All Commentary
Sunday, February 1, 1998

The Sovereign Individual (How to Survive and Thrive During the Collapse of the Welfare State) by James Dale Davidson and Lord William Rees-Mogg

Will Computer Technology Liberate Individuals from the Nation-State?

Simon & Schuster • 1997 • 398 pages • $25.00

Greg Kaza is a Michigan state representative.

The plotline sounds like a science fiction novel. Early in the 21st century, the cybereconomy produced by the Information Age liberates sovereign individuals as economic transactions occur outside government regulatory confines via such means as computer-generated electronic money (e-cash). This thesis is not the work of Robert Heinlein. Rather, it is the prediction advanced by James Dale Davidson and Lord William Rees-Mogg in this, their third coauthored book.

But Davidson, founder and chairman of the National Taxpayers Union, and Rees-Mogg, a financial adviser, have not written a fanciful book. Much of the computer technology described in their work, while unfamiliar to the general public, is familiar to futurists, savvy entrepreneurs, and the readers of Wired magazine.

Here is one particularly telling description of the new cybereconomy foreseen by Davidson and Rees-Mogg:

Not only will transactions occur over the [Inter]Net, but they will migrate outside the jurisdiction of nation-states. . . . Payment will be rendered in cybercurrency. Profits will be booked in cyberbanks. Investments will be made in cyberbrokerages. . . . Low-orbit satellites and other approaches to wireless technology will transmit feeds back and forth directly to a beeper in your pocket, a portable computer, or a workstation, without interfacing with a local telephone operating or TV cable system at all. In short, the Internet will be unwired. . . . Your PC will be the branch office of your bank and global money brokerage, as well as the equivalent of the Paris kiosk where you buy your anonymous phone card.

The cybereconomy will also have implications for the media and culture as the “mass media [becomes] the individualized media.” Consumers will be able to choose their own customized news programs rather than relying on broadcast pundits.

Their analysis is sobering in its implications for the welfare-warfare state and its economic and political superstructures. One effect of the cybereconomy will be to reduce the necessity of hiring large numbers of middle managers to monitor production processes. Employment will become temporary and situational as virtual corporations that assemble talents for specific purposes will become more efficient than longstanding companies. Sooner or later, services and products provided by large bureaucratic agencies and corporations will devolve into highly competitive markets, managed not from a “headquarters” but through a distributed, decentralized network.

The political implications of these developments are sweeping. Consider the authors’ prediction that “the nation-state is obsolete, leading to wide-spread secession movements in many parts of the globe.” The transition this development implies will involve a crisis, particularly in wealthy countries like the United States where the “national economy” brought high income to unskilled work in the twentieth century. The authors foresee intense and even violent nationalistic reactions centered among those who lose status, income, and power when what they consider to be their “ordinary life” is disrupted by the new cybereconomy. Davidson and Rees-Mogg believe the “nation-state will ultimately collapse in fiscal crisis.” Will Americans adapt if they are downsized out of a middle-class standard of living? Or will they turn to nationalist politicians who promise to protect them from the cybereconomy?

These questions increasingly occupy policy elites.

One of the best sections of The Sovereign Individual describes how the new cybereconomy will make it more difficult for government central banks to inflate and play funny-money games with monetary policy. What Davidson and Rees-Mogg’s book describes is a cyberlibertarianism.

Free-marketeers who accept the Davidson–Rees-Mogg thesis would do well to ponder this passage from Stephen J. Kobrin’s article in the Summer 1997 issue of Foreign Policy: “Without severe restrictions of individual privacy—which are not out of the question—governments will be hard-pressed to track, account for and control the flows of money across borders.” Computer technology can be liberating for individuals. Or it can serve the authoritarian state.

A truly provocative book!

  • Greg Kaza is a Michigan state representative. He has taught economics and history at Northwood University, where he served as an adjunct professor.