn’t faced with all the labyrinthine conflicting interests that often impeded the evolution of free markets and nation-state development in the Old World. The American economic and political experiment emerged on virgin soil. There were few re
mnants of feudalism in the colonies, although one could make the case that the plantation system and slave labor was a close facsimile. Still, we were spared having to spar with an entrenched nobility and aristocracy. Moreover, craft guilds never became a force to reckon with in America. Free labor existed from the very outset. Capitalists never had to contend with a pre-existing set of economic relationships that favored set prices over market prices and placed restrictions on production so that craftsmen could maintain control over their respective trades.
Equally important, mercantilism never really took hold in America. The United States of America was born in rebellion to the mercantilist policies of the British crown. We fought a revolution to free ourselves from what we regarded as an intolerable exercise of economic tyranny by the state, and although we toyed with our own brand of mercantilism in the early years of the republic, it was a short-lived affair.
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