Global Economics and Local Cipollas

Even if nation states were on their way out, some governments seem to want to linger around. They are thrusting themselves onto the global arena with a whole new set of aspirations, quite detached from their original functions. And by doing so, they meet entirely new forms of appreciation by the World.

Some will be happy, it seems, to subject themselves to ridicule: the Polish government banning the ‘super-gay teletubbies’ was an instant classic. Or contempt: the US deluding itself into a ‘global policing’ function did not exactly meet widespread appreciation around the world. Or admiration: did you register what AUSAID, the Australian government’s aid agency, did in Indonesia after the tsunami? Or, sometimes, the combination of contempt, ridicule, and admiration: remember the French government’s attempt at the global Francophone television? (Or, in fact, remember the “French government’, as such?)

The interesting thing is that these New Government Actions are mostly independent of their respective societies. And as they are busy reinventing themselves, the national economies that they have been presiding over are gradually dissolving into the global economy.

It started so much grander… 

At the beginning there were the sovereigns. Those mighty times of rule-free orgies and joyous beheadings. The times when the sovereign was still truly sovereign on its own land. 

But then, a glitch emerged. Even if slowly. 

Land was less and less important, people mattered, their heads mattered (and, shocking, more at the end of their necks, rather than on the top of a spear). With all the new ways of moving around and difficulty in stopping them from doing so, the people turned out to be not-so-loyal subjects. Huh, hard times came for the sovereigns. They had to compete with each other! Efficiency mattered. And worst of all, I kid you not, it was not even clear any more who the sovereign was. Can you imagine that? Sick world!

And thus the ‘government service providing institutions’ were born in the place of the Mighty Sovereign. But it might still end on a sweet note. 

As the world economic crisis is taking its full shape, and the national government’s services are becoming less effective by the day, a new, global set of institutions will emerge. And thus, the newly underemployed national governments will face the choice of reducing their size or finding new roles. (This is not the first time in recent history. See the variation with which the newly formed Eurozone’s old, national central banks reacted to their sudden lack of tasks. Some downsized, some magnified past functions, some created whole new ones...) This will be the moment, for national governments to reassess the globally interesting positions they sit on. There are some things, thank heavens, that cannot emigrate. Mountains rich in ore, seas of oil reserves, or nice beaches, coral reefs and snowy slopes are difficult to drag away. (Although some do try: witness Dubai’s two-piste mini ski resort.)

It might be a long time before these are submitted to global level control (do you know who owns the larger Schlesswig-Holstein banks? That provincial government never really came to terms with German reunification, did it? And I am talking about the one by Bismarck and not by Kohl.) We already began to discuss the consequences of this coming phenomenon, when the increasing role of sovereign wealth funds came into our sights. But the real thing is yet to emerge.

It is not that bad, is it? It will, or at least should not be necessarily very different from city municipalities playing a role in a nation’s economy, providing say infrastructure services, and at the same time maybe being an important, but not dominant player on the local capital markets. 

But some of the global players of government origin might turn out to be Cipollas. Excessively large accumulated wealth (maybe in sovereign wealth funds, maybe somewhere else, such as in government controlled mining companies), combined with lack of transparency, lack of any form of external oversight, and power hungry power-hungries. 

The newly emerging global state functions (well, if they emerge at all) might just start off with an unexpected rouge opposition.