The State, Put A Fork In It

In 1996, US President Bill Clinton grudgingly, famously and dishonestly announced that “the era of big government is over.” Fifteen years later, a hypothetically (very hypothetically) honest President Barack Obama would be doing the world a favor by announcing that the era of political government — or at least of the Westphalian nation-state — is over.

That announcement will never come, of course. A head of state admitting that the entity over which he presides has finally devolved from merely dysfunctional and scary to entirely non-functional and irrelevant? Ain’t gonna happen. But it’s increasingly apparent that we now live in a world with very different rules from those prevailing in 1648 … or, for that matter, 1948. Borders are passe, and vestiture of “sovereign” authority in political government is on its way out.

Two recent incidents illustrate the new paradigm well: US Senator Chuck Schumer’s public meltdown over the existence of unregulated currencies and markets, and Citigroup’s disclosure of the latest compromise of customer information in a cyber attack.

What do these two incidents tell us about the efficacy and role of the state? The first tells us that it can’t work any more. The second tells us that its sole remaining function is to damage society.

Schumer’s conniption occurred after he learned about Silk Road and Bitcoin. The former is an online market which gets around the US government’s insane drug laws by effectively anonymizing transactions while still providing for the production of market information like “reputation.” The latter is a digital currency used for, among other things, transactions on the Silk Road.

The government, thundered Schumer, must investigate Bitcoin! It must shut down Silk Road, andseize their domain name!

What he’s missing — or perhaps simply can’t get his authoritarian brain around — is that both services are at least potentially, and numerous other similar services will soon be actually, beyond his gang’s powers of supervision and control (and, I should mention, taxation). The market is slipping its leash. The Schumers of the world are going to have to find another dog to walk.

But what of enterprises which remain, by choice or through lack of adroitness, under the state’s thumb? Citigroup is a prime example. In May, hackers managed to tap into their database and extract personal information on 210,000 customers. Why were they able to do so? Because even though the technology now exists (Silk Road! Bitcoin!) for secure, anonymous financial transactions to take place entirely without that information, the US government’s “Know Your Customer” laws and other regulations which benefit neither bank nor customer, but only government regulator and tax collector, require that it be gathered, stored, and made accessible to Uncle Sugar’s minions on demand.

It’s often said that people “vote their pocketbooks” in political elections. That’s true. They do so elsewhere, too. And in a competitive market, new entrants are even now exposing the cost of political government as far too high.

Government takes half your money. As for the rest of it, government manipulates it through fiat currency schemes, erects costly barriers — the “borders” of Westphalia-style states being a prime example — to its movement, and continually noses around in what you’re doing with it, using tools that put it at even further risk.

Now that alternatives which can’t be co-opted or crushed are available, is it any wonder people are beginning to move their wealth and their economic activity elsewhere, evading those regulations, ignoring those borders, and leaving the Chuck Schumers to stew in their own broth? If you haven’t started doing so yet (and you probably have, for years, if only by dealing in cash or barter when you can), you will soon. And so will everyone else.

The state’s revenue base is shrinking, and its ability to do anything about that shrinkage is disappearing. That’s not to say the state doesn’t remain dangerous. Like a 500-ton chicken with its head cut off, it can certainly do a lot of damage in its death throes. So watch out! … but find yourself a bib, because dinner is coming soon and it’s going to be extra crispy.

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