Three Dangerous Political Ideas
Three Things #75: July 2, 2023
I discovered governance thanks to blockchain. The concept never particularly excited or interested me before, but while working on Ethereum I became fascinated about the process by which changes to the protocol are introduced, by the people and organizations and structures involved, and by the various ways those actors accumulate and take advantage of power. While working on blockchain governance I realized that I didn’t have enough of an understanding of the underpinnings and the history of governance, so I began to study political philosophy on the side. While studying I was exposed to a number of different political systems and ideas.
I still find governance endlessly fascinating because it deals with some of the most important, timeless, universal human questions. How should we make decisions and solve problems collectively? Who has the authority to make decisions and why? Do we want to prioritize security or freedom? What does the ideal form of government look like? How do we avoid tyranny? Etc. While crypto life may seem all consuming at times, it’s important not to lose sight of the fact that these incredibly important, fundamental questions and tradeoffs are relevant far beyond blockchain and cryptocurrency ecosystems, to human society at large. And while we have new ideas and new technologies with which to address them, the questions themselves basically haven’t changed at all in thousands of years. (How many fields can you say that about?)
Through this process of study and understanding governance, I’ve also come to the realization that I’m politically homeless in the modern political systems around me. Nor am I alone in feeling this way. No existing political party comes even close to representing the things I value and stand for. More to the point, I don’t even find that existing political concepts and structures like democracy sufficiently capture my values and beliefs.
During my reading and conversations I’ve come across three political ideas that I find particularly appealing. I wouldn’t exactly describe these as a political system, so to speak, since I’m not entirely sure whether these ideas are even compatible or internally consistent, or how they could be made so. But they are nonetheless powerful, dangerous ideas, worth discussing, considering, and exploring.
Thing #1: Federalism
天高皇帝遠 “Heaven is high and the emperor is far away.” - Chinese proverb
Relative to the ideas that follow, federalism should be the most familiar to most readers. Indeed, there are many large and well known federal states today including Brazil, Germany, India, Mexico, Russia, Switzerland, and the United States, although the definition and practice of federalism varies from place to place, especially with respect to the degree to which the individual, constituent states have meaningful sovereignty over local affairs and the balance of powers between the states and the federal government. It’s also worth noting that the meaning of the term federalism has changed over time: it originally meant what confederalism means today, i.e., a league or relationship among sovereign states governed by a treaty, whereas today it typically refers to a hybrid model with a central, “federal” government that sits on top of a union of sovereign states. Another way of understanding federalism is in contrast to its opposite, a unitary state, where all decisions at every level are ultimately under the jurisdiction of a single central government. By contrast, in a federal state, authority is divided between local and federal.
It’s no coincidence that many of the largest, most diverse states in the world are federal states. To me, federalism is extremely appealing because of the balance it provides between extremes. At one extreme is what I think of as an empire: a single, monolithic central government that makes decisions on behalf of (and, indeed, exploits) vast numbers of people spread over an enormous distance. The best example of such a regime today is China. While such a system may be hugely efficient—there is after all a reason China is so good at huge infrastructure projects—there’s simply no way a distant central government can responsibly or competently govern such a vast territory even in the modern era, to say nothing of appreciating and promoting cultural differences and different local preferences and values.
By contrast a federal system, while naturally a bit less efficient and a bit slower to coordinate at the top level, is much better at responding to local need. It’s a much more robust system since it allows experimentation and competition to occur among the many states: states are encouraged to experiment in policy such as, e.g., fiscal policy and taxation, and to compete with one another within bounds. Where one state fails it’s quite likely that others will take a totally different approach and succeed. And while the states in a federation do pool resources to some extent, through collection of taxes, monetary policy, and management of national debt, they also compete with one another in a sort of zero sum game involving internal migration. The fact that Americans can move to low tax states like Texas and Florida helps balance the tax regime in high tax places like New York and California: high tax states know that if they raise taxes too much they’ll lose residents to low tax states and revenues will actually decline. Of course nation states compete on the basis of policy as well, but it’s much easier to move from New York to Florida than it is to move from New York to Dubai.
Federal systems make a lot of sense, but why have a central, federal government in the first place and not form a simple confederation? The answer is that there’s a set of things—an extremely limited set of things—that a powerful, central, national government needs to handle. This set consists of national defense, foreign affairs, and fiscal and monetary policy. Through these mechanisms states can and do pool risk just as members of an insurance risk pool do.
To the extent that a set of states share a close cultural affinity, common history, geography, culture, language, etc., it doesn’t make sense for each state to maintain its own foreign and trade relations since this would be hugely inefficient and wasteful, and would lead to states competing against one another externally, driving up the price every state pays for the same resources. (Note that this is different from internal competition for labor, capital, and other resources, because with internal competition one state’s loss is another’s gain.) Finally, national defense is a public good that requires enormous resources and that should be coordinated from the top. It seems fairly obvious to me, as someone who strongly prefers government that’s as small and local as possible and is mistrustful of big, distant government, that everything else should be handled at the local or state level.
Of course federalism isn’t perfect and comes with risks. Federalism fails when the central government becomes too big and powerful, and unrepresentative and unaccountable. The idea of federalism, unlike devolution, is that the constituent state governments are not subservient or subordinate to the central government. The United States federal government started out pretty small and limited in its powers, which is how it was designed. While power has swung back and forth over time between the states and federal government, the overall trend has been towards greater centralization. As the federal government has grown bigger and accrued more power it’s become less accountable and less representative of the citizens it nominally represents—precisely the fear expressed by the Anti-Federalists in the leadup to the ratification of the US Constitution. This is a major contributing factor to the political disarray we’re experiencing now in this country. I’m not terribly hopeful of finding an easy way to reverse this trend since, short of revolution or war, governments only ever grow bigger.
Thing #2: Subsidiarity
“Minimum requirements: In all classes, subject to the special provisions for each class and the tolerances allowed, the bananas must be… free from malformation or abnormal curvature” - European Union Commission Regulation (EC) No. 2257/94 (a.k.a., the bendy banana law)
Federalism defines the relationship between individual, sovereign states and the central, federal government and specifies that powers are divided between the two layers. It doesn’t, however, automatically specify how those powers should be broken down between the two levels nor what happens when there’s a contradiction.
Enter subsidiarity, a general principle which states, in essence, that issues should be dealt with at the most immediate, local, lowest level possible. One definition defines subsidiarity as “the principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level.” It should be fairly obvious from the above how this dovetails with federalism. When you combine the two, you arrive at a nice arrangement: by default, all powers reside with the local layer (state or local government). Certain powers such such as naturalization are exclusively reserved for the federal layer. In a true form of subsidiarity, in line with the above definition, conflict should rarely arise between the federal and state level since the two are responsible for different things (in other words, there should be few to no concurrent powers). And when and if conflict does arise, states’ rights should trump federal rights: in other words, the central government should be subsidiary to (literally “serve”, or “help”) the local governments.
Of course it doesn’t always work this way in practice. Subsidiarity is enshrined in the US Constitution in the form of the Tenth Amendment, which states that those powers not delegated specifically to the federal government (“enumerated powers”) remain in the hands of the states. However, the Supremacy Clause of the same document contradicts subsidiarity in asserting that federal laws always take priority over state and local laws. The United States is thus, unsurprisingly, an imperfect manifestation of subsidiarity.
It’s interesting to note that the principle is also enshrined in EU law, summarized in the phrase “Europe where necessary, national where possible.” Both the US federal government and the EU government have, over time, usurped more and more powers from their member states. This is a major frustration of libertarians and small government types in general, including myself, and it was a major factor in Britain’s decision to leave the EU. To quote some famous examples, was it really necessary to regulate the size and shape of bananas, cucumbers, lightbulbs, and vacuum cleaners at the European level? Were these really not things that member states could decide for themselves?
Like federalism subsidiarity fails when higher levels of government, which should by design be extremely limited and subsidiary to local government, take on more powers than they were ever supposed to have and centralize decisions that belong at the local level.
Thing #3: Panarchy
“Now a Burbclave, that's the place to live. A city-state with its own constitution, a border, laws, cops, everything.” - Neil Stephenson, Snow Crash
Of the three dangerous ideas presented here, panarchy is the most nuanced and difficult to understand, but it’s also a novel idea with enormous potential and one that’s never been attempted in the real world as far as I know. Panarchy was first articulated by a Belgian political economist named Paul Émile de Puydt in 1860. The basic concept is that the relationship between the government and citizens should be that of service provider and customer. Citizens should be able to freely associate with or subscribe to whichever government “service provider” they prefer, without having to relocate to another jurisdiction. And governments should have to compete with one another for “customers.” In other words, panarchy takes away the monopoly power of government. In the words of David M. Hart, “Governments would become political churches, only having jurisdiction over their congregations who had elected to become members.”
If panarchy is a dangerous idea today it was an even more dangerous idea before the advent of digital spaces and digital jurisdictions. Basically all politics throughout the history of human governments have been tied to physical territory, the only exceptions being rare examples like governments in exile. Governments and bureaucracies like monopoly authority and they don’t like to compete. Indeed, the present system isn’t designed to allow competition and as a result things get messy if competition does occur: what happens if there are overlapping claims to taxation, or jurisdiction over legal cases? Or if a citizen of one government harms a citizen of another government in overlapping territory?
The closest examples we have of panarchy in practice today are probably things like military courts and tribunals, and sovereign first nations and autonomous aboriginal communities. Of course these aren’t exactly panarchy but to some extent, individuals who qualify as members of these communities have some choice over where and how they pay their taxes, which body of law to adhere to, and where and how justice may be served (the body of law governing these relationships has a long history and is extraordinarily complex). Another imperfect example might be communities in Afghanistan that decided to recognize the Taliban rather than the distant, slow, unresponsive, central “official” government due to, among other things, speedy, local provision of justice.
I doubt that panarchy would work well in practice in the physical world. The idea of, say, multiple political parties each operating parallel governments in modern society is a bit absurd but it’s fun to think about. But we don’t actually have to go very far to imagine panarchy in practice today because the concept is alive and well in the digital realm. Each of us has “opted in” as a citizen of multiple digital “realms” such as Google, Facebook, Twitter, etc. These overlap and provide overlapping services. Some people feel a very strong affiliation with only one or two such “realms,” whereas others join many freely and contribute little to each.
Where do we go from here? I think it’s important to recognize that the very landscape of human governance is changing rapidly. For now we’re all still subject to physical jurisdictions such as nation states and cities that aren’t compatible with panarchy, but this, too, may change one day. Ideas like DAOs and network states provide a glimpse of the future. I don’t think either idea is ready in its present form to replace or even meaningfully augment old fashioned meatspace governance, but things could look quite differently in a decade or two as these technologies and ideas continue to develop (and as OG governments continue to fail us). I don’t have too much trouble envisioning a future very much like the one posited by The Sovereign Individual in which large, liberal welfare states have begun to break up and small, agile, sovereign city states compete to attract talent, capital, and resources. And those cities could themselves be broken up into Snowcrash-style burbclaves that trade with one another, each governed by a different provider of governance-as-a-service or citizenship-as-a-service. This is one relatively compelling vision of panarchy in action; I can envision others that are far more dystopian and cyberpunk.
What would the intersection of these three ideas—federalism, subsidiarity, and panarchy—look like? It’s hard to say because even two of these have never really been correctly implemented together, much less all three. I think it could look something like small, local communes and city states that are self-sufficient and totally sovereign but that nevertheless choose to align with other like-minded groups as a federation to pool risk and co-invest in large scale projects like health and defense. Typically, as in medieval European principalities and city states, these would be geographically contiguous or neighboring areas, but with the power of the internet they could almost as easily be separated by great geographical distances but share something in terms of values and vision (what The Network State refers to as networked archipelagos). And a citizen living in one such region could absolutely choose to subscribe to, i.e., to become a citizen of, multiple such virtual service providers. In other words, rather than the monolithic form we’re stuck with today, governance could be a lot more modular. One could choose to subscribe to security from one government but education from another. The unbundling of governance is upon us.