Dragging Behind the Horse: Making States Bigger

by Benjamin Studebaker

Though history, states have been getting bigger. From tribes, we expanded to city-states, from city-states to feudal states, and from feudal states to the consolidated modern states of today. This process has never been easy, however. There has always been resistance to the expanding, consolidating state. The unifications of Germany and Italy required extensive military campaigning, the United States fought the civil war over the south’s resistance to a strong federal government, the French monarchs struggled to break the back of the nobility for generations, and the British struggled with rebellions from Scots, Welsh, and Irish. Yet, in the end, all of these countries unified and centralised, because it was economically necessary–as more territories became economically interlinked, the same economic laws needed to apply to larger swathes of territory. There was no other way to keep the medieval guilds in line, to achieve coordinated economic policies in the interests of the whole of society, rather than for one region against others, to reduce the need of every town and region to be self-sufficient in every economic category. The economy is the horse driving the  cart of the enlarged state, but there are always people dragging behind the cart, and they’re usually the very sort of people behind setting up the previous, smaller state. But this is not merely an historical tale–states are getting bigger right now for economic reasons, impeded by people who are, once more, dragging behind the horse.

We hear again and again that we live in a global economy. What happens in one state is not contained, but spreads outside its borders to other states. If the United States creates a housing bubble, the resulting chaos will destabilise economies all over the world, triggering further crises, as we found out in 2007. Banks in European countries had assets in the US economy, and those banks were in trouble. European states ended up bailing out their banks, but in doing so greatly augmented their own debts. Of course, this is where the conventional wisdom tells us that the European Union is to blame for linking all those countries together with the same currency, so that countries really could not get access to the printing press and rescue themselves from their own debt. Imagining that the Eurocrisis is proof that the European Union and the euro were both bad ideas, Euro-sceptics have been proclaiming victory all over the continent. What they have missed is that the Eurocrisis is not the result of trying to fuse together countries that don’t fit together, it is the result of failing to do so, of settling for half measures when full measures are necessary.

In the United States, some states were much more adversely impacted by the recent crisis than others. Gaps in per capita GDP between the wealthiest US states and the poorest US states are even larger than the gaps are among Eurozone members, but when Nevada’s tiny economy was convulsed by the collapse of Las Vegas, federal money flowed in through to sustain Nevada’s economy–there was no Nevada crisis as there is a Greek crisis just because Nevada is locked into the dollar and cannot do monetary policy or print money. The United States’ federal government just moved the money around, cooling things off in Nevada with no complaint from anyone.  That does not happen in Europe, where the German government resents moving German money to Greece without making a show out of penalising the Greek people with austerity. Nevada did not have to engage in any oversized austerity package to demonstrate that it took receiving federal money seriously. No one in New York or Massachusetts complained about Nevada receiving help. Nevadans are Americans, just as American as New Yorkers or Floridians or anyone else.  There remains no real sense of European unity, no willingness on the part of the German people on the whole to see the Greek people as countrymen, or the Spanish, Italians, or anyone else for that matter.

When the European Union brought in the euro and EU regulations to bring more trade, freer capital flows, and EU-wide proliferation of worker and consumer protections to fuse the Eurozone into one giant market, it was dissuaded by the sceptics from creating a federal state with the power to act in the interest of all Europeans rather than individual groups. If the governor of New York had to personally use state funds to bail out Nevada, or had to personally use his own central bank to boost its money supply, it would be a different story. The governor of New York has a responsibility to New Yorkers, and rightly doesn’t have to take responsibility for the quality of life of Nevadans. And of course the reverse is true–if the governor of Nevada could demand money from New York, he’d probably do it all the time.

When different places are brought into close economic relations, there needs to be a force to keep order and make policy to the benefit of the whole rather than for individual states. The economic situation quite literally necessitates it. The same nationalists and patriots, the same supporters of sovereignty who recognised that countries like Germany needed to be created to replace the myriad smaller states that came before to benefit everyone, these are the very same groups that now resist the very same changes simply because they come on a larger scale. Our economic links have expanded further, so our political links must consequently expand further. The fetishism of cultural diversity and national sovereignty for European states comes with a serious cost to welfare and well-being of the people of Europe, a cost that Europe’s unemployed (25% in Spain, 10% in Italy, 24% in Greece, 10% in France, and so on) feel starkly, alongside the rest of Europe, which suffers from a mix of slow growth and double dip recessions. Nationalism just is not worth it. If we are to continue to globalise our economy, we must continue to scale up our states to match it. The United States represents a remarkable achievement in this regard, and it is time for the Europeans to put aside their differences and get on board for mutual prosperity.