Henry Kissinger, in his recent book titled “World Order”, writes extensively about the Westphalian World Order that emerged from the European international consensus that followed the Thirty Years War and from the negotiations that produced the Treaty of Westphalia.
Unfortunately, Henry Kissinger’s writing about the Westphalian World Order at the beginning of his book titled “World Order” only serves to contrast the relatively stable and predictable international balance of power status quo that existed for more than one hundred years after the consummation of the Treaty of Westphalia with the break down of the integrity and viability of the nation state in the current era of globalization and instantaneous inexpensive global communication.
How can nation states formulate and manage public policy based upon the unchallenged power and sustainability of the nation state when citizens around the world can conduct business, invest funds and move assets across national borders with a simple keystroke on a computer keyboard?
There have literally been trillions of dollars of investment funds moved into and out of Emerging Market countries in the past six years. Most of those trillions of dollars in “hot money” could be moved around the world with simple computer commands if the investors and investment managers decided to move their funds using widely available computer electronic technology.
Even an authoritarian state like the Peoples Republic of China has been frustrated by its inability to effectively limit capital flight as hundreds of billions of dollars have been moved from China by Chinese citizens in the past year. This morning (11.07.2015) the Wall Street Journal published an article regarding the difficulties and risks facing the CCP leadership as they attempt to introduce market reforms into the Chinese economy. In the article, the WSJ writers state that the CCP leadership thinks that up to $5 trillion dollars may be moved out of China by Chinese citizens in the next several years if the CCP relaxes government restrictions on cross border capital flows. There are already plane loads of Chinese investors regularly arriving at LAX on real estate shopping tours as Chinese citizens attempt to hedge their political and financial bets by purchasing homes and commercial real estate assets in the US.
The United States has a very different situation that its national government is attempting to manage and remediate. US based multinational corporations are holding approximately two trillion dollars in liquid assets in foreign investment accounts that they do not want to transfer to the US due to the very high corporate tax rates in the United States.
Historically, one of the basic functions of the national government in the Westphalian World Order has been to establish physical borders and to control travel across physical borders. In the past thirty years the concept and practicality of national borders has been challenged around the world. There are currently no passports required by EU citizens if they want to travel within the EU. There are currently no established and secured national borders in most Islamic countries located in North Africa, the Middle East and SW Asia. National borders in Central America and South America are regularly ignored by millions of immigrants and refugees who are fleeing civil wars, economic hardship and intolerable levels of personal violence and crime in their native countries. Even the United States, with its high levels of expenditures on law enforcement, prisons and national defense is currently hosting approximately fifteen to twenty million immigrants who have overstayed their visas or who have illegally entered the United States by surreptitiously crossing the American border.
How can national governments establish and maintain order if they do not control the flow of people across their borders? How can national governments establish and manage economic policies when business managers and investment managers can easily shift economic activity or investment funds to other more lenient or more hospitable countries?
How can national governments establish and maintain defense and national security policies when they are continuously faced with asymmetrical threats from political and military forces that are not directly associated with a nation state? The US has spent several trillion dollars in the post 09.11.2001 era attempting to eradicate the threat posed by Islamic militants based in Afghanistan and other Islamic countries. Unfortunately, the US expenditure of large amounts of blood and treasure in the attempt to eliminate the threat of radical Islam in the Middle East has only radicalized hundreds of thousands of young Muslims who want to join the jihad against Western Civilization.
The obvious solution to the increasing limitations of attempting to formulate and manage public policy based upon the Westphalian nation state is to create transnational organizations that transfer national power to international organizations. Woodrow Wilson’s global vision as embodied in the League of Nations has been replicated in the form of the United Nations, the World Bank, the IMF, etc. The UN, the World Bank, the IMF and similar organizations have been positive forces in the improvement of global civilization, but their limitations are also increasingly evident in the Ukraine, Afghanistan, Iraq, Syria, Yemen, Somalia, Libya, Sinai, Niger, Chad, Mali, etc.
Even though the nation state is being superseded by globalization and technological change, traditional geopolitics continues to be played on a nation state level all around the world. For insights into how current globalization trends are creating challenges to the effort to establish and maintain world order I highly recommend “World Order” by Henry Kissinger.