Yes, we still need the military
Even if we don't have nation states.
This is a guest post by , author of . She writes about the history and future of defense technology and its relationship to humanity's upward trajectory and was a fellow with me last year. I hope you enjoy her thoughts about why we would still need a military in a world without nation-states.
The nation-state is dead, argues The Sovereign Individual (1996) and its erratic spiritual successor The Network State (2021). These influential books have obtained a cult following in Silicon Valley but remain relatively unknown to the general populace. They predict the collapse of nations and fiat currencies and the rise of a class of digital citizens using cryptocurrencies. The result of these momentous events will be increased global stability rather than anarchy:
As the scale of warfare falls, defense and protection will be mounted at a smaller scale. Therefore, they will increasingly be private rather than public goods, provided on a for-profit basis by private contractors… There will be no more conflicts like WWII. The very technology that is liberating individuals will see to that. –The Sovereign Individual
If a state can’t coerce, it can’t pay to enforce conscription, or pay the conscripts themselves, or seize the money to pay for all the equipment needed to prosecute the expensive industrialized wars of the 20th and early 21st century…. It doesn’t matter how many nuclear weapons you have; if property or information is secured by cryptography, the state can’t seize it without getting the solution to an equation. – The Network State
Francis Fukuyama gets a lot of flak for The End of History from people who haven’t read further than his title, but I haven’t seen anyone attack these arguments that are much more absurd than anything Fukuyama writes.
I work in defense tech at the intersection of the Pentagon and Silicon Valley. The Silicon Valley part of me is genuinely excited about the alternative forms of governance being dreamed up today, from network states and charter cities to seasteading and space colonies. Our sclerotic institutions absolutely need more competition. But the realities of violence in the physical world mean the Pentagon part of me can't let the claim that World War III is an impossibility go unchallenged.
What I’ll be arguing in this post is that “sovereignty” is a word that will continue to be inextricably linked to controlling a powerful military. Even if the vast majority of nation-states cease to exist and are replaced by network states, those network states will be forced to either build their own powerful militaries or rely on the remaining nation-states that do have large militaries.
It is indeed possible that the scale of warfare falls in the future, but it won’t be because states are unable to finance a massive conflict or lack the incentives to initiate one; rather, some state(s) will be so capable of winning a war that adversaries will not initiate conflict. Classic deterrence through technological superiority remains our greatest hope for peace.
Some background on The Sovereign Individual and The Network State
James Dale Davidson and William Rees-Mogg’s The Sovereign Individual appeals to technologists, libertarians, crypto enthusiasts, and techno-libertarian-crypto types by describing a future where the balance of power shifts from extortionary governments to individuals. The authors are lauded for predicting technologies and trends like declining nationalism, widespread remote work, cryptocurrencies, cyber attacks, and decentralized media well before the 2000s. Peter Thiel wrote the forward for the 2020 reprint where he praises the authors for applying “human reason to matters that we have been taught to leave to chance or fate.”
The authors first provide an overview of the printing press, the Gunpowder Revolution, and the Industrial Revolution, which they cite as critical transitions in solidifying the power and form of the modern nation-state.1 The Information Age changes everything, they argue. A reduced dependency on physical capital (e.g., land) will allow for the “liberation of productivity.” Representative democracy will be “replaced by the new democracy of choice in the cybermarket place,” where people express their voice not through a vote but through exit to another place.
The nation-state collapses as high tax rates for poor public services cause people to leave for other places with low tax rates. The nation-state’s usual tactics of printing money don’t work because people switch from fiat currency to “cybermoney.” In its death throes, the nation-state may lash out at the remaining citizenry through increasingly violent and despotic methods. But ultimately, the nation-state goes the same way as the Soviet Union.
We’re left not with some horrible power vacuum but the commercialization of sovereignty. Davidson and Rees-Mogg are not ignorant about the need for a monopoly on violence. They state: “The protection of life and property is indeed a crucial need that has bedeviled any society that ever existed. How to fend off violent aggression is history’s central dilemma.” But, they believe the nation-state will no longer be uniquely able to provide this protection service, and the scale of violence will decrease as governments lack the resources to prosecute wars. Private protection for hire will be sufficient for the sovereign individual’s safety.
The culmination of Davidson and Rees-Mogg’s arguments is that individuals should seek tax havens for their capital; there is no need to tie it to a state since the world is going the way of the sovereign individual. Now is a good time for you to know that Davidson and Rees-Mogg were offshore wealth advisors. The appendix to their book contains instructions for how to contact them to offshore your wealth to Bermuda today. They were literally invested in a future where tax evasion is ubiquitous.
The Network State was self-published to Kindle and is freely available online, but physical copies are not available. This anti-establishment streak is consistent with authorSrinivasan’s worldview. Srinivasan is a looming figure in Silicon Valley. Formerly the Chief Technology Officer (CTO) of Coinbase, he is now a leading advocate for crypto, eclipsed in importance perhaps only by Coinbase CEO Brian Armstrong and Ethereum founder Vitalik Buterin.
Srinivasan believes the nation-state is on its way out for largely the same reasons Davidson and Rees-Mogg do. However, Srinivasan’s vision seems more accepting of a hybrid future of nation-states and network states, and Srinivasan’s book spends more time on the community aspects needed for success.
Srinivasan defines the network state as “a highly aligned online community with a capacity for collective action that crowdfunds territory around the world and eventually gains diplomatic recognition from pre-existing states.” There is a lot of crypto talk throughout. The network state will require a web3 crypto passport, and it requires an on-chain census as the society scales. Those concepts seem straightforward enough, but Srinivasan loses me with passages like:
If you don’t consciously set the capital of your network state to be virtual, it’ll be physical. And if it’s physical, the capital is centralized in one place, and can get invaded by a nation state. But if it’s instead a virtual capital, with a backend that is encrypted and on-chain, then in the fullness of time you can host an entire subset of the metaverse there, assuming blockspace increases as bandwidth did.
Srinivasan sees the current geopolitical landscape and the fate of our world as a battle between three factions: the woke, lefty NYT, the authoritarian AI Chinese Communist Party (CCP), and the decentralized Bitcoin. You can guess which one Srinivasan believes will bring us salvation.
Sovereignty is a high bar
The network state may be challenging and difficult to execute, but I don’t find it farcical. I can imagine a developing country leasing land and providing the new citizens some special rules for how they develop and inhabit the land. If the leadership is visionary and the community is strong, we could see a flourishing network state emerge in the next 50 years. I hope that happens.
But let’s not pretend this network state has sovereignty.
In absence of violence, the network state will not own the land it inhabits. Countries of all stripes are not eager to sell their land to the highest bidder. China infamously militarized
a bunch of rocks the Spratly Islands in 2016. Thailand’s Navy arrested American seasteaders and accused them of violating Thailand’s sovereignty (the couple was living in a houseboat they claimed was positioned 12 miles outside Thailand’s territorial waters).
Since the network state will not be able to acquire the land, it must lease it from the host country. If a country is paying taxes to another country, that’s not sovereignty. Hong Kong looked independent until it wasn’t. And the network state will be relying on the host country for protection. That country, in turn, will almost certainly be relying on one of the few countries with a self-sufficient military. Indeed, this is what Srinivasan finally concedes towards the end of his book:
“You [the network state] don’t need to get full sovereignty but can instead contract with an existing sovereign for defense. In fact, this is actually what most “real” countries already do – few truly have full sovereignty, as most contract out their defense in a similar manner way [sic] to the US or (nowadays) China.”
One of the things that makes Srinivasan’s book hard to review is that he constantly hedges. After reading hundreds of pages about the path to sovereign network states, we learn that he’s actually talking about entities that will rely on a great power’s conventional military might.
Financing a war
The Great Illusion (1909) was an influential book published just prior to World War I that argued Europe was too economically interdependent to engage in war. The consequences would be too disastrous. The argument that a state won’t have the resources to finance a global war feels similarly naive. Let’s look at the two assumptions underpinning the nation-state’s inability to finance a war:
1. Cryptography places taxable assets beyond the reach of the state.
For the first time in history, IT allows for the creation and protection of assets that lie entirely outside the realm of any individual government’s territorial monopoly on violence. —The Sovereign Individual
While it may be theoretically possible to hide wealth from the State using anonymous transactions on the blockchain, this assumes 1) otherwise law-abiding citizens and corporations will engage in tax evasion en masse, and 2) crypto exchanges will successfully defy the most powerful regulatory bodies (e.g., the U.S. Government).
To the first point, there has been tax evasion as long as there have been taxes, but it’s still a criminal activity and most people don’t want to risk going to jail. Also, many people work for corporations who enjoy doing business with or in the U.S. These corporations are incentivized to accurately report employees’ earnings to the Government.
To the second point, taxation (or “extortion” as Davidson and Rees-Moog prefer to call it) is the State’s core competency. This is one area where the state really knows how to
innovate exert maximum leverage. In November of last year, the U.S. Department of Justice announced a $4.3 billion fine against Binance, and the CEO subsequently stepped down. Janet Yellen gave a press conference announcing intent to continue rigorous regulation. Srinivasan decried this as the descent of the “Digital Iron Curtain” and encouraged people to move money out of the U.S. But Coinbase, the world’s largest crypto exchange and where Srinivasan previously worked as CTO, works hand-in-glove with U.S. regulators to ensure compliance. In response to the Binance announcement, Coinbase CEO Brian Armstrong tweeted:
Since the founding of Coinbase back in 2012 we have taken a long-term view. I knew we needed to embrace compliance to become a generational company that stood the test of time … Americans should not have to go to offshore unregulated exchanges to benefit from this technology. This industry should be built right here in America, in a compliant way, under U.S. law. We're going to stay here in the U.S. because we believe in economic freedom and that the U.S. democratic system will eventually get this right.
Coinbase’s incentives are not aligned with helping individuals evade taxes. Actually, it’s the opposite. They want as few special regulations on crypto as possible, and that is much more likely to occur if Coinbase can demonstrate that users don’t use the platform primarily to evade taxes.
It seems unlikely there will be a huge drop in tax income because of crypto.
2. Countries with high tax rates will lose citizens as people exit to countries or network states with lower tax rates.
For many white-collar workers, work is decoupled from a physical location, so they have the freedom to go anywhere. The “exit” argument is that if states are failing in their duty to provide good public services and tax rates are high, those citizens will simply move to a different country where public services are comparable (or better) and the tax rate is lower. Over time, “extortionary” governments will see their tax income decline.
If countries/network states were equally non-aggressive, exit might be a compelling strategy. But aswrote in response to Russia’s invasion of Ukraine:
If the U.S. collapses, you can’t just move to Singapore, because in a few years you’ll be bowing to your new Chinese masters. If the U.S. collapses, you can’t just move to Estonia, because in a few years (months?) you’ll be bowing to your new Russian masters. And those masters will have extremely little incentive to allow you to remain a free individual with your personal fortune intact. Crypto will not save you; China shows that national governments can have their way with crypto (note that Bitcoin plunged even as gold soared in the wake of Russia’s attack). What the despots can take, they will take, unless you bend the knee and serve their purposes; this is the law of the jungle.
Exit only works as a strategy if the country or network state you exit to has defensible sovereignty, and that requires a military capable of countering a rival’s worst possible actions.
Industrial capacity and the future of warfare
Popular writeralso predicts the end of nation-states due in large part to the internet and blockchain. When pressed by a commenter on the mechanics of how the nation-state falls given its stockpiles of superior weaponry, including nuclear weapons in some cases, and its monopoly on violence, Pueyo concedes, “This is the most interesting part of the problem… If you have good resources on this, I'll take them. I don't find much on the topic.”
If I had to guess, the reason Pueyo can’t find good resources on the topic is that the military-industrial complex has a spirit rather at odds with the techno-libertarian building a network state. The Sovereign Individual does attempt to answer the question of how David fights Goliath, but I find the answer unsatisfactory:
Small groups, tribes, triads, gangs, gangsters, militias, and even solitary individuals have gained increasing military effectiveness. They will exercise far more real power in the “natural economy” of the next millennium than they did in the twentieth century. Weapons that employ microchips have tended to shift the balance of power toward the defense, making decisive aggression less profitable and therefore less likely.
Smart weapons, like Stinger missiles, for example, effectively neutralize much of the advantage that large, wealthy states formerly enjoyed in deploying expensive air power to attack poorer, smaller groups.
The authors are correct that large, expensive platforms known only to nation-states are at risk of destruction from cheaper technology that is much easier for a smaller group to acquire. What is not addressed is that nation-states will evolve their strategy and invest in large numbers of inexpensive, autonomous weapons. There are no intrinsic properties of the Stinger missile or other “smart weapons” which dictate nation-states cannot acquire or produce them in huge quantities.
Indeed, this is exactly what China is doing. Christian Brose, Chief Strategy Officer of weapons manufacturer Anduril and former staff director of the Senate Armed Services Committee, analyzes the state of play in Moneyball Military. His analysis is in sync with The Sovereign Individual's “offender/defender dynamic” but is crucially at odds with the types of actors who pose a threat globally. Brose identifies not militias or gangs who most pose a threat to the U.S., but—and this will come as no surprise—authoritarian China, the world’s second most populous nation-state:
At present, the proliferation of networked sensors and precision-strike weapons, once a monopoly of the United States and used to decisive offensive effect in recent decades, is now being wielded by China and other rivals to illuminate the battle space, increase the lethality of fires, and erode U.S. military dominance. Against this kind of mature reconnaissance-strike complex, advantage shifts from hider to finder, attacker to defender, the projection of power to the countering of it.
He goes on to ask:
recently asked Palmer Luckey, the founder of Anduril, what he thought about the offender/defender dynamics that The Sovereign Individual identifies. Luckey said, “It depends… If you talk about the ability to manufacture large numbers of autonomous systems, it really doesn’t matter so much who is the defender, but who has the larger industrial capacity. China will have a huge advantage in a world where autonomy enables them to win the way that they can best win against a much smaller nation.”2
Do we really think we will be able to keep all of our multibillion-dollar investments from becoming big, vulnerable targets for China’s massive arsenal of multimillion-dollar weapons, many of which are more capable than our own?
In recent years, the U.S. Department of Defense (DoD) has acknowledged that relying solely on small numbers of exquisite, expensive weapons will be an insufficient strategy moving forward. The DoD has thus initiated programs focused on deploying large numbers of less expensive systems. It remains to be seen if DoD can successfully execute the vision, but industrial capacity will be critical to these efforts:
Replicator: New effort to rapidly field thousands of low-cost, autonomous systems within 18-24 months.
Proliferated Warfare Space Architecture (PWSA): The U.S. Space Force Space Development Agency is building a mega-constellation of hundreds of satellites for missions like tracking, communications, and navigation. This represents diversification from the traditional U.S. strategy of buying small numbers of exquisite, expensive satellites.
Collaborative Combat Aircraft (CCA): The U.S. Air Force’s CCA program “is intended to rapidly deploy large numbers of autonomous unmanned aircraft, officially designated as CCAs, to team with the fifth or sixth-generation manned fighter aircraft.”
Decisiveness in warfare is still possible, but it will favor entities with great industrial capacity for manufacturing weapons. Those entities are much more likely to look like nation-states than like “gangsters or even solitary individuals.” There are endless thought pieces and predictions about an impending Chinese invasion of Taiwan. I’ve yet to see a single one argue Taiwan can defend itself solo. Indeed, the tense China-Taiwan situation, the defining geopolitical threat of the 2020s, is about as antithetical as you could get to the The Sovereign Individual thesis, which argues that small states or actors will be well-positioned to deter or combat a traditional nation-state.
Finally, some may point to the ongoing Ukraine War as an example of the defender’s advantage in action. While Ukraine did surprise the world in fending off Russia and creatively using cheap drones for an asymmetric advantage, the war is (sadly) not won and Ukraine is heavily dependent on aid from the U.S. and other Allies.
Balaji’s cited inspiration for the network state is Israel, a country which, notably, consistently requires a powerful military presence to assert its sovereignty. He also cites India as secondary inspiration for its ability to achieve independence non-violently, but India, also notably, has a robust nuclear weapons program.
Davidson and Rees Moog, for their part, variously cite Neal Stephenson’s fictional Snow Crash (1992) as inspiration for the future metaverse we will inhabit. In Snow Crash, governments have collapsed and fragmented their sovereignty to different private corporations and entrepreneurs. But the book is a dystopia, not a utopia. Although citizens spend much of their time in the metaverse, violence abounds and existential risk in the physical world is around the corner.
Ironically, it’s the science fiction author who comes closest to defining the realities of the very ugly world we will live in if an individual with a Stinger missile and cryptocurrency can take down the U.S. government.
The authors of both books do not follow the definition of a nation-state as one that has both political and ethnic alignment. Rather, “nation-state” gets used as an umbrella term to refer to all countries, including ones that are not considered nation-states (e.g., the United States).