The concept of a state that we’re carrying into the 21st century is out of date. We need to examine what a state is today and, to the extent that we need governance, what form a state should take in a globally connected world.
The state that we think we have, the nation state, has only had a short and brutish existence. European nation states took their present form in the 18th or 19th century. Before this there were other forms of governance — empires, city states, feudalism — with varying degrees of size, ethnic cohesion, strict or lax laws, open or closed borders, etc. The most striking difference though has been the relationship of people with government, ranging from equal partnership to open exploitation. The nation state brought three centuries of coercive policy making coupled with paternalistic welfare.
Today the nation state is in crisis, not so much because of open borders or because the clan wars that it caused threaten to tear the world apart, but because its social contract is in crisis. The modern state can neither enforce policy nor provide welfare with credibility, and we’re not collectively sure if it should. We need a clear model of the state and its role.
The German leader ought to be defeated in the next elections for blowing the handling of the Greek debt crisis. She’s been incredibly naive to treat the matter as a solvency issue for one country. Greece, for all it’s failures, just happened to be the weakest of the small indebted Euro economies. Financial markets speculated against it, and Europe failed to see the problem as what it was and stop it in time. Sarkozy and even Obama urged Merkel to bring solidarity in the Euro but she thought voters wouldn’t like it. Then the Greek crisis became a Euro credibility crisis, with markets devaluing the Euro and influential economists such as Krugman and Mankiw writing that the Euro may be “over”. To be sure, German voters won’t be happy, but they’ll be unhappy about Merkel’s colossal failure of leadership over the Euro zone.
You may have heard that there were huge protests in Greece over the financial measures, basically pay cuts, that the government put in place to get its finances under control. A minority of the protesters were violent. Someone set fire to a bank, there were staff inside, and three people died.
This must seem like tragic madness to outsiders, and even to many who live in Greece. When societies fail, it’s easy to conclude that people are irrational, that therefore there’s no prospect for improvement, and that imposing a basic plan or order upon them might be a good idea. Let me try and allay these notions.