Sunday, March 20, 2011

declare independence. don't let them do that to you!

Alliance Géostrategique is having a month on the theme of independence.

Some thoughts: First of all, we're constantly exhorted to act as individuals but also to be aware of interdependence. "Interdependence" seems to be the neoliberal mirror image of "solidarity" - rather than being a force that makes for positive liberty, it seems to be a negative one. You never here of anything good coming of it - rather, it's always about financial crises, viruses spreading on the airlines, cascade failures in supply chains and Internet routing, terrorists and organised criminal networks. We are asked to fork out in the name of interdependence, while individuals profit.

Of course, this is where the similarity with "solidarity" turns up. The supposed virtues of "solidarity" or "community" are often, even usually, indistinguishable from stifling conservatism, Nosey Parker, and the sort of family ethic where everyone knows the worst about everyone else but some people are never held responsible for it. To be really cynical, you know it's solidarity (or interdependence) when someone's rattling their tin under your nose.

Getting back to the point, in the world of "interdependence", why would anyone want independence? If even major powers are constrained by rules, what's the point? Between the 1980s and the great financial crisis, there was a fashion for a sort of soft nationalism, especially in Europe, in which it was argued that small states were worth having precisely because so many of the big questions of peace and war and fundamental economics had been reserved by institutions like the EU, NATO, the Bretton Woods structures, the WTO, and the less formal systems of the international community. Although there was not much point in having a Scottish Army, by the same token, it didn't matter. Therefore things like "Europe of the regions" and friends were a valid proposition.

One of the most dangerous toys left to a small state (or autonomous province) was its financial system. If you couldn't have a Ruritanian foreign policy, you could decide to be a freewheeling sin city of a financial centre, which would give your ruling elite the sort of self-importance the dance of diplomacy did in the Edwardian era. And, in the years when the financial sector itself was exploding in size, it meant real money. Importantly, the same slice in absolute terms means a lot more in relative terms to a small state. So, everyone and their dog wanted to be their regional money centre. In much the same way as the Edwardian small powers insisted on having a battleship or two of their own, they all insisted on having a bank of sorts and building up whatever local financial institutions were available into investment banks. This could be on the grand scale (RBS, WestLB) or on a much smaller one, like some of the Spanish cajas or the Hypo Alpe-Adria in Jörg Haider's fief. (As Winston Churchill said about the proliferation of battleships, it is sport to them, it is death to us.)

It's better that people should play with banks rather than battleships, of course - J.K. Galbraith said that one of the great things about a crash was that although it was a fine opportunity to observe all that was worst in human nature, nothing more important was being lost than money. (He may have been wrong - Chris Dillow observes that financial crises seem to destroy wealth more effectively and for longer than natural disasters.)

But I think the hilarious stories of Icesave, RBS, Hypo Alpe-Adria, that caja that was managed by the Church, and so on do tell us something about the value of formal independence, even limited formal independence like that of Scotland or Catalonia, in the era of "interdependence".

Essentially, I think, the one product that any degree of legal independence lets you produce is impunity. The legal status of independence is important here - without it, you're limited to hawking the bonds of the Serbian Republic of Northern Krajina to unusually dim marks, but with it, you can be of service to the world's plutocrats. Some features of independence that always sell include:

  1. Financial regulation

  2. Tax

  3. Shipping and aviation registries

  4. Corporate registries

  5. Criminal and civil jurisdiction

  6. An Internet top-level domain

  7. A direct dialling prefix

  8. Diplomatic privileges

  9. Passports

Criminal and civil jurisdiction, as impunity services go, have lost some value over the years as extradition treaties proliferate, legal norms are internationalised, and contracts come with arbitration clauses. Further, ever since the US Marshals hauled off Noriega, it's been at least conceivable that an extradition request may be delivered by 1,000lb air courier, in a vertical fashion and without warning. But facilitating tax evasion, the concealment of ownership, and the registration of ships and aircraft without taking responsibility for them are all highly valuable services.

Similarly, being able to register a horde of spammy websites is a good business to be in, especially if your own laws provide for genuinely bullet proof hosting. Unfortunately, many small island states are vulnerable to vigilante action by the Internet operations community as they only have direct access to one transit provider. Lending your direct dial prefix to anyone who wants to originate a mass of sales or propaganda phone calls is also a good business, especially if it involves callbacks and their attendant termination fees.

Finally, selling diplomatic privileges is the individualised version of the state's impunity. Holding an Angolan diplomatic passport kept Pierre Falcone out of jail for 10 years.

Arguably, turning the libertarian view of the state on its head, it is precisely the minimal state that is the closest to the status of one of John Robb's "gangs of black globalisation". Fascinatingly, some valuable criminal functions persist even in the absence of the canonical monopoly of force. It is probably no accident that the neoliberal era has coexisted with an unprecedented proliferation of ostensibly independent states.

We've not had a Thursday music link this week....

Because if anywhere made full use of the fraudulent possibilities of sovereign status, of course...

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