WHAT IF THE NATION STATE NO LONGER MATTERS?
The implications of Peter Phillips book, Giants: The Global Power Elite, have really been rolling around in my mind of late. I mentioned this book in a previous post, and will almost certainly reference it in the future because the world that it reveals, the one occupied by the one percent of the one percent, is so outrageous, so alien, and so daunting that one could probably write another book just on its ramifications.
There is one thought that really has kept me up at night because the ramifications for those of us who believe that democracy is inextricable from economic justice will require a complete change of worldview. We are now entering the long slog of national elections. These elections, namely that of the President of the United States, represent the pinnacle of nation state political action. We often describe the President as the leader of the “free world” and the most powerful man on Earth. That we are able to participate, albeit obliquely, in the selection of this officer is pretty awesome. It’s like standing at the base of the Grand Canyon looking up. It seems daunting, but not out of reach.
We feel this way because we see the nation state, especially the great power nation state, as being the ultimate social structure. The world is divided into these things called nation states. We can see them on a map, neatly apportioned colored shapes representing the jurisdictions of national governments. Those national governments break down further into states or districts that have regional jurisdiction. That regional jurisdiction breaks down further into county, municipal or some otherwise local political units. This further breaks down into communities, neighborhoods and households shaped by cultural values. It’s neat and simple to understand.
The nation state is at the top, of utmost importance because it is through the nation state that the world is bound together through international political interaction. The nation state conducts trade and other negotiations with other nations. Sometimes there’s conflict. Sometimes there are wars. Regardless, it’s the nation state that serves as the connecting piece between the individual and the world. My family trip to China was possible because of nation state politics.
Historians, however, point out that the nation state is a relatively new phenomenon. It is the result of political, economic and military influences emerging from the late feudal stages of the fifteenth century, defined by the Westphalian System in the seventeenth century, and maturing with Enlightenment based republicanism and nationalist movements of the eighteenth and nineteenth centuries. In other words, the nation state is no more than six or seven hundred years old and has only been a dominant form of social organization for no more than two to four hundred years depending on location.
For most of humanity’s five thousand or so years of “civilization” other forms of social organization have dominated. There’s no reason to believe that the nation state is the ultimate culmination of social evolution. Indeed, it probably isn’t.
So when might a post-nation state world emerge and what might it look like? Phillips may offer us a glimpse into the decline of the nation state and the rise of…something else.¹
Let me explain.
Giants opens with a description of the top seventeen finance companies in the world. According to Phillips’s description, these companies are integrated into what can be described as a single institutional complex as diagrammed below.²
They are interconnected via a matrix of interlocking directorates and shared board members. The shared board members represent overlapping investments. For instance, JP Morgan Chase, with almost $4 trillion in assets holds over $15 billion dollars in ten other giants including a $3.5 billion stake in Vanguard and shares in Swiss owned UBS ($618 million). This complex is governed by 199 directors holding sway of over $41 trillion in assets. Through shared governance and mutual interest and overlapping assets, it is fair to make the claim that, despite the seventeen separate identities, this complex is a singular institutional entity.
Furthermore, this institutional complex spans nations. Most of the companies are U.S. based, but Alianz is a German/U.S. interest, Barclay’s is British, UBS and Credit Suisse are based in Switzerland while AXA and Amundi are French. Whereas board membership usually follows national identity, there are some significant exceptions. The board of directors of Alianz, for instance was, at the time Giants was written, especially diverse, including members from Italy, South Africa, Austria and Switzerland. BlackRock included board members from Kuwait, Switzerland, Italy, the United Kingdom, Canada and Mexico along with American investors. Though the term “multi-national” is often used to describe such institutions, we could just as easily use the reference “extra-national” or even “non-national” without losing validity.
The reality is that the very size of this complex, with over $40 trillion in assets, dwarfs even our greatest understanding of a nation state. The chart at left makes this clear. Phillips uses the term Transnational Capitalist Class (TCC) to describe this complex. As is clear, the assets of the TCC dwarfs the total GDP for the United States, the world’s largest economy. Phillips further expands this complex by showing the connections between it and what he refers to as Near Giants, those companies with almost $1 trillion in assets, including Aegon, TIAA, Natixis, Invesco, Nuveen, Deutsche Asset, HSBC, T. Rowe Price and Affiliated Managers Group and what he refers to as the New Giants, BNP Paribas, Northern Trust and Wellington.
And this can go even further because each of the giant companies also hold major paper in other companies that most people would consider giants in and of themselves. A single example will suffice. JP Morgan holds paper on ten of the seventeen giant finance companies. It also holds investments in the billions of dollars in S&P 500 ($43.7 billion), Apple ($8.9 billion), Microsoft ($7.1 billion), United Health Group ($5 billion), Alphabet/Google ($8.4 billion), Pfizer ($5 billion), Amazon ($4.1 billion), Facebook ($3.8 billion), Philip Morris ($1.7 billion), and Berkshire Hathaway ($1 billion). And this is just a listing for its billion dollar plus holdings. What about holdings in the hundreds of millions? Tens of millions? We are looking at an impossibly tangled complex, all points of contact representing the same super 1% class, all with mutual and converging interests. It’s an institutional juggernaut that overwhelms our notions of a nation state.
So, I’ve been trying to get a functional picture of this in my mind. I finally found myself asking, what does a nation state, even one as huge as the United States, look like to the elite of such a complex?
Well, we can be sure that the nation state does not look like a source of legitimate authority that members of the board of directors should feel any obligation to respect. This is especially true with regard to the United States, where a PAC can be funded to the teeth for what amounts to loose change left under the car seat from the perspective of such a complex. I’ll buy the politician of my choice, thank you very much. Is it likely that Facebook will allow a significant challenge to corporate hegemony to gain a following on its network if JP Morgan comes along and says “pull the plug” just because of a little, insignificant thing like the Constitution of the United States? Come on!
No. From the point of view of such a monstrous construct, nation states must look very different. I speculate that, from such a lofty perch, the nation state must look like, at best, a convenient but not indispensable way to organize markets. A board member might ask, what is the most efficient use of a population in region A as opposed to region B. Perhaps region A has an established economy with disposable capital. Ah, this is a great region for a consumer market. How do we organize region A into an effective consumer market? Region B, however, may serve as an effective source of extractive raw materials that could most effectively be shipped to Region C with a high population of disposable poor people who can do the manufacturing cheap. So we have a conceptual global map of consumer markets, productive markets and resource markets that likely corresponds with Wallerstein’s core, semi-periphery and periphery nations.
Nation states also serve a convenient function of guaranteeing the legitimacy of capital. The nation state regulates and stabilizes the currency in such a way that guarantees a fruitful exchange of value between pieces of paper that are, otherwise, not worth the paper they are printed on. The nation state serves as the intermediary between other regional nation states for the sake of expanding markets, establishing and maintaining avenues of exchange that are lucrative to the board. The nation state enforces contracts no matter how one-sided, monopolies and patents no matter the consequences on average people. It’s through nation states that companies are allowed to do things that are otherwise unthinkable, like patenting gene sequences.
What about the people in those regions who do not have a say on the board of directors? Well, a nation state should be empowered to exercise control over said population in the interests of the TCC. The national government serves as the intermediary between the Demos of a defined nation and the TCC. It legitimizes the massive transfer of wealth from that which rightfully belongs to the people into the digital accounts of global capital. The nation state negotiates the legitimacy of this process. When that legitimacy, however, is demonstrably bankrupted, as it was in 2008, and the illusion of a deserving elite can no longer be sustained, when the injustices are so blatant, the nation state is responsible for coercing “law and order.” After all, markets only work if they are stable.
Furthermore, the nation state, with its monopoly on organized violence, is an efficient means of controlling labor mobility. It is an effective tool for guaranteeing that labor is not able to move as freely as is capital. This is important. Our economic giants want and need capital to move freely across borders. They can’t possibly accumulate so much wealth without global free movement of capital. Nor can they exercise independence from nation states without being able to free transfer the very currencies propped up by national governments from one market to another.
But workers are a different story. It should come as no surprise that workers will follow the capital. As capital is transferred freely from, say, Central America to banks in New York, labor is inclined to migrate to the United States. Workers moving from areas of lower wages to those of higher wages, or lower opportunity to higher opportunity is a disadvantage for colossal capital entities like the one described above. Workers in resource markets are especially subject to exploitation, abuse and low pay. They have an incentive to move into production or even consumer markets where pay and opportunity is better. However, doing so decreases the supply of labor in resource markets, thus driving up the value for that labor. This increases costs for capital. That will not do. Exploited workers must be made to stay where they are, even if that involves violence for the sake of defending imaginary lines on maps.
Make no mistake, preserving national integrity is of little concern to the TCC beyond its investments. Cost is the bottom line. The beauty of the nation state from the point of view of the TCC is the costs of running the nation state is disproportionately taken up by those bound to the nation, working people, the middle class. Stable currencies, monopoly rights, the protection of rents, the control of labor and access to resources is are externalities the costs of which the TCC is able to pass on to others. The nation state is just another tool in box.
As we approach another mind-numbing national election we need to keep this in mind. The nation state may not be as important as we think it is, but it is what we have. Who are the candidates who advancing policies that most empower the demos, those who produce the value by which the elite profit? How can we best mobilize the powers of the nation to mitigate the abuses of an increasingly bloated transnational elite?
At the same time, we have to understand that though the nation state seems like a permanent fixture, it’s not. There’s no reason to believe that this particular social evolutionary construct is the future of human political-economy. From the looks of it, the nation state is going the way of the dodo. We probably have some time. The nation state will not just implode over night. Constructs never disappear, they just morph until, one day, history students are musing over the “Age of the Nation State.” It is clear, however, that the TCC is best positioned to define the next era of organized power. As is always the case, the elite will establish the structures that govern the common. Think on the consequences of that eventuality. What will such a world look like?
If the demos is to have a future, if democracy is to be preserved, then activists will have to incorporate a global world view beyond national identity. As it stands, the global economic elite, it appears, already sees the world as a singular source of exploitation. An active demos must develop the infrastructure and the mindset by which all of humanity is a singular source of resistance.
- What this “something else is,” I can only speculate. I will admit that this post is less grounded in data and much more speculative than my usual posts.
- The diagram shows connections between these finance companies. I do not differentiate between, say Morgan Stanley investing in Goldman or Goldman investing in Morgan Stanley. If one invests in the other, that’s a connection. While I was creating the graphic, which took quite some time, I did see an interesting pattern with AXA Group. AXA held $867 million in paper in ten other giants, but interestingly enough, no other giants were invested in AXA. What’s going on there? I don’t know finance enough to speculate, but it is an interesting point of inquiry. AXA is also invested in Apple, Microsoft, Amazon, Alphabet, Facebook, Citigroup, Ishares, Philip Morris and S&P 500 ETF.